$45k loan for a $27k car!

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Originally Posted by fdcg27
Originally Posted by Wolf359
Originally Posted by fdcg27
Originally Posted by dkryan
The buyer, John Shricker, is a total MORON He rolled one loan into another at least three times simply because he could afford the payment. As mentioned previously, no one forced him to buy four cars in two years. The sad thing is a short article on MarketWatch.com appearing online this afternoon blamed "rising car prices" for his $45,000 loan on a $27,000 Jeep. We should pity his victimization. NOT!
Tell us what you really think, dkryan. LOL! I guess I have to ask who's the greater fool here. The buyer, who clearly does a good dumb blond imitation, or the lender who lends nearly double bucks on the piece? If the buyer runs into any financial difficulties, the lender is then stuck with collateral that won't bring more than 30% of the amount loaned at auction. Who is the moron here?
I think you miss the big picture. What's the interest rate the lender is charging again? If there are 10 people like that out there doing the same thing and the lender knows that 2 of them will default, but charges the other 8 a high enough interest rate so that they're covered when the two do go under, does that really make them the moron? They're taking on a risk that the higher interest rate will make up for eventual losses. If they've done their business models correctly, they will still make money when people default. Their model probably calls for a certain amount. Where they get in trouble is when too many default. But that's the risk with any business, they go under or get in trouble when the markets don't go according to their business places. Look at WeWork, they were trying for a high valuation, but the markets said otherwise.
No, I think I have a pretty good grasp of the bigger picture. Marginal borrowers agree to insanely high APRs because that's the only way they can get financed in a new car. Lenders have dollar signs in their eyes but fail to consider what will happen when the next economic contraction comes. All of a sudden, those high-profit marginal borrowers lose their jobs and stop making their car payments, focusing their unemployment benefits upon paying for food and housing. The value of the collateral also takes an instant added hit since the market for repo cars shrivels as the availability of credit and the willingness of buyers to incur debt dries up. This has happened in every serious recession in my lifetime and yours. It happened only ten years ago. There is nothing new under the sun and the current easy credit environment is nothing more than what one can observe as happening late in every economic expansion. Any bailouts will benefit the lenders, since saving the banking system will be seen as vital to continued economic survival, as it probably is.
Agreed. I've seen a few downturns in my time and lending gets easy(er) and (what many consider) reckless before a bust. Then the industry tightens up and before too long they're back at it. Wash, rinse, repeat. But I don't think we've ever seen a default rate as high as it is now, in fact I believe it's at a historical high... that can only mean it's gonna hurt more when the current expansion ends... and it will end, you can count on it
 
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FCA Mitsubishi and Nissan/Renualt are my bets for going under next crash, half their cars are sold as rental and most of the rest are in all but name.
 
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Originally Posted by GZRider
FCA Mitsubishi and Nissan/Renualt are my bets for going under next crash, half their cars are sold as rental and most of the rest are in all but name.
Can't recall the last time I met someone who bought a Mitsubishi here in the States. I guess they're still "popular" overseas???
 
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Originally Posted by bbhero
Originally Posted by pbm
Originally Posted by Slick17601
I don't like the fact that the article plays him up as a victim. No one held a gun to his head.
Being a 'victim' is the best strategy in modern America....right now it looks like all the 'victims' of college loan debt may fare better than those who paid their way. Schools used to teach 'home economics'.....now they teach 'social justice'....it's all part of 'dumbing down' (by design)....
Exactly right ^^^^
Thank god there are still people who think like us ^^^^
 
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Dude needs to get on that Dave Ramsey life. I'm flabbergasted at the lack of common sense money practice among many Americans. In small town America people get bent out of shape that all the "foreigners" come in and buy businesses and become wealthy. What they don't understand is that guy who moves here from a poor Asian, middle eastern, or Eastern block country saves all his money for 10years while most Americans are out financing a $60k truck on a 84 month loans and they do that every 4-5 years and wonder why they are broke and own nothing. At the end of 10 years that immigrant buys a gas station Or a Hotel with cash Or a lot of money down and lives and works in his Income producing asset while continuing to be frugal. People have got to learn that cars are terrible assets and you will always be poor if you spend all or a significant portion your income on depreciating assets Pay cash for cars. Keep the value of your cars (financed or not) at less than 20% of your annual Income. For example if you make $50k a year you cannot afford a $25k car. You should be in a $5-10k car. You make $100k a $20k car. $150k a $30k car etc... way too many people in America are making $35k a year and driving a $30k car and then they can't figure out why they have to run up CC debt to buy food. People need to THINK.
 
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Originally Posted by dareo
"My perfectly good [5 year old car] needs [small repair] so i better just trade it in for a brand new upgraded model." -america.
You are missing part of the equation ... I have no savings, my credit cards are maxed, I can't get a loan, AND NOW I need to repair something on my car. They can't afford to fix it, so they trade it ...
 
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Originally Posted by donnyj08
Dude needs to get on that Dave Ramsey life. I'm flabbergasted at the lack of common sense money practice among many Americans. In small town America people get bent out of shape that all the "foreigners" come in and buy businesses and become wealthy. What they don't understand is that guy who moves here from a poor Asian, middle eastern, or Eastern block country saves all his money for 10years while most Americans are out financing a $60k truck on a 84 month loans and they do that every 4-5 years and wonder why they are broke and own nothing. At the end of 10 years that immigrant buys a gas station Or a Hotel with cash Or a lot of money down and lives and works in his Income producing asset while continuing to be frugal. People have got to learn that cars are terrible assets and you will always be poor if you spend all or a significant portion your income on depreciating assets Pay cash for cars. Keep the value of your cars (financed or not) at less than 20% of your annual Income. For example if you make $50k a year you cannot afford a $25k car. You should be in a $5-10k car. You make $100k a $20k car. $150k a $30k car etc... way too many people in America are making $35k a year and driving a $30k car and then they can't figure out why they have to run up CC debt to buy food. People need to THINK.
How's that saying go, a man who lives within his means sleeps better at night....
 
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Thread starter
Originally Posted by geeman789
Originally Posted by dareo
"My perfectly good [5 year old car] needs [small repair] so i better just trade it in for a brand new upgraded model." -america.
You are missing part of the equation ... I have no savings, my credit cards are maxed, I can't get a loan, AND NOW I need to repair something on my car. They can't afford to fix it, so they trade it ...
In some respects that can be a self fulfilling prophecy in that maybe they have no savings and the CC are maxed and being used for living expenses rather than emergencies, because they're making $700+ a month car payments on top of the cost of insurance and maintenance etc. What's the figure right now?..half of Americans can't cover a $400 emergency?
 
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Originally Posted by donnyj08
Dude needs to get on that Dave Ramsey life. I'm flabbergasted at the lack of common sense money practice among many Americans. In small town America people get bent out of shape that all the "foreigners" come in and buy businesses and become wealthy. What they don't understand is that guy who moves here from a poor Asian, middle eastern, or Eastern block country saves all his money for 10years while most Americans are out financing a $60k truck on a 84 month loans and they do that every 4-5 years and wonder why they are broke and own nothing. At the end of 10 years that immigrant buys a gas station Or a Hotel with cash Or a lot of money down and lives and works in his Income producing asset while continuing to be frugal. People have got to learn that cars are terrible assets and you will always be poor if you spend all or a significant portion your income on depreciating assets Pay cash for cars. Keep the value of your cars (financed or not) at less than 20% of your annual Income. For example if you make $50k a year you cannot afford a $25k car. You should be in a $5-10k car. You make $100k a $20k car. $150k a $30k car etc... way too many people in America are making $35k a year and driving a $30k car and then they can't figure out why they have to run up CC debt to buy food. People need to THINK.
Oh my god. Yes! Dave Ramsey! For goodness sakes people. Stop buying stuff that you can not afford! Its that simple! If you have to go to someone else to borrow money to buy something, like hello? How immature, you dont work hard enough or dont save your money so you go to other people begging to borrow money. People borrow money from other people because they cant afford a $800 phone for goodness sakes. Well, guess what? Buy a $80 phone until you work hard enough to buy something more expensive. People borrow money to buy a car! Heck, 50% of new car purchasers now involve the buyer going to other people to borrow the money for it! Now only that, but they take up to SIX or more years to pay it back! Well, then, you have no right driving it! Buy a $6000 car until you work hard enough for the $36,000 car. Im sick of people who borrow money from other people, then whine that they have to pay it back! Good god! Grow up, stand on your own two feet and stop being dependent on other peoples money. Dave Ramsey should be required course in the sixth grade!
 
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Win

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Originally Posted by Mr Nice
He's an idiot and I don't feel sorry for him.
If he got somebody to lend $45K on a $27K item of personal property that will only decline more, leaving even more of the debt unsecured, he wasn't the only idiot in the room. Arguably, he's not even the biggest idiot in the room. The biggest idiot may not even be in the room - it could be whoever buys that paper, particularly if it's non recourse.
 
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Originally Posted by Win
Originally Posted by Mr Nice
He's an idiot and I don't feel sorry for him.
If he got somebody to lend $45K on a $27K item of personal property that will only decline more, leaving even more of the debt unsecured, he wasn't the only idiot in the room. Arguably, he's not even the biggest idiot in the room. The biggest idiot may not even be in the room - it could be whoever buys that paper, particularly if it's non recourse.
As I said earlier, forest for the trees. You don't think those people paying interest on a 45k loan on a property worth 27k are paying under 4% do you? Same reason why credit card interest rates are high, a certain amount defaulting is built into the interest rate.
 
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That was my 2012 Mazda3 2 years ago. OTD was under $10k with my rusty, leaking Protege5 as trade. Top of the range 2.5L 3 with a stick and IIRC, 67500 on the odometer.
Originally Posted by earlyre
Originally Posted by SirTanon
One of many reasons I buy my cars at least 4 or 5 years old, as a rule.. or more. Less than 1/2 the price, and still last me 5 years.
my sweet spot is 5yrs old/60kmi/$10k... worked at least twice so far...both cars were over $30k new...
 
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Wanting more than you can afford isn't the stupidity part. Actually signing a contract to buy more than you can afford IS stupidity. I want an Aston Martin. I could probably afford, by today's standards, a new Lexus or a BMW I drive a used Mazda.
Originally Posted by philipp10
This isn't necessarily case of stupidity (although is some instances, yes it is) as much as someone wanting more than they can afford. I've never, ever had a car loan. My parents were frugal and taught me that loans are for purchasing homes.....everything else should be with cash. And that is why my fleet averages about 10 years old. The guy in the article has no business getting 4 cars over a couple years. Each time costs money. Just plain stupid on his part. I wonder on these "subprime" loans, what is the interest rate they are paying? Paying interest is for losers.....as in money pouring out of your wallet every day you owe. Just say no.
 
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Originally Posted by javacontour
Wanting more than you can afford isn't the stupidity part. Actually signing a contract to buy more than you can afford IS stupidity. I want an Aston Martin. I could probably afford, by today's standards, a new Lexus or a BMW I drive a used Mazda.
Originally Posted by philipp10
This isn't necessarily case of stupidity (although is some instances, yes it is) as much as someone wanting more than they can afford. I've never, ever had a car loan. My parents were frugal and taught me that loans are for purchasing homes.....everything else should be with cash. And that is why my fleet averages about 10 years old. The guy in the article has no business getting 4 cars over a couple years. Each time costs money. Just plain stupid on his part. I wonder on these "subprime" loans, what is the interest rate they are paying? Paying interest is for losers.....as in money pouring out of your wallet every day you owe. Just say no.
Javacontour, You're touching on a very important point. Many people seem to think if they can make the payments they can "afford" it. That's simply not true. If one makes $150k a year, one can probably make the $2k a month payment on a Aston Martin, but one cannot "afford" it. One cannot afford to forgo saving in Roth IRAs and pretax accounts or at least some form of retirement savings. If people refuse to invest in the market like my parents, real estate is a good option. My parents decided 30 years ago the market wasn't for them, rather they saved and bought rental houses. They now own (6) that produce a livable income for retirement, Not counting Social Insecurity. The important thing is that people invest in something that is growing long term and can produce income later in life. "Failing to plan is planning to fail"
 
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Java, Lots of legitimate millionaires drive regular vehicles under $25K. Today we have cash poor people that are over leveraged up to their eyeballs in debt..... but stand back and look at their big house and fancy cars thinking they are living the American Dream. smirk
 
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Up on North Meridian, on the north side of Indianapolis, there was, back in the day, a stretch of old school mansions, built in the teens and 20's. Really nice, well maintained homes occupied by people with money. I always noticed that their cars were quite ordinary. Lots of full sized Chevy Caprice, Mercury GM, etc.. Like the homes, they were older but well maintained. I assumed this was an indication that people who have money were smart about how they spend it as well. Just like Warren Buffett, who was known to drive a very unassuming vehicle.
 
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Most millionaires in this country drive average vehicles. The top 10 I found online 1. F150 2. Honda Pilot 3. Grand Cherokee 4. Jeep Wrangler 5. Honda Civic 6. BMW X5 7. VW Jetta 8. MB E Class 9. Toyota Prius 10. Honda Accord Found this list on Money.com It clearly shows that the wealthy are overall fairly frugal as only 2 are "luxury" German cars. The average Millionaires car is also 4 years old and has around 40k miles on it.
 
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South Carolina
Originally Posted by Win
Originally Posted by Mr Nice
He's an idiot and I don't feel sorry for him.
If he got somebody to lend $45K on a $27K item of personal property that will only decline more, leaving even more of the debt unsecured, he wasn't the only idiot in the room. Arguably, he's not even the biggest idiot in the room. The biggest idiot may not even be in the room - it could be whoever buys that paper, particularly if it's non recourse.
It doesnt matter to whoever bought the paper, they aren't idiots getting a return of over 10% on their money, most likely much higher. These packages are sold knowing a certain percentage default. Chances the guy with that loan is pay 18% interest. :o)
 
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Originally Posted by Mr Nice
Java, Lots of legitimate millionaires drive regular vehicles under $25K. Today we have cash poor people that are over leveraged up to their eyeballs in debt..... but stand back and look at their big house and fancy cars thinking they are living the American Dream. smirk
YES!!! Remember Harry Chapin? He lived on Long Island were I came from. One of the most popular and highest paid performers of the 1970's. He drove a Volkswagen Rabbit. Sadly he was also killed in that car 1981 when a tractor trailer hit him in the rear while his emergency flashers were on and driving slow on the Long Island Expressway. The company that owned the tractor trailer paid his widow 12 million dollars. https://en.wikipedia.org/wiki/Harry_Chapin "On July 16, 1981, Chapin was driving in the left lane on the Long Island Expressway at about 65 mph (105 km/h) on the way to perform at a free concert scheduled for later that evening at Eisenhower Park in East Meadow, New York. Near exit 40 in Jericho, he put on his emergency flashers, presumably because of either a mechanical or medical problem. He then slowed to about 15 miles (24 km) per hour and veered into the center lane, nearly colliding with another car. He swerved left, then to the right again, ending up directly in the path of a tractor-trailer truck. The truck could not brake in time and rammed the rear of Chapin's blue 1975 Volkswagen Rabbit, rupturing the fuel tank as it climbed up and over the back of the car, which burst into flames."
 
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