Delinquent Car Loans Reach All-Time Highs

Not at all surprised... just another symptom of our entitled thinking society. Do you have a loan out Bobby?

 

i read this in usa today. a lot of credit issues seem to be on the horizon. but sometimes they pan out, and sometimes they peter to. they also said the housing bubble only has a couple years left, but not sure the data can be trusted.

 

No loan here never had one in my life. Paid cash. If I can't pay cash I don't buy it.


the bat cave

 

Well done, nothing like taking advantage of the government/people. I am surprised there is a tax credit available for hybrids. ?

 

I think the tax credit is for plug-in vehicles, not hybrids. So the Prime would qualify but the regular Prius would not.

 

plug in credit goes back aways now, federally. and locally, many states have come up with something as well.
what would be a bummer would be to get the tax credit, then have your car repossessed. or maybe not?

 

I'm thinking that the difference here is 'real property.'

Cars are real, but they're not "real"....as in real-estate.
I'm thinking that nobody is going to be bundling up blocks of car loans and selling them as real estate investments.

As far as car defaults?
When a HS grad with a Taco Bell job can get a 7-year, $25,000 new car loan without a cosigner, that's what we call "an indicator."
Frankly, it's a self-solving problem.
New car prices are riding a bow-wave of easy money such that the average new car prices are rising at an unsustainable rate.
In four years......the Taco Bell worker will grow weary of the four-year-old Mustang with three more years on the loan and want to upgrade.
This will entice the nice, honest, people down at the stealership to yoke him (or her) to another car with another 7 year loan term only this time the borrower will START OUT a few thousand in the hole to cover the first loan.

We see it on this forum at times with Priuses that are being sold privately NOT because the owner is smart enough not to trade it out but because the owner is desperate to get that next new car fix and even the stealer isn't able to bend the numbers enough for the nice, honest people at the bank.

Fortunately....this cycle will only impact one given family at a time instead of threatening a world economy.
Car makers will continue to build cars.....banks will continue to loan money, albeit at a slower rate since cars are lasting longer and today's young buyers are ALSO being enticed to borrow six figures so that they can trick out their single occupancy dorm rooms with new appliances and electronics.......or was it supposed to JUST go for books and tuition?

I forget.....

 

It's really sad when I read news like this. Using the Honda Accord as an index as it is one of the best selling car in the US for decades, today's Accord costs a little less than it did 25 years ago when you factor in inflation.
Is today's Honda Accord cheaper than it was back in 1989? - Autoblog

The problem is while the average car costs $25k, the average vehicle purchased in 2016 was $34k. Why? You guessed it. SUV's and trucks. I don't have time to be worried about the Taco Bell worker buying a $25k Mustang when the part time McDonalds worker is getting an 84 month loan on a $35k SUV.

 

regarding the bolded part, isn't that what they said about the housing bubble?

During my educational process, I had the choice at one point to either accept the amount of student loans I had with a useless degree or take out even more student loans in order to get a degree that I could use in a career field I might enjoy. I opted to keep going, and I hope in the end it will have proven worthwhile. Someone caught between car loans can feel stuck as well, but they have the further problem that what they're buying with their loans is a depreciating asset.

 

existing home sales were at an all time high since 2007 in the u.s. the coming housing bubble (burst) will make this look like childs play.

 

And the new Administration in Washington wants to REDUCE THE REGULATIONS EVEN MORE.
Good move........NOT !!!!

Or maybe this is "fake news"......or maybe it will be countered by "alternate facts".

 

for the banks. although, i have read that carmakers are taking on riskier loans than banks.

 

No credit default swaps for car loans, and even though economics isn't my strong suit I'm thinking that the bigs (GM, Yota, Ford) aren't lashed to financial arms like they were in the roaring 90s.
Oh.....they still rip people off with teaser loan rates but I'm thinking that the car MAKERS divested themselves from the car LENDERS.

If they didn't and they get caught in the pop.....then It's unlikely that the scale of the implosion will cause a large OEM to fail financially.

When Lehman Bros when TANGO-UNIFORM it caused a chain of events that threatened the world economy.
If GM fails it will be more like Hostess Twinkies.
Union Jobs will be lost but there will be retained value in the Hostess Brand that will survive under new management.
Twinkies?
You can still buy them.

WRT the Honda Accord, they're only "statistically" as cheap as they were in the 80s, and it points to why people distrust digital media.
I did a quick check.
You can indeed get a stripped out Honda Accord with a manual transmission for under $23,000 in America.......somewhere......maybe.
However (comma!) good luck finding one.
Because of how statistics work. the real-world street price for an Accord is closer to the 30's - or three times the 1980's price.
Inflation over 25 years simply hasn't been that bad.

Also, back in the 80's there was probably only about five thousand bucks separating the crank-window stick shift model from the pimped out top end model.

Now?
It's closer to $20,000 by the time you add all of the dealer-installed options.
It's VERY EASY to find a Honda Accord in the low 40's - even without the bank-busting Hybrid and PHEV options.
Also.....people mostly stopped buying SUV's years ago.
Now people buy "Crossovers" which only look a little bit like SUV's from the outside.
The differences are non-trivial, since an SUV is a car body bolted to a truck frame, and a crossover is an overinflated unit body car with some suspension mods and bigger tires and wheels.
Commuters like them for ride height, interior room, big honkin hatch in the back without the "econo-hatch" look and the fact that they usually have adequate acceleration and performance.
They're also wider and lower to the ground, making them REALLY safer in a crash instead of merely "statistically" safer.

"SUV" is still a pejorative widely used by small car drivers, but it's largely inaccurate.

 

What you should take away from this news is:
Things may not be as rosy as the overall picture might indicate.

If people can't afford to keep up with their car payments, other loan defaults might not be far behind.

I personally think that leases and loans in the new car market are done in a deceptive manner and actually constitutes deception and fraud.......and needs more regulation and not less.

And then there is "payday loans". SIGH.

 

Buddy, if there's money to be made from it they're bound to try. It's the law of quick returns!

 

You reply is a good point about how statistics and facts can be looked upon differently without any manipulation whatsoever. All it takes is spin. I disagree with your assessment on the facts and we can leave it at that.

I do agree that inflation hasn't been that bad over the past 3 decades which is really what boggles my mind on why people insist cars are too expensive. That's my subjective opinion anyway. They're not more expensive. People are choosing to buy more expensive vehicles.

 

Concur absolutely with car dealerships being deceptive with rates, plans, fleeces, packages, etc....
I'd be very much on-board with regulation if it were proven to work in the automotive loan sector.
The thing is....you have to be a very low functioning person intellectually not to be able to navigate an installment loan contract with all of it's federally mandated bold print and blocked figures.
There's just not much more that dot.gov can do to make it idiot resistant.
Period. Full stop.

Unfortunately......there are people, and I've seen them in dealerships every time I've purchased a car, that cannot afford to buy a new car no matter what sort of lease or purchase order manipulation that the dealer tries.......and dealers know EVERY trick in the book to make a non-qualified buyer look loan qualified.
Then?
The prospective buyer is forced into the sub-prime market with its gap coverage, and non-bank lenders and THAT you cannot regulate as effectively.

They should be outlawed.
Period. Full stop.

Unfortunately, the government that has sufficient power to stop these "institutions" also has too much power.
One of the reasons that commercial weed is finally taking root (pun almost unintended) s availability of mainline financial resources.
So......private investors and commercial non-bank banks step in where savings and loans cannot - and how do you stop that?

Make it illegal for me to loan you $5 to buy an overpriced coffee?

You have to strike a sweet spot between the wild wild west, and over-regulation.....and WRT car loans, we're already there.
The HS grad with the Taco Bell job and the Mustang?
He's either gonna learn early and start saving for retirement or he's going to price himself out of the ability to buy a new car.

Fair enough!

We'll see what happens when sub-prime auto loans go unpaid, but my thinking is that it will involve tow trucks and reduced credit scores....AND a slow down in new car purchases.

We can live with that...AND....we get to find out in a few years who was right.

 

if you ignore food, clothing and shelter, there's been hardly any inflation at all.