Whenever I’m out on the road, I see a lot of new cars. I often wonder to myself: How the hell does everyone afford these things? I think I make a decent living, but if I were to take out a $50,000 loan on an average new car, there’s no way I’d be able to make it work without going hungry or having to move to Madison, New Jersey.
As it turns out, most of those people I see out on the road are actually in the same boat as me. But instead of buying something cheap and stupid, like a $3,000 Range Rover from a guy off Facebook Marketplace, they do the only thing they believe they can: Take out an enormously stretched-out auto loan so they can afford to make monthly payments.
That’s the crux of The Morning Dump today. There’s a lot to look at here, from Edmunds’ new report on how down payments have dropped to worryingly low levels, to the fact that auto loan delinquencies are hitting record highs. It begs the question: Where’s the limit?
What else? Sales data for the third quarter is continuing to roll in. Kia and Hyundai released their stuff yesterday, but today we’ve got Stellantis, which posted its first quarter of year-over-year growth for 2025. The government is officially shut down, which, depending on how long it lasts, could affect stuff like new car certifications for the Clean Air Act.
Then there’s Elon Musk, who just became the first person to ever be worth $500 billion yesterday. It’s a good time to be a billionaire.
The Average Down Payment Is Down To Its Lowest Level In Years, And Rates Aren’t Helping
Edmunds released its quarterly analysis on the state of America’s auto loan industry yesterday, which gives a good sense of where things are when it comes to affordability and the general health of the average American’s finances. And the numbers aren’t exactly reassuring.
The biggest highlight is down payments. They’re the lowest they’ve been in four years, and the last time was during the worldwide COVID-19 pandemic. The average down payment has tumbled to $6,020, a near 10% drop from where it was this time last year. From Edmunds:
“In Q3, affordability in the new-car market remained stretched, with buyers putting less money down, financing more and relying on longer terms to keep monthly costs in check,” said Jessica Caldwell, Edmunds’ head of insights.
How much longer are we talking? Well, according to the data, the average car loan term grew to 70.1 months in the third quarter, up just under two months from the same period in 2024. The 84-month term is a huge factor here; it (and any longer loans) accounted for 22% of all-new vehicle financing in the third quarter.
With average transaction prices hovering in the high-$40,000 range, buyers are taking out bigger loans than ever. Edmunds says the average amount financed is now $42,647, the highest it’s recorded. So people are taking out longer loans to keep their payments down, despite the higher overall costs.
But it’s not just prices that have people taking out longer loans with lower down payments. Interest rates have been pretty awful this year, with the average hovering at 7% through Q3. There are also insurance costs, which are expected to rise due to tariffs upping the prices on replacement parts. It’s a double whammy of added costs at a time when people are also forced to spend more on stuff like food and housing. Not great!
It’s unclear how much longer Americans will be able to sustain this. Earlier this year, 6.6% of subprime auto loan borrowers were at least 60 days late on payments, according to Fitch Ratings data published by Axios. That’s the highest number ever recorded since the firm started tracking data in the mid-1990s. Defaulting on a car loan is one of the worst financial things that can happen to someone, as this report released by the Consumer Federation of America explains:
[D]elinquency and default on a car loan are especially dangerous as compared to other forms of consumer debt. Because of how central cars are to our survival, being late on a monthly payment can rapidly cascade into disaster. Losing a car to a repossession is catastrophic and sends borrowers down a spiral of even more (and often increasingly expensive) debt. It can mean losing a job, reducing or eliminating income, and making it almost impossible to reinstate the auto loan or purchase another car, all while still being obligated to repay the debt for a nonexistent car.
That same report claims Americans hold a total of $1.66 trillion in auto loan debt, which feels like an infathomably high number. Indeed, the report describes it as a “breaking point” for auto finance. How or when we’ll see the results of that breaking point remains to be seen.
Here’s How The Government Shutdown Will Affect The Automotive Sector
The government officially shut down as of yesterday, which means most federal agencies are going to cease non-essential functions until Congress figures out how to make nice and pass a funding bill. What does this mean for the car world? A couple of things.
When it comes to the Environmental Protection Agency (EPA), it means retaining only 1,734 of the agency’s 15,166 employees. It could also mean a delay in certifying new cars for compliance with the Clean Air Act. From Automotive News:
Among the activities that the EPA said would stop are “conducting research and publication of research results unless necessary for exempted or excepted activities,” “civil enforcement inspections, unless necessary for excepted or exempted activities” and “issuance of permits, guidance, regulations, and policies unless necessary for exempted or excepted activities.”
That has raised auto industry alarm about whether the EPA’s Office of Transportation and Air Quality’s Implementation, Analysis, and Compliance Division and its Testing and Advanced Technology Division can maintain normal operations. These entities certify vehicle compliance with the Clean Air Act.
“A delay in certification of [2026 and 2027 model year] vehicles beyond their anticipated start of production would necessarily either delay their manufacture or result in the need to store built vehicles while they wait for a certificate,” Dan Bowerson, the Alliance for Automotive Innovation’s vice president of energy and environment policy, said Sept. 29 in a letter to the EPA. “Either choice carries significant economic consequences for manufacturers and could interrupt the normal supply of vehicles to the market, creating scarcity of some models and potential price increases.”
What about tariffs? Sadly, it sounds like my plans of slyly importing a Skyline from Japan while the government isn’t looking to avoid the extra fee won’t pan out.
The Department of Homeland Security’s contingency plan specifies that it “will stop all financial operations and financial system operations” except for “U.S. Customs and Border Protection revenue collections” and other exempted activities.
U.S. Customs and Border Protection collects tariffs and passes them on to the Treasury, so border agents will continue that activity.
Damn.
Finally, the Federal Highway Administration and the National Highway Traffic Safety Administration (NHTSA) will seemingly be unaffected. Spokespeople for each respective agency told Automotive News no employees will be furloughed since “compensation is financed by a resource other than annual appropriations.”
Stellantis Finally Has a Positive Sales Quarter
Is Stellantis’s turnaround finally upon us? CEO Anthony Filosa has only been in his position for a few months, but the company has, for the first time in 2025, seen year-over-year sales growth. Much of that growth might be people trying to get ahead of tariff-related price increases, but still, growth is growth.
Specifically, Stellantis—which still officially calls itself FCA US LLC in America—sold 324,825 vehicles in the past three months, an increase of 6% versus the same period last year. Ram saw the biggest year-over-year increase, with 26% more vehicles sold. While Stellantis doesn’t break down sales by trim, the new Hemi-powered 1500 likely had something to do with this, since, according to Stellantis, units took just five days to sell on average. If you know how dealer inventory works, you’ll know that’s incredibly quick. People really love their V8s.
Jeep was another winner, up 11% over last year’s third quarter. The Grand Cherokee remained the brand’s best seller, hovering at 54,553 units for the period (an increase of 1%). The Wagoneer and the Wrangler saw big increases (122% and 18%, respectively). Even Chrysler saw big increases, with sales of its minivans up 49 percent compared to the last quarter. The company expects the volume to continue as 2026 approaches:
“Fueled by sales growth across the Jeep®, Ram, Chrysler and FIAT brands, our U.S. sales saw strong results in the third quarter, including the month of September, which was our highest monthly market share in the U.S. in 15 months,” said Jeff Kommor, head of U.S. sales. “We are taking deliberate actions, including the highly anticipated return of HEMI® V-8 to Ram, the introduction of the all-new 2026 Dodge Charger Scat Pack and the return of the all-new 2026 Jeep Cherokee, a critical vehicle in the CUV segment, to keep that sales momentum moving forward, with all vehicles set to arrive in dealerships now through the end of this year.”
We’ll see how that shakes out, with tariff costs slowly creeping into every orifice of the car-owning process.
Elon Musk Just Keeps Getting Even More Insanely Wealthy
News of Tesla’s strong third quarter yesterday sent the company’s stock price climbing by 4%. Tesla CEO Elon Musk owns 12% of the company, which means the value of his shares grew by nearly $10 billion in the blink of an eye. According to Forbes, it was enough to push the 54-year-old South African’s net worth past the $500 billion mark.
Only $191 billion of that fortune is tied to Tesla, of course. Musk’s other ventures, like SpaceX and xAI Holdings (his AI company that merged with his X social media company back in March), make up the difference. As Forbes points out, Musk has been able to accumulate the vast majority of this fortune in just five years, having been worth “only” $24.6 billion in March 2020. Though according to him, the cash doesn’t matter:
If he keeps up that pace, Musk could become the world’s first trillionaire before March 2033, when the first of two vesting dates for his $1 trillion Tesla pay package hits. But according to Musk, that award isn’t about the money anyway.
“It’s not about ‘compensation’, but about me having enough influence over Tesla to ensure safety if we build millions of robots,” Musk wrote in a September X post. “If I can just get kicked out in the future by activist shareholder advisory firms who don’t even own Tesla shares themselves, I’m not comfortable with that future.”
Must be nice.
What I’m Listening To While Writing TMD
I’m not the biggest Scottish rock fan. In fact, I’m not really a rock fan at all. But Elon’s bag has me yelling DADA-DA repeatedly this morning as I sing along to The Proclaimers’ most famous tune, “I’m Gonna Be (500 Miles)” from the 1988 album Sunshine on Leith.
The Big Question
Would you take out an 84-month loan?
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If the terms were the most favorable to me, sure. Zero or very low interest for even longer means I can keep more of my money accruing interest while paying the loan. If what I can gain from my money drops below the interest rate, though, I’d want to be in a position to pay it off immediately.
Would I do it because it allowed me to pay $X/month and I feel like that’s what I can afford? No. That’s how you end up way underwater on a depreciating asset.
Who’s giving out 0 or extremely low interest loans for long term loans?
Last car I purchased, the 72 month option was the same low interest as the 48 month at my credit union. So I set it up with the 72 month. I ended up paying it off early when CD rates went down almost as low as the loan, but I had options. If longer loan terms become normalized, I wouldn’t be surprised to see the low/no interest offers on longer terms (for well-qualified buyers) more and more often.
I ask because I have darn near 850 credit and the best loan rate I could get was a 3.9% on a 60 month loan in 2022 – that was the same rate as a 48 month loan. I’ll be paid off in 44 months because any car I can’t own in 4 years is too much car (hence the darn near 850 credit.)
Yeah, I have near-perfect credit, too. Timing is everything on getting the best interest rates, but I am just saying I wouldn’t rule out a longer term (partially because you can always pay it off early) if the rate is good, not that I expect the rate to be near-0 regularly. I think my last rate was about 2.9, and I still ended up paying it off years early because I am only comfortable with a rate if I can get better rates on a CD, and it got too close. Also because I similarly don’t buy a car unless I have the means pay it off quickly.
Re: loan terms, it really depends on the rate. The last time I bought a car expensive enough to require a loan was 2021, and while I was thinking of a 36 or 48 term, 60 was effectively just a couple of basis points higher (something like 2.25% vs 2.29%).
Since I’m self-employed and my income fluctuates, the lower monthly payment was nice to have in case I had a couple of lean months, even if I was planning to pay way more than the minimum most of the time.
Even if it might have made more sense to invest my extra money in something paying more than 2.29% I hate debt and ended up paying off the loan right around the 40-month mark, which is about what I’d planned. So, would I take out an 84-month car loan? Maybe, but no way in hell would I actually expect to take a full 7 years to pay for a car.
This is the same reason I have a 30 year mortgage when I could have probably swung a 15 with a better rate. The rate difference wasn’t that much and it felt good to drop my payments to minimum when inflation got high enough to make the real rate negative.
Exactly this – I’d be doing the same thing I described above with my house, but I can get almost literally double the return parking what would’ve been extra principal payments into a high-yield savings account…
Even if you didn’t get the bonus of a lower interest rate with a 15 year mortgage the amount of money saved between 30yr and 15yr is huge.
$400k, 20% down, 6% rate, 30 years : $690k total spent.
$400k, 20% down, 6% rate, 15 years : $490k total spent.
$200k saved….
You would likely get a lower rate at 15 year Mortage making that savings even bigger.
Exactly. Most of the difference comes from avoiding the first tenish years of making payments that barely touch the principal.
I have no debt and that’s the way I like it; paid cash for a new car last weekend.
That’s what I did for my Leaf!
That’s what I did for my Prius!
I would not take out an 84-month loan to buy a car. I buy cars cheap enough I could pay cash if I wanted to. I use short term loans to avoid pulling money out of my investment accounts. I dislike owning money, but I don’t want to pay capital gains taxes and give up 8-10% (or more) returns to avoid a short-term loan with a low interest rate. I don’t want debt, but sometimes the math makes too much sense.
While I wouldn’t take out an 84-month car loan, I don’t have a problem with them if used responsibly. If an 84-month loan allows you to buy a 2025 Camry instead of a 2015 Hyundai, that might be a sensible decision if you know the risks and act accordingly (i.e. have a bigger emergency fund in case your financial circumstances change).
That being said, I get the impression most people are using long-term loans to buy a 2025 Range Rover when they otherwise could have bought a 2025 Camry. That seems like a bad idea.
The average for the best credit buyers is 64 months and the average for the lowest credit buyers is 74 months. So I would guess good credit shorter loans on more expensive cars to manage the monthly cost, and even longer loans on lower price cars due to lack of options.
Great credit doesn’t mean high income (income has no bearing on a credit score at all). You can have an 850 credit score and still not be able to swing a note without a longer term.
While its true that credit is not tied to income, there is a correlation between income level and credit level though. There is also a debt to income ratio used to set rates.
Those are entirely separate things from your credit rating. Your credit rating is really ONLY based on your usage of credit in terms of how much, what kinds, and your payment history. The credit rating agencies have no idea what your income is. You can be a minimum wage earner and have a very high credit score. Or you can be a billionaire with a terrible one if you never bother to pay your bills on-time.
When you actually apply for credit, your income may or may not be taken into account. I have never actually had to verify my stated income for a car loan of any length, and I have had a couple dozen of them over the years. Though if you don’t have top tier credit you will probably have to. Because of this, auto loans also usually do not take into account debt-to-income ratio for people with high credit scores. Much, if not most, consumer credit is given based entirely on credit score alone with no income verification, as long as you have at least “good” credit.
Obviously, a mortgage is an *entirely* different thing all-together. Or at least it’s supposed to be, with today’s more stringent requirements being a direct result of all the “liar loans” with no income verification that were given prior to the 2008 financial crisis. The Feds really cracked down on that, but only for mortgages.
I do think it’s indirectly tied, because a big part of the calculation is credit utilization and revolving credit available. So for high credit scores you need a lot of credit amount open for use, but to get those high limits you probably need high income, at least to get the cycle started.
You really don’t. You just need to pay your bills on time, over time, and keep the utilization of the credit you have low. Paying your credit cards on time or preferably early every month will do it. And not running a balance, of course. It’s really not that hard, the majority of people have credit scores in the 700s and up, and something like 25% are in the 800s. Once you get in the mid-700s you are pretty much golden. It’s like being the guy who was last in his class in Med School – he’s still a Dr. The real trick is just never, ever doing anything to ding it.
One key thing to know about utilization is that generally, most creditors only report to the agencies once a month, and usually when your statement is generated. So pay your bill before the statement date and your utilization will be lower than it otherwise would look like.
At my advancing age, I would probably come out ahead with a ten year loan.
Some one came up with a geiunally brilliant plan involving a semi-dererlict LM002, the logic was good, the legal stuff, not so much. “What do you care, buy the time I am twenty you will be dead” the plan was to lad me with debt and drive away. She was seven.
Amusingly, my Grandfather took out an unsecured and very low interest loan to set my dumbass brother up in a lawn care business. About $35K worth of equipment through the dealership. When he died, there was about a $25K balance left on that loan. And zero assets in the estate to pay any creditors (just them and some medical bills). Too bad, so sad for them, because my dumbass brother sure wasn’t about to cough up the money – he hadn’t even paid the Old Man back consistently. I was the executor, so I got to give them the bad news. You would think they would be smarter than to lend that much money on a 15 year low interest note to a man in well into his 80s at the time. He made it to 92. Sharp as a tack until the cancer got him, and I miss him every day even almost 10 years on.
My Grandparents had *stupendous* old-school pension income, but almost zero savings other than a house that they deeded to my mother before they died (within two months of each other). My grandmother literally took the last cent out of her IRA and died a week later. With those pensions, they didn’t really need savings. Between pension and SS, they made over $100K a year in retirement when they died. He used a HELOC on the house as his “savings” and had a life insurance policy just large enough to pay that off and pay the funeral expenses.
I’m relatively certain most people don’t understand car loans or leases beyond they pay $xxx/mo and get to drive a new vehicle. This will probably never change.
I would probably factor drivetrain warranty into the equation.
If a manufacturer will provide backing for the major drivetrain components, it seems that having a loan on the car isn’t terribly risky. So, for most major automakers, that’s about 5 years, right? Yes, I know there’s outliers with very long warranties (nearly 10 years in some cases) but the median warranty coverage would seem a good place to start for loan length.
The risk of being stuck with an unsellable pile that’s worth less than the balance owed on it rises when the coverage on the drivetrain ends. A drivetrain failure basically hoses one doubly at that point – still owe on the now undriveable car and have to shell out bucks for repairs or eat the loss of selling a non-running car.
There’s lot of good drivetrains out there, but the cost of a bad one with a loan hanging over your head is where I draw the line.
No. I’ll continue avoiding having any car payment as long as I can. I already made the choice to own several cheaper/interesting vehicles rather than one nice one. Image and prestige don’t mean much to me so I don’t mind driving an older car with a few imperfections as long as it’s still reliable.
I buy cars for less than the average deposit amount mentioned in the article and then still drive them for 6 years. I don’t like debt, so I avoid it everywhere I can figure out how to. My costs tend to stay so low on vehicles that even after insurance rates and repairs, I can get 10 mpg and still be spending WAY less per month on that vehicle than most people with newer cars and loans.
Yes yes all day all my cars are from the previous century. We have the spices commuter ionic but what do I care if my 99 RX gets 20 mpg? It’s paid for. It has 220,000 miles and is indestructible. It may last
Longer than me.
Auto loans haven’t reach the limit until they offer to do a reverse mortgage on your house to pay for the car.
Would I take out an 84-month loan?
Sure. For a house.
I had funds available to pay for my new EV last year. But taking out a 0.99% 72 month loan made a lot more sense than liquidating assets returning a lot more. Also, being able to use already installed and paid for solar to net meter the car plus a little spiff from the utility for managing my home charging means the impact on my finances is less than the loan payment itself would suggest.
Money is a game we have to play whether we like it or not. Learn the rules and play as well as possible.
The people buying cars on 84 month loans do not have the funds to pay for anything other than what they need to this month. What’s the percentage of the US that can’t handle a $400 sudden expense? They need cars and this is how they have to do it because the payment per month is the only thing they can plan for… one month of bills.
This is the way. Maintaining an excellent credit rating and making the most of your money is better than just avoiding debt entirely.
Money is a game if you have enough to play it. There are plenty of Americans who are buying a single roll of toilet paper from Walgreens because they can’t swing the whole pack.
Most Americans aren’t taking about longer loan terms so they can get a lower payment and invest the difference. They’re doing it because it’s literally all they can afford.
Practically every adult in the US is forced to play the game of money. Unless they decide to move entirely off the grid. Society decided that numbers on paper (or a screen) would replace things like gold or trading two pigs for a cow. Not having enough means the consequences of every move are more likely to be life altering than having enough for an emergency.
Like every game, the rules need to be defined and the players need an impartial referee.
It’s not a game if you’re forced into it. It’s life, man.
We’re all forced to participate. Learning the rules equals being financially literate.
Although given the abysmal state of literacy itself in this country, learning something a few rungs up from basic literacy may be incredibly difficult or impossible for some people. That’s why we need strong regulations and well funded regulators.
Yeah, I’m not feeling this analogy, sorry. There is no referee for poor people. And there are very few choices. They’re not strategizing a fucking game of chess.
The CFPB was returning billions a year to average people. That’s why it was hollowed out. I used it once when it was fully staffed. They got a predatory bank to amend their ways and helped me keep more of my hard-earned money.
I know, it’s not a perfect analogy. What do you propose?
Money is not a game for most people. It’s life or death. And those that think it is a game are part of the problem, so congrats.
It’s sure not a game in the traditional sense. That said, we all have to participate whether we want to or not.
There are rules and referees. Learning those rules and when to involve the referee is necessary for modern survival. Those skills used to be taught in public schools. The rules changed and lots of people are facing the consequences of those changes.
Those skills were never taught in public schools in any uniform or consistent fashion. And they still won’t be even as consumer finance class requirement gain steam because it’s focused on too basic of ideas.
Have to start somewhere. If kids can’t learn financial literacy at home, then where? Public school is the logical answer. I was required to take an economics class to graduate high school in the 00’s. Took it with a Mr. Rich, no joke. Those of us not sleeping learned a thing or two.
one thing driving the huge auto loans is the rates and issues getting a loan for a used car. New car loans are lower rate, and easier to finance because of the “value” of the car is better know, and the dealers have connections to move cars. For a used car, the rates go up, the value is harder to judge for lenders, and the limits on what they will lend on makes many people by new for less per month.
Imagine needing a car and wanting a 20k 7 year old one with 105k miles. It will last you 6-10 years, but the lender either will never loan money on it due to age or miles. So you are pushed to buy a 40k new car they will have nearly the same payment but for twice as long. Its a win win for the lender, they make more money on less risk.
The amount of folks I knew taking out 72 and 84 month loans years ago was staggering. The fact that I saw multiple of those same people roll negative equity into another long term loan just to go from an SRT to a Hellcat Challenger, or from an R/T to an SRT, or, hell, just for heated seats was even worse. I knew of someone paying over $1k / month on an 84mo car loan for a basic Charger R/T.
This made me quick to realize that if I can’t plop down a decent down payment with short terms or pay outright I shouldn’t be buying that car.
Wait, you don’t like Big Country and Simple Minds? For shame.
Or Mark Knofler. WTAF.
I’ve only ever did a 60m loan. That was my first new car and that was 11 years ago 🙂
I’ll do a 60m again, but I’m waiting for interest rates to come down.
I wouldn’t do 84 months, but I do allow a bit longer loans on brand new cars, figuring I’m likely to keep them longer. But then I always pay them off really aggressively, because I *hate* car payments. I’ve never actually taken a car loan to term.
I’ve paid my last 3 cars off early, and have every intention to paying off the GR-C at least 1-2 years early. If not earlier.
“Must be nice.“
Nothing about being Musk seems nice.
His kids agree.
Oh noes! Not Madison, New Jersey! 😉
I think it’s unfathomably, not infathomably.
Can we just all agree that it’s not good for humanity as a whole for one person to possess so much wealth? And then can we please collectively do something about it?
I’ve never taken out a car loan, and I only once leased a car, when I could do so through an S-Corp that I owned, so the lease payment was effectively about a third less.
Always liked the Proclaimers. 🙂
But but but… If you take money away from the rich people, that’s just socialism! What if you become that rich one day? Then they’ll be taking that money from you!
(/s, in case it’s needed)
😀
But but but… how am I going to have the money for all these robots which I’ll never actually have to pay for? Who wants to swim in a pool when you can swim in your vault of coins, okay Launchpad, just don’t crash the plane this time, please.
I think when people say, “You’re just jealous that they’re rich!” I mean … yeah I am a little jealous of people who have more money than me. Worrying about having enough money blows. But mostly I just think it’s disgusting that Americans have collectively decided that we are okay with reinstating the aristocracy.
Every loan is a cost-benefit analysis.
Simply saying a given term is too risky or too long as an article of faith is overly simplistic.
Cars last longer than ever, accordingly, many depreciate more slowly than before, and longer loans are less risky than many people’s conventional wisdom that may have been formed decades ago.
That said, if you are financially irresponsible, a loan of any length can be risky. I’d never encourage someone to take a longer term than needed, unless they can *both* get a better rate on investments *and* commit to investing the difference in payments over that time.
Personally 60-72 months has always been the sweet spot for me, I’ve never felt tempted to go to 84. That’s not to say I never would, but shorter term has usually worked just fine.
Very much agreed. Loans and leases are just a financial tool. They can be used wisely or poorly but are not good or bad in and of themselves.
Personally, I just HATE paying interest, and having to make payments annoys me, so I make loans go away as quickly as possible when it does make sense to borrow money.
I recently read a Dave Ramsey book; and while I didn’t agree with everything he had to say, his fear mongering about debt made an impact on me. Binding yourself to a loan for 7 years is a really scary proposition that I’m afraid most buyers don’t realize. It’s hard for me to say someone “should never…,” but I struggle to think of a situation where a loan greater than 36 months is ever a good idea. If you can’t afford the car, you can’t afford the car.
Besides all that, the average transaction price being in high the $40,000s is also wild when you look at the average income in US.
The big difference is if you have the money up front. Having the option to calculate the risk on a longer loan and invest is a lot different than just trying to get the monthly payment down (which is the real reason for the longer terms).
How about a couple hundred thousand public workers now without a paycheque, plus countless contractors?
And not even counting all the industries that do work for the government.
This from a country whose leader is not historically known to politely pay his contractors.
I am never going beyond a 60 month loan and even that feels like too much to me. 36 seems about right. If you need to take out a 72 or 84 month loan then you can’t afford it, point blank…and if people would stop tripping over each other to make these reckless financial decisions in the name of getting the biggest and shiniest vehicle they can manufacturer’s would have to lower prices.
But they know how to prey on these people and our lack of consumer protections makes it effortless. It’s all part of the Truck Industrial Complex. Unfortunately everyone from the buyer up to the edge of the C suite is going to be in huge trouble because this house of cards is already swaying, but who cares? Line go UP!
The number of people that I’ve met that are either in perpetual lease cycles (and then complain that they’ve got car payments for eternity), or on 84++ loans that turn in their vehicles after four years like it’s on a lease.
Clearly financial literacy wasn’t well taught at school
But, I understand US educational institutions are on the list to be “fixed”.
Yes, “fixed” as in spayed or neutered.
Our schools seem to do more warehousing of kids than educating them, because some small groups of parents object to certain things so the curriculum needs to be dumbed down to keep all of the complainers happy (and avoid the lawsuits).
I’m on a perpetual lease cycle. I like it. I get a new car every 3 years. Payment doesn’t bother me– I’m paying to have a new car.
Hang on a second… if the bank takes your (their) car because you’re not paying for it, are you still obligated to pay for it? Is that right?
When a vehicle is reposed by the creditor, it is sold. When it sells for less than the value of the loan (which it always does thank to depreciation) you’re on the hook for the difference.
Thank you for clarifying!
They actually covered this on an episode of ChiPs. Ponch and John get called to a car theft, which turns out to be a repo. The delinquent owner sets the car on fire and then finds out he’s only hurting himself when they explain he’s still responsible for the outstanding debt and he just ruined the vehicle resale value.
One of the thousands of Gen-X life lessons we learned just by watching CHiPs.
That explains why I didn’t know. I was off learning how to care for robot dogs by watching Battlestar Galactica.
All I learned from that show was how to score fumos, ambrosia, and socialators.
84 month loan here. At 2.29% instead of using cash or investments, still coming out ahead as my investments are making more than 2.9%.
Where did you find that rate?
In the past, probably.
Rates are generally lower in Canada. That was 2ish years, it’s now 0% at GMC Canada.
This is the way.
Are you still ahead if you factor in depreciation?
Doesn’t the car depreciate no matter how you pay for it?
Good point.
I would imagine that the depreciation varies greatly depending on the buyer’s capacity to maintain. Say, two E-Classes, basically identical, but one is owned by a guy who also has a Benz for his wife and a Corvette, Harley, and boat in his McMansion garage, the other by a guy who can just barely afford the payments.
One can afford to maintain the car properly, preserving value. The other can’t, and that car will depreciate like a rock.
Also, depreciation is not a factor if you keep the car past the loan term.
Depreciation is irrelevant if you never sell it.
Another good point!
4 out of 5 investors agree: free money is the best kind!
Sure – but to me the annoyance would outweigh the minor gain, and I would still just pay it off ASAP.
But I approve of the theory, if not the actuality.