Posted on 02/11/2015 9:03:36 AM PST by george76
More than a quarter of car buyers still owed an average of $4,257 more than their vehicles were worth.
Unlike a home, which can increase in value, a new car loses 11 percent of its value on average the minute it’s driven off the dealership’s lot. After five years of depreciation, the same car has lost two-thirds of its value and is typically worth just 37 percent of its original purchase price.
The problem is that many car loans now exceed five years. Although the longer loans mean lower monthly payments, they leave many owners with negative equity in a vehicle that continues to lose value over time.
And rolling the debt from an older vehicle into a loan for a newer vehicle just increases the problem, “like a snowball rolling downhill,” Edmunds points out. “If you brought a balance over from a previous car, you might never break even.”
...
Even some large banks have gotten into the act, making loans to customers with low credit scores and minimal down payments that, combined with extended warranties, dealer mark-ups and other add-ons, sometimes exceed the value of the car.
The practice is prompting fears that the $337 billion market in sub-prime auto loans, which are securitized just like mortgages, will “start blowing up.”
(Excerpt) Read more at cnsnews.com ...
That's why God gave us eBay and Craigslist.
Sheesh, keep the car longer than 60 months. Problem solved.
We keep ours 10 - 15 years. Five to 10 years of no payments is a God send.
This article must be featuring people who live on payday loans.
We buy 1-2 year old used with 10k to 25k on the clock. Save 25% to 30% over new price (let the other owner absorb the depreciation driving it off the lot). Put down 30% and finance for five years. Keep it 10 years or more.
Registration and insurance fees are a lot lower that way, too.
Not rocket science.
Dave says a lot of things
Anyway ... the used market is a gold mine to him because of his ability to analyze and repair for cheap
Boys USED TO come out of the womb clutching an imaginary stick shift ... today ... they get jobs that pay well enough to buy 'em and pay someone else to fix 'em when they're broke
I’m always entertained by people who will borrow $30k+ for a car. A car.
Or even worse, lease one. Signing a lease is basically just saying “Begin screwing me now”. You pay to get in, you pay every month you own it and then you pay to get out.
An example of what you are doing.
So you went into a stealership to buy a car that listed for $20k and you said “That price is too low. I want to pay $22,600 for it”.
That’s what happens when you finance a car.
“This article must be featuring people who live on payday loans.”
Yep, a lot of people have very poor financial judgement. The banks and financing companies are complicit in giving these people credit that they probably don’t deserve, though.
I take a minimalist approach to my daily driver, I have a 02 Saturn L200 which I got for $1250 for last year. It does what I need it to do and I factor maintenance in.
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