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

 

How old is your car?

I have no car 5 33.33%
 
0-5 years 2 13.33%
 
5-10 years 2 13.33%
 
10-15 years 4 26.67%
 
over 15 years 2 13.33%
 
Total:15

American car buyers are borrowing like never before—and missing plenty of payments, too

Last year, Americans bought more new cars than ever before. Given that auto sales make up around a fifth of all retail spending, 2016’s banner year is being hailed as a sign of burgeoning consumer confidence across the country.

But something else is revving up, too: auto loans.

The US closed out 2016 with just shy of $1.2 trillion in outstanding auto loan debt, a rise of 9% from the previous year and 13% above the pre-crisis peak in 2005, in inflation-adjusted terms.

 

https://qz.com/913093/car-loans-in-the-us-have-hit-record-levels-and-delinquencies-are-rising-fast-too/



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I borrowed to buy a Pontiac G6. Then added Alexa.



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Here's hoping no one thinks the automotive industry is strong enough to invest.



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.



Are there any per capita looks? Average cost of loan doesn't really seem that big of a difference. I'm more surprised that so many people are buying cars.



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I don't know, in a big city, a car seems more trouble than it's worth, honestly. North America needs better public transport.



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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.



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

Ego is a demanding master. I've seen too many young adults saddle themselves with unneccesary debt just for that new car smell. Plenty of inexpensive, well maintained 5-7 year old vehicles available at used car lots that would be just fine. For some reason they get excited about having a "new car" and think it somehow puts them in a new class.



super_etecoon said:
Ego is a demanding master. I've seen too many young adults saddle themselves with unneccesary debt just for that new car smell. Plenty of inexpensive, well maintained 5-7 year old vehicles available at used car lots that would be just fine. For some reason they get excited about having a "new car" and think it somehow puts them in a new class.

Did you see my post above?