American car buyers are borrowing like never before—and missing plenty of payments, too (1.2T$ debt now)

[VGPolyglot]

Conina said:

VGPolyglot said:
Not surprising. Transportation is necessary, and for many people to have jobs they need a vehicle to travel to and from work, so it's either they don't get to work or bite the bullet and go into debt with a loan to get it.

But do they all need new cars to get to their jobs? Seems like a waste of money, no big advantages over well preserved used cars.

I bought my first car for €1200 (12 years old) and drove it for 6 years. Then bought my second car for €6000 (4 years old) and drove it for 15 years. Then bought my current car for €6300 (7 years old) and I will drive it for at least 10 years. No big repairs in almost 30 years either.

I think there's an answer in the article:

"Part of the boom in this segment is thanks to a technological advances that give banks more comfort lending to borrowers who may not be able to pay them back. Devices installed in cars let collections agencies remotely disable the vehicles when the borrower falls behind on repayment. Since these controversial and potentially dangerous devices make repossession easier, they dramatically reduce risk to the lender, opening up a new market of cash-strapped borrowers that banks were previously hesitant to approach."

 

So, the answer is that banks are more comfortable giving out loans for new cars because they have technology that makes it easier to re-possess.

Last edited by VGPolyglot - on 26 January 2018