Independent George wrote: ↑
Sun Nov 10, 2019 11:31 am
Living in a big city my entire adult life (and now working from home on top of that), I've actually never owned a car. In fact, I own a parking space in my condo that I rent out for extra money. So when I read this article in the WSJ, I was a little shocked at the financial shenanigans that people are getting into for their cars:
https://www.wsj.com/articles/a-45-000-l ... 1573295400
In two years, the 40-year-old electrician signed up for four auto loans, each time trading in the previous car and rolling the unpaid balance into the next loan. He recently bought a $27,000 Jeep Cherokee with a $45,000 loan from Ally Financial Inc.
Yolanda Finley of Pomona, Calif., bought a used 2011 Chevy Traverse with a loan of $25,585 from Santander Consumer USA Holdings Inc. in 2014. The loan included a nearly $2,200 balance she owed on her Dodge Durango after she traded it in.
Nicole-Malia Tennent and Shyanne Fernandez, both in their early 20s, wanted to trade in the car they shared for something less expensive last year. The friends, who live in Hawaii, ended up splurging on a new vehicle and moving the unpaid loan balance of $12,500 from an older GMC into a new loan for a 2018 GMC Sierra truck.
The rollover debt helped drive up the new loan balance to more than $66,000. The friends now split the payment of more than $900 a month, which they owe to Pearl Hawaii Federal Credit Union for 84 months. Their old loan was about $500 a month.
I have no experience at all with purchasing cars, so can somebody explain how you get in - and out - of this kind of financial mess? Are these loan balances typically enough to warrant declaring bankruptcy? These numbers just seem even crazier to me than the housing bubble - and having purchased my home at peak bubble 2007, I'm no stranger to crazy financial pitches. I just can't even imagine sinking that much into a car loan.
Because you're on this forum.
A huge majority of people are clueless of finances. They often buy based on PAYMENT. "I can get you into a new truck for the same payment". What's left unsaid is that they're currently underwater, and that the 6 year loan they got 2 years ago has 4 more years to go, so they sign them up for a 7 year loan, adding 3 more years of payments.
To think that the consumer is being taken advantage of is to excuse them from basic responsibility. The guy that traded in his vehicle 4 times did that because he wants to drive what he cannot afford, so he did it. Who changes vehicles every 6 months?
I always go back to the term average. "The average consumer". That means that 1/2 the people are smarter, and 1/2 are not as smart. And some of the not as smart are really not as smart.
We read on this forum of relatives having no money to retire, yet spending like crazy. You see people with two $50,000+ new cars all the time, a boat, 2 jet skis, ...
The largest home in my neighborhood was owned by a younger guy, early 30s, who bought a fancy vehicle AT THE AUTO SHOW. No one buys the car at the auto show, but he did. I found him one day spinning his tires furiously on our entrance road, which has a small uphill grade. I pulled up (in 2 wheel drive) and got out. Told him to hit the brake, then slowly accelerate. He couldn't. I said "I could pull you up the rest, but there is no where to tow from." He smiled, and pulled out a screw in tow hook from the glove box. I had to tow him all the way home, even though the rest of the way was flat, because his fancy low profile tires had no tread. I mention this because in the housing crises of 2007/2008, he lost his home and went bankrupt.
Of course, those that insist on paying cash all the time lose the ability to make money. Many auto finance companies give rebates to finance at non-subsidized rates. Take the rebate, then pay off the loan the next week. Easy $500 - $2,000.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.