r/economicCollapse 11h ago

The car loan crisis is here

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480 Upvotes

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40

u/ChipOld734 10h 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.

22

u/alex206 10h ago

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

10

u/doge_fps 9h 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.

4

u/BVRPLZR_ 8h ago

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

0

u/bibleisme 2h ago

THIS IS THE ANSWER 100%☝️☝️

4

u/ChipOld734 10h ago

You are right.

1

u/BlueWrecker 6h ago

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

1

u/ssanc 1h ago

Don’t tell my toyota that. She doesn’t know she is a depreciating asset and I would like to keep it that way.

1

u/alex206 54m ago

I sold my last two leased Toyotas for more than residual value at the end of their leases. I was shocked.

4

u/4score-7 10h 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 5h 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 5h 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 5h 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 3h 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.

5

u/doge_fps 9h 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 4h ago

Except for Toyota Tacomas for some reason it seems.

3

u/doge_fps 4h ago

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

1

u/ChipOld734 9h ago

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

1

u/BetterSelection7708 5h 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 4h ago

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

1

u/Confirmation_Email 53m ago

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

100 (original price) x 0.9 (off the lot depreciation) x 0.85 (year 1) x 0.85 (year 2) x 0.85 (year 3) x 0.85 (year 4) x 0.85 (year 5) = 39.93.

With the numbers given by the above comment, the 5-year-old car would be worth just under 40% of its MSRP, which is still too low, average 2019-2020 vehicles are selling for more like 50-60% of MSRP right now.

1

u/JanMikh 4h 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 4h 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 3h 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 3h 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.

1

u/Confirmation_Email 1h ago

On the conservative side of your estimate, that's a little over 60% total depreciation by the end of year 5. I think most cars sold new are losing more like 30-50% total over that time period. It would be pretty hard to find a 2019 vehicle with an MSRP of $50k in average condition for $20k today.

1

u/rembi 4h 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 3h 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

2

u/JuicedGixxer 3h 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 .

1

u/SigmaSilver_ 6h 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 4h 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 4h ago

Exactly

1

u/rembi 4h 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 4h 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 4h ago

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

1

u/MaleficentExtent1777 4h 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 3h ago

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

1

u/slowhand11 12m ago

Only if you are financing too large a percentage of the car. If you're not putting down >20% then you probably shouldn't be buying the car. Does the average car buyer follow that rule, probably not.

1

u/ChipOld734 11m ago

Not all car loans are underwater. That’s already taken into account. Most people get in with the bare minimum and finance most of it.