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The Debt Bubble Expands As Auto Loan Amounts Hit A New Record
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.
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The new car smell lost a quarter of its potency the minute you signed that paper.
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!
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?
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]...
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.
the camaro gets 8 MPG, FUCK the VOLT bitchez!!!! hahaha
and guess what..... i put leaded fuel in it .....GASP!!!
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.
Both my car and suv paid. I fucking hate car payments.
Strong Dollar Policy.
Not if you use the car payment money to buy phyzz.
"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.
Remember an Amerikan car will never outlive a 60 month loan
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.
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?
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.
I'm with Carl.
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.
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!
....but...after hedonics are applied we discover that autos are a potent source of deflation to the average consumer.
Yay statistics!
"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.
I guess my used baught Yaris for 5k bucks and in cash does not even qualify as car for US debt slaves?
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?
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..
...that would be, "and break in 3 years..."
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
yeah, saw afterwards ;)
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...
Dumbshits.
If you find a sack pf cash or gold never tell anyone. Just spend it slowly.
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.
"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!
There is an edit feature...
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
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!
A few rags soaked in Methyl Ethyl Ketone, stashed in the car somewhere, can mostly replicate that "new car smell".
who gives a S, live for today before it collapses.
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.
Well my beater is on the second engine, but I have a "I get the Gold" bumper sticker so it rocks.
pods
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.
This must be your theme song, then.
http://youtu.be/hjBd8_q_JQE
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
Just getting broke in.... My daily driver is 28 years old with 250k on it...
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
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...
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
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...
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.
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.
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.
infinite growth forever!
A free NSA-approved GPS in every one too. What's not to like?
Probably comes with an ability for the government to shut the car down as well. Every car a bait car.
My beater is paid for and gets 38 mpg.
A 97 month car loan? Basically you are upside down the entire loan.
I wish someone would point out the "correlation" between easy credit and higher car prices.
Like housing and student loans.
pods
I wish someone would point out the "correlation" between easy credit and higher car prices.
+1
...and the correlation between easy credit and higher home and college prices. And just about everything else.
correlation = 1.0 between easy credit and national tyranny, global hegemony.
I wish someone would point out the "correlation" between easy credit and higher car prices.
Like housing and student loans.
Right on Pods. Go back in time long enough, almost nobody would ever consider getting a loan to buy anything. Then some people started getting mortgages for homes, but they were really short term, 1-5 years max, but people would never consider getting a loan for a car or anything else. As time went on, mortgage terms grew to 30 years and car loans became common, but short term. Now car loan terms are getting longer and many people accept it as normal. Same with college. 15 years to pay off this student loan, sign me up! Anyway, I'm absolutely SHOCKED at the price of new vehicles, but I understand that it's the new normal since 95% of buyers are doing so with a loan. Like a house, they just check to see if they can afford the payments.
If you like your unstable economy, you can keep your economy unstable?
"Well the dancing has continued, and now we have Americans borrowing at all-time record levels to RENT cars. USA! USA!"
Yeah - I bet they don't buy US made cars though...
Used, used, used.
Only idiots buy new and only idiot zombies lease.
Debt.... It's what's for dinner. You have to love paying $37,000 for that $ 30,000 piece of shit that will fall apart before the loan is paid off.
It's my god-given right to own a Bentley and pay for it with my EBT card, dammit! Denying me that is raysiss!
Propaganda, propaganda, propaganda ... and people even pay for that.
My daughter has a friend who has had two cars repossed in the past. She just got another car loan at 24% interest!
I have an 8 year old Prius and...drumroll.....a 26 year old Ford F-150. Hey, my truck is eligible for "antique" license plates here in PA!!
maybe it's just me, but I never saw a Prius without an Obama sticker on the bumper.
If you spend any time on the hybrid car websites, what you will learn is that the political affiliations of hybrid owners has been polled and researched. It turns out that Prius owners break down roughly 50/50 Republican vs Democrat. This never surprised me, but maybe it surprises some people. But your observation, in fact, more or less matches my own in that more Liberal Prius owners advertise that fact with bumper stickers than Conservative Prius owners....Liberals just need to be more obnoxious; that's all.
I don't know about that, the ones without the stickers are probably the republicans, of which I know 3 that drive Prius's. They also are not of that bumper sticker in your face mentality though.
On the other hand - Subaru - never have seen one w/o an Obama sticker.
Barry should jump on this and create a "Peoples Car" that everyone can afford! ..... wait, I meant ObamaCar, sorry.
(for any young people reading this, I'm making a thinly veiled reference to Hitler)
When he raises minimum wages, the expensive cars will become cheap!
Reporters get a cheaper loan. ESP on mercedes
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If you are borrowing $27,000 to buy a new car, you are upside down in that mortgage as soon as you drive it off the lot.
#winning
This is my long term plan. If I see my collapse is imminent. I plan on getting a Mercedes Sprinter and making it my home....lots of room to live in and looks good when I'm driving. ..... then find A 24/7 fitness center and park nightly and shit, shower and shave ....(maybe even pick up a girl on the treadmill and take her back to my pad )
Don't do it. Diesel is DIRTY!
No, but seriously those Sprinter vans are solid. But one thing I'll never understand why they tried so hard to Americanize a uniquely European platform with names like Freightliner and Dodge Sprinter. It's a Mercedes dagnabbit.
I have a Nissan 300ZX from 1990 with 200,000k. Still Beautiful Timeless design and don't feel car envy from even Maserati or Ferrari or Lambos and I live in Newport Beach. She runs great still and can keep up with all of them. I rather invest in Gold than pay for a car payment. Hate Carpayments! At least I can Say I actually own all my cars.
Can I has 97 month loan with 0% APR? Please sign me up!
Sure, just as long as you don't buy one of those 50 mpg clean diesel cars with the cash. Diesel is "dirty". In the US we buy lead batteries with wheels instead...they're GREEN plus it's for the children. IT'S FOR THE CHILDREN.
Can they give thier Car to thier School Loan shark and call it even?
With all the new stock market highs the top shelf autos are doing the best. Extereme wealth for the top 10%.
My DD is 23 years old, has 320K on it, and was bought for cash when it was 5 years old. I maintain it myself, and spend less than $250 a year on maintaince. So no sales taxes on parts and service. I pay $11 per year in California registration for the portion based on the vehicle's value. A $30,000 vehichle has $600 in value-based fees the first year.
Starve the Beast
The loan durations people are commiting to are completely insane! I remember when a 60 month/ 5 year loan was considered pushing it. These long duration loans are on new cars, so they depreciate 20-30% as soon as they're registered.
When interest rates go back up, and they will. The shit is going to hit the fan big time.
i take out 60 month low interest loan and pay it off in 18. banks love that. NO BONUS FOR YOU!
The number of Benzes especially I see around here surprises me, and I live in a city that is pretty poor by American standards. It's a kinda fun game to get a look at the person driving it and guess from the other cues whether this person really can afford this car. Granted a good portion of them are probably leased. But so many people still get sucked into that game of flash. The few people I know have money, don't drive Benzes.
po people who lease autos amuse me
Leasing is much cheaper than buying unless you drive more than 1,000 miles per month. If you do you may find leasing two cars is just as affordable as buying one.
The money you save with 3 straight 36 months leases is enough to buy your next car in cash.
Not so much Mercedes, but I've known many a'dentist and doctor who have experienced significant short-term financial setbacks by getting involved with BMW claptraps. Usually the mission capable rate of such cars is so inadequate that after a few months, a Chevy or a Ford additionally appears in the driveway, strangely enough.
Everybody needs to pile into as much debt as possible. Keep the ponzi alive for a few more years. I dont have enough gold yet.
Get to turning that hamster wheel, bitchez.
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.
If you think most of these folks have any intention of ever paying any of this stuff off you are crazy. Auto finance manager I know was telling me how they come in, expecting zero interest car loans and are shocked there rates are now double digit because they never made payments on their original zero interest loans.
WHAT? Like you mean we have to pay for this shit?????
Worse, the cars now have disposable engines that WILL NOT outlive their loans, and the rest of the vehicles now are elegantly designed moving components to fall apart at about 200K miles max, in the very near future all the cars will be either brand new, or very old, there will be no cars "a few years old" and no "fixers", replacing everything will just be too expensive.
Look at the new aluminum F150 "it's recyclable" its designed to be shredded, not last indefinitely like the previous 100 years vehicles.
Engines are the least of the problems these days. Its all the other stuff.
edit delete
I was at a local retail store last night, and I overheard a customer talking to a store employee about a big financial decision he (the customer) had to make. He was either going to purchase a new car or throw the money he had into the stock market. He claimed that he had enough cash to buy a total of 1,000 shares of stock (spread among certain companies), and then he would wait a few years until the average share price of his stocks had risen $100 per share. He would then book a $100,000 profit. He did not even CONSIDER the possibility that he might lose money. That is a common mentality of many people these days in the FVCKED UP marketplace. I remember the late 1990s when there was a similar sentiment among investors. That ended poorly for many.
FedFUBARtoHell.
Engine leasing and "power by the hour" arrangements can't be far behind. Already very commonplace in the world of aircraft leasing.
I drive a 2007 A6 that now has nearly 186K on it. Keep the fluids fresh and it'll run a nice long time. I bought it in 2008 as a lease return someone gave up, and it's way way paid off.
And I'd BETTER get another 100K miles out of it.
There is a market for sub-prime auto loans.
There are four US companies selling special sub-prime auto loans. The terms of the loan require the borrower to agree to be tracked. A GPS tracking device is installed in the car. The underwriter partners with a recovery service and the loans are similarly bundled with insurance and sold as an investment grade security. The tracking devices are primarily manufactured by Montage Systems in SoCal and are pretty sophisticated. They're about the size of an USB memory stick and easily concealable. The buyers agree to be tracked but most have no idea the tracking is occurring.
I am a conservative that drives a Prius listening to 90s rap music and I enjoy contemplating the end of the (economic) world. I also have a BMW. Bought both used for 1/3 of what they were new, paid cash. The only way to buy a depreciating asset is in cash.
Too bad house-owners wouldn't understand the same. Most are caught up in the delusion that houses are appreciating assets.
More like a depreciating LIABILITY, no? I only buy used...two, three years old under 40k miles. Best value for sure...by far.
Next car? Boring Toyota Corolla. Only when my Highlander dies...not for a while.
Fuck new car dealers. Why not, the factories are jamming them with inventory.
olduvai in used vehicle sales 45% of the loans are sub prime (secondary or lower) including Buy Here Pay Here. Echos a similar number in the good 'ol US of A...
"It’s hard to even imagine this is happening so shortly after the last credit bubble train wreck, but happening it is."
If things were fixed, it would be hard to imagine, but banks are allowed to LIE about the value of assets, which means more of the same. A new bubble replaces the old one.
We must keep growing credit or it all collapses. All the Obama phone people drive newer cars than me. Where do they get gas money? 2002 with 188k for me, keep on trucking baby.
P.S. I'm having hell with this web site, are we about to go dark?
Murica. The land of car ass.
I have a gym membership on wheels. No car payment, No gas expense. Maintence Less than $100 per year.
I own a bike
Anyone who owns a car is a piker.
google Mr. Money Mousestache
Scary stuff.
27k$ - 29k$ average car loan?
Since 2000, I've probably spent that on 4 used vehicles, and still have 3 of them.
10+ years loans in the auto industry is becoming quite common.
My modest house is only a 15 yr!
Guys get with the program.
I will buy all your cars. get a new one every month, drive dwn to Mexico and will send you name of a guy ill give you 50% face value cash and then ship it to me in Asia. Put enough aside to pay for the next 12 month loan payments and get another one every month
In a year you will have $500,000 in cash and when the payments start stopping one by one thye will be chasing you. just tell them you parked it up somewhere and it vanished and clain the insurance or do what sensible people do, take your $500,000 and get a new life.
Just dont buy shit, get top of the range Mercs, Maserati Range Rover whatever, will buy them all from you 50% market value no questions asked and instant cash and will throw in a ticket to fly you home from Mexico
Subaru is the sign of a safe fuel and food pit stop, when the shtf.
98 Tacoma, 190k miles.
Modern economy is based on the principle of volatile cost of money which is not confirmed by produced goods and services. This causes inflation, debt bubbles and many other problems in freely functioning economic system. Here is good web-based service for people searching assistance in money issues.
And I think it is better to refuse from loans at all