4 ms·

> I’ve seen some crazy stories on YouTube about people trading in cars they’re already underwater on just to finance an even more expensive one. This has happe

by giobox 1y ago

> I’ve seen some crazy stories on YouTube about people trading in cars they’re already underwater on just to finance an even more expensive one. This has happened for as long as there has been car finance (i.e. practically since the dawn of private vehicle ownership), it's nothing new. Given most folks cannot purchase a vehicle outright, the customer only really cares about the monthly payment, a sizeable amount of whom do not even understand the concept of being "underwater" on a trade in. The industry has always preyed upon the financial stupidity of most car buyers.

bombcar 1y ago
Arguably cars became “unaffordable” sometime when loans became common - what percentage of cars being bought in credit can be argued, but clearly it’s become more and more.
- giobox 1y ago
  Loans appeared almost immediately alongside the invention of the private motor car (~1920 Ford/GM had to start offering financing on private vehicles to make them affordable), with 60-75 percent purchased this way in the 20s. Today its 85 percent - there wasn't really ever a period private car ownership didn't involve finance, at least in North America.
  - bombcar 1y ago
    Remind me if I’m wrong but didn’t something dramatic occur financially in the 20s?
    - giobox 1y ago
      If you mean the Great Depression, the invention of mass market car finance predates it by a decade.
      - bombcar 1y ago
        Let’s make it so car loans are non-recourse (they can only repossess the car) and see how it shakes out.
        deleted 1y ago
        [deleted]
        JumpCrisscross 1y ago
        > Let’s make it so car loans are non-recourse You're moving your goalposts to easily-tested--and disprovable--ground. The flip side of limited recourse is limited liability. For houses, non-recourse lending promotes speculation, volatility and risk shifting [1]. One would expect similar effects if non-recourse lending were normalised for cars: higher prices, bigger booms and worse busts. [1] https://www1.villanova.edu/dam/villanova/VSB/assets/marc/marc2017/SSRN-id2886111.pdf https://www1.villanova.edu/dam/villanova/VSB/assets/marc/mar...
    - JumpCrisscross 1y ago
      > Remind me if I’m wrong but didn’t something dramatic occur financially in the 20s? "The practice of Americans buying consumer goods on the installment plan dates back to the Civil War," e.g. for sewing machines [1]. America's first affordable car, the Model T, was released in 1908. In October 1919, less than one year after the Armistice of November 1918 and just four months after the Treaty of Versailles, GM had "created a financing arm called the General Motors Acceptance Corporation (GMAC)." You said "cars became 'unaffordable' sometime when loans became common." That is wrong. Cars became cheap because of industrial production. Production aimed at the American consumer, in part, due to the post-Civil War prevalence of installment-based purchasing of factory-made goods. [1] http://americanradioworks.publicradio.org/features/americandream/b1.html http://americanradioworks.publicradio.org/features/americand...
      - ericd 1y ago
        >America's first affordable car, the Model T, was released in 1908. In October 1919, less than one year after the Armistice of November 1918 and just four months after the Treaty of Versailles, GM had "created a financing arm called the General Motors Acceptance Corporation (GMAC)." (Now known as Ally Bank, the online bank popular for relatively high interest rates on deposits). Hopefully we won't be testing FDIC coverage with them...
vjvjvjvjghv 1y ago
"the customer only really cares about the monthly payment," I noticed this when I bought my Subaru. There was a young couple next to me that worked hard with the sales guy to get an acceptable monthly payment for their desired car. No thought about actual price or duration of the loan. I wanted to scream at them that they were making a big mistake.
- Esophagus4 1y ago
  Car salesmen also want to get you to focus on monthly payment instead of price. It’s easy to manipulate the payment by adjusting the loan term without actually taking anything off the price. And then the finance manager can further manipulate the payment by upselling you additional products and saying it’s only an additional $7 per month instead of saying nitrogen in your tires will cost $336.
  - tharkun__ 1y ago
    Agreed. I usually have to remind the salesperson to stop talking to me in monthly payment terms. I always tell them to talk to me about final price including all interest. It's a bit of an uphill battle, where you have to tell them over and over. They're just so used to trying to sell the monthly payment. It's really no wonder that people that don't understand interest (many if not most) will fall for this. And if you actually can't really afford the car, it's also understandable why many if not most people will "gladly" fall for it. The alternative is not having the car of their dreams. That said, financing in general isn't bad. I've financed most of my cars. I wouldn't have had the sort of "emergency fund" to just outright buy the car and financing allowed me to get the car when I needed it instead of buying some "temp beater" and taking even longer to buy the car I really wanted when I needed it and I paid it back with priority (i.e. faster than the financing terms required it).
    - benterix 1y ago
      Temp beaters are not that bad, if you choose them wisely (like a boring 3-year old Toyota). Nothing fancy, no surprises, years ahead with just basic service. And a small crash will only break your car, not your heart.
rurp 1y ago
I had a car salesman tell me he'd never met anyone else who cared more about the total purchase price than the monthly payment. That might not have been true, but it's probably rare. It was pretty maddening how he kept trying to charge me more, but over a longer term loan. It's crazy how many people do just look at the monthly payment. It's not like X price over Y years is complicated math or anything.

by giobox 1y ago

bombcar 1y ago

Arguably cars became “unaffordable” sometime when loans became common - what percentage of cars being bought in credit can be argued, but clearly it’s become more and more.

giobox 1y ago
Loans appeared almost immediately alongside the invention of the private motor car (~1920 Ford/GM had to start offering financing on private vehicles to make them affordable), with 60-75 percent purchased this way in the 20s. Today its 85 percent - there wasn't really ever a period private car ownership didn't involve finance, at least in North America.
- bombcar 1y ago
  Remind me if I’m wrong but didn’t something dramatic occur financially in the 20s?
  - giobox 1y ago
    If you mean the Great Depression, the invention of mass market car finance predates it by a decade.
    - bombcar 1y ago
      Let’s make it so car loans are non-recourse (they can only repossess the car) and see how it shakes out.
      - deleted 1y ago
        [deleted]
      - JumpCrisscross 1y ago
        > Let’s make it so car loans are non-recourse You're moving your goalposts to easily-tested--and disprovable--ground. The flip side of limited recourse is limited liability. For houses, non-recourse lending promotes speculation, volatility and risk shifting [1]. One would expect similar effects if non-recourse lending were normalised for cars: higher prices, bigger booms and worse busts. [1] https://www1.villanova.edu/dam/villanova/VSB/assets/marc/marc2017/SSRN-id2886111.pdf https://www1.villanova.edu/dam/villanova/VSB/assets/marc/mar...
  - JumpCrisscross 1y ago
    > Remind me if I’m wrong but didn’t something dramatic occur financially in the 20s? "The practice of Americans buying consumer goods on the installment plan dates back to the Civil War," e.g. for sewing machines [1]. America's first affordable car, the Model T, was released in 1908. In October 1919, less than one year after the Armistice of November 1918 and just four months after the Treaty of Versailles, GM had "created a financing arm called the General Motors Acceptance Corporation (GMAC)." You said "cars became 'unaffordable' sometime when loans became common." That is wrong. Cars became cheap because of industrial production. Production aimed at the American consumer, in part, due to the post-Civil War prevalence of installment-based purchasing of factory-made goods. [1] http://americanradioworks.publicradio.org/features/americandream/b1.html http://americanradioworks.publicradio.org/features/americand...
    - ericd 1y ago
      >America's first affordable car, the Model T, was released in 1908. In October 1919, less than one year after the Armistice of November 1918 and just four months after the Treaty of Versailles, GM had "created a financing arm called the General Motors Acceptance Corporation (GMAC)." (Now known as Ally Bank, the online bank popular for relatively high interest rates on deposits). Hopefully we won't be testing FDIC coverage with them...

vjvjvjvjghv 1y ago

"the customer only really cares about the monthly payment," I noticed this when I bought my Subaru. There was a young couple next to me that worked hard with the sales guy to get an acceptable monthly payment for their desired car. No thought about actual price or duration of the loan. I wanted to scream at them that they were making a big mistake.

Esophagus4 1y ago
Car salesmen also want to get you to focus on monthly payment instead of price. It’s easy to manipulate the payment by adjusting the loan term without actually taking anything off the price. And then the finance manager can further manipulate the payment by upselling you additional products and saying it’s only an additional $7 per month instead of saying nitrogen in your tires will cost $336.
- tharkun__ 1y ago
  Agreed. I usually have to remind the salesperson to stop talking to me in monthly payment terms. I always tell them to talk to me about final price including all interest. It's a bit of an uphill battle, where you have to tell them over and over. They're just so used to trying to sell the monthly payment. It's really no wonder that people that don't understand interest (many if not most) will fall for this. And if you actually can't really afford the car, it's also understandable why many if not most people will "gladly" fall for it. The alternative is not having the car of their dreams. That said, financing in general isn't bad. I've financed most of my cars. I wouldn't have had the sort of "emergency fund" to just outright buy the car and financing allowed me to get the car when I needed it instead of buying some "temp beater" and taking even longer to buy the car I really wanted when I needed it and I paid it back with priority (i.e. faster than the financing terms required it).
  - benterix 1y ago
    Temp beaters are not that bad, if you choose them wisely (like a boring 3-year old Toyota). Nothing fancy, no surprises, years ahead with just basic service. And a small crash will only break your car, not your heart.

rurp 1y ago

I had a car salesman tell me he'd never met anyone else who cared more about the total purchase price than the monthly payment. That might not have been true, but it's probably rare. It was pretty maddening how he kept trying to charge me more, but over a longer term loan. It's crazy how many people do just look at the monthly payment. It's not like X price over Y years is complicated math or anything.