Here's an article about a couple who got a 7 year car loan. The couple were a little worried about taking on such a long obligation, but they couldn't pass up the offer. They were able to get under $700/month car payments.
The article says that people are no longer just buying more home, but more car as well. The average car loan is now 5 years and many more are written for longer. Also the average amount of car loans has increased 40% to $30k.
So is it the car companies fault? Perhaps they should stop making nice, expensive cars. And perhaps they should stop giving out loans. Or maybe people like the Posts, should step back and consider the debt before just leaping on it.
The couple bought a Ford Truck for $44k. They rolled over $9500 owed on their previous truck which they hadn't paid off into this new truck.
But they aren't the only ones, another woman in the article Cindy Gerhardt did the same thing. Except she has done it with multiple cars, rolling what she owed from each previous car into another successive car. So now she owes at least $15k more than the cars are worth. Her monthly payments are more than her mortgage. And she's unable to sell both cars and get a loan for a single car and the difference she owes.
She says the car dealerships never said no. That they kept giving her loans, I wonder did she ever wonder how she was driving nicer and nicer cars continually? Did she ever wonder how she drove a nicer car than someone who earns 2-3x what she does? I am guessing it just seemed like a normal quality of life for her. She drove cars she thought she could afford, but never stopped to consider if she could.
I wonder do you just see the monthly obligation and think great, I can handle $600. I know we would never be able to buy a car and say great $600. So I don't quite understand how it's so easy for people to do so. And think you can afford your luxury car. If you make $40k/year how do you buy a car that costs more than you make in a year?
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7 comments:
This is truly one of the stupidest things I have read in a long time. I didn't even like having a four-year car loan and paid it off in three years instead. This is another example of people blaming the lender ("the car dealerships never said no") or store for their lack of understanding of basic money management and how financing works. Perhaps it's also an example of what happens when young people receive everything they want from their parents. No one has ever said no to them so they don't know how to say no to themselves.
About a week ago, I watched a Dr. Phil episode with a guest who spent 68% of his salary on vehicle payments and owed about $200,000. He owned a jaguar, a Hummer, boat, you name it. The young man indicated that what people thought of him and the cars he drove was important. Another example of people being raised without any real values and letting advertisers and pop culture dictate what's important in their lives. Too sad. Parents and schools must start to educate their children at a young age about the value of money and what's really important in life. Hint - it's not more "stuff" and expensive toys.
Barb1954
Amazing! I took out a five year auto loan in 1999 on a mini-van and it scared me to death. Even though I knew I was going to drive that puppy into the ground (which, 9 years and 147,000 miles later, it almost is), the idea of being upside down for the first three years was scary.
DH had a car loan for 3 years and $5k and we thought it alot. We rushed to pay it off before I went back to school and it ended a month ahead. I thought $5k was a large loan at the time too.
That is horrifying! Why would anyone do that??? My husband and I have set a car budget of $25K (we're planning to pay cash this time around). I just don't understand the need for a car more expensive than that - well, okay, I can see $30K if you want/need a larger car like a minivan.
I got my car on a 4 year loan with a payment under $200 a month. Then paying $400 a month on it really makes it go away quickly. My wife wants a new vehicle and I'm just not sure about adding a car payment in our current situation. Wanting and needing a vehicle are two different things. I don't buy new vehicles either because they lose so much value in the first 2 years. After 2 years you can get the same vehicle at half or less of the original cost. Then if your current vehicle has some value, after negotiating the price on the replacement, let them know you have a trade-in and they have to drop the price by what your current ride is worth! If necessary it is better to understand the financing and payments before looking at a car. I cannot imagine how a $700 car payment for 7 years was a good idea.
The annual auto show always comes to our city in the second half of February (after running in Detroit and Chicago). We love to look at the new cars and usually go (even if I end up with a headache from the "new car smell" in all the cars I sit in. What kind of chemicals are in that smell?)
Anyway, the high prices of new cars has me leaving the auto show very depressed. There's usually only or two cars I can even consider buying in the future. I wonder if there was no such thing as car leasing or seven-year loans if the prices would come down. I just don't understand how most people can afford to buy such expensive cars.
Barb1954
I am not sure how to afford expensive cars either. By the time we're ready to buy it will likely costs $25-30k new.
And yes it'll likely be new because we're still pretty set on Toyota, Honda, Nissan, or Subaru. It'll likely be a Japanese Import.
Because of that, buying a 1 year old car for $700/less doesn't seem to make much sense. And going to buy it private party well, it's likely a lemon because most people who on these cars hang on to them.
Also I feel that a 3 year old japanese Import does not decrease enough for me to justify buying it. I don't save tons. American cars definitely I'd buy used.
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