Car Repos

[church mouse guy]

Car Guy Eric Peters in the magazine The American Spectator (R. Emmett Tyrrell, Jr.) noted that Bloomberg is reporting that more and more people are losing their cars due to inability to make the payments. Payments now stretch out over six years often and cars are costing $35,000, a cost increase that exceeds the rate of inflation. Why are cars so expensive? Partly, because government is forcing expensive, overpriced fuel savings devices that are not worth the money. This trend is hitting young people very hard.

An interesting data nugget percolated the other day about a “sharp worsening” — that is to say, an increase — in the number of car loan defaults among borrowers under 30 years old.

According to Bloomberg Financial News, the rate for the Millennial demographic was 4.04 percent last quarter vs. 2.36 for the general population, or about twice as high.

But it’s not just The Youth who are in danger of having their cars repo’d.

The overall delinquency rate last quarter was at its highest level since 2012 — and the total number of car loans (new and used) as well as leases is up by 5.2 percent.

More people, in other words, are buying cars they can’t afford.

What’s especially interesting is that the increase in delinquencies isn’t happening in parallel with a recession. Unemployment is at a 50-year low. People aren’t defaulting on their car loans because they lost their jobs.

Their jobs just don’t pay enough to support a car loan.

Millennial Repo: Car Loan Defaults on the Rise | The American Spectator | Politics is too important to be taken seriously.

 

[InTheLight]

...cars are costing $35,000, a cost increase that exceeds the rate of inflation.

This statement makes no sense whatsoever.

Why are cars so expensive? Partly, because government is forcing expensive, overpriced fuel savings devices that are not worth the money. This trend is hitting young people very hard.

Surely you can name one or two of the most recent fuel saving devices that the government has mandated that car manufacturers must install on new vehicles?

 

[Salty]

In addition, there are so many items - as required by federal law to be in/on the vehicle.

 

[carpro]

An interesting data nugget percolated the other day about a “sharp worsening” — that is to say, an increase — in the number of car loan defaults among borrowers under 30 years old.

I have no sympathy for people whose desires, not needs, lead them to spend far more than they should for a car and finance it too long.

In my experience selling cars, I have straight up told people they should buy less vehicle and not finance over 48 mos. I knew , by their history, they would be wanting to trade it in in 1 1/2 to 2 years after putting 50,000 miles on it. Impossible situation without a lot of money down, which they wouldn't have. Hardly any of them paid any attention to my counsel. In the end I would write up the vehicle they wanted. If I didn't , someone else would.

 

[InTheLight]

I have no sympathy for people whose desires, not needs, lead them to spend far more than they should for a car and finance it too long.

In my experience selling cars, I have straight up told people they should buy less vehicle and not finance over 48 mos. I knew , by their history, they would be wanting to trade it in in 1 1/2 to 2 years after putting 50,000 miles on it. Impossible situation without a lot of money down, which they wouldn't have. Hardly any of them paid any attention to my counsel. In the end I would write up the vehicle they wanted. If I didn't , someone else would.

This is the crux of the problem. They buy too much car, and finance it for too long. It's not government mandated equipment, whether fuel saving or safety devices. It's people spending too much. Simple.

Another thing is, generally speaking, the average consumer is a lousy negotiator.

The next thing coming to all vehicles will be back up cameras. In fact, I think the rule went into effect last year. The cost to add a backup camera? About $100. In the grand scheme of a $25,000 to $35,000 vehicle, $100 is not going to push people over the edge to default on a loan.

 

[carpro]

This is the crux of the problem. They buy too much car, and finance it for too long. It's not government mandated equipment, whether fuel saving or safety devices. It's people spending too much. Simple.

Another thing is, generally speaking, the average consumer is a lousy negotiator.

The next thing coming to all vehicles will be back up cameras. In fact, I think the rule went into effect last year. The cost to add a backup camera? About $100. In the grand scheme of a $25,000 to $35,000 vehicle, $100 is not going to push people over the edge to default on a loan.

I never buy NEW. Too much money and they depreciate too fast.

My wife drives a 2006 Expedition we bought in 2010 with 42,000 miles on it. It now has 185,000 miles on it and uses no oil at all. It's been paid for since 2013. Last year, knowing this vehicle needed to last another 2 years, I spent $1600 on it rebuilding the front suspension, replacing front wheel bearings and getting a complete brake job, including new rotors, and other assorted maintenance. Money well spent. Still runs like a top.

I drive a 2011 pickup I bought in 2015, a Ford F150 Platinum Crew Cab that had a $46,000 sticker price when new. It's now paid for and has 73,000 mile on it. I will keep this truck at least another 10 years. It's easier to spend money on needed upkeep when it's paid for. Cheaper than payments, always.

Maintenance and general upkeep is the key. Along with keeping your wants in line with your needs and your budget.

 

[InTheLight]

I never buy NEW. My wife drives a 2006 Expedition we bought in 2010 with 42,000 miles on it. It now has 185,000 miles on it and uses no oil at all. It's been paid for since 2013. Last year, knowing this vehicle needed to last another 2 years, I spent $1600 on it rebuilding the front suspension, replacing front wheel bearings and getting a complete brake job, including new rotors, and other assorted maintenance. Money well spent. Still runs like a top.

I drive a 2011 pickup I bought in 2015, a Ford F150 Platinum Crew Cab that had a $46,000 sticker price when new. It's now paid for and has 73,000 mile on it. I will keep this truck at least another 10 years.

Maintenance and general upkeep is the key.

You are doing it correctly. When I was buying vehicles I did much the same--buy a two or three year old car with low miles on it and drive it for 10 years.

However, as a business owner I lease a new truck every three years as a business expense. It just doesn't make sense to buy a truck, either used or new, because of the down payment necessary. Also worrying about down time for repairs. Then hassling with depreciation schedules at tax time, etc. I get true zero down leases and drive a payment for three years. Basically paying for depreciation and peace of mind with a full warranty.

Recently my 21 year old college graduate got a job in Arizona. He needed a car. His budget was about $4,000. At that price point his options were 10 year old vehicles with 175,000+ miles on them. I didn't feel comfortable sending him on a 1,600 mile journey in a 10 year old car with no real confidence in its ability to get him there. He decided to lease a new Honda Civic. He gets a new vehicle with awesome fuel economy, gets to build up his credit rating (I had to co-sign), and I get peace of mind. And yes, he can easily afford it.

 

[carpro]

You are doing it correctly. When I was buying vehicles I did much the same--buy a two or three year old car with low miles on it and drive it for 10 years.

However, as a business owner I lease a new truck every three years as a business expense. It just doesn't make sense to buy a truck, either used or new, because of the down payment necessary. Also worrying about down time for repairs. Then hassling with depreciation schedules at tax time, etc. I get true zero down leases and drive a payment for three years. Basically paying for depreciation and peace of mind with a full warranty.

Recently my 21 year old college graduate got a job in Arizona. He needed a car. His budget was about $4,000. At that price point his options were 10 year old vehicles with 175,000+ miles on them. I didn't feel comfortable sending him on a 1,600 mile journey in a 10 year old car with no real confidence in its ability to get him there. He decided to lease a new Honda Civic. He gets a new vehicle with awesome fuel economy, gets to build up his credit rating (I had to co-sign), and I get peace of mind. And yes, he can easily afford it.

Leasing is smart for a business.

Now, if you could have bought one of my cars when I was through with it at nearly 200,000 miles for less than $4000, you could have bought with some semblance of confidence.

Leasing can be a good deal for a young person if they truly understand it, as you do. And most importantly, can control their miles. Too many miles and a lease is a money pit that's hard to perform on, contractually, at the end of the lease.

Bottom line is that most people just drive too many miles to become involved in a lease, especially in Texas. The extra mileage can be purchased up front in a lease and become part of the payment, but then the payments become as unattractive as a purchase. Not a good deal for most people, especially the young.

Now that I'm retired, I could consider a lease. My miles are easily controllable. I might go to new vehicles and take advantage of driving worry free with a warranty, and get a new one every 2-3 years. Thanks for reminding me!!!

 

[InTheLight]

Leasing is smart for a business.

Now, if you could have bought one of my cars when I was through with it at nearly 200,000 miles for less than $4000, you could have bought with some semblance of confidence.

Leasing can be a good deal for a young person if they truly understand it, as you do. And most importantly, can control their miles. Too many miles and a lease is a money pit that's hard to perform on, contractually, at the end of the lease.

Bottom line is that most people just drive too many miles to become involved in a lease, especially in Texas. The extra mileage can be purchased up front in a lease and become part of the payment, but then the payments become as unattractive as a purchase. Not a good deal for most people, especially the young.

We were worried about his going over the mileage limit, especially with the big 1,600 mile trip to start the lease. But now that he's there he's only 8 miles from work. I bet he doesn't drive more than 600 miles a month. If he were to see that he's going over the mileage an option is to buy the vehicle at lease end. Another option is to shop for a new lease and have the dealer "pull through" your old lease. This is where you turn it in a month or two early and the dealer makes the last payment or two for you. I've done a "pull through" a couple of times.

Now that I'm retired, I could consider a lease. My miles are easily controllable. I might go to new vehicles and take advantage of driving worry free with a warranty, and get a new one every 2-3 years. Thanks for reminding me!!!

The full warranty for length of the lease, usually 36 months is a huge worry relief. Plus you get all the new safety, and tech goodies. My son's Civic has lane departure, lane changing assist, automatic braking, a couple of cameras, and adaptive cruise control.Very cool. Makes a parent feel a lot better about their child's safety while they're driving. Also has Android Auto (and Apple Car Play) I know he mirrored Google Maps on his Civic's touchscreen on his trip. Basically a navigation system without paying for it.

However, since you're retired you might run into the opposite problem with miles--not using all the miles you've paid for. I've had that happen a couple of times. It's like leaving money on the table, which I absolutely loathe doing.

 

[carpro]

However, since you're retired you might run into the opposite problem with miles--not using all the miles you've paid for. I've had that happen a couple of times. It's like leaving money on the table, which I absolutely loathe doing.

That would mean it's time for a nice long sight seeing trip. Being retired is good stuff.