Avg new vehicle loan is $30k and payment is $500! [Archive]

03-03-2016, 03:49 PM

... on a 67 month loan. Damn! I see a bubble.

http://www.businessinsider.com/r-average-us-new-vehicle-loan-hits-record-high-in-fourth-quarter-experian-2016-3

The average amount of a new-vehicle loan in the United States rose by $1,170 in the fourth quarter from a year earlier to a record high $29,551, and the average monthly payment was nearly $500, Experian Automotive said on Thursday.

bren

03-03-2016, 03:56 PM

A new car price bubble?

Biggins

03-03-2016, 04:55 PM

I don't know where I stand on a "bubble" for car loans. I feel like I read about this every few months for the last couple years. I get what the authors say, but it just doesn't seem like the mortgage/housing meltdown. It's similar but different :dunno:

I definitely don't agree with the increased lengths of car loans, but I think cars are generally more reliable and most people tend to keep their cars for a long time. I never want a 7 year car loan, but I understand it a little more if you plan to keep a car 10+ years.

I have tried all I can to pay for a car in cash or keep the loan length as short as possible, but I need a car for the wife now/within the next 6 months and something more practical/comfortable for myself in the next 18 months. I'm sure a loan will be involved on at least one of them, but I don't really want to see us doing anything beyond 4 years.

For the average person, does it make sense to buy a new car with all cash anymore? I'm asking this as an honest question... I realize not many people can go in with cash and buy a car. Looking back on my last purchase, I did a substantial amount down, but the interest rates were so low that I'm not really sure it made sense to put down as much as I did.

kognito

03-03-2016, 05:30 PM

predatory practices are returning, and not just in the new/used car loan area.

Crazy 0 down mortgages are making a comeback too

bren

03-03-2016, 05:50 PM

What's the worse case for a car bubble, you have to ride the bus? That is nothing at all like the housing thing, is that really what you meant?

John V

03-04-2016, 07:32 AM

A bubble would imply there is increasing potential for or indication of people not paying their loans. Do car loans offer the same teaser rates to people with poor credit, like the mortgage industry had in the mid-2000s? Every car loan I've had in the past ten plus years has been fixed 0.99 or 1.99%.

To Chris' question, I'd much rather take a $40k loan on a car for three years at that low rate than paying cash. The cash will end up going towards my mortgage which is at 3% or into our investment accounts that make 10-15% or more.

wdc330i

03-04-2016, 08:12 AM

For the average person, does it make sense to buy a new car with all cash anymore? I'm asking this as an honest question... I realize not many people can go in with cash and buy a car. Looking back on my last purchase, I did a substantial amount down, but the interest rates were so low that I'm not really sure it made sense to put down as much as I did.

I agree it doesn't really make sense to pay all cash when interest rates are around .9 for a new car loan. Our current thinking has been to put about half or more down and do a 3-year loan. It makes sense for the monthly load, and doesn't tie up a huge amount of cash in the car. The total interest outlay is negligible.

zach

03-04-2016, 08:40 AM

I agree it doesn't really make sense to pay all cash when interest rates are around .9 for a new car loan. Our current thinking has been to put about half or more down and do a 3-year loan. It makes sense for the monthly load, and doesn't tie up a huge amount of cash in the car. The total interest outlay is negligible.

I have a weird obsession with being as liquid as possible (or the ability to achieve liquidity easily). Cheap money is a great thing and car loans have simple interest, so it's really a no brainer at 1.5% and lower borrowing rates. If you get sick of the payment, you can always pay it off.

wdc330i

03-04-2016, 08:56 AM

I have a weird obsession with being as liquid as possible (or the ability to achieve liquidity easily). Cheap money is a great thing and car loans have simple interest, so it's really a no brainer at 1.5% and lower borrowing rates. If you get sick of the payment, you can always pay it off.

I get that, too. A home equity line of credit (that you don't really use) can fit in that mix as well.

03-04-2016, 09:04 AM

I have had no problems financing at cheap rates when I could have bought in cash.

But for a good number (probably majority), those growing loan amounts and lengths have more to do with continuously rolling over negative equity into a new purchase and extending the terms to try to hold the monthly payment. Eventually that will be unsustainable.

Just my thought.

bren

03-04-2016, 09:13 AM

Alan

03-04-2016, 09:16 AM

I agree it doesn't really make sense to pay all cash when interest rates are around .9 for a new car loan.

I have a weird obsession with being as liquid as possible (or the ability to achieve liquidity easily). Cheap money is a great thing and car loans have simple interest, so it's really a no brainer at 1.5% and lower borrowing rates. If you get sick of the payment, you can always pay it off.

I agree with the liquid part but I think if you can comfortably spend the money on a car without it affecting your life in any way then you should pay for it and not finance with the key being 'comfortable with spending the money'.

It's not like investments are making anything decent and forget about the .1% interest you make in the bank.

Back on topic ... the average joe is stuck making big car payments if they want a new car which is crazy but the prices of cars are so high they have no choice plus nowadays the same average Joe has to pay for cell phones, cable/fios TV and internet ... all expensive our parents did not have.

Quality of life is much better but it comes at a cost.

John V

03-04-2016, 09:40 AM

It's not like investments are making anything decent

This statement is puzzling to me. What do you mean?

bren

03-04-2016, 09:43 AM

This statement is puzzling to me. What do you mean?

I think he's suggesting that you may want to get your money out of whatever Ponzi scheme you're in that's paying 10%+.

wdc330i

03-04-2016, 10:35 AM

I agree with the liquid part but I think if you can comfortably spend the money on a car without it affecting your life in any way then you should pay for it and not finance with the key being 'comfortable with spending the money'.

It's not like investments are making anything decent and forget about the .1% interest you make in the bank.

Back on topic ... the average joe is stuck making big car payments if they want a new car which is crazy but the prices of cars are so high they have no choice plus nowadays the same average Joe has to pay for cell phones, cable/fios TV and internet ... all expensive our parents did not have.

Quality of life is much better but it comes at a cost.

Ah, but remember how expensive long-distance calls were!

John V

03-04-2016, 12:40 PM

I think he's suggesting that you may want to get your money out of whatever Ponzi scheme you're in that's paying 10%+.

The stock market is a Ponzi scheme?!

dan

03-04-2016, 12:43 PM

http://blogmaverick.com/2006/01/03/the-stock-market-is-for-suckers/

Ive said a lot of this before. The stock market
is by definition a ponzi scheme.

Jeff_DML

03-04-2016, 12:48 PM

I don’t disagree but what else are you going to do? Not like the good old days with big pensions.

John V

03-04-2016, 02:05 PM

Interesting read. Thanks.

clyde

03-04-2016, 05:32 PM

Back to the average car payments and loan length thing...

You can either afford a car or you can't. If you can, there are lots of different ways to pay for it. Which way is best for one person may not be the same for the next person.

If you can't afford the car you're buying, your choices in how to pay for it are going to be limited, they're almost certainly going to involve many months of payments, and there's a reasonably good chance that you will not be able to make the paymets for the entire term.

The problem is that it's this type of buying/financing by people that won't be able to meet their obligations that is fueling the new car sales boom. The question is what will happen when it crashes? It probably won't be as catastrophic as the housing crash, but if the US auto industry starts shredding jobs, the ripple effect could be sunstantial. OTOH, perhaps if it just deflates a bit, it will put enough downward pressure on used car prices that the risk will level out?

Anyway, there's nothing wrong with debt as long as it's well structured and your expenses (including overall debt service) won't tax your ability to repay.

Alan

03-04-2016, 06:20 PM

This statement is puzzling to me. What do you mean?

The bank pays crapola and conservative mutual funds pay very little, in addition there are fees charged by the (my advisor) and capitals gains taxes on my investments ... All I can say is Arghh ... Reading your other post about the stock market I am guessing this is where you invest and obviously you are doing well from it but for me I just don't ... I don't think I have ever made money in the stock market but I do know for sure I have lost.

Alan

03-04-2016, 06:21 PM

Ah, but remember how expensive long-distance calls were!

Ah ha ... I was thinking of adding the cost of the home phone and of course long distance calls so your point is well taken but sheesh it's one bill compared to what most have today.

clyde

03-04-2016, 06:50 PM

The bank pays crapola and conservative mutual funds pay very little, in addition there are fees charged by the (my advisor) and capitals gains taxes on my investments ... All I can say is Arghh ... Reading your other post about the stock market I am guessing this is where you invest and obviously you are doing well from it but for me I just don't ... I don't think I have ever made money in the stock market but I do know for sure I have lost.

Do you know how to play cards?

wdc330i

03-04-2016, 07:28 PM

Ah ha ... I was thinking of adding the cost of the home phone and of course long distance calls so your point is well taken but sheesh it's one bill compared to what most have today.

I believe my parents also had an 8% mortgage. But, of course, it was on an $82,000 house.

Alan

03-04-2016, 08:04 PM

Do you know how to play cards?

Maybe you should teach me ...

clyde

03-04-2016, 08:08 PM

I believe my parents also had an 8% mortgage. But, of course, it was on an $82,000 house.

My parents had an 11% mortgage when they bought a house in 1978. The only reason I know was that my uncle gave them all kinds of shit about it since his mortgage from 1968 was only 5%.

bren

03-04-2016, 08:23 PM

I believe my parents also had an 8% mortgage. But, of course, it was on an $82,000 house.

IIRC, my mortgage secured in 2000 was @ 7.9%

rumatt

03-04-2016, 08:53 PM

11% interest rate, yikes. That would just about double my mortgage payment.

Who has the lowest mortgage rate now? I'm at 3.75, but I'm sure several have me beat.

clyde

03-04-2016, 09:50 PM

Maybe you should teach me ...

:D

Jeff_DML

03-04-2016, 10:06 PM

IIRC, my mortgage secured in 2000 was @ 7.9%

same, I had a ~8% when I bought my house in 2000. Now it is below 4%, made a nice difference in my monthly(also have paid it down)

ZBB

03-04-2016, 10:35 PM

11% interest rate, yikes. That would just about double my mortgage payment.

Who has the lowest mortgage rate now? I'm at 3.75, but I'm sure several have me beat.

Our mortgage is at 3.125%...

Jeff_DML

03-04-2016, 10:36 PM

Our mortgage is at 3.125%...

30 year fixed? Pretty good if so

bren

03-05-2016, 01:03 AM

Our mortgage is at 3.125%...

Wow, thought mine was good at 3.5% for 30.

wdc330i

03-05-2016, 07:36 AM

The house we just bought at the end of the month was at 3.625. We were a scooch lower in MD. What's a surprise is how incredibly high county property taxes are in metro ATL.

ZBB

03-05-2016, 07:52 AM

The house we just bought at the end of the month was at 3.625. We were a scooch lower in MD. What's a surprise is how incredibly high county property taxes are in metro ATL.

Which county are you in? We were in Forsyth, and property taxes were very reasonable -- under 1% of the property's value.

ZBB

03-05-2016, 08:01 AM

30 year fixed? Pretty good if so

Unfortunately no... We got a 5/1 ARM when we moved into this house -- we thought we wouldn't be here more than 3-5 years. But we've been here 11.

But it's been advantageous to us so far -- the rate dropped to 3.25% 6 years ago, and dropped as low as 2.875% for last year. I've looked at refinancing, but that would result in a higher rate (still below 4%), but never pulled the trigger.

But it's likely we'll be moving this year, so it won't matter...

wdc330i

03-05-2016, 08:18 AM

Which county are you in? We were in Forsyth, and property taxes were very reasonable -- under 1% of the property's value.
Dekalb. Decatur, but outside the City of taxes, thank goodness. Fulton are even higher.

03-05-2016, 08:30 AM

Unfortunately no... We got a 5/1 ARM when we moved into this house -- we thought we wouldn't be here more than 3-5 years. But we've been here 11.

But it's been advantageous to us so far -- the rate dropped to 3.25% 6 years ago, and dropped as low as 2.875% for last year. I've looked at refinancing, but that would result in a higher rate (still below 4%), but never pulled the trigger.

But it's likely we'll be moving this year, so it won't matter...

I was gonna say. I got 2.99% but for 15 years. It's an aggressive schedule but it will work out that the house should be paid off when the kids start going to college.

Alan

03-05-2016, 09:56 AM

I was gonna say. I got 2.99% but for 15 years. It's an aggressive schedule but it will work out that the house should be paid off when the kids start going to college.

That is a VERY smart move on your part ... I was very aggressive as well with a short term and kept paying chunks of the principal off when I had the extra dough though back then I think my rate was in the 6% range :eek: but at least I had it done by the time I was 40.

rumatt

03-05-2016, 12:58 PM

Rushing to pay off a loan at 3% interest? Meh.

I feel like this thread is going in circles. :)

Jeff_DML

03-05-2016, 01:16 PM

Rushing to pay off a loan at 3% interest? Meh.

I feel like this thread is going in circles. :)

Deductible 3% interest but what else do you extra no retirement cash.:dunno: buy old turbos ;)

Biggins

03-05-2016, 01:22 PM

I'm at 3.75/15. I could have gotten lower but wanted to keep my closing down and took negative points.

So... to get sort of back on topic, what would be your general best tactic (not all cash) to buy a $30k car with things the way they are today?

I was thinking at least 20% down and a 3-4 year loan would be what I'd try to do, maybe more down on a used car?