Good Lord, 97 month car loans introduced

[manning]

In addition, we paid our house off in less than 15 years. Same logic - nothing in it we didn't need.

.

People don't know what they save by doing this. We went from a 30 year to a 15 year and paid it off sooner.

Thanks to excel I was quickly able to calculate my savings. It was a big big bundle. A neighbor thought I was nuts. When I calculated his he ran to the bank and refinanced.

Buying on time when you don't need it is not your friend.

 

[manning]

10 year home loans were the norm a generation ago? I doubt it. My parents first mortgage, taken out in 1955 was for 20 years. The cost of their home was less than 7,000.

Can't buy a decent car for that now. I bought my house in 1984 for $140,000. That same model by the same builder sold for $75,000 in 1975. Before the bubble it was selling for $350,000. Now just under $200,000 but finally going up.

 

[robinb]

I expect 10 years out of a car with no repairs, so far, that has been a pretty good assumption. Do all the fluid changes the owners manual says to do when it says to do them, a car will last a long time. After 10 years I just plan on spending what would add up to one months car payment a year in repairs.

Not all cars. My 2006 Mazda 5 is a complete POS. We have done regular maintenance like changing the oil, replacing the brakes and tires. We have also replaced the suspension system and the clutch. The suspension needs to be replaced AGAIN and the a/c is broken. It paid for in all it's POSiness so we keep on driving it. I would have been more than peeved if I had to pay for all those expensive repairs while still paying down my car note.

 

[tvguy]

Can't buy a decent car for that now. I bought my house in 1984 for $140,000. That same model by the same builder sold for $75,000 in 1975. Before the bubble it was selling for $350,000. Now just under $200,000 but finally going up.

I disagree...about not being able to buy a decent car for that. Not a new one, but my last car purchase was a 1 year old 2007 Taurus with 29,000 miles on it for $9,500 including a Ford 5 year, 100,000 mile warranty with a $200 deductable.
Granted Cash for Clunkers destroyed a lot of decent sub-$5,000 used cars. The Honda dealer here had to fence off the cash for clunkers trade ins here because so many people wanted to buy those cars.

 

[tvguy]

Not all cars. My 2006 Mazda 5 is a complete POS. We have done regular maintenance like changing the oil, replacing the brakes and tires. We have also replaced the suspension system and the clutch. The suspension needs to be replaced AGAIN and the a/c is broken. It paid for in all it's POSiness so we keep on driving it. I would have been more than peeved if I had to pay for all those expensive repairs while still paying down my car note.

Well, I can't speak to Mazdas. I'm on my third commute car..all purchased new ..first one was a Pinto that I had for 16 years (when I had to replace it because of a growing family), a Sable which I had for 18 years, and my Focus which is now 10 years old. My family car is a Suburban, the almost 26 year old vehicle, and my wife's got a 13 year old Mountaineer.
My mom managed to get 27 years out of her Pinto!

And as my name implies, I work in TV. TV station owners won't even consider replacing a fleet car until it is 10 years old and has 300,000 miles on it, except Live Trucks........my last station ran one Econoline 650,000 miles. But, they are looking for the lowest cost per mile driven, they don't care if the paint is faded, the seats ripped, and the dash cracked.

 

[eliza61]

If people didn't try to keep up with their friends and neighbors and stop putting so many bells and whistles on their cars (and in their houses), they would need to finance them for so long.

We have 2 basic vehicles, nothing on them but A/C and a radio/CD player. Both were financed for the minimum amount of time.

In addition, we paid our house off in less than 15 years. Same logic - nothing in it we didn't need.

This is a bubble that will POP!!!!

Why don't people realize, as they buy these huge houses, that they probably will never be able to retire as long as they have a house payment.

Oh I don't believe that. My sister retired, she always wanted a big house. No kids, her and her dh (also retired) brought a 4800 square foot mcmansion. They love it. If they die before it's paid off, exactly what's the problem?

Sorry I don't want to live my entire life only buying what I "need". I don't "need" a Disney vacation but I love them. I don't "need" to stay at a deluxe but the ability to walk to epcot has value for me.

Personally all the stuff that I buy and "don't" need is pretty much what makes going to work worth it.

I want to live a life, not just exist.
now I'm not getting a 97 month note but I don't buy many used cars either. I drive on average 100 miles a day, my son goes to school 16 hours away, my family is 95 miles away. all that adds up to a lot of time in my car, so yep, I've got the satellite radio, I've got heated seats for the winter. I want the soft leather.

so ok you have your house paid off, that means exactly what?

I wonder what type of cars are the financing for that long? I couldn't open the link

 

[eMd]

I wasn't able to open the link either but I had a 7 year car loan for my first car i bought with an interest rate somewhere around 9%. It was a $13k car.

I was just barely 18 and had no credit. My used car was so old and had lasted for so long that it was on its last legs and was smoking when it was turned on. I took the 7 year loan with 9% interest because they were the payments I could afford at 18 with no credit. I couldn't even get financing for a used car at that point.

Once I was no longer "Upside down" which was about 5 years, I traded it in. The trade in value was about 2grand more than I owed. So if covered that loan and provided a 2 grand down payment on the next car. That's loan was then 7% now with credit history, it was a 6 year loan and payments were toughly the same.

I traded that one in at about 4 years, again traded it in and got about 2 grand over what was left.

I'm now on a new 5 year car loan, 2% interest. Payments are $100 more monthly than the last one, but I have a more reliable car, and moved from a sub compact to a compact. Great warranties and had mileage. This car should be paid off at the 3 year mark. And I plan on keeping it for as long as it will run at that point.


I can 100% see how someone would need a 8 year car loan to start off. Unfortunately some people wouldn't be smart about it and pay it off early, or make the car last. But there is a definite reason someone would find it appealing.

 

[indimom]

So take a person who needs a car and also needs this sort of loan. this sort of much lower monthly payment.

Now take that person and try to get them a loan on a USED car.

When DH's credit was "neutral" since he hadn't used it in nearly 10 years, it was MUCH easier to get a loan on a NEW car than a USED. The problem was that the new cars were not what we wanted, because they were just too expensive for us at that time.

We wanted a used Subaru. The ONE bank that would work with us said nope. They would not give us a loan on that Subaru. The only other car on the lot they would give us a loan on was a Grand Marquis. It was "younger" and I guess would keep value longer (which is weird, since Legacys seem to last a long time, but whatever), and so we got the Grand Marquis.

At 25% interest. On a USED car.

I had JUST turned in my leased car (I had leased for 12 years, 3 cars in that time, and I was finally tired of leasing) and we had one car. That was a total beater. And then it lost its brakes while DH was going down a hill, we didn't have the available cash to fix it, and it scared me. I wouldn't have ever sat in that car again, which yep is an emotional thing but my son was little and I was rightfully very emotional at that time.

DH worked over an hour's drive from home; taking the bus involved THREE buses and 2 hours of commute, each way. A car was needed. A loan was needed (many of our family members were busy having their homes foreclosed on b/c of their own errors and there was no one to ask). The only loan we could afford was for a used car, and the only loan on a used car we could get was at nearly predatory interest.


We were the kind of person who might have looked at that 8 year, simply because the monthly costs would have been lower and we might have gotten a nicer car.

Then again, the Grand Marquis has been no trouble at all, it runs great, it's quiet, it's comfy, it's basically been a dream, even though I don't *like* it still. (paid it off in 2? 3? years once I got angry enough at the loan to start throwing money at it, LOL, and it's 8 years old this year) In the end I'm glad we got the Marquis instead of the Subaru or the new cars we had been looking at, but having more options would have been nice.




Why do we focus so much on getting "back" what we paid? On cars, on houses, etc. Why don't we put any value into our USE, our enjoyment, of something we purchased?




Unless you actually NEED the car. If you don't have the chunk of cash to buy a used car, if you can't get a used car loan, if you need that car for work, then you need that car. Even if you can't properly afford it.



It's lovely that there are so many people who have never been in such a position, and apparently don't know or like anyone who has been in that position, but I would recommend thanking your continued good decisions AND your large amount of luck throughout your life.

But, these loans would not have helped you. According to an article in the Wall Street Journal, "people who get the longer loans tend to have good credit scores, and are buying relatively expensive vehicles."
The article also stated these were not car loans through the dealers, because dealers don't want you off the lot that long. They want you to flip those cars in a max of 5 years. These are private bank loans. So, it's only "helping" those who realistically shouldn't even need it. Go Figure.

And, IMO, 25% interest on a car loan IS predatory. That must have been a really rough time. But, not everyone posting on here is wealthy or lucky. We certainly aren't wealthy. We've struggled. We had one car for 8 years of our marriage. DH had to take me to work almost an hour early so that he could then drive to his job. He had to turn around and pick me up at the end of the day. When the brakes went out on that car, DH got on youtube, and followed the steps to replace them himself. (Obviously he tested them out before he let me or the kids in the car. lol) You do what you have to do. Sometimes it works out, sometimes it doesn't. But, I still don't think it's a good idea to get a longer loan, especially when money is tight.

I hope I'm not coming off as argumentative. I just don't think any posters on here were looking down from their high horse and judging people who are going through difficulties. They were just stating their personal opinions on long term car loans.

 

[MAH4546]

Cars also cost a lot more now and many people cannot afford the payments on a 3 or 5 year auto loan. If the 8 year loan will help them to have a means of transportation, then so be it.

Relative to inflation, cars are significantly cheaper today than they ever have been. Dirt cheap.

 

[kimsuenew]

I have looked up a calculator and the following is based on 5.0% with the amount of the loan as $25,000.

Column 1 is the number of months. Column 2 is the monthly payment (rounded to nearest dollar). Column 3 is the total interest paid over the life of the loan.

36 $599 $1,579
48 $461 $2,108
60 $377 $2,645
72 $322 $3,191
97 $251 $4,354

And for a 97 month loan, it will be after payment #53 that half of the principal is paid.

Wow, those numbers are staggering!

 

[ilovemk76]

A generation ago 10 year HOME loans were the norm, now 8 year auto loans. No thanks, I'll walk.


http://online.wsj.com/article/SB10001424127887323646604578403191117526644.html

A generation ago 10 year home lons was not the norm. In the 20s, loans were 20 years.

As for the 8 year car loans, that is just silly.

 

[DawnM]

I wasn't able to read the article as it wanted me to sign up and I have no need to be on yet another list.

However, I did tell DH about a 97 year car loan last night and he has decided he will go ahead and get the car of his dreams if that is the case.

 

[Mom2Ben02]

We had two cars die while in the midst of my husband's three year long stint with underemployment. We bought two used cars with seven year loans. We worked crazy schedules, overlapping most of the time, in opposite directions. We needed two cars.

I have a finance degree, and have worked in banking since I was 17. Did I know a seven year loan was a bad idea? Absolutely. Would we have afforded five year loans? No flipping way.

Don't judge others' financial decisions until you have been there. Sometimes, we are just doing all in our power to be able to feed our families.

 

[4HppyCamprs]

Sounds like the makings of another bubble that will eventually burst. Good luck with that 8 year note when your 4 or 5 year warranty runs out.

Exactly!!

Sent from my iPhone using DISBoards

 

[OklahomaTourist]

Agreed!
Guess the banks have not yet figured out that giving loans to people who cannot afford them is not a good idea?

Sure they have. They knew not to lend money to poor credit risks dating back during the Carter administration, which we can now see were the nascent days of what became the housing bubble thirty years later. American mortgage debt was, at the time, some of the most reliable investment paper in the world, because banks knew whom would repay, and whom wouldn't. An article in the WSJ about two or three years ago ran an in-depth article about how the Carter administration was one of the first to force banks into lending to high-risk borrowers which, in turn, forced them to repackage that now lower-quality debt as they resold it. Factor in Fannie Mae/Freddie Mac and three decades of bad lending - lending everyone in the industry knew was bad - and you have the mortgage collapse from a few years ago.

Long-term car loans like those in the OP's post are aimed at two folks: 1. Desperate people in need of transportation, or 2. Folks sufficiently flush with cash that they really don't care how long the note is. Many of the latter, however, just pay cash outright. And keep in mind that many such loans are resold on the broader investment market, hence there's very little risk to the car dealer who originates them. Its just a matter of finding an underwriter. That's why prices for things that can be financed escalate - not because of the cost of goods, but because the profit from financing is too lucrative to ignore.

Selling debt has become a sad American pastime. The problem is we're trained for extremes - the one side that says you should never have any debt, which as a practical matter isn't possible, and the other that sells debt like candy at the drug store. Reality, as usual, is somewhere in the middle.

 

[disney1990]

Oh I don't believe that. My sister retired, she always wanted a big house. No kids, her and her dh (also retired) brought a 4800 square foot mcmansion. They love it. If they die before it's paid off, exactly what's the problem?

Sorry I don't want to live my entire life only buying what I "need". I don't "need" a Disney vacation but I love them. I don't "need" to stay at a deluxe but the ability to walk to epcot has value for me.

Personally all the stuff that I buy and "don't" need is pretty much what makes going to work worth it.

I want to live a life, not just exist.
now I'm not getting a 97 month note but I don't buy many used cars either. I drive on average 100 miles a day, my son goes to school 16 hours away, my family is 95 miles away. all that adds up to a lot of time in my car, so yep, I've got the satellite radio, I've got heated seats for the winter. I want the soft leather.

so ok you have your house paid off, that means exactly what?

I wonder what type of cars are the financing for that long? I couldn't open the link

Great that your sister was able to retire and still have a car payment - most people will definitely not have that option.

We have still been able to do the things we wanted to do (although scaled back). Since 1990 we have been to Disney almost every year - although not in a deluxe and sometimes not on property. Now we take our granddaughters. My DH who climbed telephone poles for a living in the snow and/or heat was able to retire at the age of 57 (because our house was paid off). But, yet he still does side jobs for friends. I don't feel that we have suffered too much being cautious with money and not being in debt.

 

[eliza61]

Great that your sister was able to retire and still have a car payment - most people will definitely not have that option.

We have still been able to do the things we wanted to do (although scaled back). Since 1990 we have been to Disney almost every year - although not in a deluxe and sometimes not on property. Now we take our granddaughters. My DH who climbed telephone poles for a living in the snow and/or heat was able to retire at the age of 57 (because our house was paid off). But, yet he still does side jobs for friends. I don't feel that we have suffered too much being cautious with money and not being in debt.

then your first post was misleading as you said you only buy things you "need".

The thing with money and finances is that there are many ways to be successful and the definition of success is also subjective.

I'm probably one of the few who has no burning desire to pay off my mortgage early. Would I not pay my mortgage to go to Disney? NO would I not go to Disney to pay off my mortgage early. NOPE.

Now great your dh retired early. My dh scrimped and saved and then dropped dead before 55 so tell me what good did the money do him? what good was the austerity for? So now I've got a boatload of money but no husband.

As I said before I'm not existing for some magical end game. Now I'm not much into having a ton of debt but I'm no longer doing without because "in the future" this or that may happen.

My family (7) of us are going to Europe for summer vacation. yeah I could save the money and fly coach but I've decide to fly business and be comfortable. I'm quickly finding out that being debt free is no guarantee of success or happiness.

Sorry I don't want to live 20 years in a house that only has the bare necessities. I think I'm worth the "bells and whistles"

 

[OklahomaTourist]

I'm quickly finding out that being debt free is no guarantee of success or happiness.

Of course it isn't. Anyone pursuing a debt free financial situation solely on the basis of expecting success or happiness is planning for failure. Financial situations may aggravate or enhance the various pressures of life.

I'm so sorry you lost your DH. Obviously, no amount of money can make up for that.

Prayers to you, dear.

 

[eliza61]

Of course it isn't. Anyone pursuing a debt free financial situation solely on the basis of expecting success or happiness is planning for failure. Financial situations may aggravate or enhance the various pressures of life.

I'm so sorry you lost your DH. Obviously, no amount of money can make up for that.

Prayers to you, dear.

Thank you. I guess I'm now more of an advocate of a term I heard in church, meaningful finances. The entire time my dh was battling cancer, never once did he say "I wish we had paid the mortgage off". I think about that now also when i make spending decisions.

 

[disney1990]

then your first post was misleading as you said you only buy things you "need".

The thing with money and finances is that there are many ways to be successful and the definition of success is also subjective.

I'm probably one of the few who has no burning desire to pay off my mortgage early. Would I not pay my mortgage to go to Disney? NO would I not go to Disney to pay off my mortgage early. NOPE.

Now great your dh retired early. My dh scrimped and saved and then dropped dead before 55 so tell me what good did the money do him? what good was the austerity for? So now I've got a boatload of money but no husband.

As I said before I'm not existing for some magical end game. Now I'm not much into having a ton of debt but I'm no longer doing without because "in the future" this or that may happen.

My family (7) of us are going to Europe for summer vacation. yeah I could save the money and fly coach but I've decide to fly business and be comfortable. I'm quickly finding out that being debt free is no guarantee of success or happiness.

Sorry I don't want to live 20 years in a house that only has the bare necessities. I think I'm worth the "bells and whistles"

I am sorry that your DH died at age 55. No, life is not fair. My Dad died when I was only 10 and our granddaughter was diagnosed with cancer at age 8. These are the reasons for making vacations a priority with my daughters and now my granddaughters.

Not going to get into a spitting match here. I said that we only buy the things we need in cars and in our house so that we "finance" the least amount that we can and we pay them off as quickly as possible. Yes, we take vacations every single year, which is a priority in my life. Most people that I know allow themselves the luxury of a vacation. In the early years, we only camped. My daughters will tell you that, with all our trips to Disney, they rarely ate in a sit down restaurant and we drove to Florida. Our vacations, once a year to Disney on a budget cost way less than a lot people pay in interest on their cars. After careful budgeting, I found that we could actually go to Disney for less than we could vacation in Ocean City, Maryland. You can read almost anything you want to in a DIS post.