The Debt Bubble Expands As Auto Loan Amounts Hit A New Record

Tyler Durden's picture

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

Is anyone surprised that the poorest and least credit worthy of Americans are being saddled with piles of debt in order to buy new cars? It’s not enough that a generation of our citizens will toil pointlessly to pay off more than $1 trillion of student loans, we may as well add some other form of debt burden on top of it.

It’s hard to even imagine this is happening so shortly after the last credit bubble train wreck, but happening it is. Creative ways for people to purchase cars they can’t afford have been on my radar screen for some time now, and if you recall, I posted an article last April titled: Just Keep Dancing: Introducing the 97-Month Auto Loan.

Well the dancing has continued, and now we have Americans borrowing at all-time record levels to buy cars. USA! USA!

From CNBC:

A combination of higher prices for new cars and relatively low rates for auto loans means Americans are borrowing a record amount to pay for their new rides.

 

According to Experian Automotive, which tracks millions of auto loans written each quarter, the average amount borrowed by car buyers last quarter climbed above $27,000 for the first time ever.

 

According to Experian, the average auto loan in fourth quarter 2013 was $27,430—an increase of $739 compared with the same period of 2012. The average used car loan was $345 higher, coming in at $17,974.

 

Those with non-prime credit ratings—or credit scores between 620 and 679—had the highest average auto loan. For these borrowers, the average new car loan rose more than $1,500, to a new high of $29,385.

 

Not surprisingly, those with subprime credit ratings—credit scores between 550 and 619—had the highest average monthly payment, of $499.

Yep, no doubt this will turn out just peachy.

The payments are rising despite an increasing number of car buyers opting to stretch their loans over six or seven years. According to Experian, a record 20 percent of all new car auto loans in the fourth quarter were more than six years in length.

 

J.D. Power said last week that February was on track to have one-third of new car auto loans last at least six years.

Oh, and in case you forgot, we are also bringing back subprime home loans.

Full article here.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Skateboarder's picture

The new car smell lost a quarter of its potency the minute you signed that paper.

Buckaroo Banzai's picture

Average new car price is $31,352. (http://www.usatoday.com/story/money/cars/2013/09/04/record-price-new-car...)

So this means that the average American puts about $4k down.

Hell this pig still has room to run!

The Juggernaut's picture

Does this mean that people will be living in their cars... or when they can't make payments, get kicked out of the cars they live in?

HyBrasilian's picture

COAL FIRED CHEVY VOLTS!!! [Run ~ don't WALK] to go into debt to buy one!!!... [if you RUN, then you'll be getting yourself IN SHAPE for when they eventually become PLANTERS ~ & SAVE yourself from 'Sweating with the Oldies' with ObamaCare's spokesfag]...

zaphod's picture

I paid cash the last time I bought a car, then again my new car didn't come close to $27K in cost. Seriously if you need to borrow to buy a car why buy an expensive one???

Then again I'm not benefiting from low intrest debt against an inflating currency, so the joke is probably on me.

camaro68ss's picture

the camaro gets 8 MPG, FUCK the VOLT bitchez!!!! hahaha

and guess what..... i put leaded fuel in it .....GASP!!!

Rukeysers Ghost's picture

Camaros are little economy cars for greenpeace fags. I run a 1976 Olds Custum Cruiser wagon with a 455 and a fuel line leak. I measure my MPG's in feet. Now that is living.

economics9698's picture

Both my car and suv paid.  I fucking hate car payments.

tarsubil's picture

Not if you use the car payment money to buy phyzz.

TruthHunter's picture

"Custum Cruiser wagon with a 455 and a fuel line leak."

 

Reminds me of a 560 SEL I had: it left a trail of dripping gasoline. Bitchin' hard to find a fuel pump...

Best car I ever had from 80 to 120 mph.

 

 It got 22 mpg at 80 ...til the fuel pump started to leak!

Didn't need no loan.. got it for 5% of new sticker price.

max2205's picture

Remember an Amerikan car will never outlive a 60 month loan

DoChenRollingBearing's picture

If you can stay out of debt when buying a car, as well as use your car for over three - four years, then you start saving real money.  This is obvious!

Drive the car two - four years even longer and pay down your debts.  Then you have money left over for gold, silver, other investments and even BTC.

It's not rocket science.  It just requires a tiny bit of restraint.

***

Same comments re housing.  Restraint brings big rewards.

Omen IV's picture

Question?

so in a downturn -- as the financed value of new car meets new highs - when massive defaults occur in used fleet - will the downturn in new cars  sales as well  - yield a better value / price for purchase given the level of profit is very high now and they will discount to get them  off the lot or is it better to buy used  - lets say 2-5 years old -  because the discounts to net value would be greater and therefore a better buy than new ? forget the issue of immediate decline in value as the car is sold

will spreads change?

 

Carl Popper's picture

Yes of course. But you dont have to get that fancy.

Simple rule. Buy a car and drive it until it rusts so bad you can see the road beneath your feet.

Spend your automobile savings on gold, hookers, blow, and booze.

You will be glad you did.

duo's picture

Just save up money for a new transmission at 80K miles, timing belt and water pump after that, and after the emissions warranty expires, be prepared for $1000 oxygen sensors and crap like that.

RafterManFMJ's picture

Yep, I've got an '05 Element ... had it inspected and had to cough up around 300 bucks for some work. I was not happy - then I had a laugh thinking about people paying 600 dollars...every month on their auto loans, and I then felt happy and warm.

Perspective!

Serfs Up's picture

....but...after hedonics are applied we discover that autos are a potent source of deflation to the average consumer.

Yay statistics!

pitz's picture

"Price" is so distorted by incentives (both official and unnofficial) that its pretty hard to tell what cars are really selling for.

Same thing with aircraft as well.  Discounts of 50% of "list" prices apparently aren't all that uncommon. 

Againstthelie's picture

I guess my used baught Yaris for 5k bucks and in cash does not even qualify as car for US debt slaves?

Dr. Destructo's picture

The fat kid in gym class has plenty of room to run as well, but will the fat kid have the energy to do so?

snowlywhite's picture

gimme a fuckin' break. When you read this site you'd think those people are buying them at gunpoint or are taking student loans at gunpoint(over here we don't even have the concept of "student loan")!

 

I search for older models exactly because the new ones are shit and brake in 3 years..

TrumpXVI's picture

...that would be, "and break in 3 years..."

Oh regional Indian's picture

No no, he brakes and then three years later he stops. Which is rather bad in and of itself. Would dis-qualify said vehicle for me immediately...

ori

BLOTTO's picture

You stupid cunts...I said to the boys on ZH chat - watch now the authorities will come in and try to take it back...like always.

ding ding ding

.

A California couple who found a stash of buried gold coins valued at $10 million may not be so lucky after all. The coins may have been stolen from the US Mint in 1900 and thus be the property of the government, according to a published report.

http://gma.yahoo.com/10m-gold-coin-hoard-found-yard-may-stolen-141317823...

.

Lesson to be learned - keep your fuckin mouth shut...and be happy when you find treasure.

K, carry on...

Carl Popper's picture

Dumbshits.

If you find a sack pf cash or gold never tell anyone. Just spend it slowly.

thamnosma's picture

How can you be such dumbasses as to announce to the world you found those coins.  Actualy, that couple has proven they really don't deserve to keep the stash due to utter stupidity.

TruthHunter's picture

"such dumbasses as to announce to the world you found these coins"

there are so many ways to fail your IQ test.

Stay in West Virginia, marry a hooker, borrow $100,000 for Liberal Arts Degree,

 

borrow 30Kfor

a new car when you have bad credit!

Oh regional Indian's picture

I think people are looking at these as future homes. How many repos will the banks do once it bursts, which it will...

Unless the devious plan is a broken windower's wet dream.

I always felt that automotive scrap yards in the US were like armed encampments.

ori

Renewable Life's picture

That is called GROWTH in the Kenyesian economic model!! When are you non believers gonna STOP calling it debt god damn it??

It works like this....Debt is Growth, Liabilities are Assets, Gold is Worthless, Paper is Money, and Inflation is Good!!! If these things don't make instinctual sense to you, your a fucking terrorist, or communist, or Prepper, or Anti-American!!

Now carry on and enjoy Spring Training and the new season of the Voice on NBC, ohhh and watch Cramer on CNBC too for great investing advice! Lesson Over!

pitz's picture

A few rags soaked in Methyl Ethyl Ketone, stashed in the car somewhere, can mostly replicate that "new car smell". 

tempo's picture

who gives a S, live for today before it collapses.

Stuck on Zero's picture

Oh man.  I feel bad.  My car is seventeen years old and has 173,000 miles on it.  Everyone's driving a fancier car than me.

pods's picture

Well my beater is on the second engine, but I have a "I get the Gold" bumper sticker so it rocks.

pods

mayhem_korner's picture

 

 

Just bought a 2010 car w/50K miles on it for $10K - $14K less than a new model.  Avoided the frontload on the cost/mile ratio.

Groundhog Day's picture

So lets see...a 7 year loan for 30k car...all financed@5% so a payment of 425/mo for 84 months = 35616...at which time the car will be worth 60% less.  Neg AMort. loans....NICE

Cygnus Nigri's picture

Just getting broke in.... My daily driver is 28 years old with 250k on it...

camaro68ss's picture

you got me beat, mine truck only 10 years old with 125K. Oil change every 3,000-4,000 miles like clockwork.

Now the camaro is 46 years old, on its 4th motor and has over 400,000 miles. what a junker. hahahaha

Cygnus Nigri's picture

The cool part is I _can_ live in it - 4wd VW camper.... Got it after my damn dodge truck needed a full rebuild and then a tranny at 105k. 

Sounds like a sweet Camaro...

 

detached.amusement's picture

the '99 sexplorer's got 115k and a stick shift, never gets stuck in the snow, still does over 100 when I want it. 

no car payment, priceless

Kreditanstalt's picture

Don't worry.  Cars are DEPRECIABLES.  You buy the cheapest one you can find, use it up & wear it out, then junk it and get another.  Like any other consumable... 

Againstthelie's picture

NO NO NO! What are you saying?!

1000 TV stations and 24/7 advertisements to get this reactionary stupidity out of the sheeple's minds and you are still ignorant? Or immune? Nevertheless they are not amused about people refusing to become debt slaves.

saltedGold's picture

Oh man.  I feel bad.  My car is seventeen years old and has 173,000 miles on it.  Everyone's driving a fancier car than me.

I love that feeling!  I drove a beater for 8 years.  When I bought it, it was in pretty bad shape, but I did all of the work on it and had it running well.  I was averaging mid to upper 40 MPG, sometimes average 50.  I would pull into work and people would harass me about my car.  I didn't care, I was making as much or more as them and I knew I was saving a ton of money.  Someone at work bought a new car and everyone else soon followed.  A lot of those people were replacing cars that were barely a few years old.  They're buying new cars to impress each other while I'm working on investing in my future. 

pitz's picture

22 years old here, 135k miles, and just about to drop a new fuel pump in it.  The odd friend snickers that it doesn't have airbags, but they love it when I pay for dinner instead of making a car payment. 

Johnny Cocknballs's picture

infinite growth forever!

FieldingMellish's picture

A free NSA-approved GPS in every one too. What's not to like?