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Auto Industries Subprime Problem

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posted on Feb, 4 2018 @ 02:23 PM
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a reply to: Edumakated

0% is pretty much the same thing as cash.

The amount of money most people are spending on their cars is way too high though. Transportation (not including repairs) should be about 6% of your budget. That means that if you're making $100k, your takehome is going to be about 60k. That leaves you 3600, in a year for transportation, or $300/month. If you need a tank of gas every week at $30/tank, that leaves you with a $170 car payment. At that rate, a 60 month lease means your max price on a car is $10,200.

That's at a 6 figure income. People are spending way beyond that on their vehicles, and part of it is due to easy credit inflating the prices. I think that's somewhat inevitable in the auto industry though (housing too for that matter) where we're producing so many new products, but the old ones aren't leaving at the same rate. With houses, few get demolished as they age, and with cars we're adding many more to the road than are leaving so the salesmen have to do more to entice sales.




posted on Feb, 4 2018 @ 02:33 PM
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originally posted by: ketsuko
a reply to: Aazadan

We are a commuter family. Any car we buy isn't going to be an "asset" by the time we get around to deciding it needs replacing, loan or no. So the idea of depreciating asset is more or less a moot point. The only question left is whether or not we are buying a make and model that is of enough quality to last long-term, and I am talking more than the average 60 month loan term, with minimal maintenance and repair unless you get unlucky enough to get a lemon.

That's where the exhaustive research comes in, and we never buy new.


I've gone through 3 cars in 20 years of car ownership. None were new, my next car which I'll likely be purchasing in a few months won't be new either (I'm leaning towards a 2010 Ford Escape right now, subject to change depending on what the dealer has at the time and the price). Still that's a rate of about 1 car every 7 years which isn't really any different than the usual loan terms being offered today even on used cars, though my hope is that I can pay for it up front in cash.
edit on 4-2-2018 by Aazadan because: (no reason given)



posted on Feb, 4 2018 @ 02:41 PM
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You can buy a good working car for 3500.... you should buy what you can afford



posted on Feb, 4 2018 @ 02:52 PM
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originally posted by: Xtrozero
You can buy a good working car for 3500.... you should buy what you can afford


Unfortunately, affordable and low cost cars don't really have any overlap. The cheaper the car, the more the maintenance is, and it's not like you get a discount, parts and labor is about the same (in most cases) regardless of if you're driving a 2001 or a 2018. That's part of why subprimes exist in the first place, with stagnant to declining wages and a static to increasing price on vehicles companies are being pushed to more risky financing options in order to keep the lights on.

I'm not saying a bailout is going to be justified here, but the subprime crisis is the sort of thing that can trigger another major recession.

If you're making $20,000 it's pretty much impossible to buy a car and stick to the budget I outlined above and definitely impossible once you include maintenance.
edit on 4-2-2018 by Aazadan because: (no reason given)



posted on Feb, 4 2018 @ 03:04 PM
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originally posted by: Aazadan

Unfortunately, affordable and low cost cars don't really have any overlap. The cheaper the car, the more the maintenance is, and it's not like you get a discount, parts and labor is about the same (in most cases) regardless of if you're driving a 2001 or a 2018. That's part of why subprimes exist in the first place, with stagnant to declining wages and a static to increasing price on vehicles companies are being pushed to more risky financing options in order to keep the lights on.

I'm not saying a bailout is going to be justified here, but the subprime crisis is the sort of thing that can trigger another major recession.


Ya people say that an older car will cost you more in maintenance over time than the cost of a new car, and I don't believe it. There is a point when an older car is basically done as you suggest, but cars are very reliable today and can easily last 20 years.

Add 500 plus 250 for full insurance compared to less than 100 dollars for just liability and it would hard to convince me you would spend over 7k in maintenance per year on an older car.



posted on Feb, 4 2018 @ 03:05 PM
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a reply to: Aazadan

If you make $15 an hour or less you are in serious financial trouble going into the future.



posted on Feb, 4 2018 @ 03:08 PM
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originally posted by: AugustusMasonicus

originally posted by: Aazadan
But presumably their paychecks are going towards paying rent/mortgages, groceries, and anything else. No transportation to work, means no work.


Oh well, don't be an idiot and over extend yourself.


I assume you mean individually, I also assume you mean it's not possible to do so collectively.



posted on Feb, 4 2018 @ 03:09 PM
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Here's the problem boiled down to basics. We have too many banks, too many lenders. They are enabled by the federal reserve. We don't need so many banks, let some fail, let the market work.

Period.



posted on Feb, 4 2018 @ 03:11 PM
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originally posted by: toysforadults


If you make $15 an hour or less you are in serious financial trouble going into the future.


You might need to do something crazy like get roommates...



posted on Feb, 4 2018 @ 03:39 PM
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originally posted by: Xtrozero
You can buy a good working car for 3500.... you should buy what you can afford


We are a two car family, and that's generally what we do for one of ours.

One is a nicer car for longer trips and heavy road duty, and the other is a beater that costs no more than $4,000 for in-town run around work. Right now, that's a 10 year old Honda Civic. We do it that way so we only have one payment at most because we can pay the other amount easily cash off the lot.

Then the car we do make payments for, we always set a limit for less than we can afford, only take a loan that has no penalty for early payment and work like crazy to pay it off as fast as we can. The extra wiggle room we make sure we have is to if an unexpected emergency comes up, we aren't left in a bind over car payment or emergency needs.

We also do our best to pay as much up front as we can. Sometimes, that doesn't happen like we'd like, but it is what it is.



posted on Feb, 4 2018 @ 03:42 PM
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originally posted by: toysforadults
a reply to: Aazadan

If you make $15 an hour or less you are in serious financial trouble going into the future.


It depends on a lot of factors. The cost of living of the area you live in, expectation of future pay raises, age, and other financial responsibilities. In some situations I could make a case that $15/hour is ok and even doing above average. In others (most situations) it is not enough.



posted on Feb, 4 2018 @ 03:45 PM
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a reply to: Aazadan

Well, that's why I included the "future" variable. In the future $15 an hour will no longer be viable yet the laws of supply and demand will continue to enable that amount and less.



posted on Feb, 4 2018 @ 03:47 PM
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originally posted by: Xtrozero
Ya people say that an older car will cost you more in maintenance over time than the cost of a new car, and I don't believe it. There is a point when an older car is basically done as you suggest, but cars are very reliable today and can easily last 20 years.

Add 500 plus 250 for full insurance compared to less than 100 dollars for just liability and it would hard to convince me you would spend over 7k in maintenance per year on an older car.


My experience has been that an older car averages about $1500/year in maintenance. If you can buy a car outright you can go with just liability for insurance. I think mine runs me something like $30/month.

The sweet spot in terms of cost is a recent model (say within the last 3 years), purchased as a used car in good condition. There's some other situations where you can get a good buy too, like getting a test model at an end of year closeout... but that's obviously something only a few can pull off.



posted on Feb, 4 2018 @ 04:08 PM
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originally posted by: Aazadan

The sweet spot in terms of cost is a recent model (say within the last 3 years), purchased as a used car in good condition. There's some other situations where you can get a good buy too, like getting a test model at an end of year closeout... but that's obviously something only a few can pull off.



I only have 1 car payment and I typically go 5 years with zero car payments in between. I keep my cars about 15 years or so. Some families can have 1500 to 2000 dollars a month sitting in their driveway with a couple of new cars and they wonder why they can't make ends meet.



posted on Feb, 4 2018 @ 04:09 PM
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originally posted by: ketsuko

One is a nicer car for longer trips and heavy road duty, and the other is a beater that costs no more than $4,000 for in-town run around work. Right now, that's a 10 year old Honda Civic. We do it that way so we only have one payment at most because we can pay the other amount easily cash off the lot.



Ya we have a nicer car as our long haul, my other is not so much of a beater but it tends to be 5+ years older than my travel family car.



posted on Feb, 4 2018 @ 04:19 PM
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a reply to: Xtrozero

We have purchased 4 of our last 5 through Enterprise as former rental cars.

With the exception of my little Hyundai and our current newer car, all have pushed well past 250,000K with regular maintenance and minor repair work. The only reason the Chevy Metro stopped was because it got totaled in our driveway ... long story and not our fault at all. The Pontiac was a bit past 350,000 when it finally blew it's head gasket.

And even though the little Hyundai never got that far up, it still lasted three or four years past what we expected or needed it to.

I do my research on what makes and models had good years and good customer reviews, and Enterprise seems to make an effort to mostly only sell solid vehicles directly. So far, it's been a win/win.

Each of those cars went well past the ending term of any loan we had to take to pay them off.
edit on 4-2-2018 by ketsuko because: (no reason given)



posted on Feb, 4 2018 @ 04:46 PM
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originally posted by: Xtrozero

originally posted by: toysforadults


If you make $15 an hour or less you are in serious financial trouble going into the future.


You might need to do something crazy like get roommates...


So the globalists won?
I mean the globalist goal all along has been to reduce American wages and reduce consumption and force some to live together which be in accordance with Agenda 21 and sustainable development.



posted on Feb, 4 2018 @ 05:06 PM
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originally posted by: SkeptiSchism
Here's the problem boiled down to basics. We have too many banks, too many lenders. They are enabled by the federal reserve. We don't need so many banks, let some fail, let the market work.

Period.



How do you figure there are too many banks? What do you base this opinion on? if anything, there aren't enough banks because the retail banking sector has consolidated drastically limiting competition.



posted on Feb, 5 2018 @ 12:16 AM
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originally posted by: jacobe001

So the globalists won?
I mean the globalist goal all along has been to reduce American wages and reduce consumption and force some to live together which be in accordance with Agenda 21 and sustainable development.


Well I guess they won 6000 years ago... Only in America do people feel that single living is some kind of right and not something earned. I had roommates back in the 80s and until I was in my 30s I didn't make enough to live on my own...join the club...the whole world does it.



posted on Feb, 5 2018 @ 02:31 AM
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originally posted by: Xtrozero
You can buy a good working car for 3500.... you should buy what you can afford


Yep, and keep buying the $3,500 car every year or two.

I live that life. I got tired of working on it/them every month or two. Fuel pumps, water pumps, alternator, tie rod ends, suspension replacements, your deity of choice forbid the transmission goes out (like the one in my driveway right now).

Got tired of it, we bought a 2015 minivan with 40,000 miles. Cost us out of the a$$ too. But that $350 a month is keeping me with a piece of mind that it shouldn't break down with the kids in it.

Now I have to figure out what to replace my broke down $2,000 piece of scrap metal in the drive way with.

Should I buy another $2,000 hunk of junk and hope like hell it doesn't break down when I'm driving 60 plus miles one way to the jobsite, or do I spring a few more dollars and get something a little more reliable.

I'm probably going to get a rust bucket though. Then will get another one next year if it makes it that long.

There is a reason why these FB car sale sites are booming every tax time. Because people have to keep buying cheap junk cars for $2,000 - $3,500 every year. Also you might be able to afford the car at tax time, but people have a hard time springing $350- $750 when the fuel pump or alternator goes out, which is usually at the worst possible time.

I speak from direct experience on this matter.

In short, no you cannot get a good working car for $3,500. You can get a high mileage car that will hopefully pull you through for a couple of years before you have to either completely overhaul it or purchase another one.



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