Author Topic: The eternal car loan  (Read 9656 times)

brewer12345

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The eternal car loan
« on: April 09, 2013, 10:17:06 AM »

Sparafusile

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Re: The eternal car loan
« Reply #1 on: April 09, 2013, 10:28:15 AM »
Wow! When I first came to this site I felt bad for financing my car - even after a large down payment and paying it off early. Now I don't feel quite so bad.

Reading that article made me wonder if it would ever get to the point where it is nearly impossible to buy a new car without financing. Right now we take it as given that we'll need a mortgage in order to own a house, but that wasn't always the case.

gecko10x

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Re: The eternal car loan
« Reply #2 on: April 09, 2013, 10:45:30 AM »
I just came to post this.

Right at the beginning, it talks about a lady buying a $23,000 car for $480/mo for 75 months. I thought that sounded like a high payment for such a long term, so I did some quick math - she's paying $36,000 for that car!!

MtnGal

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Re: The eternal car loan
« Reply #3 on: April 09, 2013, 10:46:46 AM »
Wow. Just wow.

GuitarStv

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Re: The eternal car loan
« Reply #4 on: April 09, 2013, 11:34:43 AM »
It will be interesting to see the effect this has on future car sales.  If you haven't paid off the car you bought 8 years ago, you're not very likely to be shopping for a new one . . .

Jack

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Re: The eternal car loan
« Reply #5 on: April 09, 2013, 11:45:51 AM »
It will be interesting to see the effect this has on future car sales.  If you haven't paid off the car you bought 8 years ago, you're not very likely to be shopping for a new one . . .

That's a good joke!

But seriously, there's no way a little obstacle like not having finished paying off the old car would prevent any Good Consumer from buying financing a new one.

In fact, if you read carefully you'll notice that's what the lady in the article did: she's not paying $36,000 for a $23,000 Camry, she's paying $36,000 for a $23,000 Camry plus "several thousand dollars still owed on her old car!"

Jamesqf

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Re: The eternal car loan
« Reply #6 on: April 09, 2013, 11:54:30 AM »
Humm...  We've had the housing bubble.  Next up, the car bubble?

Cecil

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Re: The eternal car loan
« Reply #7 on: April 09, 2013, 12:05:52 PM »
Quote
"I had a new baby on the way, and I was trying to keep my monthly payment a little bit lower to help afford child care," Ms. Bishop said recently. She pays $480 a month for the 2013 Camry,

I don't even know what to say. Instead of spending $480/month, did she consider perhaps not spending $480/month?

That would free up $480/month to help afford child care.

the fixer

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Re: The eternal car loan
« Reply #8 on: April 09, 2013, 03:04:49 PM »
Humm...  We've had the housing bubble.  Next up, the car bubble?
Exactly what I was thinking. Easy credit causes car prices to go up, while at the same time everyone has negative equity in their cars and could just default. That can't be a good thing.

No Name Guy

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Re: The eternal car loan
« Reply #9 on: April 09, 2013, 03:12:42 PM »
Damn....came here to post this one as well.  Looks like I'm very late to the game. 

James:  Google "subprime auto loans" and then "GM Channel stuffing" and yes, you will see that autos (and student loans) are the next couple of bubbles of debt fueled fun.


But seriously, there's no way a little obstacle like not having finished paying off the old car would prevent any Good Consumer from buying financing renting from the bank a new one.


Fixed that for you Jack.  ;-)

Kamikaze Emu

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Re: The eternal car loan
« Reply #10 on: April 09, 2013, 03:18:11 PM »
I love the first quote where she is talking about keeping her monthly payments a little bit lower so she can afford child care.  Then the details come out and she ended up paying $5 more a month, not to mention over an extended term. 

I guess the little one doesn't really need childcare that badly...

noob515

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Re: The eternal car loan
« Reply #11 on: April 10, 2013, 07:20:05 AM »
Damn....came here to post this one as well.  Looks like I'm very late to the game. 


Me too, lol.

I think she's using childcare costs as an excuse to justify buying a newer car.  Her new payment is only $5/month less.  If $5 makes the difference between affording daycare or not, then she has a lot more issues than a car payment. 

I assume her previous car was also purchased brand-new and financed, so it probably was still in good working condition.  She just wanted a new car.  I bet she trades this one in well before the 75 months are up. 

brewer12345

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Re: The eternal car loan
« Reply #12 on: April 10, 2013, 08:23:27 AM »
I love the first quote where she is talking about keeping her monthly payments a little bit lower so she can afford child care.  Then the details come out and she ended up paying $5 more a month, not to mention over an extended term. 

I guess the little one doesn't really need childcare that badly...

The way I interpreted the statement about keeping payments down is that this ridiculous loan allowed her to buy a more expensive vehicle than would otherwise be the case without increasing the monthly payment.

EMP

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Re: The eternal car loan
« Reply #13 on: April 10, 2013, 09:00:14 AM »
I love the first quote where she is talking about keeping her monthly payments a little bit lower so she can afford child care.  Then the details come out and she ended up paying $5 more a month, not to mention over an extended term. 

I guess the little one doesn't really need childcare that badly...

The way I interpreted the statement about keeping payments down is that this ridiculous loan allowed her to buy a more expensive vehicle than would otherwise be the case without increasing the monthly payment.

How can you be a loving parent in anything less? What kind of abusive hippie asshole drives their kid around in a Corolla?  /sarcasm

Jamesqf

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Re: The eternal car loan
« Reply #14 on: April 10, 2013, 12:12:17 PM »
Well, I guess it's sorta ok as long as it's a NEW Corolla :-)

Forcus

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Re: The eternal car loan
« Reply #15 on: April 11, 2013, 10:24:08 AM »
Humm...  We've had the housing bubble.  Next up, the car bubble?

Interesting... Would love to snatch up a repo'd newer car at half price.

menorman

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Re: The eternal car loan
« Reply #16 on: April 12, 2013, 02:09:59 AM »
Humm...  We've had the housing bubble.  Next up, the car bubble?

Interesting... Would love to snatch up a repo'd newer car at half price.
Good luck. I hear that the economy has "picked up" enough so that repo companies are nearly going under in some places. People are paying their loans more, but banks apparently are also using repossession as a true last resort and spending far more time trying to coax out money in other ways. Still, if you have cash, that talks like nothing else will.

the fixer

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Re: The eternal car loan
« Reply #17 on: April 12, 2013, 09:31:56 AM »
NPR was discussing super-long-term car loans this morning (I think it was on Marketplace Morning Report, but I can't find it on their website)

The guy they were talking to about it was saying that it will be worst for the people taking out these loans, but the car loan industry isn't big enough to bring down the whole economy or anything like the housing crisis.

Forcus

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Re: The eternal car loan
« Reply #18 on: April 12, 2013, 09:59:40 AM »
Good luck. I hear that the economy has "picked up" enough so that repo companies are nearly going under in some places.

Oh, it wouldn't be right away. It would be the next economic downturn when all those people with no equity in their vehicles are faced with a payment they can't pay, and they can't sell because they would have to bring money to the table.

capital

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Re: The eternal car loan
« Reply #19 on: April 14, 2013, 04:31:24 PM »
Ally Bank used to be known as GMAC, and is GM's finance arm. They're able to offer their high interest rates by making money on car loans like this.

Reepekg

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Re: The eternal car loan
« Reply #20 on: April 15, 2013, 04:16:21 PM »
Ally Bank used to be known as GMAC, and is GM's finance arm. They're able to offer their high interest rates by making money on car loans like this.

*Mind blown* I always wondered how they could pay their interest rates.

grantmeaname

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Re: The eternal car loan
« Reply #21 on: April 20, 2013, 09:16:25 AM »
Ally Bank used to be known as GMAC, and is GM's finance arm. They're able to offer their high interest rates by making money on car loans like this.

They don't pay these interest rates because they want to. They're dramatically undercapitalized right now (too many loans, too few deposits), which is why they failed that Federal Reserve stress test last month.

MrsPete

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Re: The eternal car loan
« Reply #22 on: May 02, 2013, 08:23:45 AM »
For me, the grabbers were: 

- She's added in several thousand dollars from her old car to the loan, meaning she was underwater on that loan.
- She gave the excuse that she needed to lower her car payment, yet pays $5 more now.  Is she completely stupid? 
- This car won't be paid off 'til the child enters first grade.  Actually, you and I know that this car will never be paid off; once she has a second child, she'll "need" to move up to a minivan or SUV. 


I don't feel badly for having financed my first two cars.  I was still young and poor, and it was what I needed to do.  BUT I drove them 'til the wheels fell off -- and I saved.  Each car limped along about two years longer than I expected it could, and those were big savings years.  I was never young and stupid. 



menorman

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Re: The eternal car loan
« Reply #23 on: May 03, 2013, 12:48:40 AM »
What's arguably even more striking about the story is the lack of information about the car she's replacing. It only mentions that the new payment is $5/month more. But was the old car still running? (Relatedly, did she trade it in?) How long was left on the old loan? Why does she even need a new car? Of course, those type of questions wouldn't help people feel better about their own $6k/year worth of car payments, so they don't get asked.