32% of used car trade ins are underwater

[Wolf359]

Originally Posted By: OneEyeJack
You should pay attention to the road tests and marketing hype. How could you possibly be happy with a vehicle that did not have heated/cooled seats, leather, sunroof and all that other stuff? This is especially true if you can extend the loan to keep the payments down. You just have to accept the fact that you will be making car payments the rest of your life if you want to be happy and being debt free is out of the question. Why would you want to be debt free anyhow when you could be driving a really nice vehicle?

In 2003 I financed a new 4Runner. I'd never financed a car before and I'd purchased a dozen or more new cars by then. I got so nervous about having the loan that I paid it off the next day. Then I got worried that I might get a letter from the government accusing me of behaving in a manner that would hurt the economy. Can you imagine what it would do to the economy if say half the people purchased new cars with cash and people started keeping their cars a year or two more? It would be a terrible hit on the economy.


The massage seats were easier to get than cooled seats. The latest stuff is adaptive cruise control, lane departure, collision prevention, blind spot detection, android auto/apple carplay etc. They even have heated and cooled cupholders available now. There's people out there that can afford that kind of stuff. My last 3 cars were cash purchases. It's just that the advertising gets people who can't afford it also. It's really fun driving a car with all the gadgets. My only regret was not doing it sooner.

 

[Mr Nice]

Originally Posted By: bullwinkle
The bank & finance companies' practice of amortizing car loans so that all the interest is paid first, and all the principal is paid at the end of the loan GUARANTEES that virtually all trade-ins before the loan is paid off will be upside down-it's a loser loan, possibly the 2nd worst way to borrow money, right after the high interest credit card. I've had precisely ONE car loan in my life, when I bought my 1 year old Civic right after I got married, so my wife could have something reliable to drive-when I realized how much of a screw job it was, I vowed, never again.


Not a screw just job.... you wanted your wife in a newer car so her car doesn't break down.

 

[Whimsey]

While we do buy new vehicles we keep them until they are no longer financially viable, ie repair costs or rot. While my new bought 2002 F-150 had only 70,000 miles it's frame was totally rotted and it needed a new cat, brakes again, wheel bearing again plus the body was severely rusted even after years of constant rust abatement. Sad to lose that truck, I really liked it. Our new bought 2005 Explorer with 194,000+ miles is still running real good though the last 2 years I've spent some money for repairs but considering all the years it didn't cost me other than maintenance I'm still ahead and it runs great. And I still have my new bought 1996 Contour 2.0 Zetec with the 5 sp manual, my poor man's BMW

. Other than 2 sets of rear struts it's been totally reliable and still a blast to drive. It looks great inside and outside still plus it's still comfortable for real long drives. We'll spend the money up front but expect to recoup it over the long haul.

Whimsey

 

[Artem]

I don't understand what dealers some of you are visiting but CLEARLY, you should be running away from said "screw jobs".

It is not hard to find a good deal on a good car and not get bent over by the sales / finance guy during the process. I'm amazed by how many stories I hear of people walking away from the dealer with a sore rear end.

 

[4WD]

Originally Posted By: Snagglefoot
Originally Posted By: AZjeff
Originally Posted By: NibbanaBanana
It's insanity. There's perfectly good new cars available for less than $15K. An excellent job of marketing by auto manufacturers.


These are good cars?

10 Best New Cars Under $15,000
2016 Hyundai Accent - MSRP $14,745.
2016 Nissan Versa Note - $14,230.
2016 Chevrolet Spark - MSRP $12,660.
2015 Mitsubishi Mirage - MSRP $12,995.
2016 Toyota Yaris - MSRP $14,895.
2016 Chevrolet Sonic - MSRP $14,345.
2016 Ford Fiesta - MSRP $14,580.
2016 Kia Rio - MSRP $14,165.


Just be careful they weren’t “underwater” from the Hurricanes. Seriously.


Crossed my mind ~ how about “upside down on loan vs car value”

 

[javacontour]

Maybe they would wait until the car is paid off and really only worth at most $500-$1000? Then the could decide to trade it, or sell it to a private party.

The last two cars we parted with had over 225k miles. One was purchased new in 2002 and drive almost 277k miles, traded in late 2016. The other purchased used in the spring of 2011 at just shy of 90k miles and driven 135k miles until it was traded in the fall of 2017 for a $10k Out the Door replacement with 68k miles on the ticker.

The buyer can take many of the games out of the purchase process.

1. Pay off old car before selling or trading.
2. Show up with cash or pre-approved financing.
3. Be ready to walk if numbers don't satisfy.
4. Buy a car, not financing, warranties, aftermarket wheels, etc.

In the scenario below, if they are only willing to offer $7,500 on a car that is presumably worth $10k, I either offer a similar percentage markdown on the new car, or just say it's worth more to me, so apparently my best play is to keep driving it, as it presumably will fill the same role as the $20-30k car you are trying to sell me.

I don't think most buyers know how much power they have. They ultimately say yes or no.

The question is, will they exercise their power, or just roll over. I'd say at least 1/3rd roll over to some extent, given the numbers we see in the story.


Originally Posted By: UncleDave
Originally Posted By: javacontour
If only there was a technology to put knowledge at the fingertips of the common man so that he could look for tips and pricing trends when it comes to buying and financing major purchases.



Most actually try but can't talk their way around a floor sales guy and give up in round 1.

I watched happen live in front of me this last december while buying my Ridgeline.

The conversation 1 desk away from me went something like this .....

Sheep - Blue book on my car says its worth 10K. I only owe 10 on it and its in good condition and well maintained so you are getting a fair deal.

Wolf - Well then sell it to Kelley then. (I thought this was funny) "The market happens to be soft on (whatever you are trading in) and we can't move it for that so you are little bit " upside down" -why don't you sell it yourself and bring in cash? "

Sheep - well what will you take?

Wolf - 7500 max we have to clean it, inspect it tune it up and give warranty on it so it just isnt worth 10K to us right now today.

Sheep - Can you roll the 2500 Im upside down into the new car?

Wolf- sure I'll even buy you lunch!.... (the customer IS lunch)

Negative equity created out of thin air.

UD

 

[BrocLuno]

Buy used, pay cash, or use CC if you want the points - pay off in 1 month

 

[maverickfhs]

Originally Posted By: UncleDave
Originally Posted By: javacontour
If only there was a technology to put knowledge at the fingertips of the common man so that he could look for tips and pricing trends when it comes to buying and financing major purchases.



Most actually try but can't talk their way around a floor sales guy and give up in round 1.

I watched happen live in front of me this last december while buying my Ridgeline.

The conversation 1 desk away from me went something like this .....

Sheep - Blue book on my car says its worth 10K. I only owe 10 on it and its in good condition and well maintained so you are getting a fair deal.

Wolf - Well then sell it to Kelley then. (I thought this was funny) "The market happens to be soft on (whatever you are trading in) and we can't move it for that so you are little bit " upside down" -why don't you sell it yourself and bring in cash? "

Sheep - well what will you take?

Wolf - 7500 max we have to clean it, inspect it tune it up and give warranty on it so it just isnt worth 10K to us right now today.

Sheep - Can you roll the 2500 Im upside down into the new car?

Wolf- sure I'll even buy you lunch!.... (the customer IS lunch)

Negative equity created out of thin air.

UD


Honestly, that's just sad, to say the least...

 

[Mr Nice]

maverickfhs,

Lots of impulsive decisions when someone wants a new vehicle.

Buyers know $____ will be rolled into new loan for ___ amount of years.

 

[maverickfhs]

Originally Posted By: Wolf359
Originally Posted By: OneEyeJack
You should pay attention to the road tests and marketing hype. How could you possibly be happy with a vehicle that did not have heated/cooled seats, leather, sunroof and all that other stuff? This is especially true if you can extend the loan to keep the payments down. You just have to accept the fact that you will be making car payments the rest of your life if you want to be happy and being debt free is out of the question. Why would you want to be debt free anyhow when you could be driving a really nice vehicle?

In 2003 I financed a new 4Runner. I'd never financed a car before and I'd purchased a dozen or more new cars by then. I got so nervous about having the loan that I paid it off the next day. Then I got worried that I might get a letter from the government accusing me of behaving in a manner that would hurt the economy. Can you imagine what it would do to the economy if say half the people purchased new cars with cash and people started keeping their cars a year or two more? It would be a terrible hit on the economy.


The massage seats were easier to get than cooled seats. The latest stuff is adaptive cruise control, lane departure, collision prevention, blind spot detection, android auto/apple carplay etc. They even have heated and cooled cupholders available now. There's people out there that can afford that kind of stuff. My last 3 cars were cash purchases. It's just that the advertising gets people who can't afford it also. It's really fun driving a car with all the gadgets. My only regret was not doing it sooner.


Think I am with you, because many people who have money and want to be ahead of technology, definitely and SHOULD do it on CASH. Because it means they can afford it!

 

[maverickfhs]

Originally Posted By: Mr Nice
maverickfhs,

Lots of impulsive decisions when someone wants a new vehicle.

Buyers know $____ will be rolled into new loan for ___ amount of years.


Yes, agreed. Plus, I think these days it's a competition and show off, to post picts on social media, so too many impulsive decisions...

 

[dishdude]

Originally Posted By: Mr Nice
maverickfhs,

Lots of impulsive decisions when someone wants a new vehicle.

Buyers know $____ will be rolled into new loan for ___ amount of years.


I don't know, anyone trading in an upside down car is probably only looking at the monthly payment and probably can't figure out how many years 84 months is.

 

[NibbanaBanana]

Originally Posted By: AZjeff
Originally Posted By: NibbanaBanana
It's insanity. There's perfectly good new cars available for less than $15K. An excellent job of marketing by auto manufacturers.


These are good cars?

10 Best New Cars Under $15,000
2016 Hyundai Accent - MSRP $14,745.
2016 Nissan Versa Note - $14,230.
2016 Chevrolet Spark - MSRP $12,660.
2015 Mitsubishi Mirage - MSRP $12,995.
2016 Toyota Yaris - MSRP $14,895.
2016 Chevrolet Sonic - MSRP $14,345.
2016 Ford Fiesta - MSRP $14,580.
2016 Kia Rio - MSRP $14,165.



My guess, based on experience, is that most of them are going to be excellent value. From everything I've seen, the higher the initial cost, the higher the cost per mile and the more problems you get. Know many people who are examples of this.

Examples: I owned 96' and 97' Geo Metros, paid $8K new. Ran till 185K and 186K miles and rotted apart. Paid $9500 for the 2006 Aveo I'm still driving at over 215K miles. Wife's 2013 Kia Rio has over 105K miles and is a beautiful car. Runs and drives like new. These cars made me a lot of money. Take the extra money and invest it. That's my advice.

 

[02SE]

Those underwater on their car(s), or otherwise drowning in debt, are the willfully ignorant. They don't understand or WANT to understand finances, or they simply choose to ignore reality. They simply want to have the latest fancy cars, smartphones, etc., etc. with no care or concept of whether they can afford it.


As I've previously said and been chastised for, people need to live within their means. If they're not happy with their situation, do something to change it.

 

[maverickfhs]

Originally Posted By: 02SE
Those underwater on their car(s), or otherwise drowning in debt, are the willfully ignorant. They don't understand or WANT to understand finances, or they simply choose to ignore reality. They simply want to have the latest fancy cars, smartphones, etc., etc. with no care or concept of whether they can afford it.


As I've previously said and been chastised for, people need to live within their means. If they're not happy with their situation, do something to change it.


+1 Billion

 

[glitch]

Originally Posted By: tomcat27
my wife works in a lending institution - they care most about (loan) sales growth. defaults are not part of the discussion.


the engine behind the next economic bubble

all bubbles go * P O P *

 

[Wolf359]

Originally Posted By: NibbanaBanana
Examples: I owned 96' and 97' Geo Metros, paid $8K new. Ran till 185K and 186K miles and rotted apart. Paid $9500 for the 2006 Aveo I'm still driving at over 215K miles. Wife's 2013 Kia Rio has over 105K miles and is a beautiful car. Runs and drives like new. These cars made me a lot of money. Take the extra money and invest it. That's my advice.


The Geo Metro's were on the list of top ten death cars along with cars like Mustang, Camero and Corvette. Those were on there because drivers tended to go too fast or they didn't survive in an accident. You might want to consider spending a little more. It's an arms race out there, now SUV and trucks outsell cars. Bigger is better in any accident.

 

[fdcg27]

Originally Posted By: Lolvoguy
Originally Posted By: Artem
People need to keep their cars for longer, until it's paid off, AND THEN you're free to go trade it in if you want. Use that 2-3k car value as your down payment on the next one, of you want.


This is currently not possible. Given that most vehicles since the mid 2000's are all made with plastic engine and powertrain components, means that they simply cannot be maintained long term without considerable repair/rebuild costs.

Add to that the computer software required to repair and service these vehicles, makes your statement financially silly. Much cheaper and easier to simply get a new(er) vehicle.

Now, don't get me started on the soy based wiring insulation and interior panels, seats etc which all have a finite life expectancy.

Figured that a Luddite would show up in this thread.
Plastic parts, just like everything else you own?
Meanwhile, todays cars last longer without major repairs through their working lives than have any that preceded them.
Finite component lives?
When were they anything else?
I'm confident that our newer vehicles will be just fine out to 200K+, plastic parts or not.

 

[PandaBear]

Originally Posted By: javacontour
If only there was a technology to put knowledge at the fingertips of the common man so that he could look for tips and pricing trends when it comes to buying and financing major purchases.


Trust me, most consumers know about it, they just couldn't resist their own temptation for the perfect car on the lot, RIGHT NOW.

Most people will do the right thing when they have no other choices, like going up side down and monthly payment for a long time.

 

[Mr Nice]

Originally Posted By: fdcg27
Originally Posted By: Lolvoguy
Originally Posted By: Artem
People need to keep their cars for longer, until it's paid off, AND THEN you're free to go trade it in if you want. Use that 2-3k car value as your down payment on the next one, of you want.


This is currently not possible. Given that most vehicles since the mid 2000's are all made with plastic engine and powertrain components, means that they simply cannot be maintained long term without considerable repair/rebuild costs.

Add to that the computer software required to repair and service these vehicles, makes your statement financially silly. Much cheaper and easier to simply get a new(er) vehicle.

Now, don't get me started on the soy based wiring insulation and interior panels, seats etc which all have a finite life expectancy.

Figured that a Luddite would show up in this thread.
Plastic parts, just like everything else you own?
Meanwhile, todays cars last longer without major repairs through their working lives than have any that preceded them.
Finite component lives?
When were they anything else?
I'm confident that our newer vehicles will be just fine out to 200K+, plastic parts or not.


My 2005 RSX and 2006 Accord seem to be doing just fine with all their plastics...