Posted on 06/20/2014 2:39:59 AM PDT by Red in Blue PA
ut please appreciate how stretched non-discretionary car financing has now become. The following is per the Wall Street Journal:
“[The] average automotive loan term [reached] 66 months for the first time. According to Experian Automotive’s latest State of the Automotive Finance Market report, loan terms in the first quarter of 2014 reached the highest level since the company began publicly reporting the data in 2006. The analysis also shows that loans with terms extending out 73--84 months made up 24.9% of all new vehicle loans originated during the quarter, growing 27.6% since Q1 2013.
“The average amount financed for a new vehicle loan also reached an all-time high of $27,612 in Q1 2014, up $964 from the previous year. In addition, the average monthly payment for a new vehicle loan reached its highest point on record at $474 in Q1 2014, up from $459 in Q1 2013.
“ ‘As the cost of purchasing a new vehicle continues to rise, consumers clearly are stretching the loan term to help lower monthly payments, keeping them at a manageable level,’ ” said Melinda Zabritski, Experian Automotive’s senior director of automotive credit.
With maturities of seven years or more, car loans might better be called car mortgages. But as the Wall Street Journal report makes clear, it isn’t just lengthened terms that have been required. The report also said that lenders have lowered credit scores while lessors have introduced lower mileage caps. Just as we saw in housing at the top, lenders are doing whatever they can to lower the monthly payments to consumers.
Two weeks ago, I read a quote from the CFO of America’s Car-Mart in which he offered: “Our customers have never been more stressed, yet they have never had more aggressive financing options.”
(Excerpt) Read more at marketwatch.com ...
You can’t keep layering more and more burden on the consumer. Eventually, somethings gotta give.
Wages have been stagnant for the past six years, but in that time, the consumer has had to absorb the costs of the following policies:
Biofuel Mandate increasing cost of both Gas and Food
Additional required equipment on automobiles
Artificial shortage of used cars caused by Cash for Clunkers
Obamacare
Artificial water shortages in agricultural areas
Rising electric rates from the War on Coal
For people living paycheck to paycheck, these costs wind up on the credit card, because there is no other way to pay for them.
Nice graphic, but it’s more like a flood up.
Actually, I don’t attribute our problems to communism. Our problems are due unemployment due to stupid trade policies. We lowered the import tariffs till they are almost non-existent. We tariff 1% but tax domestic producers 10% on labor. So there is a large tax incentive to off-shore.
Nevermind that it’s stupid to have free trade with countries that have massive amounts of unemployment. You’re just asking to have your industries devastated and to import their unemployment problem.
And then there’s immigration, illegal and legal in a period of high unemployment.
On the whole, the economy has been screwed up for over a decade....going back into the Bush administration. When the North American Free Trade deal went through.....it dissolved various small industries around every state and destroyed all of those $10-to-$15 jobs that existed. In my home county area where I grew up....the paper mill finally shut down. The 1,000 employees were all local guys who grew up....had only a high school diploma and were pulling in $40k a year starting out (union wage) and the guys in the 50’s were making $75k a year. Their lifestyle is gone, and most were stupid enough to spend every penny they ever made.
The 2008 economic fall? The recovery? Non-existent. Look around at business operations shut down and banks that used to exist which no longer exist. Folks run their cars another two to four years longer than they used. No one buys magazines at the grocery anymore. The ten-day vacation era is long gone, and the best you might hope for is one extended three-day weekend at some non-expensive hotel in Reno or Orange Beach.
It is a full-blown depression, but they made such a happy event out of it....that you just won’t admit it’s that bad. And the fact that Wal-Mart continues to make profits ought to tell part of the story.
It’s been screwed up longer than that. We lowered the tariffs in the 60’s. Our real wages have stagnated since then. It’s just that free market economies do a pretty good job of reallocating labor to either the next most productive thing, or to new technologies.
We’re to the point now where new technologies are instantly exported. We shored up the economy during the Bush administration by lowering interest rates and credit standards to help housing. That created a mini boom in refinancing jobs. But that party couldn’t last forever. And an oil price shock took the legs out from under it.
But...but.... but... we keep hearing from the press that the economy’s bouncing back.
Not surprising. When you take a great portion of the middle class and relegate them to low-paying service jobs by shipping manufacturing overseas, this is what you get.
“Not surprising. When you take a great portion of the middle class and relegate them to low-paying service jobs by shipping manufacturing overseas, this is what you get.”
Agree. But, it’s concerning to see people financing autos for as long as 72 months and much longer. These people will never be right side up on these autos. By the time the note is paid off the car will be junk and worth little to nothing. It does say something about the sense of entitlement that permeates throughout our country though. Whatever happened to the notion of deferred gratification?
Starting with an old beater, then as one’s financial circumstances improves progressing to a better used car, then perhaps to a new one, etc, etc? Answer; gone baby gone.....
“Not surprising. When you take a great portion of the middle class and relegate them to low-paying service jobs by shipping manufacturing overseas, this is what you get.”
Yeah, you’re right. But, manufacturing companies must maintain cost and price competitiveness to stay in business. But, there is hope; should we (GOP) take back the senate during the midterms and then the presidency in 2016, perhaps we can open up drilling on public land, build the Keystone Pipeline, staff EPA with people with a brain, congress write some business friendly and growth enhancing tax laws, etc, etc. if this should happen then you would see manufacturing return to the US in droves. Hey, a guy can dream can’t he? :)
“When you take a great portion of the middle class and relegate them to low-paying service jobs by shipping manufacturing overseas, this is what you get.”
A lot of this is inflation as well; the government denies it exists to suppress Social Security increases, while at the same time cheering minimum wage hikes to deal with it.
The worst thing is that this story could’ve been released five years ago, but was deliberately suppressed. Anyone with eyes saw this happening, and either voted in response to it or bought the media lies about it.
“It does say something about the sense of entitlement that permeates throughout our country though. Whatever happened to the notion of deferred gratification?”
Owning houses, cars, or having children are a thing of the past for most American taxpayers; hopefully by now they realize this and react. In the meantime, they’ll rent apartments (who needs a home without children?), lease cars (always have a late model, but no title), and subsidize the children of the gibsmedats and illegals with their taxes.
I agree with you, but I’m hard pressed to look upon statistics related to new car financing as evidence of consumers in distress. It sounds more like the bigger problem is consumers who don’t know how to manage their own expectations.
That’s impossible, there is no inflation.
This is the dilemma we're facing, and bringing industries back here to the U.S. isn't going to change that.
We have a huge BMW plant where I live and they are always hiring. A lot of related industries as well. I imagine BMW gets all sorts of tax breaks, though.
“This is the dilemma we’re facing, and bringing industries back here to the U.S. isn’t going to change that.”
Umm, maybe. But, if the economic, fiscal and tax polices should bend the cost curve downward in favor of bring back mfg, then due to competition, prices would follow the cost curve. However, the most beneficial event would be the return of good paying jobs that would enable employees to return and/or remain in the middle class. Obviously, these higher wages earned would make various products, including autos, more affordable. That’s the theory anyway :)
It was the same way under slick willie. They were on food stamps back then if they were below E9 and had a couple of kids. Retired Military have had 2 small COLA raises, same as SS COLAS in 5 yrs, yet the prices at the base commissary now match the local grocery stores. Exchanges are geared to the Brass rank for 90% of products. Who has $65 for a Polo collared T shirt, or $45 for a pair of Docker shorts, or $200 for a Vera $3 china made wallet? Shoes are only very expensive brands. Cost rival any mall. Just no sales tax.
From the press?
For the purveyors of prevarication, the market has never been rosier!
Don’t staff the EPA, eliminate it. Let Interior cover what is needed on Federal Land, and let the States handle the rest.
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