Posted on 09/14/2007 3:27:02 PM PDT by Hydroshock
Auto lenders refuse to put the brakes on risky loans, even as subprime mortgage lenders are skidding off the road.
Mortgage lenders are spinning their wheels as more and more borrowers with weak credit are unable to make payments now that their adjustable rates have reset. This has made it difficult for the lenders to unload new mortgages on investors, bringing their businesses to a standstill.
In the case of auto lenders, rate resets aren't the problem -- the rates on most auto loans are fixed. But the terms of these loans are getting longer as consumers stretch to buy more car than they can afford. Longer terms help to lower monthly payments, offsetting the impact of rising interest rates and allowing them to put less money down.
"Most consumers still come into dealerships and tell the salespeople that they want to pay a certain amount of money per month for their car," says Jesse Toprak, executive director of industry analysis for Edmunds.com. "That is probably the single worst way to shop."
(Excerpt) Read more at thestreet.com ...
The loans will last longer than the cars................
that’s why I am saving up 10k or more so I can purchase a Jeep Patriot, I only need to finance the other 10k. and it has lifetime warranty on the drivetrain I’d keep it till the wheels rust off.
As long as manufacturers make cars that last 10 years, financing for 6 or even 7 makes (some modicum of) sense. But if you’re buying some plastic windup roller skate and making payments for 60 months, you’re going to be paying long after that car is in the boneyard.
When people walk into a dealership and say that they “only want to pay a certain amount each month” for a car, the sales people salivate. Might as well stroll in there with a T-shirt that says “I’m stupid, please rip me off.”
I know. When I buy a new car (which is rare because I drive my in to the asphalt) I do not ever talk payments. I come in with a loan already set up. I know what my trade is worth and basically what their car is on invoice.
It’s even harder when you go with cash—getting a salesman to understand that you’re willing to spend $X out the door, total, everything included (and of course, my $X figure is always worked out with a good amount of bargaining room) is like pulling teeth. They just do NOT seem to understand the concept of “I will be paying cash for this. Today. There is no need to talk financing, or payments, or trade ins... CASH. Now. Deal or not?”
Well stated. Much better to learn the dealer cost--from Kelley Blue Book, Edmunds.com, or Consumer Reports--and then refuse to pay more than about $100-$200 above cost.
The important thing to remember is this: Whether interest rates are high or low, and whether it is considered a "buyer's market" or a "seller's market," the salesperson almost always needs the customer more than vice-versa.
The natural clash between a salesperson's interests and a consumer's interests is really an unfair fight--heavily weighted in favor of the consumer, just as long as he or she realizes it.
I beg to differ with this guy. I go in and tell them what I am looking for, and THEY keep asking me how much a month can I spend. They are really obnoxious about it.
The last honest guy I tried to buy a car from, the dealership owner fired him. I went in the next day because I liked the way he was dealing with me prepared to buy and they gave me a new salesman, because the other one “wasn’t really handling my sale properly”. I left.
When I was growing up a car seemed to last maybe 130K miles. They started to rattle about 70K and then slowly shook themselves to death.
The first Japanese car I ever bought was running like a top at that.
PS Right now I have a Toyota Camry and Honda Accord both at about 140K, and they run great.
A loan to get a car?
How quaint.
Yep.
Last year I had to buy a new car when my beloved ‘83 Camaro blew. It was uneconomically repairable. My son in law was nice enough to buy it for cash, and I bought a new Tiburon - with a 6 year financing. The only cars I could really afford were granny cars. I was fortunate to find 7% financing. It will be at least next year before I will have any equity. The current payoff is still more that the blue book value.
At least I now have air conditioning, power windows and a reliable car that really is fun to drive. It’ll burn out in the first two gears and sometimes squeak in third.
I just wish it wasn’t financed for so long a time - but I’m a poor boy.
my intrepid that I am giving to my sister has 165,000 miles on it.
It’s always good to go in at the end of the month - when the staff is trying to get their numbers up.
sign of the times.
Many modern cars will go well over 200K miles with a few repairs on the way.
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