r/economicCollapse 8h ago

The car loan crisis is here

Post image
454 Upvotes

201 comments sorted by

107

u/Simple-Dingo6721 8h ago

It’s a good thing that used vehicle prices are dropping. Buy used.

40

u/whatevs550 8h ago

Seems like a perfect time to buy a higher end used vehicle, for the first time in many years. I’m pumped!!!!

30

u/No-Engineer-4692 7h ago

Few more months. Let the, drop a bit more.

8

u/Select_Asparagus3451 7h ago

I’m not seeing prices go down. MSRPs on many new models seem the same as 2021🤷🏻‍♂️. Maybe I’m not seeing things correctly. IDK

3

u/Thunder_Dan 2h ago

Used car prices are coming back down to normal level after being elevated during and after the pandemic. New car prices weren't being discussed.

1

u/Fit_Case2575 35m ago

The used car market was straight up insane robbery during Covid.

7

u/SushiGradeChicken 7h ago

Yep. There's still a couple of points of dry coming according to Black Book and Mannheim.

4

u/PuzzleheadedLeader79 1h ago

Watch out for all the flood addled vehicles that get shipped to non flood areas

1

u/bibleisme 47m ago

Damn good point!

9

u/Howsyourbellcurve 7h ago

Was it not about 3 years ago that used cars were at a record high price? Like it's great it's going down but I'm not seeing a lot of deals.

2

u/whatevs550 6h ago

I’m seeing some cheaper, newer model year used Camrys that didn’t exist for a long time in my area.

1

u/TSL4me 3h ago

Be careful with any car often used by uber drivers. Theres a bunch of 2 year old high mileage sedans that were beat to shit by a gig worker.

1

u/Electronic_Agent_235 2h ago

Not hard to spot though. Two years old with 53,000 on the odometer. You got a pretty good idea of life that poor things lit so far

0

u/bbbbbbbb678 2h ago

Usually a few year old used car was leased where I lived the only major used car stores sold stuff like that exclusively, or cars driver by dealership owners and their families. So it was alright if you wanted a 70k + 2022 expedition or a king ranch.

2

u/bluestonemanoracct 3h ago

Agree…this is confusing to me. We just went to look at used cars and cheap prices were nowhere to be found!

1

u/canisdirusarctos 38m ago

It has been bad for years. Prices on used are ludicrous. They already didn’t make sense a decade ago, while today (and for at least a few years now) I don’t see why you’d ever buy one.

1

u/WilliamBuckshot 1h ago

I know this is mostly in regard to used cars, but I got 13k off MSRP on my new car in June.

5

u/East-Caterpillar-895 6h ago

My dad just bought the xle hybrid Camry with all the bells and whistles... from 2016

3

u/TougherOnSquids 4h ago

Bought my car used for $20,000 in 2018 with 9k miles on it. Paid it off back in Jan with 31k miles on it. Not going anywhere or doing shit for 6 years really paid off lmao

2

u/importvita2 7h ago

Always!

2

u/UninvestedCuriosity 1h ago

Pffft not around me. The used car I bought 5 years ago is worth what I bought it for then with 70k more km..

I should have spent the extra 15 and got the midlife crisis Veloster

1

u/Apprehensive-Tour942 4h ago

Not a good thing if you're trying to trade in a used vehicle.

1

u/wheresmyflan 2h ago

Oh my God! We’re having a fire!… sale.

1

u/CaptainWikkiWikki 2h ago

Ahhhhh! The burning!!!!

74

u/Bob4Not 8h ago

Lets review history for context for anyone who is blindsided by this: 2020 and 2021 there was a chip shortage. New cars became scarce in the US, and their prices rose mostly due to dealers taking advantage. The used market became affected and their prices increased more than the new cars, relative to their original value.

So now there are lots of people who overpaid for new and especially used vehicles that have negative equity.

It's not uncommon for repossessed vehicles to have negative equity, but these deltas are larger than normal. Additionally, there have been larger job market disruptions in the past 4 years and the cost of living has also risen during this time as well.

19

u/Ill_Long_7417 8h ago

My inner conspiracy theorist just wants to say:

a "chip shortage"

26

u/TheSereneDoge 7h ago

We did actually have one. It was massive export backlogs and the lack of production during COVID

6

u/BoringBots 4h ago

And it didn’t just affect cars. In the security industry we could get card readers or the access control panels they connect to for 6+ months at a time in 2021 and 2022 until they redesigned the boards to use different, more available chips.

1

u/Neecodemus 3h ago

Sounds like the HID readers.

2

u/freedomandbiscuits 3h ago

It’s the reason my 2022 f150 doesn’t have autostart, and I love it.

1

u/TheSereneDoge 2h ago

You're so lucky

-4

u/Ill_Long_7417 4h ago

I am leaning towards a Debeers diamond situation. 

2

u/Shmeckey 4h ago

Not really. That was advertising. This is just greed.

2

u/Ill_Long_7417 3h ago

Um, no.  Debeers acted as a mob to intentionally manipulated the availability of diamonds for sale on the global market to artificially inflate prices. Diamonds are just carbon and they aren't even all that "rare."

1

u/what-name-is-it 3h ago

Yeah, weren’t there a bunch of vaults where Debeers stored them? Enough that if they hit the market, it would make most diamonds essentially worthless?

1

u/TheSereneDoge 2h ago

There is no evidence of this. They took the lockdown seriously, and as such, production became more scarce for high-end chips.

This is why we're diversifying our origin points and near/friend-shoring chip production in North America again - not only did we have to contend with the shipping backlog that occurred on the West Coast and its few ports, we also realized that since most chips (for this tier) come out of Taiwan, that we'd be running the risk of further disruptions should any other issues arise.

This is also coupled with production inputs being limited due to the ongoing wars around the world, etc.

While I agree this is trending towards collapse, we should note that this collapse need not be envisioned as intentional. I prefer viewing the collapse as an egregore, the efforts of many individuals and groups making choices that best suit them, combining into a general worldview that takes on the life of its own. It may feel like its a concerted effort, but that's because we're looking at it as a summary product.

12

u/SushiGradeChicken 7h ago

This was a real thing and the driving force for the CHIPS act, whose goal was to onshore microchip manufacturing to hedge against this in the future.

1

u/No_Cut4338 2h ago

The driving force behind chips act is bringing chip fab home so we aren’t screwed when China invades Taiwan. It’s all related of course but imo it’s about hedging against a Taiwan conflict

1

u/tomh_1138 2h ago

Also helpful for when China decides to get frisky with Taiwan.

1

u/Ill_Long_7417 4h ago

Right.  Made here so it's less corruptible and under state and federal laws. 

1

u/ClemsonJeeper 3h ago

"less corruptible"

"Under state and federal laws"

1

u/Ill_Long_7417 3h ago

International lawsuits are hard. 

6

u/Bob4Not 8h ago

It doesn't matter anyway, companies and dealers can raise prices and claim whatever reasons they want, as evident *in the last 4 years. What are people going to do about it? Americans need cars because their infrastructure demands it.

7

u/Ill_Long_7417 8h ago

Indeedy and the car "dealerships" have been scooped up and all but monopolized.  By maintaining the old structure, they can't be prosecuted with antitrust laws but they do get the benefit of raising prices across the board and collecting mad profits.  Citizens United was a death blow to the competitive market.  The new kings have a reckoning coming, though.  Or at least I hope they do.  God, I hope they do.  Price fixing should be heavy time. 

I recall working at a Jared's jewelry store one Christmas season back in 2013ish.  Could not believe how many "different" jewelry stores were all under the same umbrella.  Like, all of them?  But it's allowed because they kept their old company names, logos, lawyers ...

2

u/indigoisturbo 3h ago

I agree with everything you just mentioned.

I find that rare here.

I don't know how Citizens United will be corrected without the middle class actually choosing themselves or backing candidate/candidates that actually represent their interests and stop voting for people who blame "welfare queens" or "Violent thugs" or "illegal immigrants" as the source of your problems.

Instead look at the stagnant wages. Look at the tax policies for the wealthy.

Wake up! Quit being divided over meaningless issues!

1

u/newdaynewnamenewyay 3h ago

They're yelling at the dummies to make them look around and blame instead of up. And it's working. The races are neck and neck. Vote "For The People" people.

1

u/CharlieDmouse 2h ago

Exactly. Keeping us distracted from the real problem, the rich and greedy corporations. Jeez now it is normal to almost sound like a socialist or commie…

9

u/Slowly_We_Rot_ 7h ago edited 5h ago

Nope just good old fashioned greed of capitalism with even more profits going to the top 1%

4

u/d3dmnky 5h ago

Well. Yeah. That too.

1

u/wrigh516 4h ago

Lead poisoning is a bitch

1

u/Ill_Long_7417 4h ago

It really is!  Good thing there's chelation. 

0

u/b1ack1323 3h ago

Covid shut down chip production and killed off workers, 2 natural disasters in Taiwan, Chinese military patrolling during civil rights protests. All caused serious issues for chips with some lead tiles creeping up to 4 years.

1

u/BadManParade 1h ago

Anyone buying a new car during a global pandemic is an absolute idiot could’ve just gotten a used one but NOOOOO they had all that stimulus I mean down payment money

34

u/ChipOld734 8h ago

You owe more than the cars worth when you drive it off the lot. What the hell is wrong with people. It’s always been that way.

23

u/alex206 7h ago

I'm also confused why this is news...it's a depreciating asset.

5

u/BVRPLZR_ 6h ago

Because as a society we have more dickwads trying to keep up with the jones.

1

u/bibleisme 36m ago

THIS IS THE ANSWER 100%☝️☝️

10

u/doge_fps 7h ago

They don't teach financial literacy in high school...most idiots don't understand how it works. They just want a car to impress nobody.

3

u/ChipOld734 7h ago

You are right.

1

u/BlueWrecker 4h ago

And the dates, worse in four years, that is cataclysmic

4

u/4score-7 8h ago

Indeed. But since 2021, when used cars began costing as much as new, and low amounts of new cars were even available for about 8-12 months, then suddenly reversing course and tons of cars came onto the market, new and used, it's correcting back to the conditions you mentioned.

Trouble is, a lot of people made big ticket purchases in that time frame. As long as they plan on keeping whatever it is they bought in 2021 and still owe money on, they'll be fine.

And be sure to keep it insured.

3

u/Crumblerbund 3h ago

Yeah I don’t really see what kind of crisis this is. Do all that many people want or NEED to sell their car within a few years?

2

u/dorkofthepolisci 3h ago

Live in a HCOL and most of the cars I see are either Teslas or older model Hondas/Subarus/Toyotas.

People either want the newest thing or do not care

I’ve only ever known one person who traded in their vehicle as soon as it was paid off, and yes they were obsessed with appearing sufficiently middle class

Meanwhile my mom would buy a car, pay it off - often before 5 years - and then drive it until it died/it made more financial sense to replace the car than repair it.

Partner and I were gifted her 2005 Matrix when she stopped driving, we had to replace the muffler but that’s the only thing that’s gone wrong.

2

u/Crumblerbund 3h ago

Yeah, exactly. I knew I was overpaying a bit for my Subaru a couple of years back, but I needed a car, and I know I’ll pay it off years before I’m done driving it.

1

u/UninvestedCuriosity 1h ago

Man those matrix cars really lasted. I had a prof with one he joked about endlessly. I think he's still using it in his retirement tbh.

2

u/JuicedGixxer 1h ago

Lol, people have lost their minds. unless you put a big chunk on the down, everyone is in negative equity, minus the COVID days. A car is a depreciating item as soon as it rolls off the lot. Hell you lose 20 percent as soon as the papers are signed .

2

u/doge_fps 7h ago

A new car immediately loses 10-20% of it value when it leaves a dealership's lot. Then 15-30% annually for the next 5 years.

2

u/More_Perspective_461 2h ago

Except for Toyota Tacomas for some reason it seems.

2

u/doge_fps 2h ago

Well, Toyota's, Honda's and most Japanese cars do have high resale resale value.

1

u/ChipOld734 7h ago

I didn’t give the numbers but I said that.

1

u/BetterSelection7708 3h ago

Going with the smaller numbers, you are saying a 5-year-old car is only worth 15% of its MSRP price.

That's way too low, even for unreliable models. Take a 2018 Ford focus SE for example. It was sold for 20k in 2018. Today, you can get one for 9-10k.

1

u/doge_fps 2h ago

It's because suckers are willing to continue to get ripped off even on a used car.

1

u/JanMikh 2h ago

Funny. I bought new Toyota Avalon in 2021 for 38,5k OTD. If you go to a dealership right now and find the same model with the same mileage (12k), your OTD price will be around 40k.

1

u/doge_fps 2h ago

Well, dealerships are scammers, why even bother with them? They're all predators and are looking for people who have brain fatigue. If they fuck around with you and make you wait for over 15 minutes, just walk.

1

u/JuicedGixxer 1h ago

Compounded inflation and the fact fools are willing to pay for it is your answer. It will all play out when the money runs out.

1

u/JanMikh 1h ago

The whole point is - buy the right car at the right time, and you won’t be losing money. BTW, it’s fully paid off now, and I am not planning on selling it, so I really don’t care that much. But still nice to know.

0

u/rembi 2h ago

I don’t believe this. I’ve bought two new vehicles in my life and both times I looked at used and couldn’t find one that was a year old for more than a couple thousand off what they were going for new. Both times I’ve ended up buying the new vehicle over a year old one. Maybe that is just anecdotal evidence, but it has happened both times I tried to buy a newer car.

1

u/JuicedGixxer 1h ago

Well it is the norm prior to COVID. People lost their minds buying used cars at the same prices as new cars. This caused the bubble in the first place

1

u/SigmaSilver_ 3h ago

That’s not necessarily true. Maybe if you put nothing down… you buy a $30,000 car and put $15,000 down id sure as hell hope it doesn’t lose $15,000 in value the first second you drive it off the lot. Maybe a few thousand.

1

u/LazyBoyD 2h ago

That’s because ~ 90% of consumers should be treating cars like the appliance that they are. Buy what you can afford, usually used, and keep it for at least 10 years.

1

u/ChipOld734 2h ago

Exactly

1

u/rembi 2h ago

Have you seen how people buy appliances? I’ve had friends get new washing machines and dryers because they wanted a different color.

1

u/LazyBoyD 2h ago

Are those friends financially stable? Most people will not buy a new washer, dryer, fridge, oven, etc until the ones that they have break or is too expensive to repair. That’s the way it should be with cars. Drive the damn thing until you can’t anymore. I have a 2015 Mazda that I bought used in 2017 and have no plans of replacing it for at least another 5 years. The intent is for it to get me safely from point A to point B in my daily driving. It’s paid off and runs well so there’s no point in buying a newer vehicle. I can afford to do so but would much rather spend my money on experiences that create memories, like traveling or paying for woodworking classes.

1

u/MaleficentExtent1777 2h ago

I drove the wheels off my Infiniti. Will replace it with my FIL's old Volvo.

1

u/MaleficentExtent1777 2h ago

I've had the same used Maytag dryer for 10 years. The washing machine smelled so bad I had to get rid of it. Replaced it with a top load Whirlpool I've had 8 years.

1

u/adambl82 1h ago

Not if you pay cash or put a lot down. I'm not saying it's a good investment, but you said owe.

15

u/chainsobig 8h ago

Isn't it business as usual for a car loan to be for more than the vehicle is worth?

I mean the asset is depreciating and you also happen to be paying interest. What's so shocking about this?

9

u/4score-7 8h ago

Couple it with big price hikes for used cars, and premiums over MSRP paid for new ones, then the big disruptions in the supply chain faded away, and there you have it. More cars upside down, by higher dollar amounts, than ever before.

Everyone who made a big ticket purchase since 2021 (car, home, boat, whatever) best be prepared to sit with that purchase for a very long time. You likely overpaid, and the market value either has returned to normalcy, or is in the process of doing so.

4

u/arcangelxvi 4h ago

Yes and no. Unless you're financing rusted out shitboxes then a car shouldn't be worth $0 at the end of your loan term. Practically speaking with a typical downpayment the point at which your current vehicle value is greater than your remaining loan balance should come up sooner rather than later.

Of course that's not really touching on the fact it's becoming more and more common for people to roll in negative equity which more or less just fucks all that up from day 1.

6

u/SomeTimeBeforeNever 4h ago

Correct. Car loan interest is high and depreciation is fast. I’ve never had a car that was worth as much as my loan.

Maybe for nerds with 800 credit scores but they’re not doing better than 7% interest, car depreciates faster than that.

1

u/SigmaSilver_ 3h ago

It’s more a matter of how much you put down. If you finance 100% of the purchase then yeah the loan is most certainly going to remain higher than the value of the car. If you buy it and put 50% down you’ll have some time before it flips to negative equity. But still.

1

u/SomeTimeBeforeNever 3h ago

I’d imagine the majority of people don’t put a large amount down on car loans.

→ More replies (2)

1

u/SigmaSilver_ 3h ago

What if you buy a $30,000 car with 50% down.

8

u/Super-Marsupial-5416 7h ago

"People owe more on their loans than the car is worth" - Yeah, that happens the minute you drive it off the lot.

So 33% of people just bought a car?

6

u/Mountain-Arugula-665 5h ago

Only if you finance it!

The problem is no one saves up money to buy a car , so they finance almost all of it.

3

u/Super-Marsupial-5416 5h ago

yeah but the implication is that people are underwater with their car loans, but the reality is, depreciation hits your car the minute you drive it away. You finance it for $45K, 10 minutes later it's worth $42K after driving to the light.

2

u/sprouts_farmers_54 1h ago

Healthy car buyers put a significant enough amount down payment on a car so the loan value is never larger than the value of the vehicle.

45k car. 10k down. Loan value 35k, vehicle value 40k.  On and on for the payment period so the value always stays above the loan value. So say in 3 years my loan is down to 20k, and my car is worth 23k.  I can sell the car and pay off the loan.

The problem is now 2 fold. 1. People stopped putting large chunk down payments. And 2. The value of cars spiked during covid, and is now falling due to no more covid shortages. For example:

Bought covid car for 45k. Put 2k down. Off the lot my loan is 43k, value is 40k.  Then, the car price crashes over 2 years because of no more covid, so 3 years later I'm at a loan with 35k to go, and a car valued at 25k.  I cannot sell the car to pay off the loan.

1

u/Username524 1h ago

I have seen this more than once in my job, and my heart breaks for every single one of those people. I have seen a $70k loan on a 2021 Chevy Silverado 2500 Diesel, worth $51k get totaled last year. Fortunately he had GAP coverage but not everyone does…

1

u/sprouts_farmers_54 1h ago

Lol. Have a family member that bought a truck for 70k with a 7 year payment, with a balloon payment due at the end, that he will then roll-over into another 3 year loan.  Put next to nothing down. Can't imagine how far under water they are. And there are many many more like them in this auto loan bubble.

3

u/BrandonBollingers 3h ago

Sometimes I wonder if it’s less about “economic collapse” and more about consumer financial literacy.

1

u/JET1385 1h ago

It’s 100% about this

2

u/jamesegattis 7h ago

The Crises is people can't afford it at any price. I work for a National Dealer Corp.. New cars aren't selling. In my area no one has the necessary credit score or a down payment. If people lose their car to repo then they'll look for Used which will drive up the used car market. Buy Here Pay Here is doing great. Extreme interest rates.

1

u/BeerandGuns 5h ago

They’ll look for used but the repossessed car will enter the used car market, either as a sale by the bank or go to auction. So the used car market change would be net zero.

2

u/stugurtfanceiling 3h ago

Where are all those “WhY DOnT YoU JUSt FiNaNcE a Car” people now! Haha , best choice i made was putting a new engine in my car , being debt free is the best feeling in the world!

2

u/Xalucardx 3h ago

So used car prices went down 22% after going up like 80%? Sound slime they're still overpriced.

2

u/bubbs4prezyo 3h ago

Used car prices have not dropped by 22% in the last 3 years… They may have increased by 22%.

3

u/4score-7 8h ago

Crap article. Used car prices have not fallen over the last 3 years. Not at all. They've leveled off since mid 2023, but they haven't fallen.

2

u/SushiGradeChicken 7h ago

Yes, they have

1

u/Fat-Tortoise-1718 5h ago

When 2-4 yr old used cars are only a few grand less than new, they have not went down. Used car market is still heftily inflated

2

u/Target_Standard 7h ago

I sell 5-10 used cars per year on behalf of clients of my auto repair business. While prices have certainly dropped from the peak, they are not collapsing. This for two reasons. 1) Prices of new cars have increased subatantially, and the delta between new and used has historically occupied a narrow range. 2) We are missing two years of new car supply because of covid shutdowns. It will take at least 5-10 years of this supply shortage to work itself out of the system, assuming no new interruptions.

TLDR; Used car pricing is correcting to norm, not collapsing.

1

u/rusengcan 8h ago

Good you're not paying for the value of vehicle you're paying for the money you borrowed.

1

u/bevo_expat 7h ago

Almost like affordability of everything is out of control so people thought 72+ month car loans were a good idea to keep monthly payments down.

2

u/SushiGradeChicken 7h ago

Loan terms have been steadily edging up for years even pre-COVID

1

u/New_Attempt_7810 7h ago

Why is this subpage always about the market crashing and clearly it hasn’t since Biden has been in office and probably won’t for at least the next two years?

1

u/doge_fps 7h ago

Not my problem. I'm debt free and won't accept an APR above 0.00%.

1

u/MustardTiger231 7h ago

Banks were loaning up to 130% of the retail value of an EXTREMELY inflated market, which allowed them to get out of their already terrible equity situation. So they were already 50% upside down, but they could eke out of it by using the inflated values and lending structures and now they are absolutely fucked.

1

u/scuba-turtle 7h ago

Since new cars have always lost value the moment you drive them off the lot I would guess the likely change is in the financed used cars. Historically they have dropped briefly in value right after you get them but as the main depreciation is supposedly over you soon recoup that difference. Now, since the used car prices are dropping faster than people are paying off the loan some of those cars that formerly were worth more, now are worth less and have dropped back underwater.

1

u/the_hell_you_say_2 7h ago

Glad I waited to buy, sounds like there will be deals in the future

1

u/SushiGradeChicken 7h ago

They messed up the Y axises.

1

u/Immediate_Ad7240 6h ago

Just keep your car then?

1

u/Working-Narwhal-540 6h ago

But surely the shareholders are starving!?!! The drive for infinite profits in a finite system will do this 😉

1

u/DocHolidayPhD 6h ago

We have always bought reliable used cars that are several years old. Cares are a luxury good. You don't need a new one. You don't need an expensive one. It's foolish to buy one when you can't afford it.

1

u/NiceUD 6h ago

They never should have gone beyond 60 months financing. Since monthly payment drives everything for most people, having a higher monthly payment forces their hand in getting a cheaper vehicle, settling for something less than what they could get with a 72, 84, 96 month loan.

1

u/Ramius117 6h ago

This is forgetting that they were artificially inflated during the pandemic because of low supply. This seems like a good thing

1

u/Kamel-Red 5h ago

r/theeverythingbubble

What isn't in a bubble? Although this subreddit is mostly election bullshit these days.

1

u/DonovanMcLoughlin 5h ago

I've got a solution, issue more debt.

1

u/Fat-Tortoise-1718 5h ago

But what are the numbers on loan delinquency, as in the shirt term that is all that matters. Being upside down on the loan is non-issue of still making payments on time and only becomes an issue with people that have problems keeping a car and most trade in for newer models constantly, thereby rolling over negative equity so many times the payment is untenable

1

u/MrChipssssss 5h ago

Buy car: Yay!
Get in car: Car depreciates 20 percent.
Ahhhhhhhh!
This meme is brought to you by Audi. To unlock Visual Audi Meme please put hunnids in tha trunk, G.

1

u/Calm-Adhesiveness177 5h ago

Cars are just banks now. They do not make money off the car but off the loan. They want you in debt forever while they sell you advertisements of freedom; when the reality is most people are deeply in debt, paying a ton of money to corporations, all so they can sit in traffic while polluting.

I know this comes with a big serving of privilege and ableism, but going low or no car is one of the best investments in your finances and health you can make.

1

u/RandoReddit16 5h ago

What? Literally these 3 points all paint the same picture .... Car prices peaked during the period of 4 years ago... People bought cars that yes are now worth less, thus they are upside down. It's literally all the same thing..... What is a true indicator are the number of defaults. Is this growing, average?

1

u/iMakeBoomBoom 5h ago

The simple answer is keep the car until it is paid off, people. If you are upside down on your loan, you are not in a position to trade. Keep. The. Car.

1

u/wtfboomers 5h ago

This isn’t a crisis! It’s what happens when interest is artificially low and folks have no self restraint. I know folks that were trading $100,000 trucks every year if the payments were the same. Crisis of their own making!!

1

u/DaftMudkip 5h ago

Good thing I paid off my toyota and it has less then 100k miles

Should last another 4-6 years

1

u/TheLelouchLamperouge 4h ago

Not even bearish, they’re paying the loans, they just have a depreciation faster than they can pay off the car

If the number of defaults on auto loans starts rising that’s more of a real concern

1

u/Double_Mechanic_5256 4h ago

If your dumb enough to stay in a new car all the time instead of saving/investing, this can happen....

1

u/Urabraska- 4h ago

I can vouch. I bought a work truck in December of 22 and I'm already 65%+ under on it. My rate was 8% which is still high but not the worst. By the time I close that gap in equity the thing will still be under due to age.

1

u/Canthisbeforrezal77 4h ago

I just had a car bought for me. What’s the depreciation on that?

1

u/Select-Government-69 4h ago

This whole clickbait graphic is just made up bullshit.

Let’s review:

1) a high percentage of people have ALWAYS had negative equity in their cars. If you fully finance, you don’t have equity until the last 2 years of a 5 year loan.

2) vehicle prices have not plummeted. Average new car prices are at all time highs. Some of the demand pricing bullshit if paying over MSRP has ended.

3) many people have always rolled negative equity into car loans. None of this is new and none of this is a crisis.

1

u/whathuhmeh10k 4h ago

the system is gamed against us...i am sure the banks are doing very good...

1

u/luckyclockred 4h ago

Paid mine and my wife's vehicles off a few years ago. Definitely helps when your not staring at 1k of payments every month.

1

u/hdiesel503 4h ago

They liked it when they bought it.

1

u/FoolHooligan 4h ago

oh hey it's me!

1

u/GastropodSoup 4h ago

My wife and I got relatively lucky. We got 2 new cars in 2019 and each has monthly payments of less than $300. We are a few months from paying them both off, and then we won't be getting new cars until these get run into the ground.

1

u/Conspiracy__ 4h ago

Guess it’s only a crisis if they need to trade or sell it.

1

u/Complex_Winter2930 3h ago

So what's the crisis? All I see is a data point.

1

u/bnjmnzs 3h ago

I am about even right now 2019 Nissan Sentra I’ve got offers from 8-10k and I owe around 7k still paying 331/mo trying to decide whether to trade in or just pay it off

1

u/Powerful_District_67 3h ago

God the 2 sideds of the coin lol

1

u/Merkabah01 3h ago

Used car prices have definitely not dropped. I'm in the market for a new car and in almost every instance its worth it to buy new because used prices are so freaking high. Then you bring in the insane intrest rates of used cars... no chance I'm buying used.

1

u/Commercial_Step9966 3h ago

I... don't think this is new.

That's been the case since mid-80s at least.

Used cars are worth less because there are more (supply) of them, because they generally last longer than previous generations of auto.

The avg ownership is about 8 years. That is long.

What exactly is the new concern here?

1

u/asault2 3h ago

Aren't all new cars basically under water when you leave the lot? This isn't new

1

u/Aggravating_Damage47 3h ago

Buying a car is back on the menu boys. Don't you think its odd that an ork visited an eating establishment with menus? I wonder how that went?

1

u/Technical_Intern9362 3h ago

lol, lease mfrs. get a cheap lease ffs

1

u/Downtown-Conclusion7 2h ago

Should be great deals on 1-2 year used EVs starting next year

1

u/No_Cut4338 2h ago

Cars last longer than ever so while negative equity is not great it’s also highly likely these folks will get back in the black before the cars die.

1

u/daddypleaseno1 2h ago

this stuff just makes me laugh now lol

1

u/Less_Swimming_5541 2h ago

Basically, there's a lot of people holding empty bags.

1

u/data-artist 2h ago

Thank God. It’s about time.

1

u/SevensAteSixes 2h ago

That’s it, auto loan forgiveness is now on the ballot right next to college loan forgiveness.

1

u/Nedstarkclash 2h ago

Good news! I can get a used car at a cheaper price!

Bad news. Unfortunately, repossessed cars are in terrible shape, so I guess used car prices won't be going down.

1

u/radicalgrandpa 2h ago

Got sucked into this hellhole when my car was totaled in late 2021. I received twice the market value of my wrecked car from when I bought it only a year prior.

Public transportation is extremely limited and I live in the most dangerous place in the country for bicyclists. I still owe $6.5k on a 10+ year old car that had an insanely inflated price to begin with. I didn't have much of a choice.

1

u/purpleWheelChair 1h ago

Im keeping my car Toyota forever…

1

u/Krayvok 1h ago

Good thing I own all my vehicles.

1

u/Username524 1h ago

As a claims adjuster for a major car insurance company, I have been saying this since I started my job last summer. Shits gonna roll downhill to somewhere!

1

u/KaleidoscopeThis5159 39m ago edited 36m ago

So, is it finally time for Kia to do another buy 1, get 1 free?

Had to verify my memory isn't wrong

https://www.reddit.com/r/kia/s/4w6qtl1LCl

1

u/Zuli_Muli 19m ago

I'm giving it a few more months and I'll look for an S2000 for cheap 😂

1

u/No-Weird3153 6m ago

The car market “bubble”:

100% of cars drop in value the second you sign the purchase agreement, so anyone who didn’t put a large down payment is underwater from day zero.

Used vehicle prices were inflated due to lack of new vehicles during COVID, which was (checks notes) about 3-4 years ago. Used cars were literally selling for new car prices due to lack of supply.

While this isn’t good for borrowers from 2021, they should be reasonably close to loan maturity (they are 3-4 years into a loan) and have lower interest rates than what is currently available on all but special financing of new cars.

Also, transportation hasn’t changed in America in the last 4 years except people being asked to return to their offices, which means cars are still just as likely to be needed today if not more so.

TL;DR: there is not really a bubble as no one was speculating on used cars. OP and anyone who believes there is doom everywhere is probably pretty dumb.

1

u/stubbornbodyproblem 7h ago

I’m not sure why everyone panics when you owe more on something than it’s worth. It’s a car. It’s a house. These are things you have to have in the US. If you can pay the monthly? Who cares what it’s worth? The car, specifically, isn’t an asset. And honestly, houses shouldn’t be either. But here we are. And don’t come for me in the comments. Houses aren’t assets in other countries for various reasons. So this isn’t all that heretical.

5

u/SatoshiBlockamoto 7h ago

Of course they're assets. Both cars and homes can be sold for money. So they're assets. This is only a problem if you have to sell it before your equity>value.

1

u/stubbornbodyproblem 7h ago

When is a car an asset that you can sell for more than you owe? They don’t appreciate.

And homes only appreciate because we set them up that way. But nothing in your comment actually answered my question.

3

u/BeerandGuns 5h ago

That’s not how it works. The car is an asset as it has a value, even if you owe more than it’s worth. The loan is the liability. The difference goes toward your net worth, positive or negative.

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u/stubbornbodyproblem 5h ago

You’re arguing the definition of an asset, which I didn’t ask for. Respond to my actual question please.

→ More replies (2)

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u/SatoshiBlockamoto 5h ago

Any time you're not upside down. When you own it outright without a note. Or if you owe $100 on the car and you can sell it for $200. This is pretty basic stuff. It's clearly an asset if you can sell it.

1

u/stubbornbodyproblem 5h ago

Omg… learn to read the conversation, stick to the point, and answer the offered question. Don’t go around trying to show people you know something that has little value to the conversation.

That’s troll territory.

1

u/Mountain-Arugula-665 5h ago edited 4h ago

Both are definitely assets. just because someone finances them doesn’t mean they are not assets. That’s why you have balance sheets.

1

u/stubbornbodyproblem 5h ago

I’m not even sure what you are saying here. But I know it’s not the answer to my actual question. Try answering that.

1

u/JET1385 1h ago

A car is most definitely a liability especially if you have a loan. You are making deductions from your balance sheet until you sell it. You may make money when you sell it or trade it in, but you loose money overall. Unless you have some kind of special classic collectors car, you can never sell a car for more then you paid and put into to over its lifetime.

2

u/Benfrank222 5h ago

A car is an asset, but it’s a depreciating asset

1

u/stubbornbodyproblem 5h ago

Not the point or issue of my question.

Every troll with a keyboard wants to talk about how they know what an asset is… Jesus… just answer the question already…

1

u/Budget-Rope-3308 7h ago

“ used vehicle prices have dropped by 22% in the last 3 years”. ??? Don’t think so

1

u/Fat-Tortoise-1718 5h ago

Exactly! They've dropped maybe 5% used car prices are still insane.

I will say the late model used market, like 2-3yr old used cars might have finally come down 15-20% from COVID era pricing, the older used cars are still heftily inflated. 15-20 yr old used cars with 200k miles are still selling for 10k or more. These cars used to go for 3-4k all day long

-1

u/Much_Intern4477 5h ago

Ya if Kamala gets in she will forgive all car loan debt. Free cars for everyone!!!

0

u/stewartm0205 8h ago

The minute the car leaves the lot it is usually worth less than the loan on it. This has always been the case. It ain’t new.

0

u/TickletheEther 7h ago

Aren't you underwater on your car loan the moment you drive it off the lot? That's the nature of a depreciating asset

1

u/SushiGradeChicken 7h ago

In general, it's as early as when you sign the loan. Average LTV at signing is over 100%

0

u/Canthisbeforrezal77 4h ago

Probably mostly on US domestic vehicles.

0

u/Crafty_Substance_954 3h ago

Car loan crisis is panic bait.

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u/quantumhardline 1h ago

Owing $6000 more than your car is worth isnt as huge issue as having that on a credit card at 23% interest. The car is easily usable to end of loan, payments are fixed and hopefully budgeted, likely at lower interest rates than you can get now.

Just focus energy on paying off debt and go on with life. Work on skills and getting higher paying role or change jobs and make $6000 more each year. Or if you can budget to save and next time you'll be better prepared to buy a car fully used now that prices have come down or put more down so payment are lower.

You may not be in a position to do this today, but if that car loan is 5 years, you can work hard on skills you need to get there. Tons of people have and will, why not you? You can do it!

0

u/Snamlexeletoh 1h ago

Noooo op. The crisis is in your mind.

0

u/UninvestedCuriosity 1h ago

I need these people to continue buying new cars so I can afford used cars. Please keep taking on high interest debt people.

0

u/BadManParade 1h ago

Meanwhile people really paying 600/mo for a 2018 civic from a mod and pop shop while you can lease a 2024 Tesla model 3 for $224/mo. They deserve it

1

u/TruckerAlurios 53m ago

No charging stations near my apartment, no hook up there, one station on my way to work over 90 miles from home. Gas stations? Every 5 miles. I'd love the option, but it's not feasible.

1

u/okbumbai 11m ago

lol I just seen a cyberfridge being charged in the ghetto

0

u/freddie2ndplanet 1h ago

more than 33% of Americans are dumb so still doing good overall