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One thing that I noticed in this article and charts was the unprecedented growth of auto loans. They too have skyrocketed. That seems like another "bubble" wait
by robohoe 7y ago
One thing that I noticed in this article and charts was the unprecedented growth of auto loans. They too have skyrocketed. That seems like another "bubble" waiting to happen.
- thrower123 7y agoIn the last twenty years, new vehicle prices have doubled. My eyes just about roll out of my head when I see what the sticker price is for a new truck or minivan. I assume people must be leasing more than they used to, because I can't see any other way to get the payment down into a palatable $500/month range.
- vidanay 7y agoCoincidentally, my newest vehicle is almost 20 years old.
- patrick5415 7y agoMine is 21, which makes this whole discussion rather humorous to me.
- chrisco255 7y agoAt least, when it comes to cars, they have gotten better in quality over the past 20 years. Not sure the same can be said about higher education.
- dsfyu404ed 7y agoIf this were 10yr ago I'd agree. The 80s gave us computers. The 90s gave us good simulation software and the engineers used that to build us reliable cars. The early 2000s gave us plastic interior and exterior trim that didn't rattle and fall apart in short order. Since then we've tacked more gears onto automatic transmissions, hybrids have become more mainstream, sedans and wagons have been replaced with small SUVs as electronic doodads have proliferated. If you don't mind creaky plastic quality is about the same back deep into the 90s for cars that were on reasonably modern platforms in the 90s.
- chrisco255 7y agoGas mileage is better, backup cams are standard (and required), the average age of a vehicle on the road is 11 years (up from 8 years in the 90s), so they are more reliable and last longer, better airbags (side curtains are standard nowadays), better anti-corrosion technology, adaptive cruise control, lane assist, auto parallel parking, partial autopilot, bluetooth standard, etc.
- dsfyu404ed 7y agoSo marginal incremental improvement in drive-train technology and electronic doodads? That's how I read that list you gave me. Cars these days don't age any better than cars from 20yr ago or the more modern cars of the 90s. I guess anti-corrosion has improved but it hasn't improved by that much. You still have plenty of vehicles that repeatedly rust out in some spot because the salt gets flung there and the surface coatings aren't adequate to stop it.
- chrisco255 7y agoAverage age of cars on the road is 11 years vs 8 years in the 90s...which means cars are on average lasting 37.5% longer than 20 years ago. And that might be a lagging indicator.
- pessimizer 7y agoIt also might be an indicator of how deep the 2008 recession was, and of how big the 90s stock boom was.
- chrisco255 7y agoNo, the measure is average age, which is more indicative of used cars than any largess caused by various boom times. Cars don't get salvaged for spare parts and metal until they're no longer useful as vehicles. They otherwise get resold and traded in and put back out on the road.
- 7y ago
- mgkimsal 7y agosame here. bought a used 2016 last year for ... ~$12k? Small Focus, nothing fancy. Even that felt like a bit of a stretch, although... I'm getting more conservative with $ as I get older. It's also just 2 of us in the house - no kids, and I get that some people want/need larger cars to haul around kids and stuff. But seeing that an 'average' new car loan is $30k, my mind just... boggles.
- g00s3_caLL_x2 7y agoTrucks have doubled and it's insane. Jeeps as well. A base Ruby is now what...42k-ish? Friggin' stupid. I can almost buy two rental houses for that price. At least one that can be in move in condition with a splash of paint and carpet.
- lemcoe9 7y agoWhere are you buying rental houses for $42k?
- irrational 7y agoMaybe Detroit? Though I hear houses are closer to $10k there.
- g00s3_caLL_x2 7y agoInner city. There are always cheap rentals if you look around. I'm landlocked with no beaches. This helps costs tremendously.
- apta 7y agoWhat's the ROI on such rentals (cost of property vs. amount of rent generated per month)?
- wil421 7y agoSimple, put down a larger down payment. I put down almost 50% of my last car purchase to get it down to ~$500.
- kevin_thibedeau 7y agoBuying new is basically a fools game now. Take note of vehicles with proven longevity and snatch them up when the depreciation makes them affordable.
- papln 7y agoThe market is rather efficient in these vehicles, so depreciation isn't a way to save money. Dealers beg 3-yr-old car owners to sell their cars back so they can flip them. Like real estate, cars are cheap to buy. The expense comes when you sell them, losingthe residual becase you won't get a good price. The most important factor in auto afforidability is how long you own the car, not how good a deal you get at purchase time. And buying a "reliable" used car is a risk, because you don't know what damage this particular used car has suffered. Unless you have good intel on why the previous owner gave it up, and how they treated it, you're taking a gamble.
- sokoloff 7y agoYou can pretty blindly buy a no-accident 3-year off/lease Honda or Toyota and be overwhelmingly likely to have a great ownership experience.
- alexhutcheson 7y agoWith the rate at which electronic safety features are advancing, I think the advantages of buying used have fallen a bit. A new base-model Corolla currently has more electronic safety features than a high-trim 3-4 year old Avalon or Lexus. That's a recent phenomenon, though, and it might be a temporary condition if the rate of improvement of those systems slows down.
- kevin_thibedeau 7y agoHow did everybody manage to convince themselves that they need these expensive add-ons? You need seatbelts, airbags, and impact absorption. That was perfected 20 years ago. Everything else is a luxury not needed for driving.
- mdorazio 7y agoSome quick numbers here. Inflation over the last 20 years was about 54%, so I would expect an apples-to-apples vehicle to cost that much more today than it did in 1999. If you look at the CPI-based numbers for cars from 2000 to 2019, in real dollars it's barely gone up [1]. I think what you're seeing is that the cars getting advertised, and more specifically the cars that you want are more expensive than they used to be because auto makers are trying to boost margins in a shrinking market by pushing fancy features and higher-end models. But if you look at base-model sedans, they've stayed pretty close in price over the last two decades. [1] http://www.in2013dollars.com/New-cars/price-inflation http://www.in2013dollars.com/New-cars/price-inflation
- robohoe 7y agoExcept it's hard to find base model cars anywhere.
- mdorazio 7y agoIs it? I’m still driving the same car I bought 10 years ago so I’m genuinely not sure. At the time, I ordered it from the Honda fleet manager at a dealership and getting a base model was no problem. If you’re walking into a dealership or want a car ASAP then you’re probably right, but I feel like if you can wait a couple weeks getting a base model is still relatively easy.
- aaronblohowiak 7y agoDepends on the make, iiuc
- maxxxxx 7y agoWhen I bought my Kia it definitely was a problem to get the low end model. There was just one base model on the lot vs. many cars fully decked out. I guess not many people buy base model these days.
- alexhutcheson 7y agoThe Costco Auto Program[1] can be good for that. [1] https://www.costcoauto.com https://www.costcoauto.com
- cwbrandsma 7y agoPickups especially. From what I remember, Ford is all but dropping making cars in favor of the F series because it has a higher profit margin. But I'm less concerned about car prices in contrast to college and healthcare costs.
- lotsofpulp 7y agoWith GPS/always on mobile data connections, the lender has a much easier time reclaiming the collateral and recouping their losses by selling or leasing it again.
- lemcoe9 7y agoI can absolutely confirm this. I have done work (not on this particular type of system, however) for many small-to-medium car dealerships, and they will spend roughly $400 to equip many of the vehicles in their inventory with ignition interlocks that can be disabled remotely. Here is their business cycle: 1. Purchase a used car from a customer for 80% of "fair market value." 2. Sell the car on a $0-down, 7-year note for 110% of "fair market value." 3. Undoubtedly the loan goes into arrears, and the dealer will disable the ignition system after a certain amount of time. The "owner" will be billed for the tow as well as multiple "recovery fees." 4. Sell the car again for 110% of "fair market value." 5. Repeat. Multiple times I have been told "we don't want them to pay off the car; we make less money that way." I remember one particular dealer bragging to me about the fact that he had sold a 2009 Honda Civic 11 times in 4 years. That is, 11 sales and 10 repossessions over the course of 4 years. The saddest part was hearing that over 70% of their car notes would go into arrears within 4 months.
- deleted 7y ago[deleted]
- lotsofpulp 7y agoI don’t understand your use of the term “fair market value” in quotes, implying that it’s not the actual market value. If the seller and buyer are not under duress while selling and buying, why is the dealer not buying and selling at the market value?
- lemcoe9 7y agoBecause the vast majority of the customers that walk through these buy-here pay-here places' doors already have loans on their vehicle and are looking to upgrade. "Kelly Blue Book" is not a phrase used very often by their salespeople; the customer base seems to be much more interested in the appearance of the cars than the financial utility of them.
- howard941 7y agoThe problem is getting worse. It used to be hard to get 5 year loans for new cars. 8 year loans are pretty common. With the vehicle failing to reach the loan's end of life these new loans roll in the old loan's deficiency until someone defaults. A still relevant earlier discussion: https://news.ycombinator.com/item?id=14476381 https://news.ycombinator.com/item?id=14476381
- alexhutcheson 7y agoIs it common for modern used cars to not last 8 years? I know lots of people driving cars that are 10-15 years old at this point.
- OJFord 7y agoIs it common for houses not to last centuries? I know lots of people living in very old houses. Perhaps mortgages should have longer terms too?
- randomdata 7y agoI think you would be very lucky to get a few decades without the need for any major repairs or upgrades. It too know people who live in houses that have some features that are centuries old, but none of them are living in the exact house that was constructed centuries ago. The distinction is meaningful as the comments earlier in the thread are talking about how long a new car will last before it needs work (beyond your basic oil changes, etc.). If you are willing to put money into major repairs and upgrades, there is no real reason why a vehicle cannot last centuries as well, as classic car enthusiasts can attest.
- aerophilic 7y agoShort answer: yes it is common for a building not to last long periods of time (unless properly maintained). I recall a civil engineer telling me once that most “tract” homes only are designed for a 35 year useful life. While I can’t find a reference for that, I did find this Quora article from a structural engineer: Answer to What is the design life span of a building? by Vishnu Vijayakumar https://www.quora.com/What-is-the-design-life-span-of-a-building/answer/Vishnu-Vijayakumar-14 https://www.quora.com/What-is-the-design-life-span-of-a-buil... Note: while he quotes 60-80 years, the concrete is still in that 30-40 year timespan.
- deleted 7y ago[deleted]
- gniv 7y agoCar companies seem to have figured out a lucrative business model: pump up the price of desirable cars (suvs, trucks), then offer low-interest loans, making it seem like you’re getting a good deal. That’s how you end up with an average new car price of 34k. And now I’m wondering if the same dynamic is happening in education: schools increase tuition because govt-subsidized loans are easily accessible.
- JamesBarney 7y agoI think of lot of this is very low interest rates which makes new cars more affordable.