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The used car market is on the brink of an auto loan collapse
Posted on 7/2/22 at 10:24 am
Posted on 7/2/22 at 10:24 am
LINK
quote:
Just like how the housing market collapsed from the loan crisis in 2008, the same thing is said to be starting to happen in the Auto Loan market.
As the supply chain and chip crisis has improved from COVID times, used car prices have dropped for 4 consecutive months & are now down 6.4% since January.
This is a nightmare for the banks that have lent money on these cars, whose value is rapidly beginning to fall.
quote:
Just recently, Equifax reported that 8.5% of subprime borrowers defaulted on their car loans - the second-highest on record!
WSJ also found that more subprime borrowers have started missing out on payments as rising inflation made them choose between essentials & auto loans.
quote:
KPMG predicts that used car prices can drop 30% as more supplies hit the market and Ally Financial predicts a 20% drop.
The timing is a bit uncertain but it looks like it's going to unravel in the next 12-18 months.
14
Posted on 7/2/22 at 10:29 am to WPBTiger
Thanks Putin
Posted on 7/2/22 at 10:29 am to WPBTiger
Maybe Tammy will think twice next time about financing a $900 note for 84 months on her new Yukon.
Posted on 7/2/22 at 10:35 am to WPBTiger
Excellent news. Used car prices need to come down.
The scale is nothing like the 2008 housing crisis. So for the most part this will be beneficial to most of us.
The scale is nothing like the 2008 housing crisis. So for the most part this will be beneficial to most of us.
Posted on 7/2/22 at 1:10 pm to WPBTiger
Sold my 2016 Camry with 80,000 miles on it for $17,500 Oct. 2021. Lost less than $4,000 off the price of buying it brand new. Perfect timing I suppose based on this news!
Posted on 7/2/22 at 2:00 pm to WPBTiger
Damn was planning on selling my truck soon. Guess I waited too long.
Posted on 7/2/22 at 6:26 pm to WPBTiger
I was hoping to get my Bronco and sell my Sierra while prices are high but that is now how my luck works
Posted on 7/3/22 at 9:58 am to rintintin
quote:
Maybe Tammy will think twice next time about financing a $900 note for 84 months on her new Yukon.
How else are we gonna get Braxtynn to the World Series *in style* in Orange beach ?????
Posted on 7/3/22 at 3:26 pm to rpg37
quote:
Sold my 2016 Camry with 80,000 miles on it for $17,500 Oct. 2021. Lost less than $4,000 off the price of buying it brand new. Perfect timing I suppose based on this news!
I traded in my 2019 Ram 1500 Limited. I owned it for 41 months. I essentially paid $256 per month to "own" it once I traded it in. Better than a lease, and I had plenty of equity.
The price of used vehicles is insane right now. If anyone is thinking of wanting to get top dollar for their used vehicle, the time is now.
On the flip side, if you're looking to buy new, don't expect the dealership to come off their price too much either.
I look at it this way. The deals that one could negotiate for a new vehicle are now being flipped to selling/trading a used vehicle. My truck "increased" in value by nearly $12,000 before the shortage of vehicles became stronger and stronger.
Posted on 7/4/22 at 12:28 am to WPBTiger
If you want to have your mind blown, visit the lot of a nearby Carmax. The sheer number of BMWs that people seemingly defaulted on is mindblowing.
Also, the prices offer entertainment value. To cite just one example, I saw a Ford Maverick for $43,000 (and you can see them online with Carvana for similar prices).
Also, the prices offer entertainment value. To cite just one example, I saw a Ford Maverick for $43,000 (and you can see them online with Carvana for similar prices).
Posted on 7/4/22 at 1:49 pm to WPBTiger
The flood of cars with paper plates on the road recently foretold the ‘collapse”. No collapse, all the stimulus money flowed right back out they pockets
Posted on 7/4/22 at 2:11 pm to MikeyFL
quote:
If you want to have your mind blown, visit the lot of a nearby Carmax. The sheer number of BMWs that people seemingly defaulted on is mindblowing
A surprising number of BMWs purchased are leases by people who should really be buying economical cars with lower maintenance costs.
I would love to see the breakdown of default by make and model. I would think low end luxury cars would be disproportionately represented
Posted on 7/4/22 at 3:20 pm to WPBTiger
Who couldn’t see this coming. I sold my two year old truck last year for a $5000 profit and went back to driving my old jeep. I’m waiting to buy another used vehicle in 2023.
I think there will be a flood of cars, boats, ATVs, campers, etc.
People with little means got way over extended in the past two years.
I think there will be a flood of cars, boats, ATVs, campers, etc.
People with little means got way over extended in the past two years.
Posted on 7/4/22 at 3:38 pm to molsusports
quote:
A surprising number of BMWs purchased are leases by people who should really be buying economical cars with lower maintenance costs.
This, I remember years ago at my company a chick in the call center talking about her new BMW. It was a poverty/lease spec 320i. Her payments were 'only' $399 a month she was very proud about.
She was a single mom making $16/hour. I will say in Atlanta you see a ton of people who love to live above their means in their vehicles. Luxury brands very rampant even in apartment complexes. People lease new Audi/MB/BMW in droves, a ton of entry spec ones for the badge and similar payments to buying (vs. Leasing) a more economy type car.
This post was edited on 7/4/22 at 3:40 pm
Posted on 7/4/22 at 3:52 pm to thunderbird1100
quote:
People lease new Audi/MB/BMW in droves, a ton of entry spec ones for the badge and similar payments to buying (vs. Leasing) a more economy type car.
Leasing an entry-level luxury car (CLA/A3/2series) is around the same price as buying a Toyota Camry. and when you lease you don't have to worry about repairs. I get the appeal. You get a car you really want without the worries of repairs. The only issues come is that you never own a car that way and just continue to live with payments.
Posted on 7/4/22 at 3:54 pm to The_Duke
quote:
Leasing an entry-level luxury car (CLA/A3/2series) is around the same price as buying a Toyota Camry. and when you lease you don't have to worry about repairs. I get the appeal. You get a car you really want without the worries of repairs. The only issues come is that you never own a car that way and just continue to live with payments.
And these people usually stay broke forever because they live with a car payment forever. Continually pay the worst depreciation a car will see in perpetuity.
This post was edited on 7/4/22 at 3:55 pm
Posted on 7/4/22 at 4:47 pm to thunderbird1100
I bought a new 4runner last spring and two things really stood out to me about how much things had changed since I last bought a new vehicle.
1. When they ran the numbers on my trade in and brought out the sheet to me they were stunned that I wanted to put additional money down for the new vehicle. Apparently most people just trade and start monthly payments.
2. On the sheet they had payments for 5, 6, 7 years. 60, 72, or 84 months? Good god, that sounds like torture to have that many years of payments.
1. When they ran the numbers on my trade in and brought out the sheet to me they were stunned that I wanted to put additional money down for the new vehicle. Apparently most people just trade and start monthly payments.
2. On the sheet they had payments for 5, 6, 7 years. 60, 72, or 84 months? Good god, that sounds like torture to have that many years of payments.
Posted on 7/4/22 at 6:23 pm to grsharky
quote:
2. On the sheet they had payments for 5, 6, 7 years. 60, 72, or 84 months? Good god, that sounds like torture to have that many years of payments.
Did they break out the 4 square? It doesn't even have interest rate on it, just monthly payment amount. I hate when a place tries to breakout the 4 squares on me (trade in value, price of car buying, down payment, monthly payment).
They try and push people to longer terms to lower the monthly payment and jack up the interest rate.
This post was edited on 7/4/22 at 6:24 pm
Posted on 7/4/22 at 8:16 pm to thunderbird1100
I don’t remember to be honest, but I laughed when they said 84 months was an option.
Posted on 7/5/22 at 6:13 am to The_Duke
quote:
You get a car you really want without the worries of repairs. The only issues come is that you never own a car that way and just continue to live with payments.
That is a pretty big issue.
A car payment drains your wealth over time unless you are paying less than 2% interest. Even then, you should not sell when your payment is up. At that point, you have a reliable vehicle with no up front cost and you can redirect that money to building wealth.
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