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#4648727 - 01/28/18 08:19 AM 32% of used car trade ins are underwater
Mr Nice Offline


Registered: 09/12/04
Posts: 20909
Loc: Orlando, FL
32% of used car trade ins are underwater in recent Edmunds report.

https://www.zerohedge.com/news/2018-01-2...-are-underwater


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#4648730 - 01/28/18 08:22 AM Re: 32% of used car trade ins are underwater [Re: Mr Nice]
Quattro Pete Offline


Registered: 10/30/02
Posts: 35561
Loc: Great Lakes
I'm surprised it's only 32%.
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#4648732 - 01/28/18 08:24 AM Re: 32% of used car trade ins are underwater [Re: Mr Nice]
ZZman Online   content


Registered: 03/17/08
Posts: 5480
Loc: Michigan
No surprise there. Cars are super expensive and they depreciate a lot. Most people get tired of their vehicles in 4-5 years.
Many also don't have big down payments or car equity to trade in so it is a vicious cycle.


Edited by ZZman (01/28/18 08:26 AM)
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#4648733 - 01/28/18 08:24 AM Re: 32% of used car trade ins are underwater [Re: Quattro Pete]
spasm3 Offline


Registered: 05/30/10
Posts: 8424
Loc: North Carolina
Originally Posted By: Quattro Pete
I'm surprised it's only 32%.


So am i!
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#4648736 - 01/28/18 08:25 AM Re: 32% of used car trade ins are underwater [Re: Mr Nice]
Leo99 Offline


Registered: 03/30/14
Posts: 2874
Loc: NJ
I don't understand this:

which means that dealers lenders are willing to accept an immediate loss for new transactions

Any negative equity is rolled into the new loan so how are the lenders taking a loss?


Edited by Leo99 (01/28/18 08:26 AM)
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#4648739 - 01/28/18 08:28 AM Re: 32% of used car trade ins are underwater [Re: Mr Nice]
madRiver Offline


Registered: 07/11/15
Posts: 3307
Loc: New England
*If people stuck to paying for new vehicles in 4 years or less this would not occur.

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#4648747 - 01/28/18 08:31 AM Re: 32% of used car trade ins are underwater [Re: Leo99]
dlayman Offline


Registered: 12/21/14
Posts: 850
Loc: pennsylvania, usa
I didn't understand that either, buy from further reading it sounds like they expect a large number of these loans to go into default with the lenders not getting their money back

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#4648751 - 01/28/18 08:35 AM Re: 32% of used car trade ins are underwater [Re: Leo99]
Donald Offline


Registered: 03/21/04
Posts: 20241
Loc: Upstate NY
Originally Posted By: Leo99
I don't understand this:

which means that dealers lenders are willing to accept an immediate loss for new transactions

Any negative equity is rolled into the new loan so how are the lenders taking a loss?


In reading the article the consumer can get into an unsustainable cycle.

Owe $15k on car worth $10k, they roll $5k onto the new loan. You buy a $25k car with a trade in and no down payment and driving off the lot you owe $30k.
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#4648760 - 01/28/18 08:46 AM Re: 32% of used car trade ins are underwater [Re: Mr Nice]
NibbanaBanana Offline


Registered: 05/23/16
Posts: 292
Loc: New England
It's insanity. There's perfectly good new cars available for less than $15K. An excellent job of marketing by auto manufacturers.
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#4648765 - 01/28/18 08:50 AM Re: 32% of used car trade ins are underwater [Re: Mr Nice]
madRiver Offline


Registered: 07/11/15
Posts: 3307
Loc: New England
It still is consumer thinking paying now in 5-8 year loan terms. Depreciation out paces the payment and surprise you are upside down.

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#4648781 - 01/28/18 09:02 AM Re: 32% of used car trade ins are underwater [Re: NibbanaBanana]
AZjeff Online   content


Registered: 01/14/11
Posts: 2483
Loc: Cottonwood Az
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.
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#4648783 - 01/28/18 09:03 AM Re: 32% of used car trade ins are underwater [Re: Leo99]
SuzukiGoat Offline


Registered: 02/04/13
Posts: 534
Loc: Louisiana
Quote:
which means that dealers lenders are willing to accept an immediate loss for new transactions

Any negative equity is rolled into the new loan so how are the lenders taking a loss?


Given that 625 credit score and up can finance over 100% of the value of the car plus and hard adds, it isn't hard.

They then charge interest on the greater amount and make money, not lose it.
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#4648784 - 01/28/18 09:03 AM Re: 32% of used car trade ins are underwater [Re: Mr Nice]
Artem Offline


Registered: 10/30/10
Posts: 5085
Loc: Florida
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.

I have a low APR on my Mazda 3 and have been paying $50 extra each month. Once it's paid off this year, it will have maybe 70-80k on it and is in MINT CONDITION. I plan to use it for an additional 5 years PAYMENT FREE before I even begin to think about getting another car payment.

People these days just can't manage their money nor their desires.
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#4648785 - 01/28/18 09:04 AM Re: 32% of used car trade ins are underwater [Re: AZjeff]
SuzukiGoat Offline


Registered: 02/04/13
Posts: 534
Loc: Louisiana
One of those cars will hit 300k with just maintenance
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#4648787 - 01/28/18 09:07 AM Re: 32% of used car trade ins are underwater [Re: AZjeff]
Artem Offline


Registered: 10/30/10
Posts: 5085
Loc: Florida
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.



crackmeup

The reality is, the people who technically NEED to buy those cars because it's in their budget, end up buying some $32,000 Benz instead and then struggle with the $800 monthly payment. But hey, at least they look good driving to work... to McDonalds.
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