The Next Financial Crisis Might Be in Your Driveway
February 21, 2017 6:46 AM Subscribe
[U.S.] auto debt hit a record in the fourth quarter of 2016, according to the Federal Reserve Bank of New York, when a rush of year-end car shopping pushed vehicle loans to a dubious peak of $1.16 trillion. ... It’s an alarming number, big enough to incite talk of a bubble.
/me hugs his eight year-old and long paid-off Honda.
posted by octothorpe at 7:00 AM on February 21, 2017 [7 favorites]
posted by octothorpe at 7:00 AM on February 21, 2017 [7 favorites]
Yeah. I can see it. I'm upside down on my car loan. The minivan is worth under $2000 and my loan balance is still slightly over $6000. But it's all I could get after a year and a half of taking a combination of train/bus and I was told flat out, if you want this upcoming job you need a car. Period. Sucks but it is what it is.
posted by 80 Cats in a Dog Suit at 7:02 AM on February 21, 2017 [7 favorites]
posted by 80 Cats in a Dog Suit at 7:02 AM on February 21, 2017 [7 favorites]
I was wondering about that because I get a lot of personalized offers trying to get me to auto finance and I have pretty shitty credit. If they are coming after me, they were already shooting the fish at the bottom of the barrel
posted by MCMikeNamara at 7:07 AM on February 21, 2017 [1 favorite]
posted by MCMikeNamara at 7:07 AM on February 21, 2017 [1 favorite]
Auto debt is also the dumbest kind of debt. It's financing a depreciating asset. I can't think of another worse form of debt to have.
Here's a better way to go about car ownership:
Last I looked, the average car payment in the US was $375. So save half that monthly for a year ($200 a month). You'll have around $2,400. Buy a used beater with that savings. Can't afford to set aside $200 a month? Well, then you can't afford a $375 car payment. Now, take that beater, drive it for two years, setting aside the same amount of cash. At the end of two years you'll now have $4,800 and can afford a better and more reliable car, and can probably sell that original beater close to what you paid for it. Rinse and repeat until you are buying a new used car every decade or so.
I know the above is a simplification, and makes some assumptions, but honestly, every argument I ever hear for why one needs to finance a car never makes sense. I need something reliable! Even reliable cars break down. What you need is AAA and the ability to take care of a broken car.
I would argue being upside down on a car is the worst possible place to be. What if you are in an accident and now you owe $6,000 on something you can't even drive? Hope you have more than liability insurance.
I hate the idea of debt (mostly because I made every mistake one can make with it), so I admit, I am biased, but no way will I ever have a car payment (or student debt) ever again.
posted by cjorgensen at 7:10 AM on February 21, 2017 [17 favorites]
Here's a better way to go about car ownership:
Last I looked, the average car payment in the US was $375. So save half that monthly for a year ($200 a month). You'll have around $2,400. Buy a used beater with that savings. Can't afford to set aside $200 a month? Well, then you can't afford a $375 car payment. Now, take that beater, drive it for two years, setting aside the same amount of cash. At the end of two years you'll now have $4,800 and can afford a better and more reliable car, and can probably sell that original beater close to what you paid for it. Rinse and repeat until you are buying a new used car every decade or so.
I know the above is a simplification, and makes some assumptions, but honestly, every argument I ever hear for why one needs to finance a car never makes sense. I need something reliable! Even reliable cars break down. What you need is AAA and the ability to take care of a broken car.
I would argue being upside down on a car is the worst possible place to be. What if you are in an accident and now you owe $6,000 on something you can't even drive? Hope you have more than liability insurance.
I hate the idea of debt (mostly because I made every mistake one can make with it), so I admit, I am biased, but no way will I ever have a car payment (or student debt) ever again.
posted by cjorgensen at 7:10 AM on February 21, 2017 [17 favorites]
So warning: complete anecdote time.
Lately, being pregnant, and feeling like crap a lot of the time, I'm been taking a fair number of Ubers, and even more recently, Lyfts. I don't really know much about cars, but enough to tell that a lot of the drivers who pick me up are driving rather nice ones. Lots of SUVs, lots of shiny newness.
I often start conversations on these rides, and if the driver feels like talking, we end up chatting about all kinds of things. Sometimes the shiny new cars are being driven by people who have a stable full-time job and they're just doing this on the side to make a little extra cash, but just as often it's people who are between jobs, or are driving Uber/Lyft full time. Sometimes they talk about saving up money for a down payment, and I can tell by the locations they mention that they're not rolling in money.
And I do realize that I have a lot of privilege here: the privilege to make do with one car that we bought used in cash for $6000, because we live 8 minutes from a T stop and have flexible employers and can take an Uber or Lyft or a taxi in a pinch. But honestly, it is scary - so many of the people I talk to seem to think a car payment is an inevitability. I really truly hope they've not overextended themselves.
posted by peacheater at 7:10 AM on February 21, 2017
Lately, being pregnant, and feeling like crap a lot of the time, I'm been taking a fair number of Ubers, and even more recently, Lyfts. I don't really know much about cars, but enough to tell that a lot of the drivers who pick me up are driving rather nice ones. Lots of SUVs, lots of shiny newness.
I often start conversations on these rides, and if the driver feels like talking, we end up chatting about all kinds of things. Sometimes the shiny new cars are being driven by people who have a stable full-time job and they're just doing this on the side to make a little extra cash, but just as often it's people who are between jobs, or are driving Uber/Lyft full time. Sometimes they talk about saving up money for a down payment, and I can tell by the locations they mention that they're not rolling in money.
And I do realize that I have a lot of privilege here: the privilege to make do with one car that we bought used in cash for $6000, because we live 8 minutes from a T stop and have flexible employers and can take an Uber or Lyft or a taxi in a pinch. But honestly, it is scary - so many of the people I talk to seem to think a car payment is an inevitability. I really truly hope they've not overextended themselves.
posted by peacheater at 7:10 AM on February 21, 2017
It does suck. We live in a city where public transit is something they have made a sincere effort on, but the area is so sprawled out it's hard to create a system that works well for everyone. We recently bought two newer used cars over the span of a year. It wasn't something we wanted to do, but the engine in my 16 year old car with 220,000 miles developed an engine noise and power loss, and her 14 year old car with 190,000 miles had started smoking pretty bad. Fortunately our car payments aren't outrageous, seeing that we bought used and bought lower end models (Kia Soul and Honda Fit) but having car payments at all is not a comfortable feeling. The thing is, though, if you take a look at car prices, it's no surprise that auto loans are way up. I know someone who decided they needed to replace their year old F-150 with a new diesel F-250. They're paying $900 a month just in that one vehicle. I was looking at new vehicles, and if I wanted a basic Nissan Frontier it would have been on the order of $24k once all was said and done. Same with a base model CR-V. When you see all of those mid-model cars in the lot, some of them are going to require monthly payments that are more than our mortgage payment.
So yeah, auto loans are likely out of hand. If that bubble bursts it's going be a catastrophe for the auto industry in the US.
posted by azpenguin at 7:13 AM on February 21, 2017 [1 favorite]
So yeah, auto loans are likely out of hand. If that bubble bursts it's going be a catastrophe for the auto industry in the US.
posted by azpenguin at 7:13 AM on February 21, 2017 [1 favorite]
Uber/Lyft both require you to have purchased your car recently. Last I looked into it, my 10 year old Ford Taurus didn't qualify, and it's a damn fine and reliable car.
posted by cjorgensen at 7:14 AM on February 21, 2017 [4 favorites]
posted by cjorgensen at 7:14 AM on February 21, 2017 [4 favorites]
Back when I was in the US on an H1B1, I went to buy a used car. I found one which was OK, and had enough money in cash to buy it.
The sales-creep spent a good 30 minutes trying to convince me it was a better deal to buy it on credit, even though it would turn out to cost about 50% more than in cash, because something something credit ratings, what about when you want to buy a house? Which segued into 'what do you mean you don't intend to live in the US for the rest of your life????'
I was so weird, I ended up not buying the car at all.
posted by signal at 7:15 AM on February 21, 2017 [2 favorites]
The sales-creep spent a good 30 minutes trying to convince me it was a better deal to buy it on credit, even though it would turn out to cost about 50% more than in cash, because something something credit ratings, what about when you want to buy a house? Which segued into 'what do you mean you don't intend to live in the US for the rest of your life????'
I was so weird, I ended up not buying the car at all.
posted by signal at 7:15 AM on February 21, 2017 [2 favorites]
Uber/Lyft both require you to have purchased your car recently. Last I looked into it, my 10 year old Ford Taurus didn't qualify, and it's a damn fine and reliable car.
Really? I did not know that, and frankly that sucks. I guess our 2007 Honda Fit would not qualify either, and it works perfectly.
posted by peacheater at 7:19 AM on February 21, 2017
Really? I did not know that, and frankly that sucks. I guess our 2007 Honda Fit would not qualify either, and it works perfectly.
posted by peacheater at 7:19 AM on February 21, 2017
A few years ago I saw this extraordinary reality tv show. It was about these car repossessors. They were... I'm not sure what you'd call them, bad dudes, bros, dudebros? They had tattoos and wrap around sunglasses. Real tough white guys. They emphasized how dangerous their job was, and how they had to get the job done before anyone noticed. Because really, without the paperwork it appeared they were stealing the car. They were even armed.
Like most reality tv, it's difficult to tell how real it was. Though they were confronted by the owner of one of these cars. At least the person who had the keys. They demanded the keys and they didn't give them to them, but there wasn't much they could do to stop these guys who were already towing it while they were 'arguing'. These big tough guys were scaring the shit out of this woman as a distraction. Waving papers in her face.
Afterwards as they're driving away, in the epilogue part of the repo, they sympathized with her, I think she was a single mom. But she was a deadbeat who couldn't pay and they had a job to do. She should have known better.
I don't watch American TV much.
posted by adept256 at 7:20 AM on February 21, 2017 [5 favorites]
Like most reality tv, it's difficult to tell how real it was. Though they were confronted by the owner of one of these cars. At least the person who had the keys. They demanded the keys and they didn't give them to them, but there wasn't much they could do to stop these guys who were already towing it while they were 'arguing'. These big tough guys were scaring the shit out of this woman as a distraction. Waving papers in her face.
Afterwards as they're driving away, in the epilogue part of the repo, they sympathized with her, I think she was a single mom. But she was a deadbeat who couldn't pay and they had a job to do. She should have known better.
I don't watch American TV much.
posted by adept256 at 7:20 AM on February 21, 2017 [5 favorites]
Uber/Lyft both require you to have purchased your car recently.
Not only that, but Uber (not sure about Lyft) will "helpfully" give you a let's-not-call-it-predatory subprime auto loan in order to buy a car that will meet their requirements.
What, you thought the Company Store was an outdated business model? Don't be silly.
Also, if you were wondering who provided the capital for this exciting new adventure in capitalism, I'll give you two guesses and the first one doesn't count. Here's a hint: think "blood funnel".
posted by Kadin2048 at 7:22 AM on February 21, 2017 [16 favorites]
Not only that, but Uber (not sure about Lyft) will "helpfully" give you a let's-not-call-it-predatory subprime auto loan in order to buy a car that will meet their requirements.
What, you thought the Company Store was an outdated business model? Don't be silly.
Also, if you were wondering who provided the capital for this exciting new adventure in capitalism, I'll give you two guesses and the first one doesn't count. Here's a hint: think "blood funnel".
posted by Kadin2048 at 7:22 AM on February 21, 2017 [16 favorites]
Meanwhile: Biggest Gasoline Glut in 27 Years Could Crash Oil Markets.
posted by Sonny Jim at 7:22 AM on February 21, 2017 [1 favorite]
posted by Sonny Jim at 7:22 AM on February 21, 2017 [1 favorite]
Looking more carefully at the requirements, it seems that my Honda Fit would just qualify for Uber (2006 or newer model year), but probably not for much longer.
posted by peacheater at 7:24 AM on February 21, 2017
posted by peacheater at 7:24 AM on February 21, 2017
If only there were a way to find out what the motherfuckers owe, and make them pay!
posted by thelonius at 7:25 AM on February 21, 2017 [2 favorites]
posted by thelonius at 7:25 AM on February 21, 2017 [2 favorites]
cjorgensen, as to the reliability bit: yes, all cars can break down, and yes, I can afford the repairs. You know what I can't afford? The downtime. With a newer vehicle I am much less likely to deal with it. Now I'm not going to go trade up when the warranty is up. But with my older cars, yes, I could dump $3-4K into rebuilding the engines plus whatever else might be needed (one needs new control arms and struts, things like that.) But at the end of that I still have a 16 year old car with 220,000 miles, and with the way things deteriorate here in the desert I'm going to have a lot of fixing to do. So I look at it this way: how much is it costing me to buy this car? To figure that out, I take the total purchase cost of the car + unexpected repairs. (Struts, brakes, maintenance don't count; those are all wear items and you'd have to do that on any car. New water pump or catalytic converter or things like that? Those count.) Then I divide it up by how many miles I have on the car. The 14 year old car we just moved up (well, laterally) from was the first car we bought new. The 16 year old car was bought used for less than half of what we paid for the new car. The new car has cost us less per mile to buy than the older one.
posted by azpenguin at 7:26 AM on February 21, 2017 [8 favorites]
posted by azpenguin at 7:26 AM on February 21, 2017 [8 favorites]
Because really, without the paperwork it appeared they were stealing the car. They were even armed.
A co-worker of mine just had the car he uses to drive Lyft/Uber stolen by a tow truck from his parking lot. We were remarking on how indistinguishable repossession is from steal a lot of the time.
He's decently well set up to take these risks; he's got a decent job, drives as very much a part-time thing to save a little extra money, shopped around for the car, and was paying for some kind of insurance that's paying for a Uber-drivable rental while he waits for the claim to be processed. That said, he could easily be in possession of a loan for an asset he no longer owns, while also being out a job he depended on. Plenty of people would be, if they were in his shoes.
posted by Bulgaroktonos at 7:31 AM on February 21, 2017 [1 favorite]
A co-worker of mine just had the car he uses to drive Lyft/Uber stolen by a tow truck from his parking lot. We were remarking on how indistinguishable repossession is from steal a lot of the time.
He's decently well set up to take these risks; he's got a decent job, drives as very much a part-time thing to save a little extra money, shopped around for the car, and was paying for some kind of insurance that's paying for a Uber-drivable rental while he waits for the claim to be processed. That said, he could easily be in possession of a loan for an asset he no longer owns, while also being out a job he depended on. Plenty of people would be, if they were in his shoes.
posted by Bulgaroktonos at 7:31 AM on February 21, 2017 [1 favorite]
I know the above is a simplification, and makes some assumptions
Yeah. That right there should have been a clue you could have toned it down or maybe just moved on. But thanks for the scolding. I appreciated it.
posted by 80 Cats in a Dog Suit at 7:31 AM on February 21, 2017 [16 favorites]
Yeah. That right there should have been a clue you could have toned it down or maybe just moved on. But thanks for the scolding. I appreciated it.
posted by 80 Cats in a Dog Suit at 7:31 AM on February 21, 2017 [16 favorites]
But it's all I could get after a year and a half of taking a combination of train/bus and I was told flat out, if you want this upcoming job you need a car. Period. Sucks but it is what it is.
posted by 80 Cats in a Dog Suit at 10:02 AM on February 21
I'm a little concerned for your rights given your statement.
----
HR Q&AS
Interviewing: Can a recruiter ask a candidate, Do you own a car?
In most cases, no. The question of whether an individual owns a car is irrelevant, unless the position requires an employee to use his or her personal vehicle to travel between worksites, or other locations, as a primary job duty.
Whether candidates use public transportation, bike, carpool, or drive to work really has no bearing on how they will perform in the job. Therefore, the mode of transportation used to get to work is not what an employer should be considering when making a selection decision.
----
“Do you have a car?” Most positions require a candidate to provide their own transportation to and from the job. So it’s quite common for an employer to ask a candidate if they own a car. However, according to Hireology’s Product Development Director Margot Nash, “It is rare that a car is actually needed to do the job. Instead, the employer is asking this question because they are concerned with attendance.” Rather than asking such a question that allude to the interviewee’s assets, try asking: “Is there anything that could interfere with your ability to arrive to work on time each day?”
posted by Nanukthedog at 7:39 AM on February 21, 2017 [1 favorite]
posted by 80 Cats in a Dog Suit at 10:02 AM on February 21
I'm a little concerned for your rights given your statement.
----
HR Q&AS
Interviewing: Can a recruiter ask a candidate, Do you own a car?
In most cases, no. The question of whether an individual owns a car is irrelevant, unless the position requires an employee to use his or her personal vehicle to travel between worksites, or other locations, as a primary job duty.
Whether candidates use public transportation, bike, carpool, or drive to work really has no bearing on how they will perform in the job. Therefore, the mode of transportation used to get to work is not what an employer should be considering when making a selection decision.
----
“Do you have a car?” Most positions require a candidate to provide their own transportation to and from the job. So it’s quite common for an employer to ask a candidate if they own a car. However, according to Hireology’s Product Development Director Margot Nash, “It is rare that a car is actually needed to do the job. Instead, the employer is asking this question because they are concerned with attendance.” Rather than asking such a question that allude to the interviewee’s assets, try asking: “Is there anything that could interfere with your ability to arrive to work on time each day?”
posted by Nanukthedog at 7:39 AM on February 21, 2017 [1 favorite]
What if you are in an accident and now you owe $6,000 on something you can't even drive? Hope you have more than liability insurance.
Banks know this and require you to carry full coverage on the car until it's paid off. Of course, if the car is worth less than what you owe on the loan, the insurance company is going to pay the lower amount and you're on the hook for the difference (and the lower your credit score is the higher your insurance premiums in the first place), etc.
Capital knows the game well enough to avoid getting stuck with the short end of the stick.
posted by Hiding From Goro at 7:41 AM on February 21, 2017 [1 favorite]
Banks know this and require you to carry full coverage on the car until it's paid off. Of course, if the car is worth less than what you owe on the loan, the insurance company is going to pay the lower amount and you're on the hook for the difference (and the lower your credit score is the higher your insurance premiums in the first place), etc.
Capital knows the game well enough to avoid getting stuck with the short end of the stick.
posted by Hiding From Goro at 7:41 AM on February 21, 2017 [1 favorite]
Uber/Lyft both require you to have purchased your car recently.
>Really? I did not know that, and frankly that sucks.
Yeah, a few months, maybe a year ago a former roommate of mine posted on facebook something to the effect of "just got a new car so I could drive for uber! hope this works out so I can make the payments 🙏 😂 🔫 "
Since then she's been in a car wreck and I believe is no longer driving for uber.
posted by phunniemee at 7:41 AM on February 21, 2017 [2 favorites]
>Really? I did not know that, and frankly that sucks.
Yeah, a few months, maybe a year ago a former roommate of mine posted on facebook something to the effect of "just got a new car so I could drive for uber! hope this works out so I can make the payments 🙏 😂 🔫 "
Since then she's been in a car wreck and I believe is no longer driving for uber.
posted by phunniemee at 7:41 AM on February 21, 2017 [2 favorites]
A few years ago I saw this extraordinary reality tv show. It was about these car repossessors.
One of the best movies ever made. "Not just a job, it's an adventure."
posted by effbot at 7:41 AM on February 21, 2017 [9 favorites]
One of the best movies ever made. "Not just a job, it's an adventure."
posted by effbot at 7:41 AM on February 21, 2017 [9 favorites]
The best financial advice I was ever given was from a friend's dad when I was about 13 years old. We were talking about saving to buy a car when we turned 16 and my friend's dad told us the story of him and his friends and their early car ownership. He said that he and almost all of his friends bought used cars when they were 16. One friend didn't.
All of his friends who bought used cars were still driving crap used cars (and back then all cars were crap and used cars even more so). The friend who didn't was now driving new BMWs swapped out every few years.
He laid out the rough math for buying a used car, cost to run, repair and insure from 16 on compared it to saving and compound interest (there was interest in those days!).
Except I blew all my money on replacing broken parts on my BMX bike so I guess I wasn't a lesson I really took to heart.
posted by srboisvert at 7:44 AM on February 21, 2017 [6 favorites]
All of his friends who bought used cars were still driving crap used cars (and back then all cars were crap and used cars even more so). The friend who didn't was now driving new BMWs swapped out every few years.
He laid out the rough math for buying a used car, cost to run, repair and insure from 16 on compared it to saving and compound interest (there was interest in those days!).
Except I blew all my money on replacing broken parts on my BMX bike so I guess I wasn't a lesson I really took to heart.
posted by srboisvert at 7:44 AM on February 21, 2017 [6 favorites]
Whether candidates use public transportation, bike, carpool, or drive to work really has no bearing on how they will perform in the job. Therefore, the mode of transportation used to get to work is not what an employer should be considering when making a selection decision.
If they stick the job site out in the middle of the suburbs, there's just a built in requirement to own a car if you want the job. My city's transit system is designed to get suburban workers into the city in the morning and out in the afternoon; if you live in the city, it's almost impossible to use transit to get to a suburban job.
posted by octothorpe at 7:46 AM on February 21, 2017 [8 favorites]
If they stick the job site out in the middle of the suburbs, there's just a built in requirement to own a car if you want the job. My city's transit system is designed to get suburban workers into the city in the morning and out in the afternoon; if you live in the city, it's almost impossible to use transit to get to a suburban job.
posted by octothorpe at 7:46 AM on February 21, 2017 [8 favorites]
I'm a little concerned for your rights given your statement.
Well that's nice.
But since at the time I was a newly divorced single mom on welfare, I really couldn't advocate for myself at the time and no one was stepping up to advocate for me and I was not tripping over people pointing out my proper rights. And what's funnier was I was working for the county labor department and applying for a job working for the county level welfare office. You'd think if anyone should have been ethical, right? Anyway, after I got the car the job magically went to someone's niece. So... anyway.
posted by 80 Cats in a Dog Suit at 7:47 AM on February 21, 2017 [17 favorites]
Well that's nice.
But since at the time I was a newly divorced single mom on welfare, I really couldn't advocate for myself at the time and no one was stepping up to advocate for me and I was not tripping over people pointing out my proper rights. And what's funnier was I was working for the county labor department and applying for a job working for the county level welfare office. You'd think if anyone should have been ethical, right? Anyway, after I got the car the job magically went to someone's niece. So... anyway.
posted by 80 Cats in a Dog Suit at 7:47 AM on February 21, 2017 [17 favorites]
nothing to see her folks, the happy motoring lifestyle is infinitely sustainable
keep building new freeways, keep widening new ones, and don't—whatever you do—build in such a way that cars are a choice, not a requirement.
posted by entropicamericana at 7:55 AM on February 21, 2017 [15 favorites]
keep building new freeways, keep widening new ones, and don't—whatever you do—build in such a way that cars are a choice, not a requirement.
posted by entropicamericana at 7:55 AM on February 21, 2017 [15 favorites]
If they stick the job site out in the middle of the suburbs, there's just a built in requirement to own a car if you want the job. My city's transit system is designed to get suburban workers into the city in the morning and out in the afternoon; if you live in the city, it's almost impossible to use transit to get to a suburban job.
Or if the job moves. My office is looking into other locations, and while they say that they're taking bus lines into account, I'm terrified that they're going to find a location and my commute is going to double or triple and involve walking in areas with no sidewalks because it can look good on paper, but people who don't take public transit are really horrible at judging whether or not areas are bussable or walkable.
posted by dinty_moore at 7:58 AM on February 21, 2017 [4 favorites]
Or if the job moves. My office is looking into other locations, and while they say that they're taking bus lines into account, I'm terrified that they're going to find a location and my commute is going to double or triple and involve walking in areas with no sidewalks because it can look good on paper, but people who don't take public transit are really horrible at judging whether or not areas are bussable or walkable.
posted by dinty_moore at 7:58 AM on February 21, 2017 [4 favorites]
Because of a repossession and a foreclosure (laid off, flooded house, bad decision-making in terms of buying during the housing bubble, all of it), I didn't qualify for any credit for about 10 years. And I managed to live without any credit for those 10 years and pretty much still do to this day. I have a couple of very low-balance credit cards to "maintain my credit rating" (stupid, stupid policy, I think, since paying your rent on time doesn't count, but paying for slacks at Macy's does) and I took out a car loan with the intention of using it as an expensive way to rebuild credit, as well.
I wanted a car around $10K, since the payments on that would be comfortable. I wound up getting a loan for "up to $14K," which was nice. I found a Kia Soul for $11K and attempted to use my line of guaranteed credit to buy the car off the lot.
The car salesman did his damndest to try to sell me on the idea of using their financing, which would have cost me an extra $4,000 in PRINCIPAL to buy the car. They kept slapping on things like warranties (still covered by the original warranty, this was extra) and clear coatings on the bottom and CAR MATS. It was maddening, trying to buy the car with a check I had in-hand.
I only was able to get them to stop loading me up with extra money owed by walking out of the dealership and not returning calls for a week. When I went back, the car was still available, so I said, "Take my check or I'll buy from somewhere else." They took the check.
posted by xingcat at 8:07 AM on February 21, 2017 [5 favorites]
I wanted a car around $10K, since the payments on that would be comfortable. I wound up getting a loan for "up to $14K," which was nice. I found a Kia Soul for $11K and attempted to use my line of guaranteed credit to buy the car off the lot.
The car salesman did his damndest to try to sell me on the idea of using their financing, which would have cost me an extra $4,000 in PRINCIPAL to buy the car. They kept slapping on things like warranties (still covered by the original warranty, this was extra) and clear coatings on the bottom and CAR MATS. It was maddening, trying to buy the car with a check I had in-hand.
I only was able to get them to stop loading me up with extra money owed by walking out of the dealership and not returning calls for a week. When I went back, the car was still available, so I said, "Take my check or I'll buy from somewhere else." They took the check.
posted by xingcat at 8:07 AM on February 21, 2017 [5 favorites]
From TFA:
At the time, the classic example of subprime car dealing was the shady used-car-lot-on-the-corner, like you can find in a lot of small cities. The one that traditionally had the big "No Credit? Bad Credit? No Problem!" banner out in front of it. Someone once told me, half-jokingly, that in their retirement they were going to run one of those because all you needed was three shitty old Toyotas and a tow truck. It's only a slight exaggeration. In its most pure form, you "sell" a car at some insane price and interest rate to a subprime buyer, milk them as long as they can make the payments, and then the second they hit 30 days delinquent and default, you run over in the tow truck and grab the car back. Either they bring the loan up plus pay you the tow / storage / attorneys fees, or you just keep the car, sell it back to yourself at a "commercially reasonable" value, sell the deficiency debt (difference between the outstanding loan balance and the value of the car — i.e. how far "upside down" they were) to a collection agency for a few cents on the dollar, and find another chump to sell the car to. Rinse, repeat. I think in the latest generation of this scheme they even have remote tracking devices and killswitches built into the car, so the tow truck is optional.
This is obviously a bottom-feeder business model, but it's not exactly a systemic risk, and it's not new; it's been going on since at least the 1930s. Any fool can look at this operation and realize that while in a good year it's probably a license to print money, but in a bad year (say, if someone or better yet multiple someones decide to give their car a Viking funeral before you can repossess it) it can go from "undercapitalized" to "insolvent" very quickly. There's just too much risk for the return it offered, at least in the pre-crunch environment, for most investors. AFAIK, most of these operations didn't package and securitize their loans for sale on the open market; they'd carry the loans on their own books, and get traditional block loans from commercial banks for the purchase of inventory and cashflow management, if they needed it.
For reasons that are still hazy to me, that has clearly changed. Maybe it's because the no-risk return (e.g. T-Bills, etc.) is so low, even low risk-adjusted-return business models seem interesting, or maybe some bright young thing out there on the Street has found a way to massage the numbers a bit better. Probably both.
Bloomberg, in a related article on the subject, probably sums it up as succinctly as possible:
posted by Kadin2048 at 8:07 AM on February 21, 2017 [10 favorites]
Car companies—and their captive finance units—make about half of all car loans these days, but they underwrite three-quarters of the ones going to subprime vehicle buyers. As delinquencies rise, these are the first companies that will feel them. Indeed, the Fed says recent delinquencies are inordinately hitting carmakers, while bank and credit unions have actually seen an improvement in late payment data.That struck me as interesting. It's been a while since I've been involved in consumer auto finance, and my involvement was pretty peripheral (although it was interesting, and I learned a lot that I would never have known otherwise), but as of 10-12 years ago or so, at least some of the major auto companies did not want any exposure to subprime. Maybe that was because the subprime RE crash was already getting started, and they had already cleaned their books, but it didn't feel like a new policy.
At the time, the classic example of subprime car dealing was the shady used-car-lot-on-the-corner, like you can find in a lot of small cities. The one that traditionally had the big "No Credit? Bad Credit? No Problem!" banner out in front of it. Someone once told me, half-jokingly, that in their retirement they were going to run one of those because all you needed was three shitty old Toyotas and a tow truck. It's only a slight exaggeration. In its most pure form, you "sell" a car at some insane price and interest rate to a subprime buyer, milk them as long as they can make the payments, and then the second they hit 30 days delinquent and default, you run over in the tow truck and grab the car back. Either they bring the loan up plus pay you the tow / storage / attorneys fees, or you just keep the car, sell it back to yourself at a "commercially reasonable" value, sell the deficiency debt (difference between the outstanding loan balance and the value of the car — i.e. how far "upside down" they were) to a collection agency for a few cents on the dollar, and find another chump to sell the car to. Rinse, repeat. I think in the latest generation of this scheme they even have remote tracking devices and killswitches built into the car, so the tow truck is optional.
This is obviously a bottom-feeder business model, but it's not exactly a systemic risk, and it's not new; it's been going on since at least the 1930s. Any fool can look at this operation and realize that while in a good year it's probably a license to print money, but in a bad year (say, if someone or better yet multiple someones decide to give their car a Viking funeral before you can repossess it) it can go from "undercapitalized" to "insolvent" very quickly. There's just too much risk for the return it offered, at least in the pre-crunch environment, for most investors. AFAIK, most of these operations didn't package and securitize their loans for sale on the open market; they'd carry the loans on their own books, and get traditional block loans from commercial banks for the purchase of inventory and cashflow management, if they needed it.
For reasons that are still hazy to me, that has clearly changed. Maybe it's because the no-risk return (e.g. T-Bills, etc.) is so low, even low risk-adjusted-return business models seem interesting, or maybe some bright young thing out there on the Street has found a way to massage the numbers a bit better. Probably both.
Bloomberg, in a related article on the subject, probably sums it up as succinctly as possible:
Never underestimate the creativity of business people in need of new business and investors in need of something in which to invest.As epitaphs go, you could do worse, I guess.
posted by Kadin2048 at 8:07 AM on February 21, 2017 [10 favorites]
> But thanks for the scolding. I appreciated it.
My comment wasn't in reference to any previous comment. If it were, I would have quoted you. It wasn't meant personally.
posted by cjorgensen at 8:16 AM on February 21, 2017
My comment wasn't in reference to any previous comment. If it were, I would have quoted you. It wasn't meant personally.
posted by cjorgensen at 8:16 AM on February 21, 2017
> You know what I can't afford? The downtime.
I get this. I also get that you know your situation well enough to plan for your environment.
Auto debt is one of the largest factors in downward pressure on middle class finances. Often you see people trading in cars that aren't even paid off yet only to acquire additional debt.
The Car Talk guys did an article at one point to see whether it made sense to buy used or new. They took like $20,000 and put them into cars. One they bought outright for like $12,000, and one they financed. They did the same maintenance to both, but the purchased car had $8,000 in its "car fund" for repairs, and the $20k car had to be out of pocket. When the $20,000 car was paid for they sold both and totaled up costs. The $20k car depreciated by like 25% as soon as it was driven off the lot, and much more by the time it was sold. The $12k car did depreciate, but not nearly as much. The interest on the $20k car wasn't insignificant, and all repairs were on top of the initial purchase price. Both cars lasted the life of the loan, but one cost nearly twice as much in the end.
posted by cjorgensen at 8:27 AM on February 21, 2017 [2 favorites]
I get this. I also get that you know your situation well enough to plan for your environment.
Auto debt is one of the largest factors in downward pressure on middle class finances. Often you see people trading in cars that aren't even paid off yet only to acquire additional debt.
The Car Talk guys did an article at one point to see whether it made sense to buy used or new. They took like $20,000 and put them into cars. One they bought outright for like $12,000, and one they financed. They did the same maintenance to both, but the purchased car had $8,000 in its "car fund" for repairs, and the $20k car had to be out of pocket. When the $20,000 car was paid for they sold both and totaled up costs. The $20k car depreciated by like 25% as soon as it was driven off the lot, and much more by the time it was sold. The $12k car did depreciate, but not nearly as much. The interest on the $20k car wasn't insignificant, and all repairs were on top of the initial purchase price. Both cars lasted the life of the loan, but one cost nearly twice as much in the end.
posted by cjorgensen at 8:27 AM on February 21, 2017 [2 favorites]
The Car Talk guys did an article at one point to see whether it made sense to buy used or new. They took like $20,000 and put them into cars. One they bought outright for like $12,000, and one they financed. They did the same maintenance to both, but the purchased car had $8,000 in its "car fund" for repairs, and the $20k car had to be out of pocket. When the $20,000 car was paid for they sold both and totaled up costs. The $20k car depreciated by like 25% as soon as it was driven off the lot, and much more by the time it was sold. The $12k car did depreciate, but not nearly as much. The interest on the $20k car wasn't insignificant, and all repairs were on top of the initial purchase price. Both cars lasted the life of the loan, but one cost nearly twice as much in the end.
Yeah, but I think the rest of us are talking about buying a $2,000 car outright or financing a $12,000 car, or financing a $2,000 car vs. not having a way to get to your job, which is a completely different scenario than the one you're talking about.
posted by dinty_moore at 8:38 AM on February 21, 2017 [8 favorites]
Yeah, but I think the rest of us are talking about buying a $2,000 car outright or financing a $12,000 car, or financing a $2,000 car vs. not having a way to get to your job, which is a completely different scenario than the one you're talking about.
posted by dinty_moore at 8:38 AM on February 21, 2017 [8 favorites]
Is that fair, though? Wouldn't the comparison need to be between 20k of used car and 20k of new car? The test that the car talk guys ran sounds like a test for user satisfaction instead of cost, because obviously a car you buy for cheaper will end up being cheaper if there's no major hardware failures.
I like used vehicles because I hate to think of dings and scratches in financial terms. From the article, it does seem a race between the credit bubble popping and electric and driverless cars causing continued new car purchasing.
posted by BeeDo at 8:39 AM on February 21, 2017
I like used vehicles because I hate to think of dings and scratches in financial terms. From the article, it does seem a race between the credit bubble popping and electric and driverless cars causing continued new car purchasing.
posted by BeeDo at 8:39 AM on February 21, 2017
Having $12k on hand for a car is a lot for most people. We're back to Sam Vimes theory of boots - if you're poor, you don't have the money required to save money.
posted by dinty_moore at 8:40 AM on February 21, 2017 [23 favorites]
posted by dinty_moore at 8:40 AM on February 21, 2017 [23 favorites]
Hey, remember how the cars & the banks involved themselves in urban design policy at every level to make sure you'll need to be this in debt for as long as these suburbs exist
(Subtitled: It's not about how the poors can't save $200/month)
posted by tapesonthefloor at 8:47 AM on February 21, 2017 [8 favorites]
(Subtitled: It's not about how the poors can't save $200/month)
posted by tapesonthefloor at 8:47 AM on February 21, 2017 [8 favorites]
There's the same worry in the UK. Same conclusions: a collapse in asset-backed securities made up of car loans will hit manufacturers worst, and the popularity is built on current low interest rates, which won't last forever.
Bonus, from the article: Ling's Cars is one of the top sites in the UK. It's bonkers. And shifted £85M-worth of leased cars last year.
posted by dowcrag at 8:48 AM on February 21, 2017
Bonus, from the article: Ling's Cars is one of the top sites in the UK. It's bonkers. And shifted £85M-worth of leased cars last year.
posted by dowcrag at 8:48 AM on February 21, 2017
My partner and I just paid off her car. That's $300/month we're not spending now, so yay.
A few years ago we had the godawful misfortune to have the need for two vehicles right at the moment the one vehicle we'd been depending on died in a way that'd cost more than it was worth to fix. We both had jobs that paid well at the time.
And the first thing we noticed was that, in our area at least, used cars seemed like an awful deal.
Used cars came in two varieties: truly old cars that would need massive maintenance soon and cost around $8,000, and cars just a year or two old that cost only a couple thousand less than the new price. Apparently that 25% drop in value once you drive it off the lot doesn't pass on to people looking to buy used.
So we bought two new Hondas, then a year later had significantly worse paying jobs that still required two vehicles and a massive financial crunch.
Once mine is paid off our plan is to never buy a car again, because we're hoping that by the time both of these cars totally wear out and cost more to repair than they're worth self driving cars will be a thing and we can just subscribe to a car service instead of going to the fuss and bother of owning a car.
posted by sotonohito at 8:48 AM on February 21, 2017 [2 favorites]
A few years ago we had the godawful misfortune to have the need for two vehicles right at the moment the one vehicle we'd been depending on died in a way that'd cost more than it was worth to fix. We both had jobs that paid well at the time.
And the first thing we noticed was that, in our area at least, used cars seemed like an awful deal.
Used cars came in two varieties: truly old cars that would need massive maintenance soon and cost around $8,000, and cars just a year or two old that cost only a couple thousand less than the new price. Apparently that 25% drop in value once you drive it off the lot doesn't pass on to people looking to buy used.
So we bought two new Hondas, then a year later had significantly worse paying jobs that still required two vehicles and a massive financial crunch.
Once mine is paid off our plan is to never buy a car again, because we're hoping that by the time both of these cars totally wear out and cost more to repair than they're worth self driving cars will be a thing and we can just subscribe to a car service instead of going to the fuss and bother of owning a car.
posted by sotonohito at 8:48 AM on February 21, 2017 [2 favorites]
> Yeah, but I think the rest of us are talking about buying a $2,000 car outright or financing a $12,000 car, or financing a $2,000 car vs. not having a way to get to your job, which is a completely different scenario than the one you're talking about.
I wouldn't say it's completely different. It's the same math, just different numbers.
Whether you buy the $2,000 car outright, or finance the $12,000 one, you are either choosing to take on debt, or electing to forego debt in favor of cash flowing your transportation.
Again, no one is suggesting you stay with the $2,000 car forever. But rather than putting that money down on a $12,000 car and financing $10k in debt, but a beater outright and save for a nicer car, and if you can't afford to save, well, then a car payment isn't going to help.
I also get the boot theory. Being poor is expensive, and it is a hard cycle to break out of. I was there for decades. But I also recognize my debt was the a major contributing factor of my poverty (that and my limited income).
I'd also suggest that the majority of the debt this article is referring to has little to do with the truly poor, and more to do with those who feel a need to be driving something new and nice and reliable, when an older car can meet their needs just fine.
posted by cjorgensen at 8:50 AM on February 21, 2017 [3 favorites]
I wouldn't say it's completely different. It's the same math, just different numbers.
Whether you buy the $2,000 car outright, or finance the $12,000 one, you are either choosing to take on debt, or electing to forego debt in favor of cash flowing your transportation.
Again, no one is suggesting you stay with the $2,000 car forever. But rather than putting that money down on a $12,000 car and financing $10k in debt, but a beater outright and save for a nicer car, and if you can't afford to save, well, then a car payment isn't going to help.
I also get the boot theory. Being poor is expensive, and it is a hard cycle to break out of. I was there for decades. But I also recognize my debt was the a major contributing factor of my poverty (that and my limited income).
I'd also suggest that the majority of the debt this article is referring to has little to do with the truly poor, and more to do with those who feel a need to be driving something new and nice and reliable, when an older car can meet their needs just fine.
posted by cjorgensen at 8:50 AM on February 21, 2017 [3 favorites]
I wouldn't say it's completely different. It's the same math, just different numbers.
The difference is the reliability of the cars - you can get a basically reliable car that's maybe four years old for $12k (depending on area, needs, whether you can drive stick...), but the $2k car is barely going to get out of the lot before needing repairs. The quality of cars decrease exponentially with a linear decline in purchase price.
The worst of those loans do mostly go after those with bad credit, those who haven't needed a car before, and those who don't have the time to shop around for a loan - mostly, the young and the lower middle class/poor, and those who simply haven't purchased a car before. Sure, some richer people do get ensnared into it, but they're also more likely to be able to bounce back from financial hardship.
Much like the housing crisis was supposedly all about all of these silly suburbanites who bought houses with fifteen bedrooms or something, but nobody talks about the fact that the areas that suffered the biggest long term financial impact were in the lower middle class, especially minorities. Sure, McMansions exist and they were part of the problem, but the foreclosure crisis was hardly limited to them.
So yeah, no, it's not just about silly people who can't figure out that they should just buy a used car.
posted by dinty_moore at 9:05 AM on February 21, 2017 [2 favorites]
The difference is the reliability of the cars - you can get a basically reliable car that's maybe four years old for $12k (depending on area, needs, whether you can drive stick...), but the $2k car is barely going to get out of the lot before needing repairs. The quality of cars decrease exponentially with a linear decline in purchase price.
The worst of those loans do mostly go after those with bad credit, those who haven't needed a car before, and those who don't have the time to shop around for a loan - mostly, the young and the lower middle class/poor, and those who simply haven't purchased a car before. Sure, some richer people do get ensnared into it, but they're also more likely to be able to bounce back from financial hardship.
Much like the housing crisis was supposedly all about all of these silly suburbanites who bought houses with fifteen bedrooms or something, but nobody talks about the fact that the areas that suffered the biggest long term financial impact were in the lower middle class, especially minorities. Sure, McMansions exist and they were part of the problem, but the foreclosure crisis was hardly limited to them.
So yeah, no, it's not just about silly people who can't figure out that they should just buy a used car.
posted by dinty_moore at 9:05 AM on February 21, 2017 [2 favorites]
Bonus, from the article: Ling's Cars is one of the top sites in the UK. It's bonkers.
Her website advice section has some real gems (you have to scroll down a bit to find the text). "Last, don't let 1 day go by without changing or feeding or petting website, even tiny thing. If you don't feed website it will die. Like pet. This is all emotion, not fact. You think I'm wrong? Look at your website, look at my website."
posted by effbot at 9:07 AM on February 21, 2017 [3 favorites]
Her website advice section has some real gems (you have to scroll down a bit to find the text). "Last, don't let 1 day go by without changing or feeding or petting website, even tiny thing. If you don't feed website it will die. Like pet. This is all emotion, not fact. You think I'm wrong? Look at your website, look at my website."
posted by effbot at 9:07 AM on February 21, 2017 [3 favorites]
Warning: rantfilter
Yeah, I had an older Toyota Tacoma that I planned to run into the ground and only had a year of payments left on it. Well, fate had it that one day I was going to work and was making a left turn at a traffic light. Once the light turned green, I pulled into the intersection and a couple seconds later was t-boned by a guy on a motorcycle who had "fallen asleep at the wheel". Don't ask me how that happens. Fucking asshole. Anyway, he had been doing 60-70 mph at the time, and needless to say, totaled my truck. I only had a few $1000 left to pay on it at that point. Well, the insurance paid it off for me.
But the real shitter was when they gave me money for my truck. It was a drop in the bucket towards another vehicle and I had to take out a 5 year loan on a USED vehicle just to get something decent that would last and that I could afford the payment on. So I have a payment again now and no warranty and I just had to put $2500 into fixing my car too. You're fucked no matter what you do.
The real issue is that cars are so goddammed expensive that unless you make a shitpile of money, you have to finance them. Bottom line.
Oh, and student loans on top of that. That's another thread altogether.
posted by strelitzia at 9:09 AM on February 21, 2017 [7 favorites]
Yeah, I had an older Toyota Tacoma that I planned to run into the ground and only had a year of payments left on it. Well, fate had it that one day I was going to work and was making a left turn at a traffic light. Once the light turned green, I pulled into the intersection and a couple seconds later was t-boned by a guy on a motorcycle who had "fallen asleep at the wheel". Don't ask me how that happens. Fucking asshole. Anyway, he had been doing 60-70 mph at the time, and needless to say, totaled my truck. I only had a few $1000 left to pay on it at that point. Well, the insurance paid it off for me.
But the real shitter was when they gave me money for my truck. It was a drop in the bucket towards another vehicle and I had to take out a 5 year loan on a USED vehicle just to get something decent that would last and that I could afford the payment on. So I have a payment again now and no warranty and I just had to put $2500 into fixing my car too. You're fucked no matter what you do.
The real issue is that cars are so goddammed expensive that unless you make a shitpile of money, you have to finance them. Bottom line.
Oh, and student loans on top of that. That's another thread altogether.
posted by strelitzia at 9:09 AM on February 21, 2017 [7 favorites]
I don't know about the US, but here in a relatively low-income part of the UK you rarely see a car more than 3-4 years old. I drive a 2005 Ford Ka and it's uncommon enough to drive a car of that age that people comment on it. (In this country, the year your car was new is on its plates.)
I'd imagine this might be different in different parts of the US, but I have to say that's not the case where I'm from. You do see a lot of somewhat somewhat newer Subarus, but that's more because winters are shitty and 4 wheel drive is nice. Otherwise, I'd say the prototypical car is a Honda Accord that's about 10-15 years old. I have noticed that the Uber drivers have nicer new cars, but I guess Uber's requirements explain that.
posted by dinty_moore at 9:19 AM on February 21, 2017
I'd imagine this might be different in different parts of the US, but I have to say that's not the case where I'm from. You do see a lot of somewhat somewhat newer Subarus, but that's more because winters are shitty and 4 wheel drive is nice. Otherwise, I'd say the prototypical car is a Honda Accord that's about 10-15 years old. I have noticed that the Uber drivers have nicer new cars, but I guess Uber's requirements explain that.
posted by dinty_moore at 9:19 AM on February 21, 2017
Never underestimate the creativity of business people in need of new business and investors in need of something in which to invest.
Just wait until we hit the smart phone lease bubble, which is something I bet we see by 2020. I'm not sure what's cheaper and more ubiquitous that they can convince people to take out loans for, but whatever it is, that would be my guess for the source of the financial crisis of 2025, since that seems to be the trend.
posted by Copronymus at 9:23 AM on February 21, 2017 [1 favorite]
Just wait until we hit the smart phone lease bubble, which is something I bet we see by 2020. I'm not sure what's cheaper and more ubiquitous that they can convince people to take out loans for, but whatever it is, that would be my guess for the source of the financial crisis of 2025, since that seems to be the trend.
posted by Copronymus at 9:23 AM on February 21, 2017 [1 favorite]
I used to have a bunch of employees on the perpetual subprime car cycle, complete with every usurious trick in the book. Right now I'm working in a more evenly middle class environment, and from what I can see it is split about 1/3 late model cars owned outright, 1/3 frugal reliable older vehicles, and 1/3 new vehicles with high loan payments. Everyone seems happy enough with their choices, even if no one quite understands each other.
posted by Dip Flash at 9:24 AM on February 21, 2017 [1 favorite]
posted by Dip Flash at 9:24 AM on February 21, 2017 [1 favorite]
I often counsel friends and family who have an older car that meets their needs just fine, except that their older car is breaking down a lot, which has an economic cost that's harder to budget for. In many instances, they're looking at a significant investment to get the car back on the road. In most instances, they rely on their cars for work; some have a career that only exists lucratively within non-transit areas -- welcome to Los Angeles! -- or they are self-employed and traveling to client sites on a daily basis.
The formula is simple: add up all the money you've spent in the last three years on repairs (not routine maintenance or wear parts like tires), divide it by 36, and see if that has been costing you more or less than a 3-year lease or a 5-year, 0% interest dealership loan buy. If the old car only has liability insurance, get an insurance quote for the full coverage you'd need, so that can be factored in, too.
Often the numbers make it clear that the repair is likely worthwhile (like the friend who just dropped 3,000 to put a new battery in her old Prius), and they can proceed with that repair with confidence. Often, the numbers show a new lease or new/slightly used purchase makes more sense (like the friend whose 15+ year old Volvo needed 3,000 of work in the past two years, and was facing a larger bill to get it running again...and had the opportunity to pick up a low-mile, few-year-old volvo from a friend for the trade-in value.)
Occasionally, the numbers aren't the only motivation for a new car purchase. I have a friend right now who loves her older, long-paid-off car, but after nearly a thousand spent on attempts, neither the dealer nor independent mechanics can get it to pass smog due to a computer defect technicality (it won't reach "ready" state for the test to take place), and her state exemption runs out in about a year -- plus her air conditioning compressor just died.
So it is easy to say "buy an older used car, it will be good enough", but that's not going to work for everybody. You really need to run the numbers, and ensure it is compatible with your lifestyle, both as it is and as it could be.
For me, I spend a total of $268/mo to lease, operate and maintain my electric car (which is my only car, and yes, that includes the amortized cost of installing the EVSE in my garage, fuel costs, and replacement tires near the end of the lease.) Bus passes for my family would cost $170/mo, so only $98 a month more gets me mobility autonomy without concern for transit schedules, routes or the extra hour+ I'll spend on or waiting for the bus each weekday.
The enemy, then, isn't new cars or used cars by themselves; it is a combination of not having the financial literacy to cultivate a good credit rating from a young age, not having the financial literacy to calculate true cost of ownership and lifestyle impact/alternatives, and the usual collection of unanticipated challenges in your life. You can't plan for the third, but on the whole our schools could do a hell of a lot better job on the first two (and if you're a parent, you owe it to your kids to get wise and teach them -- that's what I did, as nobody taught me and I had a very deep hole to crawl out of, one I dug myself out of ignorance.)
posted by davejay at 9:30 AM on February 21, 2017 [9 favorites]
The formula is simple: add up all the money you've spent in the last three years on repairs (not routine maintenance or wear parts like tires), divide it by 36, and see if that has been costing you more or less than a 3-year lease or a 5-year, 0% interest dealership loan buy. If the old car only has liability insurance, get an insurance quote for the full coverage you'd need, so that can be factored in, too.
Often the numbers make it clear that the repair is likely worthwhile (like the friend who just dropped 3,000 to put a new battery in her old Prius), and they can proceed with that repair with confidence. Often, the numbers show a new lease or new/slightly used purchase makes more sense (like the friend whose 15+ year old Volvo needed 3,000 of work in the past two years, and was facing a larger bill to get it running again...and had the opportunity to pick up a low-mile, few-year-old volvo from a friend for the trade-in value.)
Occasionally, the numbers aren't the only motivation for a new car purchase. I have a friend right now who loves her older, long-paid-off car, but after nearly a thousand spent on attempts, neither the dealer nor independent mechanics can get it to pass smog due to a computer defect technicality (it won't reach "ready" state for the test to take place), and her state exemption runs out in about a year -- plus her air conditioning compressor just died.
So it is easy to say "buy an older used car, it will be good enough", but that's not going to work for everybody. You really need to run the numbers, and ensure it is compatible with your lifestyle, both as it is and as it could be.
For me, I spend a total of $268/mo to lease, operate and maintain my electric car (which is my only car, and yes, that includes the amortized cost of installing the EVSE in my garage, fuel costs, and replacement tires near the end of the lease.) Bus passes for my family would cost $170/mo, so only $98 a month more gets me mobility autonomy without concern for transit schedules, routes or the extra hour+ I'll spend on or waiting for the bus each weekday.
The enemy, then, isn't new cars or used cars by themselves; it is a combination of not having the financial literacy to cultivate a good credit rating from a young age, not having the financial literacy to calculate true cost of ownership and lifestyle impact/alternatives, and the usual collection of unanticipated challenges in your life. You can't plan for the third, but on the whole our schools could do a hell of a lot better job on the first two (and if you're a parent, you owe it to your kids to get wise and teach them -- that's what I did, as nobody taught me and I had a very deep hole to crawl out of, one I dug myself out of ignorance.)
posted by davejay at 9:30 AM on February 21, 2017 [9 favorites]
Oh, and the enemy that is the unethical, predatory salesman/financial persons you might encounter along the way. Didn't mean to leave that one out, as it is undeniably a strong contributor...and financial literacy from a young age via schools and parents would help people spot those people more easily.
posted by davejay at 9:32 AM on February 21, 2017 [1 favorite]
posted by davejay at 9:32 AM on February 21, 2017 [1 favorite]
Financial literacy without financial opportunity means nothing, though.
posted by scruss at 9:33 AM on February 21, 2017 [12 favorites]
posted by scruss at 9:33 AM on February 21, 2017 [12 favorites]
Except that financial literacy helps you spot people trying to take advantage of you financially, which is arguably more important if your financial opportunities are limited.
posted by davejay at 9:36 AM on February 21, 2017 [2 favorites]
posted by davejay at 9:36 AM on February 21, 2017 [2 favorites]
Again, no one is suggesting you stay with the $2,000 car forever. But rather than putting that money down on a $12,000 car and financing $10k in debt, but a beater outright and save for a nicer car, and if you can't afford to save, well, then a car payment isn't going to help.
The other problem is that you don't actually know what you're getting with a 2,000$ car. You can't buy that car at a dealer, it's not worth keeping on the lot - you need to get it from a private sale. Well, who is guaranteeing that sale? The guy you bought it from off Craigslist? What if it breaks down completely next month? The answer people usually give is "take it to a mechanic", but what guy selling his car for 2000$ on Craigslist is going to wait for you to do that or let you do that?
Also many people can't wait a full year in order to save so they can buy a car in cash, even if they can afford the payments. They need the car for employment or job hunting now, not in a year from now.
posted by corb at 9:38 AM on February 21, 2017 [10 favorites]
The other problem is that you don't actually know what you're getting with a 2,000$ car. You can't buy that car at a dealer, it's not worth keeping on the lot - you need to get it from a private sale. Well, who is guaranteeing that sale? The guy you bought it from off Craigslist? What if it breaks down completely next month? The answer people usually give is "take it to a mechanic", but what guy selling his car for 2000$ on Craigslist is going to wait for you to do that or let you do that?
Also many people can't wait a full year in order to save so they can buy a car in cash, even if they can afford the payments. They need the car for employment or job hunting now, not in a year from now.
posted by corb at 9:38 AM on February 21, 2017 [10 favorites]
Except that financial literacy helps you spot people trying to take advantage of you financially, which is arguably more important if your financial opportunities are limited.
This may protect you on the margins, but it doesn't help you if the only reasonable way you have to participate in a major life activity effectively requires you to be ripped off.
On another point, "overcollateralization" and "subordination" have essentially nothing to do with the terms on which a person buys a car. They're technical matters of how the bonds which depend on the loan payments from the car to be paid are sold. They help to mitigate default risk but they can't overcome a collapse in performance of the underlying assets.
posted by praemunire at 9:43 AM on February 21, 2017 [4 favorites]
This may protect you on the margins, but it doesn't help you if the only reasonable way you have to participate in a major life activity effectively requires you to be ripped off.
On another point, "overcollateralization" and "subordination" have essentially nothing to do with the terms on which a person buys a car. They're technical matters of how the bonds which depend on the loan payments from the car to be paid are sold. They help to mitigate default risk but they can't overcome a collapse in performance of the underlying assets.
posted by praemunire at 9:43 AM on February 21, 2017 [4 favorites]
I think that it is worth pointing out that sometimes newer cars are more financially palatable when you consider the safety features that they have and may be missing in older cars.
When you drive, for the most part, you are at the mercy of other people and the idea of depending on other people to behave responsibly when behind the wheel of a 3,000 pound metal missile gives me the creepers.
Say some dirtbag is driving drunk or someone is texting and driving and then BOOM, wrecked car and injuries for you. Given how crappy most people's health insurance is these days, having a newer car with more advanced safety features can be a worthwhile investment.
I guess the key is being financially literate enough to get a decent deal on one, knowing what you can afford, and making the best decision that you can.
Of course, this comes from someone driving a 1999 Avalon in Milwaukee, a city which, as far as I'm concerned, has the worst drivers in America, bar none.
posted by Fister Roboto at 10:10 AM on February 21, 2017 [5 favorites]
When you drive, for the most part, you are at the mercy of other people and the idea of depending on other people to behave responsibly when behind the wheel of a 3,000 pound metal missile gives me the creepers.
Say some dirtbag is driving drunk or someone is texting and driving and then BOOM, wrecked car and injuries for you. Given how crappy most people's health insurance is these days, having a newer car with more advanced safety features can be a worthwhile investment.
I guess the key is being financially literate enough to get a decent deal on one, knowing what you can afford, and making the best decision that you can.
Of course, this comes from someone driving a 1999 Avalon in Milwaukee, a city which, as far as I'm concerned, has the worst drivers in America, bar none.
posted by Fister Roboto at 10:10 AM on February 21, 2017 [5 favorites]
All the talk about the Lyft, et. al new car requirements leaves out one point. Crash safety standards have strengthened significantly in the past 10 years. A car that got 5-stars in 2007 might get 1 or 2 stars today. You might be okay with mitigating that risk in your own car, but I like the idea of the extra safety factor when being driven by a complete stranger.
posted by hwyengr at 10:10 AM on February 21, 2017 [4 favorites]
posted by hwyengr at 10:10 AM on February 21, 2017 [4 favorites]
I don't know about the US, but here in a relatively low-income part of the UK you rarely see a car more than 3-4 years old.
Same in New England except for the occasional crazy with a volvo 240 with at least one panel ducktaped. I've thought it was largely tied to the insane almost negative interest rates (maybe given inflation) that allowed the car salesmen to make a case for the actual cost being close to book value, forgetting first mile depreciation. So unless POTUS takes out a hit on Ms Yellen, rates are going to inch up and folks will decide they can live with a 4-5 year old hot rod minivan. Yes big hit on the economy, nothing compared to self driving cars though.
Oh my, if the winter salt did not literally eat through the floorboards of 240's (I could see the road) I'd still have that good old beater, was utterly amazing what would fit in the back, boat, any furniture, a small honda ;-)
posted by sammyo at 10:20 AM on February 21, 2017
Same in New England except for the occasional crazy with a volvo 240 with at least one panel ducktaped. I've thought it was largely tied to the insane almost negative interest rates (maybe given inflation) that allowed the car salesmen to make a case for the actual cost being close to book value, forgetting first mile depreciation. So unless POTUS takes out a hit on Ms Yellen, rates are going to inch up and folks will decide they can live with a 4-5 year old hot rod minivan. Yes big hit on the economy, nothing compared to self driving cars though.
Oh my, if the winter salt did not literally eat through the floorboards of 240's (I could see the road) I'd still have that good old beater, was utterly amazing what would fit in the back, boat, any furniture, a small honda ;-)
posted by sammyo at 10:20 AM on February 21, 2017
So I'm a person with a looong beater car history. I had driven (and sometimes shared with my brother) 12 different cars from the time I turned 16 until I was able to buy my own car at 22. None of those cars were totaled: more than half overheated, an oil pump went out in one, a rod blew in another, etc. (This was before we could afford a cell phone too: pre-2005) The longest a car lasted me was about a year, the shortest was less than 3 weeks. Granted, all of these cars were purchased by my parents for me, so I am privileged there (although what usually happened was the car I was driving would bite the dust, so my dad would go pick a new (beater) car from the lot, and hand his car down to me, which I drove until it bit the dust. Lather, rinse, repeat.)
After a history like that, to be constantly worrying whats going to go wrong with your car next? will I make it to school or work today? what major street am I going to break down on today?, I decided that as soon as I could, I would never have a beater again. I will gladly pay for the privilege of not having to worry about my car. I don't care if that means I have a car payment the rest of my life. The weight that was lifted when I finally bought a brand new car was just unquantifiable.
posted by LizBoBiz at 11:03 AM on February 21, 2017 [22 favorites]
After a history like that, to be constantly worrying whats going to go wrong with your car next? will I make it to school or work today? what major street am I going to break down on today?, I decided that as soon as I could, I would never have a beater again. I will gladly pay for the privilege of not having to worry about my car. I don't care if that means I have a car payment the rest of my life. The weight that was lifted when I finally bought a brand new car was just unquantifiable.
posted by LizBoBiz at 11:03 AM on February 21, 2017 [22 favorites]
my 10 year old Ford Taurus didn't qualify, and it's a damn fine and reliable car.
Ha! You must have better luck than me. Two of the above referenced beaters were Tauruses. Both overheated.
posted by LizBoBiz at 11:03 AM on February 21, 2017
Ha! You must have better luck than me. Two of the above referenced beaters were Tauruses. Both overheated.
posted by LizBoBiz at 11:03 AM on February 21, 2017
So... will this impending crash mean that used cars will be cheap and plentiful?
posted by Artful Codger at 11:23 AM on February 21, 2017 [1 favorite]
posted by Artful Codger at 11:23 AM on February 21, 2017 [1 favorite]
One aspect of the earlier beater-v-new car comparison that wasn't taken into consideration is the role a new-car warranty plays in the calculation. Some makes offer quite impressive warranties anymore (some up to 10 years/100,000 miles!) so surely the idea of no out-of-pocket repair costs over a given period of time vs. all repairs being out--of-pocket must be factored-in.
posted by Thorzdad at 12:38 PM on February 21, 2017 [3 favorites]
posted by Thorzdad at 12:38 PM on February 21, 2017 [3 favorites]
I'm 47 now. I look back on my first auto loan and the terms offered to me, and now. You should never take any loan where you can extend the length of the loan well past the life of the thing being financed. You'll be in debt forever.
If you feel the need to do that, use the money to move to the city and use public transit or Uber.
posted by prepmonkey at 12:45 PM on February 21, 2017
If you feel the need to do that, use the money to move to the city and use public transit or Uber.
posted by prepmonkey at 12:45 PM on February 21, 2017
cjorgensen: "Auto debt is also the dumbest kind of debt. "
Eh. Unless you're arguing against all forms of credit, that isn't necessarily true. Paying for an asset over the course of its lifespan is a fairly reasonable thing to do, provided that interest rates are reasonable.
I financed my used car for about 1.5% through my credit union. That's insanely cheap credit. Use the extra liquidity to fund your retirement account or make another investment.
posted by schmod at 12:57 PM on February 21, 2017 [1 favorite]
Eh. Unless you're arguing against all forms of credit, that isn't necessarily true. Paying for an asset over the course of its lifespan is a fairly reasonable thing to do, provided that interest rates are reasonable.
I financed my used car for about 1.5% through my credit union. That's insanely cheap credit. Use the extra liquidity to fund your retirement account or make another investment.
posted by schmod at 12:57 PM on February 21, 2017 [1 favorite]
The weight that was lifted when I finally bought a brand new car was just unquantifiable.
Same here. I ran through 7 beaters over 15 years, costing $1500 - $5000 each. Then I bought a brand new Corolla. Never going back. When I see the scheduled car payment leave my checking account, I feel just fine. Worth every penny.
Any $2k beater needs a few hundred in delayed maintenance and is riding on bald tires and is basically a slow-burning inverse scratch-off lotto ticket. It fails emissions tests, then fails 'em again. The trunk lets in water, the A/C doesn't work (universal to beaters), it pulls to the left (or right), and the parking brake is broken. Then it leaves you stranded, late for school or work. Or while on a date. CV Joints start popping and the alternator goes. The starter goes, like every third month, and sure you can replace it yourself but the bolt on the far side takes 45 minutes to get out because you can only work it a 1/8 turn at a time with your hand all twisted and jammed up in there and fuck dropped the fucking wrench again. Then it overheats. And once that starts happening, it'll never get fixed right.
This is from a middle age rust-belt baseball hat lower middle class midwestern guy who can wrench. Beaters are a soul-crushing, savings-crushing bad idea.
posted by everythings_interrelated at 1:08 PM on February 21, 2017 [21 favorites]
Same here. I ran through 7 beaters over 15 years, costing $1500 - $5000 each. Then I bought a brand new Corolla. Never going back. When I see the scheduled car payment leave my checking account, I feel just fine. Worth every penny.
Any $2k beater needs a few hundred in delayed maintenance and is riding on bald tires and is basically a slow-burning inverse scratch-off lotto ticket. It fails emissions tests, then fails 'em again. The trunk lets in water, the A/C doesn't work (universal to beaters), it pulls to the left (or right), and the parking brake is broken. Then it leaves you stranded, late for school or work. Or while on a date. CV Joints start popping and the alternator goes. The starter goes, like every third month, and sure you can replace it yourself but the bolt on the far side takes 45 minutes to get out because you can only work it a 1/8 turn at a time with your hand all twisted and jammed up in there and fuck dropped the fucking wrench again. Then it overheats. And once that starts happening, it'll never get fixed right.
This is from a middle age rust-belt baseball hat lower middle class midwestern guy who can wrench. Beaters are a soul-crushing, savings-crushing bad idea.
posted by everythings_interrelated at 1:08 PM on February 21, 2017 [21 favorites]
While the predatory bottom-feeding auto loans are absolutely awful and indeed should be avoided, I brought my current car with a 1 percent interest loan from the manufacturer. Sure, I could have paid cash, and did pay an unusually large amount down, but I would rather have the other 15K available as part of my emergency fund, plus the loan was useful for keeping my credit score up. So I'm paying under $80 a year to keep my resources instantly available for emergencies, and that's worthwhile insurance for me.
posted by tavella at 2:06 PM on February 21, 2017
posted by tavella at 2:06 PM on February 21, 2017
"So... will this impending crash mean that used cars will be cheap and plentiful?"
If the car loan bubble bursts (and the way things are going....it will), there will be a huge glut of used cars hitting the market, lowering prices. If you are in a position to take advantage, it will definitely be a buyers market.
When I was younger and dumber I was one the same treadmill, buying a new car every 3 years or so, sometimes finding myself upside down and rolling what was owed into the next loan. I could afford it, but it was far from smart. I no longer drive due to a disability, and in one way it helps. You just don't truly realize just how expensive car ownership is until you no longer have those expenses. It's a horrendous amount of money you'll never, ever get back. But depending on your situation, often money you just plain have to spend.
posted by bawanaal at 3:03 PM on February 21, 2017 [1 favorite]
If the car loan bubble bursts (and the way things are going....it will), there will be a huge glut of used cars hitting the market, lowering prices. If you are in a position to take advantage, it will definitely be a buyers market.
When I was younger and dumber I was one the same treadmill, buying a new car every 3 years or so, sometimes finding myself upside down and rolling what was owed into the next loan. I could afford it, but it was far from smart. I no longer drive due to a disability, and in one way it helps. You just don't truly realize just how expensive car ownership is until you no longer have those expenses. It's a horrendous amount of money you'll never, ever get back. But depending on your situation, often money you just plain have to spend.
posted by bawanaal at 3:03 PM on February 21, 2017 [1 favorite]
Considering the ever growing population and the low but positive inflation I would expect the total auto debt to aways but an upwardly trending number that routinely hits all time highs. If it was a ration of auto debt to income that got disproportionately out of whack then I would be concerned.
The student loan bubble if far more worrisome.
posted by ShakeyJake at 3:59 PM on February 21, 2017
The student loan bubble if far more worrisome.
posted by ShakeyJake at 3:59 PM on February 21, 2017
The trouble I have with getting a decent used car is this: Every late model used car out there seems to be a premium model with every option known to man. Special paint, leather seats, blingy hubcaps, sunroof, fancy lighting and stereo, etc. So the base model of that small car might have cost $22K but it's got $10K worth of options, most of which are plumb useless. And since it was $32K new, they want $25K for the late model used one. They don't stop factoring all the fancy options into the price, until the car declines to beater state.
I'd rather buy a smaller used car that doesn't have all that extra cost crap. But hardly anyone who bought a smaller new car with few extra $ options, sells it while it's still reliable. The people selling the late model used cars are the ones who go for the huge ones and lard them up with high dollar options. You end up mostly choosing from whatever cars the more foolish new car buyers were choosing five years ago.
The new car salespeople will push and push to get you to upsize to a big car, and buy the fancy packages - that's where the money is for them. If you aren't patient, you can't even get a base model new small car - they don't have them on the lot, or they claim they don't. You have to order them and wait. The car salespeople are not super interested in you; they know you are a smaller-than-normal commission and ALSO someone will be slow to come back and buy again. You have to really push back. But it's easier to push the car salesman, than it is to find a late model used car without all that crap.
posted by elizilla at 4:15 PM on February 21, 2017 [8 favorites]
I'd rather buy a smaller used car that doesn't have all that extra cost crap. But hardly anyone who bought a smaller new car with few extra $ options, sells it while it's still reliable. The people selling the late model used cars are the ones who go for the huge ones and lard them up with high dollar options. You end up mostly choosing from whatever cars the more foolish new car buyers were choosing five years ago.
The new car salespeople will push and push to get you to upsize to a big car, and buy the fancy packages - that's where the money is for them. If you aren't patient, you can't even get a base model new small car - they don't have them on the lot, or they claim they don't. You have to order them and wait. The car salespeople are not super interested in you; they know you are a smaller-than-normal commission and ALSO someone will be slow to come back and buy again. You have to really push back. But it's easier to push the car salesman, than it is to find a late model used car without all that crap.
posted by elizilla at 4:15 PM on February 21, 2017 [8 favorites]
Crash safety standards have strengthened significantly in the past 10 years. A car that got 5-stars in 2007 might get 1 or 2 stars today.
You don't even have to go that far back: from 2017 onwards, cars without automatic emergency braking / automatic lane keeping assistance - basically auto-pilot like features - can only score a maximum of 2 stars under Euro NCAP. I don't think I've ever driven a car with both those features - they are reserved for only the top end models today, and car safety tests are done on only the cheapest model in the range.
This means that as of January 2017, virtually all cars on the road except luxury vehicles would only score a maximum of 2 star safety rating if tested under the current rules.
posted by xdvesper at 4:57 PM on February 21, 2017 [1 favorite]
You don't even have to go that far back: from 2017 onwards, cars without automatic emergency braking / automatic lane keeping assistance - basically auto-pilot like features - can only score a maximum of 2 stars under Euro NCAP. I don't think I've ever driven a car with both those features - they are reserved for only the top end models today, and car safety tests are done on only the cheapest model in the range.
This means that as of January 2017, virtually all cars on the road except luxury vehicles would only score a maximum of 2 star safety rating if tested under the current rules.
posted by xdvesper at 4:57 PM on February 21, 2017 [1 favorite]
There are definitely deals to be had in used cars if you look, but overall, prices of late model used cars often seem crazy to me, so close to new prices that there is not much reason to buy used if you can afford the difference. (Having those funds is one of those important assumptions, obviously, along with having the luxury to take your time shopping and the literacy to be able to research.)
It also depends entirely on the model of car -- for a late model Civic or Tacoma, I'd lean towards buying new, but for a luxury model that depreciates faster, I'd look used.
posted by Dip Flash at 6:10 PM on February 21, 2017
It also depends entirely on the model of car -- for a late model Civic or Tacoma, I'd lean towards buying new, but for a luxury model that depreciates faster, I'd look used.
posted by Dip Flash at 6:10 PM on February 21, 2017
I also drive a Kia Soul, and when I bought mine, it wasn't just that used ones were almost the same as new, most of the used ones I saw advertised were more than what I paid for mine, unless it was four years old and had 80,000 miles on it. I don't know how many cars have a used vehicle market like that, but it definitely didn't make sense for me to accept four years of wear to save $500. (And while it's true that mine is an ultra-base, no frills model, that's part of the calculation, too. I don't mind shifting gears manually.)
posted by Pater Aletheias at 6:56 PM on February 21, 2017 [2 favorites]
posted by Pater Aletheias at 6:56 PM on February 21, 2017 [2 favorites]
Yeah, if you like to drive pretty basic, reliable cars (like a compact Honda/Toyota/Kia/etc.) and you don't want to spend the next five years crossing your fingers every time you drive somewhere and/or taking your car to the shop every other month ... your best bet is probably going to be buying a new car.
I used to be a big proponent of buying used for financial and environmental reasons. But after having four beaters in a row (including two ancient Toyotas), none of which lasted more than a year and one of which lasted a week*, I decided when it was time for a car that I was just going to buy new. Actually, I looked into certified pre-owned, but it just wasn't enough savings. So I bought, yes, a new Kia Soul with a 10-year warranty almost a year ago and oh my god, it is just so nice to not have to hold my breath every time I turn the ignition. Also, frankly, it's nice to have a car where everything works and isn't already beat to shit. The upholstery is still nice! I can play things from my phone via bluetooth!
*When I think of all that I spent on those cars, including repairs, I could have almost bought a new car that I would currently be driving into the ground.
posted by lunasol at 7:07 PM on February 21, 2017 [7 favorites]
I used to be a big proponent of buying used for financial and environmental reasons. But after having four beaters in a row (including two ancient Toyotas), none of which lasted more than a year and one of which lasted a week*, I decided when it was time for a car that I was just going to buy new. Actually, I looked into certified pre-owned, but it just wasn't enough savings. So I bought, yes, a new Kia Soul with a 10-year warranty almost a year ago and oh my god, it is just so nice to not have to hold my breath every time I turn the ignition. Also, frankly, it's nice to have a car where everything works and isn't already beat to shit. The upholstery is still nice! I can play things from my phone via bluetooth!
*When I think of all that I spent on those cars, including repairs, I could have almost bought a new car that I would currently be driving into the ground.
posted by lunasol at 7:07 PM on February 21, 2017 [7 favorites]
And while it's true that mine is an ultra-base, no frills model, that's part of the calculation, too. I don't mind shifting gears manually.
Is manual transmission really still a base model thing? I had to wait months for a serviceable used hatchback with a 5-speed to show up anywhere even remotely close to me, and all of the base models seemed to have automatics. Even looking at new car stocks, manuals were few and far between.
posted by indubitable at 7:15 PM on February 21, 2017
Is manual transmission really still a base model thing? I had to wait months for a serviceable used hatchback with a 5-speed to show up anywhere even remotely close to me, and all of the base models seemed to have automatics. Even looking at new car stocks, manuals were few and far between.
posted by indubitable at 7:15 PM on February 21, 2017
I also drive a Kia Soul, and when I bought mine, it wasn't just that used ones were almost the same as new, most of the used ones I saw advertised were more than what I paid for mine, unless it was four years old and had 80,000 miles on it. I don't know how many cars have a used vehicle market like that, but it definitely didn't make sense for me to accept four years of wear to save $500.
Yeah, I found the same thing with the Soul, as well as the Honda Fit, the smallest Prius model, and a few similar cars. Where they were available as certified pre-owned, they would only be like $500-1,000 cheaper than new - and with Kias, they usually weren't covered by the same warranties as new.
posted by lunasol at 7:16 PM on February 21, 2017 [1 favorite]
Yeah, I found the same thing with the Soul, as well as the Honda Fit, the smallest Prius model, and a few similar cars. Where they were available as certified pre-owned, they would only be like $500-1,000 cheaper than new - and with Kias, they usually weren't covered by the same warranties as new.
posted by lunasol at 7:16 PM on February 21, 2017 [1 favorite]
LizBoBiz: "After a history like that, to be constantly worrying whats going to go wrong with your car next? will I make it to school or work today? what major street am I going to break down on today?, I decided that as soon as I could, I would never have a beater again. I will gladly pay for the privilege of not having to worry about my car. I don't care if that means I have a car payment the rest of my life. The weight that was lifted when I finally bought a brand new car was just unquantifiable."
It's infuriating driving something that breaks down in a minor way every couple of months. My current car, a 16 year old Hyundai, has been playing this game with me lately. Over the last year of operation (I don't have it insured unless I need it so about 2.5 years calendar time) on top of regular things like light bulbs and brake pads it's need a battery, exhaust flex pipe, alternator, starter, engine fan motor, radiator clamp (only worth mentioning because it left me stranded) and thermostat. The last five items all while 30-60 minutes from town.
The last occurred just two days ago on my way to work (I work in a remote area 260 kms from home, commute weekly). The thermostat stuck partially closed 40 kms from work in an area with no cell coverage. I ended up nursing it all the way: driving 500-750m, pulling over and letting it cool with the heater, driving another segment, pulling over, repeat the whole way. The repair was 20 minutes and $30 but the stress was just crazy high. I'd buy a new car in a heart beat if I could afford a 60 month car payment.
posted by Mitheral at 7:28 PM on February 21, 2017 [2 favorites]
It's infuriating driving something that breaks down in a minor way every couple of months. My current car, a 16 year old Hyundai, has been playing this game with me lately. Over the last year of operation (I don't have it insured unless I need it so about 2.5 years calendar time) on top of regular things like light bulbs and brake pads it's need a battery, exhaust flex pipe, alternator, starter, engine fan motor, radiator clamp (only worth mentioning because it left me stranded) and thermostat. The last five items all while 30-60 minutes from town.
The last occurred just two days ago on my way to work (I work in a remote area 260 kms from home, commute weekly). The thermostat stuck partially closed 40 kms from work in an area with no cell coverage. I ended up nursing it all the way: driving 500-750m, pulling over and letting it cool with the heater, driving another segment, pulling over, repeat the whole way. The repair was 20 minutes and $30 but the stress was just crazy high. I'd buy a new car in a heart beat if I could afford a 60 month car payment.
posted by Mitheral at 7:28 PM on February 21, 2017 [2 favorites]
Is manual transmission really still a base model thing? I had to wait months for a serviceable used hatchback with a 5-speed to show up anywhere even remotely close to me, and all of the base models seemed to have automatics. Even looking at new car stocks, manuals were few and far between.
In the US, manual transmissions are down to about 4 or 5 percent of new cars, so mostly irrelevant for most buyers, new or used.
posted by Dip Flash at 8:05 PM on February 21, 2017
In the US, manual transmissions are down to about 4 or 5 percent of new cars, so mostly irrelevant for most buyers, new or used.
posted by Dip Flash at 8:05 PM on February 21, 2017
Is manual transmission really still a base model thing?
Not really. More for sporty models, or at least models marketed that way, and maybe related models. Like, it appears that you can still get a manual in a non-WRX Impreza.
posted by ROU_Xenophobe at 8:42 PM on February 21, 2017 [1 favorite]
Not really. More for sporty models, or at least models marketed that way, and maybe related models. Like, it appears that you can still get a manual in a non-WRX Impreza.
posted by ROU_Xenophobe at 8:42 PM on February 21, 2017 [1 favorite]
Both of the vehicles we bought used in the past year were good deals, but boy did we have to hunt for them. We got a 2014 Kia Soul with under 14,000 miles for $3500 less than new, and this one already had the front windows tinted. It took several weeks before we stumbled across this one at a dealership a bit outside of town. Most of the used Souls were either pretty close to new or they had already had a lot of miles piled up on them. A couple of months ago I bought a 2013 Honda Fit Sport with 24,000 miles for $5500 less than new. This one already had the windows tinted, things like floor mats and a trunk mat and such, and it was a one owner car that had been regularly serviced at the dealership. The dealer we bought the car at had also put new tires on it. Most other vehicles I'd looked at were too expensive or had way too many miles or had wrecks on the Carfax. Plus, with the Fit, I got a simple car. It does have power windows and locks but everything has that nowadays (our 2003 Saturn, though, had crank windows and manual locks. Quaint!) Other than that, it doesn't have a lot of fiddly bells and whistles that can break. I had been looking at cars for a month and a half before I found this particular Fit. So yeah, used deals can definitely be had, but you're gonna have to look for a while most likely.
posted by azpenguin at 8:57 PM on February 21, 2017 [2 favorites]
posted by azpenguin at 8:57 PM on February 21, 2017 [2 favorites]
"I'd rather buy a smaller used car that doesn't have all that extra cost crap. "
Oh I have three magical words for you: Used. Rental. Cars. Not only are the mostly three-year-old "sport" trim levels (i.e., bottom trim), you get an additional 20% ish off blue book because of the rental car stigma. Plenty of scratches and dings, which is a relief to me, I don't have to obsessively worry about my kids scratching it more, but the mechanicals were meticulously maintained, my long-time mechanic was impressed. The best part was, you "rent" the car that's for sale for three days ... plenty of time to get a feel for it and have my mechanic look at it. If you like it (I did), you click a button on the website, they refund your rental cost, you just keep the car, and they start fedexing you documents. Everything came to my house, I signed, they paid all the overnighting costs, took about 30 days to finalize all the paperwork by mail (I was slow at the wire transfer part as my bank gave me confusing instructions) and I had the car the entire time, so I felt like I got a month free rental before owning it outright! If you don't like it, you just drive it back to the rental place, pay your 3 day rental, and the end. No price negotiation, and they gave zero shits if you pay cash, finance through a third party, or finance with their in-house department; there was no sales pressure to use their finance, they just wanted to know which way I'd do it so they could send me the right set of instructions.
Best car purchasing experience, A++++ if you like basic model vehicles 2-3 years old, may never buy another way again. Been driving it five years so far, routine maintenance only, no problems (knock on wood) except a dead battery, easy enough to deal with myself.
(Also I've sold cars on Craigslist twice and OF COURSE I let people take them to their mechanic, I'm not a monster! Generally they leave you some significant collateral, it's not a big deal.)
I recently had my first ever car loan (we were saving up for a new one but my husband's car gave up the ghost four months before we were ready to jettison it), which I was strongly against, but I also didn't want to spent half our car fund fixing his beater at 3x the blue book value and also it had become a death trap. We did it through our credit union and it was SO EASY and the rate was great and the terms are non-predatory. The dealer tried to convince us to use his financing and his terms were, by comparison, nuts. The loan was five years but we paid it in the five months it would have taken us to save up the rest of the money in the first place, no penalty for early payment, rate slightly under 2% I think. I'm still kind of grumpy about having had a loan for a depreciating good, but what with all the death prevention I feel like it worked out pretty well and served as a "bridge" for us, and I am more chill about car loans now. But I definitely do not understand people like one of my neighbors, who bitch constantly about their car loans, have a little champaign party when they pay one off, and then immediately go sell it and buy a new car with a loan. They're perfectly good cars that are only five years old! You hate car loans! It seems nuts. (But I'm content to drive the same car for 15 years or more as long as it keeps going okay, so clearly I'm not the right person to understand their car thoughts.)
posted by Eyebrows McGee at 12:26 AM on February 22, 2017 [26 favorites]
Oh I have three magical words for you: Used. Rental. Cars. Not only are the mostly three-year-old "sport" trim levels (i.e., bottom trim), you get an additional 20% ish off blue book because of the rental car stigma. Plenty of scratches and dings, which is a relief to me, I don't have to obsessively worry about my kids scratching it more, but the mechanicals were meticulously maintained, my long-time mechanic was impressed. The best part was, you "rent" the car that's for sale for three days ... plenty of time to get a feel for it and have my mechanic look at it. If you like it (I did), you click a button on the website, they refund your rental cost, you just keep the car, and they start fedexing you documents. Everything came to my house, I signed, they paid all the overnighting costs, took about 30 days to finalize all the paperwork by mail (I was slow at the wire transfer part as my bank gave me confusing instructions) and I had the car the entire time, so I felt like I got a month free rental before owning it outright! If you don't like it, you just drive it back to the rental place, pay your 3 day rental, and the end. No price negotiation, and they gave zero shits if you pay cash, finance through a third party, or finance with their in-house department; there was no sales pressure to use their finance, they just wanted to know which way I'd do it so they could send me the right set of instructions.
Best car purchasing experience, A++++ if you like basic model vehicles 2-3 years old, may never buy another way again. Been driving it five years so far, routine maintenance only, no problems (knock on wood) except a dead battery, easy enough to deal with myself.
(Also I've sold cars on Craigslist twice and OF COURSE I let people take them to their mechanic, I'm not a monster! Generally they leave you some significant collateral, it's not a big deal.)
I recently had my first ever car loan (we were saving up for a new one but my husband's car gave up the ghost four months before we were ready to jettison it), which I was strongly against, but I also didn't want to spent half our car fund fixing his beater at 3x the blue book value and also it had become a death trap. We did it through our credit union and it was SO EASY and the rate was great and the terms are non-predatory. The dealer tried to convince us to use his financing and his terms were, by comparison, nuts. The loan was five years but we paid it in the five months it would have taken us to save up the rest of the money in the first place, no penalty for early payment, rate slightly under 2% I think. I'm still kind of grumpy about having had a loan for a depreciating good, but what with all the death prevention I feel like it worked out pretty well and served as a "bridge" for us, and I am more chill about car loans now. But I definitely do not understand people like one of my neighbors, who bitch constantly about their car loans, have a little champaign party when they pay one off, and then immediately go sell it and buy a new car with a loan. They're perfectly good cars that are only five years old! You hate car loans! It seems nuts. (But I'm content to drive the same car for 15 years or more as long as it keeps going okay, so clearly I'm not the right person to understand their car thoughts.)
posted by Eyebrows McGee at 12:26 AM on February 22, 2017 [26 favorites]
One time I bought literally the cheapest car on San Francisco craigslist that ran and had current DMV registration. It cost $875 and needed new tires and a wheel bearing. It was an ok car.
posted by ryanrs at 4:02 AM on February 22, 2017 [2 favorites]
posted by ryanrs at 4:02 AM on February 22, 2017 [2 favorites]
If the car loan bubble bursts (and the way things are going....it will), there will be a huge glut of used cars hitting the market, lowering prices. If you are in a position to take advantage, it will definitely be a buyers market.
If the Great Recession is an example, there may not be a glut and a buyers market. When the recession hit, there was a huge drop off in sales of new cars in 2009, 2010, and 2011. Financially stretched households were holding onto their old cars for several years longer than usual. Many others were buying used instead of new. This meant that there was a not a glut but a shortage of used cars and their prices were relatively high.
So the effects of a financial crash are dominated by the lowered sales of news cars, lowered creation of used cars, and not driven by the increase in repossessions. This means a shortage of used cars, not a glut.
A few years ago we had the godawful misfortune to have the need for two vehicles ... And the first thing we noticed was that, in our area at least, used cars seemed like an awful deal.
Just unlucky timing. That was right when there was a shortage of used cars coming out of the recession.
posted by JackFlash at 9:49 AM on February 22, 2017 [1 favorite]
If the Great Recession is an example, there may not be a glut and a buyers market. When the recession hit, there was a huge drop off in sales of new cars in 2009, 2010, and 2011. Financially stretched households were holding onto their old cars for several years longer than usual. Many others were buying used instead of new. This meant that there was a not a glut but a shortage of used cars and their prices were relatively high.
So the effects of a financial crash are dominated by the lowered sales of news cars, lowered creation of used cars, and not driven by the increase in repossessions. This means a shortage of used cars, not a glut.
A few years ago we had the godawful misfortune to have the need for two vehicles ... And the first thing we noticed was that, in our area at least, used cars seemed like an awful deal.
Just unlucky timing. That was right when there was a shortage of used cars coming out of the recession.
posted by JackFlash at 9:49 AM on February 22, 2017 [1 favorite]
I will gladly pay for the privilege of not having to worry about my car.
I'm right there with Lizbobiz. My father is a mechanic, but asking him for any kind of car advice comes with an healthy side of shaming and criticism, along with the hard-to-shake idea that I should know enough about my vehicle to not have let the Bad Thing happen to begin with.
I don't have enough words to express the amazing feeling that came with buying a slightly used Prius that can fearlessly go on road trips.
posted by redsparkler at 10:21 AM on February 22, 2017
I'm right there with Lizbobiz. My father is a mechanic, but asking him for any kind of car advice comes with an healthy side of shaming and criticism, along with the hard-to-shake idea that I should know enough about my vehicle to not have let the Bad Thing happen to begin with.
I don't have enough words to express the amazing feeling that came with buying a slightly used Prius that can fearlessly go on road trips.
posted by redsparkler at 10:21 AM on February 22, 2017
Is manual transmission really still a base model thing?
The usual base model comes with automatic, but the bigger dealerships seem to keep a manual transmission around most of the time. I negotiated as hard as I could for a "base" model and then asked how much lower they could go if I took a standard transmission. The downside is was greatly reduced color choices, so I only had my choice of my least favorite and second least favorite colors, but the price was good.
Then I paid $60 for a the cruise control switch and wiring harness that comes on the upper models, popped them into my steering wheel, and enjoyed factory cruise control since all the computers are already programmed for it. #cheapskatetips
posted by Pater Aletheias at 11:17 AM on February 22, 2017 [1 favorite]
The usual base model comes with automatic, but the bigger dealerships seem to keep a manual transmission around most of the time. I negotiated as hard as I could for a "base" model and then asked how much lower they could go if I took a standard transmission. The downside is was greatly reduced color choices, so I only had my choice of my least favorite and second least favorite colors, but the price was good.
Then I paid $60 for a the cruise control switch and wiring harness that comes on the upper models, popped them into my steering wheel, and enjoyed factory cruise control since all the computers are already programmed for it. #cheapskatetips
posted by Pater Aletheias at 11:17 AM on February 22, 2017 [1 favorite]
what guy selling his car for 2000$ on Craigslist is going to wait for you to [get it checked by your mechanic]
The guy that actually wants to sell his car? I've bought cars and motorcycles off craigslist. Of course you get it checked by your mechanic first. He can photocopy your license, or if he wants to be weird about it, he can come with you to the mechanic.
Look, you can steal a $2000 beater with a slim jim and some wire cutters. Messing around on craigslist is not going to make the process easier. The seller's risk is really in the payment (cash is nice).
If the seller does let you get the car checked out, that's the biggest red flag in the world and you should run away. A legit seller will realize that taking the car to the mechanic is a strong sign that you're not going to flake out, which is by far the most annoying part of selling anything on craigslist.
posted by ryanrs at 1:27 PM on February 22, 2017 [1 favorite]
The guy that actually wants to sell his car? I've bought cars and motorcycles off craigslist. Of course you get it checked by your mechanic first. He can photocopy your license, or if he wants to be weird about it, he can come with you to the mechanic.
Look, you can steal a $2000 beater with a slim jim and some wire cutters. Messing around on craigslist is not going to make the process easier. The seller's risk is really in the payment (cash is nice).
If the seller does let you get the car checked out, that's the biggest red flag in the world and you should run away. A legit seller will realize that taking the car to the mechanic is a strong sign that you're not going to flake out, which is by far the most annoying part of selling anything on craigslist.
posted by ryanrs at 1:27 PM on February 22, 2017 [1 favorite]
If the seller does let you get the car checked out, that's the biggest red flag in the world and you should run away. A legit seller will realize that taking the car to the mechanic is a strong sign that you're not going to flake out, which is by far the most annoying part of selling anything on craigslist.
I once went to look at a second hand Jeep. The owner not only didn't let me get it checked out, he didn't let me drive it, because something about his insurance, plus that noise it makes when I try to start up the engine for the third time is completely normal.
Hard pass.
posted by signal at 1:38 PM on February 22, 2017
I once went to look at a second hand Jeep. The owner not only didn't let me get it checked out, he didn't let me drive it, because something about his insurance, plus that noise it makes when I try to start up the engine for the third time is completely normal.
Hard pass.
posted by signal at 1:38 PM on February 22, 2017
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posted by schmod at 6:57 AM on February 21, 2017 [10 favorites]