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Introducing The 97-Month Auto Loan

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http://www.zerohedge.com/news/2013-04-10/will-we-never-learn

While many of us have been shouting about this from the rooftops for years now, with each passing day it becomes more clear what a terrifyingly gigantic powder keg we have created. There is no debate that this will end in a compete financial holocaust, the only question is when and how. As time progresses, the practices and desperation of the status quo to keep the sheeple in debt and consuming is getting increasingly insane. We learn from the Wall Street Journal that:

The average price of a new car is now $31,000, up $3,000 in the past four years. But at the same time, the average monthly car payment edged down, to $460 from $465—the result of longer loan terms and lower interest rates.

In the final quarter of 2012, the average term of a new car note stretched out to 65 months, the longest ever, according to Experian Information Solutions Inc. Experian said that 17% of all new car loans in the past quarter were between 73 and 84 months and there were even a few as long as 97 months. Four years ago, only 11% of loans fell into this category.

Such long term loans can present consumers and lenders with heightened risk. With a six- or seven-year loan, it takes car-buyers longer to reach the point where they owe less on the car than it is worth. Having “negative equity” or being “upside down” in a car makes it harder to trade or sell the vehicle if the owner can’t make payments.

Hmmm, sound familiar?

Car makers have mixed feelings about long-term loans. They allow consumers to buy more expensive—and profitable—cars. But long loans may keep some people from replacing their cars, cutting into future sales.

I love how THAT is what they are concerned about.

Experts say there is an appetite for more risk because banks see limited downside in auto lending. The delinquency rates on car loans are near record lows, and used car values are at record highs. And if a buyer defaults, the bank can repossess and sell cars with limited losses.

Excellent car prices can keep on going up now as people can borrow more.....

8 year car loans, 50 year house loans....

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http://www.zerohedge.com/news/2013-04-10/will-we-never-learn

Excellent car prices can keep on going up now as people can borrow more.....

8 year car loans, 50 year house loans....

Why not have 150 yr house loans - after all most houses will last that long or more before demolition? You can just pay very small amounts unto death and then the vastly increased value will pay it off on sale by your estate thereafter. Just think how much more you could borrow if you were paying it over a whole life on a repayment of eermmmm 150 yrs? "20 times salary is fine, according to the Bank of England". 10 yrs later........"... it costs about 20 times average salary for a 2 bed flat now even with a new low rate 200 yr mortgage, so we are stuck in it for life...and death" :lol::lol::lol:

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This was mentioned on Max Keiser's show on RT tonight. 97 month car loans, increible. Another example of kicking the can down the road.

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Excellent car prices can keep on going up now as people can borrow more.....

8 year car loans, 50 year house loans....

At least with car loans, you could say that with longer warranties and the generally improved reliability of cars nowadays, there's a justification.

I wouldn't mind seeing forecourt prices with the option of (say) 20% down/7 year finance, if I'm looking at a car to last 10-12 years.

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At least with car loans, you could say that with longer warranties and the generally improved reliability of cars nowadays, there's a justification.

I wouldn't mind seeing forecourt prices with the option of (say) 20% down/7 year finance, if I'm looking at a car to last 10-12 years.

Really? 20% down, 7 years on tick sounds like a NR together mortgage, IO over 35years. I would expect forecourt prices to rocket on that basis. With current used prices, I'm not sure you'd ever get out of negative equity till you'd more or less paid it off. If you think that rising prices across the board to the exclusion of all other problems is the answer, maybe you could send your CV to the treasury?

Longer car finance scares me.

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Payday loan companies in the US are now specifically targeting the equity in the car loan as security against advances.

Like houses with wheels.

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For years now Americans have been rolling over their car loans.

New truck/car every 3 or four years, but 5 year loans; rollover the old loan onto the new one.

Folk all over the world also take out cash loans on top of the car ticket price to cover insurance and etc...

GMAC, GE Capital and their subsidiaries have made a lot of money doing this.

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Really? 20% down, 7 years on tick sounds like a NR together mortgage, IO over 35years. I would expect forecourt prices to rocket on that basis. With current used prices, I'm not sure you'd ever get out of negative equity till you'd more or less paid it off. If you think that rising prices across the board to the exclusion of all other problems is the answer, maybe you could send your CV to the treasury?

Longer car finance scares me.

The difference being that whilst house prices are determined by the availability of credit, car prices are for manufactured objects, where it's harder to bid up prices. After all, if Ford decide to hike prices 20% because of these credit deals, it just means that everyone will buy Kias instead. Doesn't work for houses because of our wonderful* planning system; if the UK was restricted to buying 100k cars per year, then this sort of thing would mean that car prices shot into the stratosphere.

As I said; 7 year finance on an Austin Allegro would have been stupid, if only because you'll spend the last couple of years paying for a pile of Iron oxide. On a Skoda Octavia that's probably going to be running fine 10 years and 100k later it's a different matter.

*Not wonderful.

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Payday loan companies in the US are now specifically targeting the equity in the car loan as security against advances.

Like houses with wheels.

You say that but I hear an advert on the radio quite frequently for a pay day loan time thing that uses your car as security.

I cant remember the name of the company, I tend to mute the auto when I get these type of sheisters coming on the radio and shout, "C**Ts" at the radio at the top of my voice.

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The difference being that whilst house prices are determined by the availability of credit, car prices are for manufactured objects, where it's harder to bid up prices. After all, if Ford decide to hike prices 20% because of these credit deals, it just means that everyone will buy Kias instead. Doesn't work for houses because of our wonderful* planning system; if the UK was restricted to buying 100k cars per year, then this sort of thing would mean that car prices shot into the stratosphere.

As I said; 7 year finance on an Austin Allegro would have been stupid, if only because you'll spend the last couple of years paying for a pile of Iron oxide. On a Skoda Octavia that's probably going to be running fine 10 years and 100k later it's a different matter.

*Not wonderful.

have you seen the price of modern Kias with their 7 year warranties?

QED

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Kia has gone from cheap and cheerful to mainstream.

Now I'm confused, you suggested that Kia was an alternative, i said I didn't think so and then you said Kia wasn't an alternative. Are you agreeing or not?

I look at the mobile telephony market that is arguably far more along the lines of a service for which a rolling contract may make sesne. I've witnessed contracts having extended in length, from typically 12 to 24 months and the costs escalate so that nowadays it is often cheaper to buy the high performance phone you want outright and then take a PAYG service.

Not sure why I should expect a different response if auto makers go (even) longer on finance..

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Of course one difference is that car prices are on a long-term downward trend, dating back at least to Henry Ford.

Must've been sometime in the 1980s the average new car price (or even a low-end new car) first dropped below the average annual income, for instance.

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At least with car loans, you could say that with longer warranties and the generally improved reliability of cars nowadays, there's a justification.

I wouldn't mind seeing forecourt prices with the option of (say) 20% down/7 year finance, if I'm looking at a car to last 10-12 years.

Agree.

3 yr car loans mostly arise from the 80s when cars rusted to bits after 3 years and engines fell apart after 50,000 miles.

They're also designed to tie you into the maximum depreciation period of course, then flog you another maximum depreciation period.

As more cars now last 15-20+ years matching the loan to the depreciated life of the asset makes more sense, depending on the interest rate of course.

Buy a well made asset and keep it for as long as possible.

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Now I'm confused, you suggested that Kia was an alternative, i said I didn't think so and then you said Kia wasn't an alternative. Are you agreeing or not?

I look at the mobile telephony market that is arguably far more along the lines of a service for which a rolling contract may make sesne. I've witnessed contracts having extended in length, from typically 12 to 24 months and the costs escalate so that nowadays it is often cheaper to buy the high performance phone you want outright and then take a PAYG service.

Not sure why I should expect a different response if auto makers go (even) longer on finance..

Sorry, it was like:

Imagine Kia and Ford start the same price. Ford say 'Ha! With bigger loans we can charge more for cars!' and hike prices 20%.

Then a large number of customers go to Kia.

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Agree.

3 yr car loans mostly arise from the 80s when cars rusted to bits after 3 years and engines fell apart after 50,000 miles.

They're also designed to tie you into the maximum depreciation period of course, then flog you another maximum depreciation period.

As more cars now last 15-20+ years matching the loan to the depreciated life of the asset makes more sense, depending on the interest rate of course.

Buy a well made asset and keep it for as long as possible.

Do car manufacturers want to be encouraging increased length of ownership? (See PC hardware market)

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Sorry, it was like:

Imagine Kia and Ford start the same price. Ford say 'Ha! With bigger loans we can charge more for cars!' and hike prices 20%.

Then a large number of customers go to Kia.

I know but I meant and you agreed that rather than seeing they were on to a good thing and staying cheap and cheerful, the likes of Kia are trying to position themselves in the mainstream.

If the mainstream moves to another operating model that seems to work, the up and comers have been shown to copy.

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I find the whole concept of borrowing money to buy a car bizarre. You can get a perfectly good car for a grand, you can get a damn good car for 4 grand. Every day I drive past lots of dull little econoboxes - these aren't a "heart" decision, they are practical, dull, little machines. Who is it who goes to a dealer and says "I've borrowed £12K and I'd like that crappy little Citroen over there"? If you don't care about what you drive, then just get a second hand econo box for peanuts.

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Of course one difference is that car prices are on a long-term downward trend, dating back at least to Henry Ford.

Must've been sometime in the 1980s the average new car price (or even a low-end new car) first dropped below the average annual income, for instance.

I remember an article in a car magazine in the 60s which suggested that people tended to buy new cars worth about their annual income. Whether pre or post tax I can't remember and what the tax would have been like I wouldn't have a clue as I was still at school.

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  • 261 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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