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So basically,
- Banks will repossess vehicles to try and minimise losses
- Banks will not be able to sell those repossessed vehicles, resulting in losses
- Banks may become insolvent as they are unable to liquidate the vehicles
- Government steps in to bail them out
New vehicle prices are not in line with their actual value, so banks are making loans that aren’t covered by the collateral. This is shit management by the banking industry. If it’s impossible to get an auto loan then vehicle prices will eventually fall as supply stacks up. Banks are feeding this cycle by being unrealistic in these loan assessments.
But… But price only go up?
The sky daddy book of economics says price only ever goes up and concentrated wealth is a good thingThis is what my partner and I call a “state’s right to what” problem. The centralized wealth says that centralizing wealth is good. Centralizing wealth is good for whom, Mr. Finance?
- Government steps in to bail them out *with tax money taken from the people who couldn’t pay their car note in the first place
So either banks make money or banks take money.
Well, yes and no. It’s grey like most things in life.
Banks and credit are a means to “grow the pie” by allowing us to factor in future value. Before banks and credit, the world was a zero sum game where one person only had because the other person had not.
They do serve a real purpose but are only valuable when properly managed.
Yeah that isn’t true. The world never ran on the mathusian nightmare. If it had everything would be gone by now. You see wild edible plants and wild edible animals. Also census numbers and tax revenues would have been stable. The people of the past had the same issues we had. They starved on fertile farm land, they had economic downturns, they had baby booms, farms would switch from high end cash products to cheap grains they could sustain themselves with and back again.
Banks aren’t doing us some favor by being the engine of economic growth. Every bank you see has become a corny capitalism abomination that makes most of its money lending money to people who don’t need it, government infusions, and fees. Even the things that you can point to like financing a home ignore that it is a disease that they helped cause and they are selling the cure to.
The people who couldn’t pay their car note in the first place usually ain’t the type making a shit ton of money. They probably pay little taxes if any.
So taking responsible people’s money then.
4 probably won’t happen. The mortgage bailouts were a bit of a special case, because the debt was rolled into securities and spread all over the place. To my knowledge there isn’t a secondary market for auto loans, so the scope is limited to individual banks.
What may happen is the FDIC guarantees all deposits like they did with silicon valley bank, which is less bad than a full on bailout.
Why wouldn’t they? You said it yourself, they will get bailed out. This is classic moral hazard. Once you remove risk of lose people will make decisions that are reckless.
Exactly. Consequences are necessary to curb reckless behaviour. That’s why the leaders of these entities should be punished separately.
Don’t forget people also not being able to go to work anymore potentially
Toyota is selling a basic (no ABS brakes, no airbags, crank windows) pickup in the rest of the world for $10,000. They could probably sell a version with the optional safety equipment in the US for $15-20k. But they will not sell it here and mess up the $50-100k luxury pickup gravy train.
At least they aren’t doing what the big 3 do with their trucks. A mid range XLT F-150 will cost about the same as a fully decked out Tundra, and a fully decked out F-150 will set you back over $100K, but these were sold for $50-$75K just before the pandemic, so what changed? They just decided to charge more due to greed.
I look at it as fleecing the assholes who buy those fucking things for vanity. Keep it up Ford and GM. Make them go fucking broke.
Maverick is okay, if you can find a hybrid.
I’d love a Maverick hybrid, but I just can’t find one for sale right now. They’re very popular apparently.
And also the chicken tax
They don’t sell vehicles without ABS in the US because they are required by law here.
Did you read the rest of the post where they mention a full US spec one would probably be $15-20K?
“Probably”
No one would buy that in the US.
I would
Me too. Otherwise, I am clinging to my '99 Silverado with 8 foot bed, single bench seat, and crank windows. (And no, it’s not my daily driver. I only use it when I need to move a Big Dumb Object, which is often enough in my line of work that it’s worth it.) I’m holding out hope that someone will finally make a usable electric work truck, but that chance was never that great and seems to be getting slimmer with each passing minute.
And before the fuckcars crowd jumps down my throat, my insurance charges me precisely $165 per year on this piece of shit, and it costs me $40 a year to keep it plated. That’s less than the cost of renting a U-Haul twice after you add on all their bullshit gotchas and fees.
My truck is a tool. It is not a vanity item or a luxury. Not only do I not need it to have leather seats, power everything, and a moonroof – I don’t want it to, because I will just break all of that stuff and it does not do anything to actually make the vehicle useful as a truck.
dude, where do you get your insurance??
Progressive.
It probably helps that I have 9 vehicles insured with them (7 of which are motorcycles). My truck is also probably worth less than your shirt.
ahh, it could be the multi vehicle discount. are you doing some kind of per-mile or low-driven-miles program? 'cause any beater truck just on liability limits is still almost double a regular car policy for me
Nope. I have the same full coverage as my other vehicles. (I haven’t tested just how “full” it is, though.)
Insurers use actuarial tables and byzantine math to calculate your premiums. Possibly their magic chart just shows that my make/model/year is low risk. For grins some time, get an insurance quote on a Dodge Ram (assuming you don’t already have a Ram) and a Silverado or Sierra of the same year. I’ll bet you a penny the quote you get on your Ram will be significantly higher. Despite it functionally being the same vehicle to you and me, to an insurer the Ram is the one statistically more likely to be owned by a drunk driver and/or a moron.
It’s the same thing with my FZ6R. That bike has a detuned R6 engine in it and gets from 0-60 exactly as fast as an R6, but its insurance premium is like a quarter as much. But more dudebros buy and crash R6’s, and only silly old men carefully ride FZ6R’s. Or something.
Oh shit, I want one soo bad now
Yeah there’s no way they’re ever going to touch the cash cow that is the Tacoma. If they had any desire to, they would have started selling the Hilux here decades ago.
The shift towards massive vehicles (SUVs) and trucks loaded to the tits with tech junk is to blame. Auto industry sold the idea to Americans that their fat ass needs a compensator instead of psychiatric help.
Nah.
It’s poor planing and over spending that is the issue. People who lease cars are on an endless cycle of never owning anything and always laying a premium.
Just actually buy a car you can actually afford.monthly payments on and drive the car into the ground. Every car in have owned has made it at least a decade and a 150k miles. Once you are done paying off take what the monthly payment would be and out it into two banks account split 20/80. Woth the 80% being towards a new car and the 20% being for repairs.
My wife’s Honda has over 300k and still runs fine and doesn’t use oil. We put $10k aside for an emergency down payment, but every month it keeps going we are a few hundred dollars wealthier.
I laugh at my buddies who constantly need to have new vehicle.
Too many see their car as a measure of their worth.
Funny thing is my wife bought herself a beat up 1980 squarebody pickup for hauling stuff around the farm and you cannot take it out anywhere without people stopping to comment it and she only paid 4k for it… Hell, we have near weekly offers from strangers to buy it off of us at a premium. I want to emphasise it is not some pavement princess it has whiskey wrinkles from past owners and plenty of rusty bits.
whisky wrinkles
Love it.
I have a most similar vehicle, a battered 12 year old F150 that started life as a Menard’s rental truck. The most notable feature about it is that it’s a long-bed, single cab truck that isn’t white. People who ride in it are either confused or enthralled with it’s lack of whiz-bang features. There are no power windows, no power locks, no keyless entry, no color touchscreen infotainment center, no CD player, and no carpet. It’s not driven every day because motorcycle, so it should hold up a long time.
I have a similar truck. It’s great for hauling junk around. I’ve had it since college. It used to be my daily driver. Now I have a commuter car, but I use that for errands. The thing is a tank. I also get notes on it all the time. I paid $500 for it 10 years ago. People have offered me $10k. It’s very tempting, but I love that truck.
Yea, I don’t think there is a dollar amount that would make my wife sell hers.
that’s what i’m hoping for with my 1st gen yaris, 100k and no signs of wear besides the 3 previous owners fucking up the clutch and synchronizer gears.
poor planing
well you got the poor part right
Buy what you can afford.
And if someone can’t afford a car, and they live within a car-centric area of the world, and they can’t afford to move?
Maybe they make a gamble and buy a car with the hope it will be an investment, and provide them with more income…
But when interest rates have been at near zero for over a decade, and now they have shot up - it could upset quite a lot of finances!
That’s one of the big problem with unwalkable cities, yeah. In Amsterdam, if you’re poor you don’t have to buy a car. Bikes are way cheaper than a beater car.
In the US, we’ve decided to design nearly all cities and towns to make life impractical if you don’t have a car. Just another way we fuck over poor people.
I see people who can’t afford a car trying to make it using an e-bike or a cheap scooter. Where I live, scooters are allowed to get up to 32mph, and e-bikes are limited to 20mph. That can make for a long, rough commute in any place except urban settings (where you have a fighting chance at public transportation), 55+ communities where everyone drives golf carts, or resorts, where traffic is usually painfully slow to begin with.
Name a person you know who over spends like this.
My brother in law and sister in law. They have two brand new leases and a house they can’t afford and have been borrowing money from my in laws to keep afloat.
Lots of people over spend this way. I had a friend who was making $700 a month payments on a used Mercedes suv as a new teacher.
Lots of people over spend on dumb shit.
People in power will squeeze and squeeze. They’ll crank up the interest rates. They want you to default on the equity. Take your payments and your car. That’s how they make their money.
Have to be sure they don’t repo a running usuable car, then.
I understand the sentiment but please leave us decent cars on the used market.
Car payments are a poverty trap. Save and pay cash for cars, it’s harder now that used prices are absurd, but it doesn’t change the math.
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You don’t need to drive a beater forever. At this level cars are basically worth the same you bought them for. A year of driving a 1k beater and saving 500 a month that is less than an average payment leaves you with 7k for a better car.
Minimum wage in most of the USA is $7.25. Working 40 hours a week, 4 weeks of the month is $1160 dollars before taxes and all the other bullshit. Where exactly is that $500 to save coming from?
Most people aren’t making federal minimum wage.
Less than 1% of Americans make federal minimum wage. However, despite your dumb take on the amount of money Americans generally make, I strongly agree that saving $500 a month is a complete possibility for many working Americans
I don’t see why they don’t just ask their parents for money?
It’s like people don’t even know how to take care of themselves.
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You’re buying bad cars, but that aside there’s a big range between your $500 shitbox and an overpriced $50,000 penis-extension.
Fyi, beaters can usually be sold for what you paid for them. Buy a beater for $1000, save for better car. Sell beater for $1000, and get $5000 good car.
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I’ve driven nothing but beaters and beater-adjacent vehicles all my life. Even though I can afford a nice vehicle now, I don’t waste my money. Good test driving and mechanical skill goes a long way.
Oil in the coolant? Coolant in the oil? White smoke? Run away.
Knock? Walk away. Lifter tick? Ask to knock the price down, flush oil. You won’t throw a rod bearing on a modern car because it was low on oil a year ago. If it somehow does, you bought a car for less than a car payment. If it lasted 2 months you’re still ahead and now you have a parts car, get another.
Always head straight to the scrappers and grab an alternator and starter, put them in the trunk for when one of them eats shit.
Learn to spoon tires or make a friend with a tire machine. Tires are a huge expense and used ones / takeoffs are nearly free. Haven’t bought a new tire in many years. Get a plug kit too.
Learn to recharge AC and identify a working compressor with no charge. Then hard ball on the price. “Broken” AC devalues the car terribly and is a $10 fix.
Standard transmission cars go for a song, especially with slipping clutch they are worthless, learn to change a clutch and you can have one for decades. My favorite beater was a 1985 Corolla I owned from the age of 16 to 26, bought for $400 sold for $600.
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Lol. You’re buying bad cars.
Okay, and your average person doesn’t have the knowledge to buy ‘good’ cars. Google can only take you so far, and RNG will still fuck a significant number of people even with knowledge. If your system requires people to have fairly in-depth knowledge in a field they don’t work in just to not get absolutely fucked, then your system is shit.
Your failures are your own.
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The other answer, from someone who used to buy beaters - you learn real fast what not to buy.
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Definitely they should.
The Magnuson Moss Warranty Act has given people the right to repair cars since the 1970s. Most people just don’t have the skills, time, or tools to fix them on their own.
There are no viable $1500 beaters anymore. Those vehicles now cost $3000-$4000. More if it says “Honda” or “Toyota” on the front.
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Okay, so two years ago. Currently the cheapest two used cars in my local market are a Civic with 348,000 miles on it for $2000, and a 2010 VW with a blown engine for $3000. Even a clapped out 90’s Blazer is $5000 if it runs. That’s what’s out there on Craigslist and Facebook marketplace. Maybe I can go hang around every shady parking lot in town looking to see who’s got a lower number soaped on a window someplace, but people in the real world tend to have to work during daylight hours.
And then: Okay, so you found one 80’s Chevy Nova that might run. You got extremely lucky. If, as the other poster suggested, you’ll treat it as disposable and plan to ditch it after a few months and “buy another,” can you do it again? That’s even less likely.
Used car prices are still too insane for poor people to be able to count on reliably finding and scraping by with a beater.
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Bold of you to assume that people have an extra $1500 lying around.
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And just cross your fingers that you don’t lose your job because you’ve called in 8 times with car trouble. Buying beaters isn’t the right path for most.
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that’s not the point. the point is that there are people who can’t afford to save money in the long run. not like metaphorically can’t afford, like literally mathematically cannot afford.
they are trapped by their existing financial burdens which they already cannot meet and which are getting larger every month thanks to compound interest.
inflation, which normally has the effect of reducing the value of debts over time, is instead making their financial burdens effectively larger too. as inflation drives up the cost of living, wages stay the same and they have ever less of their income available to make debt payments as a result.
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62% of Americans are living paycheck to paycheck.
Don’t play this ‘they’re not good with their money’ libertarian bullshit. People aren’t being paid very well and essentials have shot up in price.
Saving even $800 is beyond many people’s reach.
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Its funny how all you have to hear is “someone is broke” and you already have ideas about their moral character.
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How exactly would an engine “throw a cylinder”?
Typically it’s a rod but you’ve either never heard the term before or are being pedantic.
Or I’m literally just asking a question to gain some insight. I’ve heard the term thrown a rod, and I’ve actually worked on cars more than most people. But thanks for the unwarranted hostility.
Easy killer “how exactly would a car throw a piston” wasn’t exactly a non-hostile comment yourself.
some engines have cylinder sleeves that can be pushed out. Although, as another commenter already mentioned, they actually meant “throwing a rod”
when the transmission goes or the engine throws a cylinder?
You take the paperwork out, take the license plate off, and wave good bye to the car with “well car, I guess you are the local government’s problem now”.
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And? The penalty for abandoning a car is they haul it away.
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Stuff that never happens for $100 Alex. I have done it multiple times.
Congratulations on littering your shitty cars around your city. Do you just go to friends houses and leave a fat shit in the toilet for them to clean up too?
Yep, a properly maintained car can last you a long time. Thankfully used car prices in my country that are outside of the top 3 brands have very reasonable prices. My last car lasted me 18 years before we couldn’t use it anymore due to emission regulations.
The best option is to ditch the car entirely… buy an ebike instead for the price of 1 car payment, or move to an area with ample sidewalks/mass transit…
Definitely a big task, but is certainly more viable than buying a car with cash… (it most certainly was for me at least…)
The best option for single digdet percentage of the population
Ftfy
Not all of us are 23 years old, work from home, and live in hipster city. I love these alternative forms of transportation, I have a moped when I was a single and decent bicycle. It just wouldn’t be practical for me to deal with highways and picking up my kids from aftercare on an ebike.
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Mathematically it was much better to buy with a loan at a low rate. You’re paying less each month on a 2% APR loan when inflation is at 4-8% like it has been the past year.
Inflation doesn’t help you on a loan unless you are actually getting Inflation level raises, otherwise you have the same amount of dollars and everything else is more expensive. Also mathematically cars go down in value, so you are paying interest on money that you lost, making that loss greater.
That’s the whole reason this crisis exists, because Cara with 30k are being repossessed on loans with 40k in principal left.
It does help when you’re comparing it to someone with a big pile of cash to buy outright versus buying with a low interest loan. That cash can be invested and give you great returns while the cost of your loan goes down with inflation.
Even high yield savings accounts are giving ~4% interest right now with zero risk meaning someone with a 2% loan would be earning 2% interest on that cash and driving a new car while the person who bought outright is earning 0% interest while driving the same new car.
To further demonstrate the point using an extreme example, imagine you bought a brand new car 40 years ago for an MSRP of $5,000 with a 50 year low interest loan. You’d currently be paying that $5,000 loan using 2023 dollars which are worth 209% more than they were in 1983 while the loan is fixed at 2% (or whatever). That $5,000 cash you had in 1983 is now $15,000 in your bank account while you still get the benefit of driving the car over all that time.
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Dealers are starting to call around. They’re acting confident but they know the market has collapsed… they’re all trying to sell the last NFT.
they can hear the music and see the lack of chairs…
My dad found a rural lot near here where a bunch of dealers are parking inventory so they can still make it look like a shortage. One dealer still has $5k markups last I checked, but also still have the car I looked at ~5 months ago.
Lots are full where I am. I asked about one car a few months ago and they wouldn’t haggle. Tempted to call back and ask when they car’s lot birthday is so I can bring a cake.
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My wife and I bought a Nissan Rogue in 2020 for 22K. 2020 model with 1400miles on it. We paid it off in 3 years. Today with 35k miles on it the trade in value is 23k at the Nissan Dealership. What a crazy time in the industry!
I bought an 81,000 mile F150 for $12k in january of 2022, it now has 100,000 miles and I’m pretty sure I could sell it for at least what I paid for it.
So what I’m seeing is to find any way I can to short the auto lenders so when they declare bankruptcy I can finally be able to afford a car?
“ok Google, how do I buy a short position on auto lenders?”
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American banks fucking the world once again.
I don’t understand how people buy new cars. They cost like 1/4 of a house.
I mean it depends on what you’re looking for. For some the ability to have all the features they want and not have any small issues are worth the premium. You can choose what you value.
I think it’s a different argument where people buy products outside their means.
Hopefully. Maybe I wont see so many people who make very little money driving pickups so large they can’t even park them right and then returning them 4 years later to get an even larger one.
I have an economy car. My whole family fits it, it is already more car than I actually need. I bought it when it was 5 years old. I will repair it until the point it can no longer be repaired. At which point I will buy another reliable used economy car in cash.
A car is not an experience, it is not a status symbol, it is not compensation for your tiny penis, it is not for showing off, it is a machine that moves humans and goods from A to B.
I have known a retired accountant who lived in an apartment with an oversized pickup, I have known people who make $11 dollars an hour with a bright shiny pickup, I have known a small retail store manager drive around in a Hummer they got modified to look militarish-copish, homemakers with one kid with a SUV that sits 8, people on the verge of bankruptcy telling me how they will be rich restoring a mercedes from the 70s.
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It’s ok if they are actually spending their own money, the issue here is that those people have no self control or financial skill as they drive a vehicle they can’t afford because the dealer happily drags then down the drain and they believe his lies.
Dumb idiots shouldn’t be dragged down for their whole worth, people who don’t know how to money need help.
But seeing how the average american only cares about: “muh guns, murica” i’d say good luck as a nation to fix their dumb dealers filthy tricks.
Money doesn’t grow on trees, it needs to come from someone and that someone tends to be the tax payer when shit hits the fan.
Stop defending your own future downfall for the sake of some minimum wage workers Hummer H1.
Fine they are entitled to their dumbass views and I am entitled to laugh at their dumbasses when their life sucks. Which for most “sports utility vehicles” it already sucks due to micropenis.
My wife’s head gasket went and we had to decide do we get a new car or replace the entire engine and the fact the engine was the better option these days is just wild. Those new monthly payments are wild
I mean, that kinda makes sense? An engine should be cheaper than a whole car, shouldn’t it?
Ya but usually to justify doing large jobs like these you gotta weigh out how much your repairs are annually and if you put more work Into a car a year than the cost of a car payment per year it use to be betrer to just get another car.
Where are we on the whole used car market thing? This could get wiggly if tons of people can’t pay their car note, but for at least the first few they might actually be able to sell and turn around some money. Not a ton, mind, but until recently it was a given that your car is worth less than you owe on it.
We were in the market for a new car about 6 months ago. I wanted to buy used, but a used version of the exact same car (except a year or two older, obviously with mileage) was roughly the same price as the new car on the lot. Needless to say we bought the new car
This is because the Banks, and dealers are floating the losses.
COVID pumped prices up so a 2015 car had a loan taken out at 35k and now it’s been repo’d. If a bank/dealer takes less than 35k then they have to write that loss on their books. So it will remain on the lot until the lots are beyond capacity.
People were buying a 2015 car for 35k. Driving it home, calling their lender and saying because COVID they need forbearance. They drive that shit around for 6 months and then right up until it’s repossessed 90 days later. Having driven a car around for free for 9 months. Leaving the bank with a 2015 Chevy Cavalier and a loan of 35k. Ain’t nobody realistically going to pay 35k for a 2015 Chevy Cavalier.
Even if they wanted to pay it off. Financially they couldn’t. They made $17/hr but nobody checks that. They take your word at the dealership.
We’re going to see the 2008 of car prices for the exact same reason.
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Used cars are still more expensive than their new counterparts, at least in San Diego. It’s almost cheaper to buy a classic car than a used car in many cases.
