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Can't they just roll the old loan in with the new one and offer 120% financing? Get a $20,000 car with a $24,000 loan and use the extra $4,000 to pay off the old car loan.
Dear Tanta
The link was not working for me. However, I did read a similar report (maybe be the same one) in the Chicago Tribune:
Long loans put dent in auto sales
This is the quote I thought was interesting:
North suburban Chevrolet dealer Bill Stasek doesn't see longer loans keeping buyers from his showroom, but he says there's no question consumers are signing up for longer terms. Part of that is because manufacturers like General Motors Corp. have lured them with zero percent financing for five years. But he estimates that 60 percent of his customers trade before their current vehicle is paid off.
"Probably 70 percent of our business is for 60 months or more, and 72 months is pretty normal," he said. "If you're pulling negative equity, you basically have two choices: a higher monthly payment or extend the term of the loan," he said, and most choose the latter so their monthly payments don't go up.
My father always told me...never listen to that crap about payments...what's the total cost?
(P.S. finished Thread of Grace...good read...but kinda sad!)
Best regards,
Dear All,
Sorry...I had one too many "be"s but not bees in my last post.
maybe the same one...
Regards,
Seb read the text not the headline. (the proper headline is: Credit Crunch)
"Wells Fargo is nevertheless fighting credit issues. Its $28 billion auto loan portfolio still has some issues due to previously low credit standards, and its home equity portfolio is showing "some deterioration" because of declining home values in much of the nation, Atkins said.
The bank at the end of last year bulked up its auto-loan infrastructure by hiring more collection managers, installing a new collection system and slowing new loans, particularly to higher-risk borrowers. "Delinquencies have come down" as a result, he said.
The company's residential mortgage portfolio, despite the growth in applications, also is being more tightly managed. It represents about 26% of Wells Fargo's total assets, down from about 30% through much of last year, due to tightened standards and smaller loans imposed during the first quarter to borrowers with weak credit histories. "
You know, I didn't even like having a 36 month loan on my car at 0%, so I paid it off 9 months early, even thought it didn't make sense economically NOT to carry the loan. I guess I have some of my grandparents "A lender not a borrower be."
The embracing of debt is ridiculous, however. 3/5 car loans are 5 years+!?
Then again, I believe in "Buy new, drive into the ground" as the 95 saturn my parents got me when I graduated is still going strong and until it meets with a >$1500 repair bill, its going to keep being driven.
Also, notice its GM blaming upside-down borrowers. If the vehicles didn't depreciate like a stone, the owners wouldn't be under water.
My pappy always told me that using credit to buy something that depreciated faster than the money repaying the loan was a really, really stupid thing to do.
Thanks, Kett82, I fixed the link. It only took me three tries, too. My problems today are apparently not limited to too many bees.
Mary Doria Russell's novels are beautiful, thought-provoking, and abosutely not recommended to anyone who depresses easily. "The Sparrow" is an extraordinary novel, and I say that as someone who had nightmares about it for months after I read it, and who can still barely talk about the experience. It took me over a year after I bought "A Thread of Grace" to bring myself to read it.
I just remain committed to the view that anyone who can retain any faith in the human race after actually confronting the kinds of things Russell writes about is a far stronger and more worthwhile participant in the discussion than those who limit themselves strictly to happy books. Not that there's nothing to be said for happy books, and you need to keep one in reserve if you try Russell. I went back and fished out my old dog-eared copy of A Confederacy of Dunces as an antidote. I don't know how many readings of that I'm up to--probably six or so--but it still cracks me up every time.
From the Malaysia Star, May 3rd: (quote) Khoo said the financial institutions were tightening their belts due to the overall reduced prices of cars and taking steps to reduce their risk.
This is why there are nine-year loans, higher interest rates for used-car loans, and the banks valuing used cars according to their own criteria when they should be using an experts opinion.
Nine-year loans are not good because when a owner wants to trade-in the car after four years, the outstanding amount of the loan is more than the market value of the car. (end quote)
A new frontier to investigate for car sellers in the US-9 year loans.
Another credit union bites the dust. This was CA/MN. I'm wondering when the FDIC gets going? No one is going to be able to convince me that Coast Bank is actually solvent.
This is really funny.
As an immigrant when I arrived to the US and shopped for a car everyone talked to me about "x $ per month".
I had no idea what they talk about. Where I come from they used to pay cash for cars.
I realized that credit is used in the US to promote and increase consmuption.
WE now made a full circle: Credit is used to reduce consumption because people simply have too much outstanding balance.
Yal, that is one heck of an observation.
Equity on cars? Are they on crack? Nothing depreciates like a vehicle off the lot. It is insane to consider a car an investment. I kept the last one for 10 years until the underbody rust from these damn upstate NY winters resulted in to many repair costs, too often. And I plan to keep the next one 10 years because it is going to take that long to figure out what needs to be done about gas.
The beauty of it? Over those 10 years I was able to save enough to by the next one in cash. Cars may be expensive these days, but amortized as an expense (not an investment) over 10 years they aren't too bad.
"My pappy always told me that using credit to buy something that depreciated faster than the money repaying the loan was a really, really stupid thing to do."
It's hard to overstate how much money car makers make by selling on credit. When credit is used:
1) Car makers sell a lot more cars to people, at higher prices. (Think: XXX cash back ~OR~ 1.9% APR financing.)
2) Buyers are a lot dumber when they buy on credit. (e.g. buying a useless spoiler $5 piece of plastic from China for $1000) People make smarter buying choices when they have to spend out-of-pocket money.
3) Dealers and car makers make money on the credit side (e.g. GMAC or other in-house financing or kickbacks from banks/credit unions).
FWIW I've come to making buying things used a habit. I have 2 used cars (private party sales), used bicycles, used fridge, microwave, TV, couch, dresser, computers, and much more. I certainly can afford to buy new things, but the money I've saved is astounding (mind you, I do have to look for quality).
Both of the cars I own were 5-6 years old when purchased. (5-6 years seems to be a sweet spot.) Both were ~$30k new, both bought for $10k or less. Both should have at least another 10-12 years on them, and lots of miles. A rough estimate gives ~4k/year depreciation for the first 5 years, ~$1k/year for the next 10.
Even my dog is used (adopted from a shelter). From the breeder, the dog was originally $2000-$2500, I got her from the shelter for $125 in adoption fees, spaying, shots, etc. And I get to "miss" the part where she chews on everything in the house.
It's not that buying new things is such a bad deal. It's just that Americans focus so much on buying stuff new that there's a great latent used stuff market that can save the savvy lots of money.
Let me give you the scoop from the Average Joe,
Everyone bought a much nicer car recently (Escalade and Lexus in my case) and simply put them in the house loan on a refi. This way you could say that the only thing you "owed" on was your house...your cars and credit cards are "paid off". House debt isn't real debt you see.
In the mean time you DTI went to as much as you could afford. No way to buy a new car and take a $500 a month payment on top of the newer bigger house payment. And since the cars were much nicer than you would have afforded otherwise....no need for a new car.
Presto, 30 year loans on cars that are "paid off".
It's gonna be a while until I buy a new car and the same goes for the Joes around me.
Even my dog is used
I did, actually, once encounter a mortgage loan (cash-out) wherein we were paying off the debts associated with a dog-buying binge. We only knew that the credit card balances in question involved dog purchases because we got the tax returns and saw a rather amateurish attempt to create a schedule C "breeding" business in order to write off the vet bills and an astonishing amount of "equipment." Sadly, once the underwriter was done "adjusting" the borrowers' income, they no longer qualified. I don't know what happened to the dogs. Maybe zoiks got one.
Holden Lewis ,
Thank you.
Did I mention that my first car in the US was a Ford Pinto ?
I survived.
We brought auto purchase style financing to the home market and f***ed it up pretty good. 105% financing sounded pretty good.
"Millionaire Next Door" said most popular vehicle of wealty was a used F-150.
Want to have fun? visit a custom home subdivision that is next door to a tract home project. Typically, the tract homes are priced slightly less, but the tract homeowners own more expensive, newer cars. Total payments are similar.
"Did I mention that my first car in the US was a Ford Pinto ?"
A Pinto? Yuk. I once had an AMC Gremlin. Whenever I would go through a large enough puddle, water would get under the distributor cap and the car would stall out. I had to keep a big-gauge wire on hand to jump the car. This was inconvenient.
Everyone bought a much nicer car recently (Escalade and Lexus in my case)
Whenever I'm behind one of those Escapades I mutter "what were these people thinking?" under my breath. Did they think that gas was somehow magically going to go down soon?
And 8 year car loans? Wow. We need some basic financial education in this country. How did we get from "neither a borrower nor a lender be" to "why pay cash when you can borrow?" in just two generations?
BTW: great story on NPR on Ameriquest and all their shady dealing. Stuff like whiting out and replacing numbers on W2s, putting fixed rate paper work on the top of the ARM mortgage paperwork so that the sucker... err.. I mean borrower reads the first couple of pages and thinks they're getting a fixed rate loan.
Man, I decided years ago that I wasn't interested in making new car payments on a 6 year old car. That's what you get with a 6 year note.
"Once the housing correction is behind us and if there is less volatility in oil prices, it should improve. The underlying fundamentals of the industry are still very positive."
Other than that, Mrs. Lincoln, how was the play?
Talked to a buddy of mine that owns a dealership that primarily does commercial leasing, but also sells recent model used cars and specialty vehicles. Even though his typical clients write a check, he has seen more and more customers come in upside down on cars and longer loan periods to get payments down. He said there's a double-whammy working against dealers that work on volume sales (new car dealerships lose money on sales but get their profits from service) like his since cars are made better, lasting longer, so no utility value in buying another car.
OT on LEND -
Gee, you would think since Q1 has been over for 6 weeks, LEND could do more than just project a significant loss. They are up today, probably on the word that they had 350M cash at the end of March...
I think the type of people who read and post here figured out personal finance that works a long time ago. I haven't bought a new car in close to 20 years. I look for a FL car off a 3 year lease from some little old lady. Great value and you know it wasn't driven hard.
Hey, I used to drive a Pinto. They were fine, as long as no one rear-ended you. Of course, then it was Viking funeral time!
I've got 15 years on my Acura. Buy quality, maintain it, and don't stop until you see 200,000 miles.
Consumerism and consumer credit is a byproduct of mass production. The factory owners wanted to keep their plants running constantly for greatest efficiency and profit. That meant upping demand through advertising, credit, and more. Somebody once said that the most subversive thing you could say in America was "Buy a used car!"
arghhhh... halo filtered my post... [the struggling subprime mortgage lender projected a "significant" first-quarter loss]
The pinto was fine. had a great time on it for month traveled all accross westren US and canada.
sold it to a Psychic reader. I kept telling her: You don't have to ask me how the car is doing: YOU SHOULD KNOW.
I love reading the anecdotes and observations of CR posters. But, at the same time my cynical side wonders what percentage of them are true or just false assumptions. For example, whenever I hear the old "credit card at check out" story I'm thinking how do they know it's not a debit card? I suspect CR has a higher accuracy percentage than most blogs. Anyway the numbers back it up...60% are +61 months!?#% Would love to hear a story from Sebastian why people are doing this that doesn't result in credit crunch. I've also heard 70% living paycheck-to-paycheck, are there any reliable stats showing this?
Bill, it's UberNerd entertainment to get horrified by consumer debt. We're just strange that way.
I have no idea where that 70% figure came from--or how people define "paycheck to paycheck." I assume that means no cash or near-cash reserves. It wouldn't surprise me to find that 70% of the population has less than 2 months' reserves in cash; how vulnerable that actually makes most people (who do have somewhat less liquid assets) is a good question.
There is this from Brookings:
Still, while the vast majority of lower-income households are managing credit just fine, there is at the same time a large, relative share of lower-income borrowers who are struggling to manage their debt. This is indicated by at least two credit trends that set lower-income borrowers apart from other borrowers. First, lower-income households are highly leveraged. In fact, about 27 percent of lower-income families are now paying more than 40 percent of their income on debt paymentsa dramatically higher proportion of households compared to those with a higher income. In fact, among the second income quartile, 15 percent of families pay these high debt-to-income ratios;
about 10 percent within the third quartile; and just 3 percent of the top income quartile. With such high debt service obligations, these 27 percent of lower-income borrowers face greater difficulty saving for additional investments and paying bills on time.
Second, lower-income borrowers are much more likely to fall behind on payments compared to higher-income borrowers. In fact, about one out of every three lower-income borrowers (33 percent) reported in 2004 that they have trouble making payments on time. In contrast, between 22 and 25 percent of borrowers in the second and third income quartiles, fell behind on payments; and just 10 percent of borrowers in the top income quartile fell behind on credit payments in 2004. . . .
What's odd about that is the top quartile having 3% with excessive debt service but 10% getting behind on payments. That was also in 2004, when consumer debt rates were cheaper and the housing "wealth effect" was in full bloom. I can only assume that there was a significant portion of the top quintile who either experienced very volatile income--the self-employed group--or whose idea of "discretionary income" did not include the idea of "after the bills are paid."
http://www3.brookings.edu/views/articles/fellowes/20070508.pdf
Bill: Paycheck-to-paycheck in practice often enough means not that people don't technically have money, but all their funds/assets after daily expenditure are illiquid one way or another -- e.g. tied up in investment vehicles where pulling them out comes with a penalty or at an opportunity cost (e.g. having to sell stock, cancel a CD, life insurance policy, or take money from a 401(k)). Sell the second/third car etc.
So they may have reasonably quick access to assets, or can "free up" cash, but would rather prefer not to.
I read a story a while ago about some "Silicon Valley" company whose internet access got severed for a few days, causing them to miss some file transfer to the outsourced payroll vendor, and as a consequence the paychecks were not issued on time. Supposedly the executives were the first to knock on the door asking for an advance. They may just have been clever, but somebody speculated the had all their funds committed and really needed the cash. Actually I'm not sure whether that last part was speculation or reported fact.
cm, I worked for a company who had one of those "direct deposit failure" payroll crashes once. Like the rest of the managers, I got an urgent voice mail from HR telling me that the actual payroll wouldn't hit employee accounts until Monday.
So I went around to the three people who reported to me, and told them about it. I was particularly worried about the newest, youngest, and poorest member of the group, but they were all young and not terribly well paid, so I did offer as any good boss should to float anyone a loan over the weekend who needed it, since my ATM card was good for $500 a day.
I was just in the third such conversation--they all declined the offer--when my boss came running around the cubicle corner to tell me that her boss had just showed up to ask her for a loan, but he needed more than her daily debit card limit, and did I have $100 I could spare until Monday?
Of course the man had enough "invested assets" to buy us all twice over. It nonetheless startled us all quite a bit to think that the only one at risk of bouncing a check over the weekend was in the executive suite.
I want to say the 70% number was self reported via survey. It would be interesting to do some analysis. For example, almost all classes of insurance have seen deductibles chosen by consumers rise. I'm sure some can be attributed to inflation, but how much is based on people simply not being able to afford the premium for a lower deductible. (I'm know it is a bit contradictory. Generally you should assume greater deductible risk if you have higher cash reserves, but in the real world it doesn't work that way.) Lengthening auto terms are definately consistent with cash flow issues.
if you want a new car every 3-4 years, wouldn't it better to lease than buy?
"Analysts and auto manufacturers cite several factors for the sales slide, including high gas prices"
High gas prices prevent people who would otherwise buy a new (possibly more fuel efficient) car from doing so?
Tanta, cm - I appreciate the responses. I think this gives me some more insight into bulls. First they feel that any problem areas (housing) are isolated. Second, consumers are not overburdened they are just investing every possible dollar. If there is a downturn in the market cycle consumers will just stop investing to cover the gap. A bull might become a little bearish if there is a shortfall and enough start cashing out.
So, your only a true bear if you think that consumers without any liquid assets can significantly impact our consumption based economy or if the downturn will outlast their assets.
Is it possible investment returns are so high that it makes more sense to get a 61+ auto loan at a high rate than to cut back your contributions and shorten the loan or even cash out an asset to pay for it in cash?
Guess time will tell the tale, but I've seen enough warning signs that I am no longer a bear...I'm chicken little. Great blog BTW!
Bill,
That kind of analysis has always bothered me to a degree. If we look at the bottom 80% of the public, their invested assets are negligible. If we were to add the NPV of their retirement liability, your typical household would look terrible. For example a 40-year-old making $40,000 a year should have ~$90,000 saved already. The assumes they are putting 10% of their income aside, which we know not to be the case. (I didn't do income or inflation adjustments. Just 80% of income from age 65 to 85 paid out.)
I believe in buy two to three years old, drive into the ground. Of course the 96 Voyager is likely to go south this year. But getting it fixed so far is still cheaper than car payments.
Geez, I'm such a lousy consumer.
Donna,
I am the same way ever since I bought my 1995 Ford Taurus and watched it depreciate by 2/3 in 3 years. I drove it until it reached 193K miles. I liked the car, guess what I am driving now? A 2002 ford Taurus. The sticker was $24K, I bought it in 2005 with 37K miles on it for $7,800. The guy selling it to me said his wife had to have the new Volvo. He was p.o. because he knew they go at least 200K without problems (with the v6). The car is just about the safest American made car.
Yal
Remember my comment about exploiting the consumer like overfishing a fishery. This is exactly what happens without controls. In short, every method was made to extract the consumer dollar without regard to his ability to pay in the future.
Eventually there demand falls because the ability to pay does not exist. The question is how far does it fall and how. Who is hurt?
Could the reduction in sales volume be due to the mix of autos sold? That is, with more Japanese cars being sold, the increased useful life of those cars may actually undermine total volume.
"Once the housing correction is behind us and if there is less volatility in oil prices, it should improve. The underlying fundamentals of the industry are still very positive."
Dummy, those ARE the fundamentals.
Most of my monthly expenses (groceries, etc.) goes on the credit card, which is why I have an instinctive "so what" response to statistics about credit card spending. (Yes, I do pay it off each month.) Of course, while the statistic itself may not be so meaningful because of this sort of behavior, the actual /changes/ in the statistic should have meaning.
obCars: If I'm offered 0% financing on a car, I'm going to take the longest loan period possible and put my cash in an altogether different sort of vehicle. Of course, my '92 has under 90K miles, so it still has another decade or so to run.
"if you want a new car every 3-4 years, wouldn't it better to lease than buy?"
Depends on why you want a new car every 3-4 years. If it's because you drive 25-30,000 miles a year, you're going to have trouble finding someone to write the lease.
I'm part of my own problem, I buy new when I don't have the cash to buy a good resale.
WIthout the Bush SUV incentive, I might have considered something smaller, but still big enough to push the Prius's out of the way.
Speaking of automakers, I'm liking the private purchase of Chrysler.
I'm thinking we're looking at a major reset of the US auto making model, GM/Ford will have to follow suit and jettison the long term union benefits that you are buying along with the new car to be world wide competitive.
Hi, Tanta: Nothing to add about car loans, but I read The Sparrow two years ago and still haven't gotten over it, either. I was just pondering it once again recently. One of these days I'll manage to read the sequel.
Sippn,
If the the health benefits were covered under a national policy you might find the cars more competitive.
Yes, but you have to do something with the $4-5K tail per car of pension/med benefits for former employees, what the automakers and unions negotiated doomed the current model.
On cars and demand... there are two major sub-groups or factors of demand:
1) Need to buy - they need transportation, period.
2) Want to buy - a car is part of their 'persona'.
In almost all cases people are a mix of some of both... some WAY more one type than the other but still some of both. Maybe it is better to think of them as 'dimensions'... on a chart (X-Y)... with some folks much closer to one axis than the other.
As for the first dimension (need)... a great predictor of the demand from this group is the 'age of the rolling stock'... the number & age distribution of vehicles already out there on the road.
If there are a lot of newer vehicles in good shape out-n-bout... then there will be suppressed demand for new buys from this group... they drive the wheels off.
On the other hand if the majority of cars are really old & worn out at least some of these folks will be forced to buy new even if they don't want to... And even if tight, they will find a way to finance them... in most of America you can't NOT have a car.
As for the second factor... 'want'... these are the folks who look to find an excuse to buy a new car... frequently based on 'style' or 'trend'. Think about when Mini-van's were first out, or the evolution from rough backwoods 4X4 to SUV or Mini-Coopers & Prius'... there were a lot of sales due to nothing more than the 'novelty'.
For this second demand factor to have an influence there needs to be a new must have product out there.
The bad news in both (1) and (2) above is that conditions in neither is indicating a large increase in automotive demand...
The average car on the road is fairly new (relative to vehicle life expectancy) AND there really isn't a super hot must have product out there.
I do not look for significantly increased auto sales for at least a couple years (until the cars on the road wear out or a new 'must have' trend is established).
That was the sales & marketing half of dryfly talking...
Any opinions on the theory that Americans buying more Japanese cars reduces overall sales volume due the better longevity?
Any opinions on the theory that Americans buying more Japanese cars reduces overall sales volume due the better longevity?
I think that effects the 'need' to buy but not the 'want' to buy. If there was another 'must buy' genre of vehicle released... folks would hock their kids to get one even if their current vehicle was just fine... its happened before.
Back when the 'SUV' first came out (not off-road 4X4's - they'd been around for decades as every rural guy like me knows)... The timing was perfect for them... gas was cheap and interest rates fairly low... Result was gazillions of them sold even as we crushed a lot of cars that were still drivable.
But a lot of people who didn't even know what 'off-road' was just HAD to have one... and every OEM, domestic & foreign, produced one or more models.
Now SUVs are a drug on the market... and so stripped down from their original 'off-road' roots as to be a generic drug at that. Couple the lack of excitement with tighter money, long finance periods and better reliability of the existing rolling stock and it should come as no surprise that sales are 'off'.
Any opinions on the theory that Americans buying more Japanese cars reduces overall sales volume due the better longevity?
My opinion is that there is a false premise, namely that Japanese cars last longer than American or European cars. If one is going to subscribe to the premise - and I don't - you would see a reduction in replacement part purchases.
The key factor is average miles driven per year. Total miles goes up about 2% per year. ( http://www.gggc.state.pa.us/plan0607/cwp/view.asp?a=3&q=154297 ) The old standard used to be that a cars functional life was 10 years or 100,000 miles. Increased inefficiency has typically resulted in more miles being driven rather than actual conservation. As with any durable good, there will be some flux when useful life will be declared. I would speculate that we have been on the earlier end due to easy credit availability and a deflationary auto environment. I think we are seeing a return to normalcy. I additionally believe that we could see later shift in useful life as liquidity deteriorates.
Yes, even I talked myself into a Ford Explorer back in 1994. I really only go off-road with my boots or mountain bike. I took the Ford off road 3-4 times, just to prove it could go off road. I did notice the 4 wheel drive was almost as good in the snow as front wheel drive.
Now I'm back to beloved Accords, but then I'm an accountant.
Increased efficiency that is.
MZ Forrest,
I guess The New Republic agrees with you, but with a nod to the Japanese:
"Thanks in part to competition from Japanese car manufacturers, American cars now last longer than ever before. Today it's not at all unusual for a car to last upwards of 200,000 miles. Americans have responded by keeping their cars longer. In 1989 the average age of cars in the United States was 6.5 years. By 2000, despite the economic boom of the late 1990s and the surge in demand for brand new SUVs, the average age had risen to 8.3 years."
Interesting article The Page You Are Looking For May Have Moved | The New Republic
My opinion is that there is a false premise, namely that Japanese cars last longer than American or European cars. If one is going to subscribe to the premise - and I don't - you would see a reduction in replacement part purchases.
I work with automotive suppliers & their engineers. I don't have data available but have been told on numerous occasions by engineers I call on that Japanese cars DO generally last longer... and it has to do with adherence to an engineering 'philosophy' called the Taguchi Loss Function.
Both domestics & Japanese companies do this... the Japanese are obsessed with it. I been involved with testing at both, the difference is subtle but important.
Result is that even if two vehicles have identical 'initial quality' as measured by defects per vehicle coming off the line... the vehicle with better 'targeting to nominal'... the central theme in Taguchi Loss Function... will have better long term reliability... assuming of course the initial design was right (the target is where you want it to be... that's a whole other topic).
Slowing new car sales are one of the best leading indicators of recessions. I've been waiting to hear this shoe...
Anyone taking out a 96 month car loan should just be shot.
If you can't buy the ride you want with 20% and a 5 year loan you don't deserve to drive it.
Dryfly,
I would distinguish between ordinary and catastrophic failure. The two most common cat failures are engine and transmission. These failures are rare across the board. Later in vehicle life, you will have failures exceeding salvage value. The biggest change I have seen is electrical component dependency. Any vehicle over 8 years old I would be hesitant to buy because electronics failures are more dependent upon time rather than use. My experience on the retail end is that 8 years and 130,000 miles is where you start assuming more significant risks. I no longer work on the retail end.
Fred,
I would not recommend a loan exceeding 36 months on a vehicles purchase. Your typical buyers will want to change vehicles at 42 months. On a 60 month note, one is just too far upside down to facilitate that. If you can't afford a 36 month note, lease.
Someone made a comment about not being able to get a high mileage lease. You can get any kind of lease that you want. You may have to go to a dealership that specializes in high mileage leases, but there is a market. I would advise any buyer to know the lease cost of a vehicle before purchase. If a properly formed lease is too expensive for you, then the vehicle is too expensive.
I was sitting in Barnes and Noble last year when two 20something girls walked by, and one was saying that she and hubby would buy a new car, drive it until the warranty expired, then buy another new car. Jaded as I am, I had trouble believing I'd heard that bit of arrogance correctly.
Long-term financing for cars? Heck, out here in SoCal they finance their rims!
MZ Forest - I sell parts into both the electrical & mechanical end of the biz... mostly to tier one & tier two.
I personally wouldn't worry much about modern auto-electrical systems... they are pricey to buy but are pretty easy to swap out & exchange... sensors, engine computers, etc. Some of the connectors & wire harnesses can be a problem but typically not terrible.
Catastrophic failures definitely are the killer... engine & trany. But the last few vehicles I owned got 250K out of them and never an engine or a trany rebuild.
The key thing about the Taguchi Loss Function is if the designer designs it right (calculates the right 'target') and the mfgr hits that target consistently... there will be FAR fewer catastrophic failures...
If on the other hand they are cheating toward either the UCL or LCL... then the part/assembly is well on the way toward failure even before it leaves the assembly line. A little wear and they are there.
In a lot of cases a part failure won't lead to a catastrophic system failure (due to redundancy or a carefully thought out FMEA)... but you can't always count on that.
And anyway, given 15K-20K parts in a typical vehicle... the more of them that hit 'dead nuts' in the middle of their tolerance range, the less likely you have a catastrophic event and the more likely the vehicle will last.
Sebastion will be speaking at the Money Show in Vegas this week, seats are still available.
I may drive out in my '79 Eldorado, with 400,00 miles on-it the engine is finally broken-in!
dryfly,
It's nice to hear commentary on the other end of the spectrum. My old '94 Accord had the instrument cluster go bad. I guess it was common in that model year. That was $300 or $600. Anyhow, I think we are pretty much in agreement.
Since you work that end, the last estimate I heard was that if you added the retail cost of every part in a modern car, the value would come to around $80,000. Have you heard that stat or do you have a different one?
Test- driving is an essential part of car buying process. Always take the car for at least a 3-4 km test drive. Drive the car in different types of roads and observe your comfort levels during the drive. Make sure the engine starts rightly, the steering is not vibrating and there is no unusual sounds and vibrations. Vibrating steering means a front end trouble. Apply brakes properly at the speed of about 30-50 km to check that the car stops in a straight line. Check that the speedometer and mileage recorder is working. Clutch should be smooth in its operation. When releasing the clutch, the car should move gradually without uneven jerks. Try each gear and note whether the car jumps out of gear. At the end of the test-drive, park the car on clean ground and look for oil leaks from the engine or gearbox.
edwina
Car Loans