New cars that are fully loaded — with debt

LA Times ^ | December 30, 2007 | Ken Bensinger

[Freedom_Is_Not_Free]

This article and many posted here about housing illustrate my fears for the longer-term economy. We are living on a structured economy of ever-accelerating consumer debt that is unsustainable. Yes, GDP is good. But you must look at WHY GDP is good. It has been good because consumers are saving less than ever and are willing to go deeper in hock than ever before.

Seven year car loans. Routinely selling cars upside-down on loans. Maxed out multiple credit cards. Routinely refinancing homes to consume disposable goods. These are not a prescription for long-term economic health. They spell out a short term boom. When the US consumer hits the wall of maxed out debt, the party will end and the economy is going to sputter.

I've more or less quit posting on the housing threads because I'm sick of the idiotic responses saying I'm just trying to talk down the economy. But I grieve thinking about the end-game when the consumer debt ponzi scheme comes to a halt. It won't be TEOTWAWKI, but it is certainly going to be difficult to continually grow the economy year after year when businesses can only sell goods in an amount proportional to incomes and not to a continually growing debt load as well.

I see some bad times ahead. Sorry for the doom and gloom, but I can't figure out how to reconcile this massive increase in consumer debt that is rapidly approaching critical mass, with a healthy long-term economy. I just can't.

Maybe someone can explain it to me.

[Puppage]

When Jennifer and Bobby Post traded in their 2001 Chevy Suburban last year for a shiny new Ford F-350 turbo diesel with an extended cab, it seemed like a great deal. Even though they still owed $9,500 on their SUV after the trade-in value, they didn't have to put a penny down.

Not to worry Jenny & Bob...the gov't will bail you out like they did for your home.

[Puppage]

but I can't figure out how to reconcile this massive increase in consumer debt that is rapidly approaching critical mass, with a healthy long-term economy. I just can't.

Well, you can't fix stupid people who spend & spend money they DON'T HAVE.

[caisson71]

If government was really “about the people”, there is a way out of our spendy lifestyles. If savings was tax free there would be more incentive to save than to spend - for most.

[Texas Eagle]

"We have no options," she said.

Yes you do. Stop paying on the vehicle. It'll eventually get repossessed and then you can start over. My recommendation would be you buy a piece of crap and use the savings to finance a brain transplant.

[wastedyears]

I want a car to come fully loaded with a very strong chassis, big block V8, bullet proof windows, and a good mount for an M249 SAW.

[Texas Eagle]

The Posts were a little worried about taking on such a long obligation, but they couldn't pass up a monthly payment under $700.

They couldn't?????

[Spktyr]

Um... this is a repost of the same article with the same title.

http://www.freerepublic.com/focus/f-news/1945963/posts

Can we get a lock please?

[Rightly Biased]

Debt is about bad habits and a microwave attitude.

Anyone that says debt is a good because I need it for credit doesn’t understand the basics of money.

And until businesses quit loaning to those that will never repay this will not end.

[al baby]

Thread cop

[Paleo Conservative]

If you can’t pay off a car in 3 years, you either need to look for a cheaper model or get a used car.

[Texas Eagle]

Even though they still owed $9,500 on their SUV after the trade-in value, they didn't have to put a penny down.

Sell the SUV yourselves. Doesn't everyone know by now that car dealerships don't give you squat on trade-ins?

They're in business to make money for crying out loud.

[caseinpoint]

Thanks for posting the article. We haven’t financed a car since 1990 and I had no idea financing was so reckless now. My kids are reaching the car-buying age and I really hope they consider the debt they might assume. As for hubby and me, we drive a 1984 Mercedes 300TD and a 2001 BMW 535i, both bought used, with cash. It’s the only way to go. We still have our 1990 VW Vanagon Multivan. Anyone want to buy it? ;o)

[Spktyr]

The other thread has 266+ replies already. Why do we need another, wherein we’ll get the exact same replies? :P

Normally I don’t care (because the search engine is so wretched) but this is ridiculous.

[Henchster]

"Well, you can't fix stupid people who spend & spend money they DON'T HAVE."

Nothing has changed for over 100 years. As Scrooge says:

"Fools who have no money spend it, get in debt, then try to end it. Seek me out to befriend 'em, knowing I have cash to lend them."

[Neu Pragmatist]

LOL !

[Catholic Canadian]

Insane isn’t it? $700 is the rent I pay on my apartment....unbelievable.....I’m shoveling away money with an expense that low, and these idiots couldn’t pass up that all for a stupid truck? Dumb dumb dumb.....

[Names Ash Housewares]

“Sell the SUV yourselves. Doesn’t everyone know by now that car dealerships don’t give you squat on trade-ins?”

Yep, that one always blows my mind.
Yeah selling a car can be annoying, but it is more then worth the time and effort.

That and people buying brand new that have no business doing so, mostly young people. They should be buying used. These days cars are far more reliable, it not an issue.

I didn’t buy new until I was 39 and could afford to pay for the whole thing, no financing.

Not to mention people never learn to do even the basic maintainance themselves.

[DB]

Money has been to easy for to long.

Now the value of that money is declining.

Interestingly, there is something to be said about being heavily in debt while the currency is declining. It is really the lenders that are going to eat it under these conditions. The dollars used to pay back the debt are worth significantly less than what they were worth when they were borrowed.

The opposite is true for those who have large cash holdings. If the value of the dollar declines 15%, they’ve lost 15% of the value of their holdings.