Americans owe $1 Trillion on their cars

[ghuns]

I read an article that in the last quarter of 2016 the average car payment was $508 and the average term was 68 months. That is staggering to me.

Doesn't surprise me in the least.

Now for my bitter, penny pinching, old guy sounding rant...

Imagine if that $500 a month went into a health saving account. Damn, I just solved the health care crisis.

I hear from friends and coworkers all the time about how they barely get by. They all drive new-ish cars, live in new-ish homes in cute little subdivisions. But they can't afford to go to the doc when they're sick as hell, or they're getting collections calls on a $1000 medical bill. Most of them are in Florida right now with their kids on spring break.

A $500 car payment, a $200 cell phone bill, another $200 for cable/internet, a $1000 mortgage, at a minimum, annual vacations to Disney, etc but I can't afford decent healthcare or to save for retirement, it should all be free.

Entitlement isn't unique to lower income brackets.

 

[seedubs1]

You sound like me.

I have a friend right now that claims she can't live on her own without help. Makes $60k+, brand new car with payment, expensive cable and cell phone bills, vacations, fancy designer clothes, etc... But can't afford to move out of her parents house and complains about it all the time.

Doesn't surprise me in the least.

Now for my bitter, penny pinching, old guy sounding rant...

Imagine if that $500 a month went into a health saving account. Damn, I just solved the health care crisis.

I hear from friends and coworkers all the time about how they barely get by. They all drive new-ish cars, live in new-ish homes in cute little subdivisions. But they can't afford to go to the doc when they're sick as hell, or they're getting collections calls on a $1000 medical bill. Most of them are in Florida right now with their kids on spring break.

A $500 car payment, a $200 cell phone bill, another $200 for cable/internet, a $1000 mortgage, at a minimum, annual vacations to Disney, etc but I can't afford decent healthcare or to save for retirement, it should all be free.

Entitlement isn't unique to lower income brackets.

 

[jamil]

A lot of strong opinions here about car loans, and to the point of saying it's so stupid. People have choices and if they can make the payment while enjoying the ride, why not? It's stupid where you indulge into such but unable to pay, living beyond one's means. Also, every person's reason in buying a car is different. Some for show, some for personal comfort, some for self reward or a goal achieved.

Also, I'm pretty sure there are tons of people out there who say the same thing about us owning multiple guns and loads of ammo as stupid. Throwing money on something you can't take to your grave. But hell, we still do it cause we enjoy it.

It's pretty immature to say such choices as stupid. We only live once in this world. Why not live the most of it but smart enough not to drown in debt.

Getting a loan, in and of itself, isn't a bad thing. I took out a loan for my current car. Could have paid cash, but with a 3.99% interest rate at the time, I'd rather invest the cash and pay the 3.99% over 5 years. It's paid off now, and I still have the cash in the brokerage account that I would have spent on the car, plus the interest I made off the cash for those 5 years.

But what posters are railing against is when people use credit to live outside their means. When you do that, you're mortgaging your future financial security for living in the now. If living in the now means you're not preparing for what happens when you're too old to work, you'll become someone else's burden. A lot of folks still consider it morally wrong to live it up when you're young and expect "society" to provide for you later when you're old.

 

[jamil]

I read an article that in the last quarter of 2016 the average car payment was $508 and the average term was 68 months. That is staggering to me.

Average? Holy ****! On 68 months? Median household income is just over $50K/year. That payment is a pretty hefty share of household income. Also, people like to trade their cars in every 3 or 4 years. Their equity on a 68 month loan is going to be pretty ****ty after 3 years, and trading up is going to cost them more, because they still have to roll in the payoff of their current loan.

If you can only afford the car you have by taking out more than a 5 year loan, you're probably living outside your means.

 

[mom45]

This thread is making my head spin....I would not be able to sleep at night if I had those kinds of payments. I like my $30 prepaid cell phone and my old paid off vehicles just fine. I consider having internet and $12 a month for Netflix to be a splurge!

Don't get me wrong, we spend money on things we don't really NEED at times, but anything that goes on the credit card gets paid off as soon as the bill arrives and earns me cash back.

People could live so much better if they got rid of loan payments (mortgage included). Most simply don't realize what those loans are really costing them in the long term.

I look at my guns and ammo as an investment. If our economy crashed, I have things that I could barter for things I need. I also have the ability to defend what is mine. Those who laugh at our desire to have more guns/ammo won't be laughing so much if this scenario were to actually happen.

 

[BehindBlueI's]

People could live so much better if they got rid of loan payments (mortgage included). Most simply don't realize what those loans are really costing them in the long term.

.

Most also don't realize what it's costing them in long term wealth to pay off low interest tax deductible debt as opposed to investing that same money. If you aren't maxing out your tax deductible retirement account contributions but are paying extra on a mortgage at today's rates, you're costing yourself long term.

 

[seedubs1]

Yup. 401k, Roth, etc... maxed out. I wouldn't take that money and pay off my house quicker. We're already on a 15 year loan @ 2.8% and on track to pay that off in less than 10 years. It wouldn't make sense when you look at the math to decrease our retirement contributions to pay off the house quicker.

But damn is it going to be awesome when the house is paid off.

.

Most also don't realize what it's costing them in long term wealth to pay off low interest tax deductible debt as opposed to investing that same money. If you aren't maxing out your tax deductible retirement account contributions but are paying extra on a mortgage at today's rates, you're costing yourself long term.

 

[ghuns]

Also, people like to trade their cars in every 3 or 4 years. Their equity on a 68 month loan is going to be pretty ****ty after 3 years, and trading up is going to cost them more, because they still have to roll in the payoff of their current loan.

I know several people that have taken cars to a dealer for repairs. When faced with a repair bill they can't afford, they trade it in for new car. Of course the trade in value is far less than they owe, so they just roll it over into the new car.

The dealer is happy because the cost of the repair is way less than the screwing he gave them on trade in. The customer is happy cause they drive off in a brand new car.

 

[lovemachine]

I would love to have a newer 4-door truck. I'm loving the F150's and Silverados. But Lordy they're expensive.

Recently, my priorities have changed. My goal is to give my son the best possible life I can give him. How can I do that if all my money is going into a car payment?

 

[jd4320t]

I would love to have a newer 4-door truck. I'm loving the F150's and Silverados. But Lordy they're expensive.

Recently, my priorities have changed. My goal is to give my son the best possible life I can give him. How can I do that if all my money is going into a car payment?

Smart thinking. Stick with it and you'll pay cash for a new truck when he's in highschool.

 

[lovemachine]

Smart thinking. Stick with it and you'll pay cash for a new truck when he's in highschool.

Hah dunno if I can wait that long . All these new trucks look so nice!

 

[seedubs1]

In a couple of years, they'll look dated, and the new ones will look nice

Hah dunno if I can wait that long . All these new trucks look so nice!

 

[jd4320t]

Hah dunno if I can wait that long . All these new trucks look so nice!

Yep they do. Every spring I start dreaming of buying a toy car but then I make myself come back to reality and do the right thing. Someday, when my daughter is out of college I'll have it.

When you feel the urge just come on here and we'll help you through it lol

 

[jamil]

I know several people that have taken cars to a dealer for repairs. When faced with a repair bill they can't afford, they trade it in for new car. Of course the trade in value is far less than they owe, so they just roll it over into the new car.

The dealer is happy because the cost of the repair is way less than the screwing he gave them on trade in. The customer is happy cause they drive off in a brand new car.

30 years ago 60 month loans for new cars was almost unheard of. They mostly offered 36 and 48 month terms. The higher price of cars and having to roll in the payoff for the current loan is why you can now get 72 month loans.

I have a relative who bought a new car with part of her student loan money. By the time she graduated she no longer had the car, but then had to start paying back the loan. The interest rate for her student loan was kinda high, and the conditions of the loan were such that she couldn't pay it off early, so she couldn't refinance--or so she said.

She was young when she made those choices, and didn't really have anyone there to look out for her. She wanted it now, and that was how she got what she wanted. Sometimes young people are too trusting, and just don't have the experience to foresee the consequences of their choices. She ended up paying off a car she no longer owned over the next 10 years. Parents, don't let you kids grow up to do stupid.

 

[KMaC]

"She ended up paying off a car she no longer owned over the next 10 years. Parents, don't let you kids grow up to do stupid."
Too late. There's already another trillion dollar debt in student loans, many of which were used for European vacations, pizza parties, cars and other frivolity of youth. Bernie would like for us old folks to be kind and give the kids a do over because they'll never pay it off.

 

[woowoo2]

As a family, we owe around 16K
I could pay them off today, but I like having the emergency fund in the bank.
I don't think the total is too bad considering that we replaced three cars last year.

 

[hoosierdoc]

Not about living heathy, It's about being in a nursing home and no money

Then that's a different point. If people learn to stay healthy, then that should also solve a part of that problem. How many patients have you encountered that pretty much, most of their lives, didn't take care of themselves or just plain non compliant. But like I said, that's a whole different issue. Healthcare is, and will always be a drain, coz we're all frail, biological parasites of this blue planet.

Heck, if we're talking about wasting on things, we're right up there in food waste.

And also these:

https://www.washingtonpost.com/inve...b0774c1eaa5_story.html?utm_term=.6c9ff7fb52ed

Golden Hammer: GAO reports federal government wasted $125 billion in 2014 alone - Washington Times

50 Examples of Government Waste | The Heritage Foundationu

But then again, nothing we can do about it.
Ri
One can live at the moment but still plan for the future, that's a choice. But to call it stupid for living at the moment is short sighted IMO without knowing that person's way of life.

I agree though, there are people, and I mean tons of them, don't know what the hell they're doing and drown themselves in debt, car loans is just one of them. Like this: US households now have over $16,000 in credit card debt

 

[jamil]

As a family, we owe around 16K
I could pay them off today, but I like having the emergency fund in the bank.
I don't think the total is too bad considering that we replaced three cars last year.

I could be debt free if I wanted to, but I'd kinda like my money to work for me so I can retire someday if I want. But I like work, so I'll probably work until I'm senile.

 

[seedubs1]

I hear old beater trucks are the new in thing

Yep they do. Every spring I start dreaming of buying a toy car but then I make myself come back to reality and do the right thing. Someday, when my daughter is out of college I'll have it.

When you feel the urge just come on here and we'll help you through it lol

 

[Fizzerpilot]

My last car payment was back in 2000. My last mortgage payment was back in 2013. The two are very closely related.

Borrowing money, at 0% or not, on a quickly depreciating "asset", is sort of ridiculous. If you have spare change to make payments on that car, you can't really claim you don't have money for healthcare, insurance, college funds etc... because only one of those is a luxury.

Im also a firm believer that if you can afford a payment, then you can also afford to save for a cash purchase of a reasonable car. Now, some may have a twisted view of "reasonable". Until two years ago, I drove a 1992 Celica... earning six figures. My flight attendants who earned $20k per year and had student loans, drove $20k cars. Now, you tell me, why is that? Are they just much more knowledgeable about finances and using debt to create wealth? Are they extremely sophisticated in their thouht processes?

No.

Now, I will be transparent, I did then upgrade to a 2004 Saturn Vue with 90,000 miles on it. No A/C however... but that's for men in skinny jeans. So, I have certainly made a huge leap forward to my current vehicle, worth $3,000.

When we can be convinced to borrow money, on a rapidly depreciating vehicle, that we simply don't need... they have most certainly won the game. All of money management is a game... some people wake up every day playing, working to extract your wealth. Most consumers awaken each morning, and don't play at all. They don't even think of how they are being sold to 24/7... which is why they succumb so easily. Marketing is a human science, if you think you can outsmart them, you are wrong.

I have things, but they come from a pre planned budget. If the $$ aren't allocated, it isn't purchased. I could go replace both cars tomorrow, buy new, pay cash, but it would still be stupid to do so. Just because you can, doesn't mean that you should. I will never spend more than $15k on a vehicle, it's just not worth it to me. Repairs? I spend less in repairs per year than the average person spends on ONE car payment.

Maybe my flight attendants are really sophisticated. Maybe they all know a trick that I don't. But I don't think so.

Id like to say that since I'm debt free, my money isn't working for me... but, in all honesty, it is. Our net worth has exploded since we stopped writing checks to the bank.