Isn’t this the case beginning with the first month of buying a car (on loan)? The car depreciates drastically as soon as it’s bought, making the car loan “underwater”.
>>Sandra Rivas, who is 38 and works for a bank in San Antonio,.. is $5,000 underwater on a 2018 Toyota Camry Hybrid and is tired of making $648 monthly payments on a loan with a 14% interest rate.
>>“It’s a little ridiculous when you sit back and look at the numbers,” she said. “It’s like how much am I paying you? And how has my loan amount not gone down?”
You’d think that someone who works for a bank would understand how interest works.
Car prices rise: It’s bad news.
Car prices fall: It’s bad news.
The hankering for misery on the part of the press is a bigger part of the misery than many will admit.
So? What does being “underwater” on a car loan even matter? Pay it off, drive it ten years after you pay it off.
This is why I drive a 16 year old Subaru with 240,000 miles on it.
New car prices are a ripoff. And “high mileage” cars are not what they used to be. You can get a reliable, high mileage car as long as there are records of maintenance over the life of it.
The last car I bought was a 2005 Nissan Altima. I paid cash for it at the time because I had the money back then. I kept that car for almost 15 years, then traded it in to lease a 2019 Nissan Sentra. Three years later, I turned that car in to lease a 2022 Nissan Altima. I’ve had the maintenance package, and damage coverage with both. At 76, I’ll never buy another car. If I die during the lease, all my kids will have to do is take the car back to the dealer. End of story.
The average new car price is almost $50K. The average new car loan rate is now over 7% (5% - 14% depending on your credit). To afford a new car (along with their skyrocketing mortgages, rent, groceries and gas), many buyers now get 6, 7 or 8-year car loans.
Monthly payments for a $50K car at 7% for six years are $852 per month. At the end of the first year, you still owe over $43K. You still owe $35,600 at the end of the second year and $27,600 at the end of the third.
If you calculate the same loan terms over seven years (though generally you have to pay a higher rate for a longer loan) you get payments of $755 per month. At the end of the first year, you still owe $44,263. You still owe over $38,110 at the end of the second year, and over $32,500 at the end of the third.
Meanwhile, on average, new cars depreciate 20% the first year and 15% each of the next four years. That $50K new car will be worth only $40K after one year, $34K after two years, and $29K after three. So, you will be under water over two years with a 6-year loan and over 3 years with a 7-year loan.
Thanks Brandon. Why don't the sheeple realize how great Bidenomics has been?
Stupid thread. So a guy bought a car a few years ago with a 2% interest rate. What’s the big deal?
I’m glad Mrs. Chandler insisted we pay cash for our last car. I didn’t get the car of my dreams, but I didn’t get payments, either.
Here comes the next bailout, after student loans.
My husband has been in the car business for over fifty years. His clientele is almost all repeat customers and referrals. During COVID and even after there has been limited availability,parts and the dreaded “chip” shortage. Many new cars were selling for “over sticker” prices and used car prices were ridiculous. He cautioned people about buying unless they absolutely had to because they would be grossly upside down when the market corrected. This is no joke, high profile SUVS were selling anywhere from 20k to 50k over sticker.