9 ms·

Is it really that the middle class can't afford cars, or is it that a lot of folks want to buy a car they really can't afford? My much higher concern is that t

by kop316 7y ago

Is it really that the middle class can't afford cars, or is it that a lot of folks want to buy a car they really can't afford? My much higher concern is that the reason people take a seven year auto loan, as it is the default option given to them and see a lower monthly payment. By doing that, one can think they can afford the $40k or $50k car, not realizing that the total cost of ownership (i.e. maintenance, gas bill, etc.) also just rose, and the money they are paying in interest is also much higher now.

mmcconnell1618 7y ago
I've noticed that car commercials in the US never show the price of the vehicle anymore. They just show a low monthly payment amount. Often, it is a lease payment which is even worse because you're renting the vehicle at a very high effective interest rate that doesn't need to be disclosed because you're not technically borrowing money. US regulations don't currently require disclosure of interest rates and fees on vehicle leases.
- ghaff 7y ago
  > anymore Not really a new thing. Ads and dealers have played the "low low monthly payment with zero down" (or whatever) forever.
- lotsofpulp 7y ago
  How can there be an explicit interest rate if there is no loan? You’re borrowing the car, not the money.
  - mmcconnell1618 7y ago
    The effective interest rate is the difference in the actual depreciation of the vehicle and what your buy out price is at the end of the lease. The dealer has the ability to set the price at the end so they can manipulate how much over true depreciation you're spending.
  - SonicScrub 7y ago
    You can do the math and convert it as a loan equivalent. If you get a loan for a car, you're paying the value of the vehicle + an extra fee for the convenience of not having the full amount upfront to purchase it. When you lease a car, you're doing the exact same thing. The only difference is that the car company is not legally obligated to disclose your effective interest rate. You can calculate it yourself here: https://www.calculator.net/lease-calculator.html?ctype=fixpayment&cloanamount=20000&cresidualvalue=8000&cloantermy=3&cloantermm=0&cinterestrate=6&cmonthlypay=400&x=111&y=20 https://www.calculator.net/lease-calculator.html?ctype=fixpa... A $20,000 car leased over three years for $400 a month that depreciates to $10,000 at the end of the term has an effective interest rate of 9.539%
    - deleted 7y ago
      [deleted]
- robotnixon 7y ago
  It's even worse in the Detroit area. Pretty much every domestic automaker (and Nissan, I think) show payment amounts with employee discounts.
HarryHirsch 7y ago
THe OECD has the numbers on GDP per hours worked: https://www.oecd-ilibrary.org/economics/gdp-per-hour-worked/indicator/english_1439e590-en https://www.oecd-ilibrary.org/economics/gdp-per-hour-worked/... Worker productivity in the US has risen while wages have remained flat and expenses for healthcare and education have gone up. People really can't afford their cars any longer. Besides, if you have a 90-minute megacommute a nice car is no longer a luxury, it's a necessity.
- vorpalhex 7y ago
  > if you have a 90-minute megacommute a nice car is no longer a luxury, it's a necessity. I used to commute 90 minutes on the bus and rail on a daily basis. I assure you, even at 90 minutes, a nice car is _still_ absolutely just a luxury. A dependable car may be required, but not a fancy one.
  - PaulHoule 7y ago
    If you have a long commute you probably want a fuel-efficient car, which is usually going to be a small (and inexpensive) car. My impression also is that many of the most dependable cars are inexpensive. I've been so amazed at the reliability of the Honda Fit (it required no major repairs until it got totaled around 120k; my main beefs were with the hatchback which needed to be oiled quite often, and the tire pressure sensors that seemed to fail around once a year or so) I was amazed enough that I bought another one (with a three year payment)
    - HarryHirsch 7y ago
      When you are driving 90 minutes in the early morning on busy roads, when everyone around you is just as sleep-deprived as you, you'd like to minimize distractions, so you can pay attention to the road. You really want a good suspension and a silent engine. (I agree about the fuel efficiency, but that's not the whole story.)
      - PaulHoule 7y ago
dghughes 7y ago
>Is it really that the middle class can't afford cars, or is it that a lot of folks want to buy a car they really can't afford? If you have to spend more than 100% of your total yearly income on an item that rapidly depreciates in value then yes it's not affordable.
- johnbrodie 7y ago
  Right, but you 100% _do not_ need to spend that much on a car.
  - dghughes 7y ago
    Correct but many people do it's quite common. Most ordinary vehicles these days tend to be around $30,000. That's a bit more than the total yearly take home pay for someone in my region making minimum wage. Even used at half that is a large amount of money to spend on a vehicle. People scoff at multi millionaires spending hundreds of thousands or a million dollars for a sports car. But that's a small amount of their total net worth or even their yearly salary. Cars are so expensive to own too. I don't think people realize how much it costs to operate a vehicle let alone but it. The AAA says it costs about $7,000 per year in expenses; gas, maintenance, insurance, depreciation.
auiya 7y ago
Vehicles these days are on average more expensive simply because SUVs outpace smaller car options in terms of overall volume sales, and SUVs are on average more expensive. Somehow auto manufacturers have convinced the middle class of this ridiculous notion that they can't transport their children safely in anything other than an SUV. So the middle class tend to buy more expensive vehicles they can't afford as easily because of marketing propaganda. The irony is, as more of these nuisance-sized SUVs flood the roads, the less safe everyone in smaller cars become, and road wear increases exponentially, leading to higher fuel taxes, etc... lather, rinse, repeat.
- dsfyu404ed 7y ago
  People (mostly) aren't buying Chevy Suburbans. They are (mostly) buying crossovers. Crossovers are basically the station wagons of the 21st century. If you want two rows, a hatchback and usable trunk space your options are crossover (technically an SUV, even if it's just a lifted wagon) or spending tons of money for a proper wagon made by either the Germans or Swedes. The reason the OEMs won't build wagons en-mass seems to be emissions classifications.
  - auiya 7y ago
    To haul their crumb-snatchers, yes. But this also doesn't explain why people are choosing to misappropriate farm vehicles (pickup trucks) as single passenger daily commuters.
    - unlinked_dll 7y ago
      People buy trucks because they like them. It's the same as any luxury item. I like guitars for example, don't need them, don't need any more, but I bought one recently. Because I liked it. The question isn't why do people choose to buy luxury items but why debt is so easily accessible for the purchase. That's much more troubling.
      - throwaway100773 7y ago
johnbrodie 7y ago
When I was in college, I needed a car to get to work (server at a restaurant), and to school. I spent $1600 on a 10 year old Volvo. For two years I did a fairly brutal commute between home/work/school, and drove for close to 3 hours a day. Wasn't great on gas, but it worked just fine. At some point it failed a state inspection and needed a new exhaust and new brake pads and rotors. Shop wanted around $5k. I shopped around and got a (cat-back) exhaust done for < $300 from a local shop, since it's just not something I could do myself. Bought rotors and pads for < $100, and spent some quality time in a parking lot with YouTube videos and a few wrenches. Heck, I make substantially more money now, and still have a pretty long 45-minute each way commute, with a lot of traffic. My primary vehicle is a $1600 motorcycle, and I _just_ added a truck as a backup (and to tow a track car). Spent $17k on the truck, it's perfectly fine, even looks good. Most I've ever spent on a vehicle by far, and I assume I'll have it for the next decade, at least. I'm driving it 4 hours out into the middle of the desert later today, and I have no worries about reliability. Bought the truck and every other vehicle I've ever owned in cash. I think that's the big difference between some others and myself. When I could afford only a few grand cash, that's the kind of car I bought. Honestly hard to feel too sorry for people that "need" a $30k+ car/truck/suv. I think these articles will always ring hollow for anyone that's been in the same situation and opted for a cheap car. Why on earth would you take out that long of a loan on a car that costs you a full year's salary or more?
- kop316 7y ago
  That's partly how I feel too. I bought a car out of college and took out a loan for it, and my goal with that car was to be able to pay off the loan AND save up enough money that I could buy my next car in cash. I have achieved that goal, but my original car still runs fine after 10 years, and most people are incredibly surprised when I tell them the age and the mileage. I really feel no need to buy a new car, but I am happy to know I am able to buy a car in cash when the time comes.
  - vaxman 7y ago
    The difference between 0% (paying cash) or 0.9% (mfr incentive rate) or %3 (preferred rate) isn't that significant on a sub-$50K vehicle over 5-7 years. When the vehicle goes back to the used car lot, there will be a hit taken and you either absorbed it upfront (by paying cash) or will absorb it at the end (by being upside down on the loan) or some combination so that it balances out. As far as driving your next car for 10+ years, the vehicles being manufactured today are almost designed not to last (because the auto industry fell on hard times a while back and vowed never again).

by kop316 7y ago

mmcconnell1618 7y ago

I've noticed that car commercials in the US never show the price of the vehicle anymore. They just show a low monthly payment amount. Often, it is a lease payment which is even worse because you're renting the vehicle at a very high effective interest rate that doesn't need to be disclosed because you're not technically borrowing money. US regulations don't currently require disclosure of interest rates and fees on vehicle leases.

ghaff 7y ago
> anymore Not really a new thing. Ads and dealers have played the "low low monthly payment with zero down" (or whatever) forever.
lotsofpulp 7y ago
How can there be an explicit interest rate if there is no loan? You’re borrowing the car, not the money.
- mmcconnell1618 7y ago
  The effective interest rate is the difference in the actual depreciation of the vehicle and what your buy out price is at the end of the lease. The dealer has the ability to set the price at the end so they can manipulate how much over true depreciation you're spending.
- SonicScrub 7y ago
  You can do the math and convert it as a loan equivalent. If you get a loan for a car, you're paying the value of the vehicle + an extra fee for the convenience of not having the full amount upfront to purchase it. When you lease a car, you're doing the exact same thing. The only difference is that the car company is not legally obligated to disclose your effective interest rate. You can calculate it yourself here: https://www.calculator.net/lease-calculator.html?ctype=fixpayment&cloanamount=20000&cresidualvalue=8000&cloantermy=3&cloantermm=0&cinterestrate=6&cmonthlypay=400&x=111&y=20 https://www.calculator.net/lease-calculator.html?ctype=fixpa... A $20,000 car leased over three years for $400 a month that depreciates to $10,000 at the end of the term has an effective interest rate of 9.539%
  - deleted 7y ago
    [deleted]
robotnixon 7y ago
It's even worse in the Detroit area. Pretty much every domestic automaker (and Nissan, I think) show payment amounts with employee discounts.

HarryHirsch 7y ago

THe OECD has the numbers on GDP per hours worked: https://www.oecd-ilibrary.org/economics/gdp-per-hour-worked/indicator/english_1439e590-en https://www.oecd-ilibrary.org/economics/gdp-per-hour-worked/... Worker productivity in the US has risen while wages have remained flat and expenses for healthcare and education have gone up. People really can't afford their cars any longer. Besides, if you have a 90-minute megacommute a nice car is no longer a luxury, it's a necessity.

vorpalhex 7y ago
> if you have a 90-minute megacommute a nice car is no longer a luxury, it's a necessity. I used to commute 90 minutes on the bus and rail on a daily basis. I assure you, even at 90 minutes, a nice car is _still_ absolutely just a luxury. A dependable car may be required, but not a fancy one.
- PaulHoule 7y ago
  If you have a long commute you probably want a fuel-efficient car, which is usually going to be a small (and inexpensive) car. My impression also is that many of the most dependable cars are inexpensive. I've been so amazed at the reliability of the Honda Fit (it required no major repairs until it got totaled around 120k; my main beefs were with the hatchback which needed to be oiled quite often, and the tire pressure sensors that seemed to fail around once a year or so) I was amazed enough that I bought another one (with a three year payment)
  - HarryHirsch 7y ago
    When you are driving 90 minutes in the early morning on busy roads, when everyone around you is just as sleep-deprived as you, you'd like to minimize distractions, so you can pay attention to the road. You really want a good suspension and a silent engine. (I agree about the fuel efficiency, but that's not the whole story.)
    - PaulHoule 7y ago

dghughes 7y ago

>Is it really that the middle class can't afford cars, or is it that a lot of folks want to buy a car they really can't afford? If you have to spend more than 100% of your total yearly income on an item that rapidly depreciates in value then yes it's not affordable.

johnbrodie 7y ago
Right, but you 100% _do not_ need to spend that much on a car.
- dghughes 7y ago
  Correct but many people do it's quite common. Most ordinary vehicles these days tend to be around $30,000. That's a bit more than the total yearly take home pay for someone in my region making minimum wage. Even used at half that is a large amount of money to spend on a vehicle. People scoff at multi millionaires spending hundreds of thousands or a million dollars for a sports car. But that's a small amount of their total net worth or even their yearly salary. Cars are so expensive to own too. I don't think people realize how much it costs to operate a vehicle let alone but it. The AAA says it costs about $7,000 per year in expenses; gas, maintenance, insurance, depreciation.

auiya 7y ago

Vehicles these days are on average more expensive simply because SUVs outpace smaller car options in terms of overall volume sales, and SUVs are on average more expensive. Somehow auto manufacturers have convinced the middle class of this ridiculous notion that they can't transport their children safely in anything other than an SUV. So the middle class tend to buy more expensive vehicles they can't afford as easily because of marketing propaganda. The irony is, as more of these nuisance-sized SUVs flood the roads, the less safe everyone in smaller cars become, and road wear increases exponentially, leading to higher fuel taxes, etc... lather, rinse, repeat.

dsfyu404ed 7y ago
People (mostly) aren't buying Chevy Suburbans. They are (mostly) buying crossovers. Crossovers are basically the station wagons of the 21st century. If you want two rows, a hatchback and usable trunk space your options are crossover (technically an SUV, even if it's just a lifted wagon) or spending tons of money for a proper wagon made by either the Germans or Swedes. The reason the OEMs won't build wagons en-mass seems to be emissions classifications.
- auiya 7y ago
  To haul their crumb-snatchers, yes. But this also doesn't explain why people are choosing to misappropriate farm vehicles (pickup trucks) as single passenger daily commuters.
  - unlinked_dll 7y ago
    People buy trucks because they like them. It's the same as any luxury item. I like guitars for example, don't need them, don't need any more, but I bought one recently. Because I liked it. The question isn't why do people choose to buy luxury items but why debt is so easily accessible for the purchase. That's much more troubling.
    - throwaway100773 7y ago

johnbrodie 7y ago

When I was in college, I needed a car to get to work (server at a restaurant), and to school. I spent $1600 on a 10 year old Volvo. For two years I did a fairly brutal commute between home/work/school, and drove for close to 3 hours a day. Wasn't great on gas, but it worked just fine. At some point it failed a state inspection and needed a new exhaust and new brake pads and rotors. Shop wanted around $5k. I shopped around and got a (cat-back) exhaust done for < $300 from a local shop, since it's just not something I could do myself. Bought rotors and pads for < $100, and spent some quality time in a parking lot with YouTube videos and a few wrenches. Heck, I make substantially more money now, and still have a pretty long 45-minute each way commute, with a lot of traffic. My primary vehicle is a $1600 motorcycle, and I _just_ added a truck as a backup (and to tow a track car). Spent $17k on the truck, it's perfectly fine, even looks good. Most I've ever spent on a vehicle by far, and I assume I'll have it for the next decade, at least. I'm driving it 4 hours out into the middle of the desert later today, and I have no worries about reliability. Bought the truck and every other vehicle I've ever owned in cash. I think that's the big difference between some others and myself. When I could afford only a few grand cash, that's the kind of car I bought. Honestly hard to feel too sorry for people that "need" a $30k+ car/truck/suv. I think these articles will always ring hollow for anyone that's been in the same situation and opted for a cheap car. Why on earth would you take out that long of a loan on a car that costs you a full year's salary or more?

kop316 7y ago
That's partly how I feel too. I bought a car out of college and took out a loan for it, and my goal with that car was to be able to pay off the loan AND save up enough money that I could buy my next car in cash. I have achieved that goal, but my original car still runs fine after 10 years, and most people are incredibly surprised when I tell them the age and the mileage. I really feel no need to buy a new car, but I am happy to know I am able to buy a car in cash when the time comes.
- vaxman 7y ago
  The difference between 0% (paying cash) or 0.9% (mfr incentive rate) or %3 (preferred rate) isn't that significant on a sub-$50K vehicle over 5-7 years. When the vehicle goes back to the used car lot, there will be a hit taken and you either absorbed it upfront (by paying cash) or will absorb it at the end (by being upside down on the loan) or some combination so that it balances out. As far as driving your next car for 10+ years, the vehicles being manufactured today are almost designed not to last (because the auto industry fell on hard times a while back and vowed never again).