Lots Of Car-Buyers Are Now $10,000+ In Debt On Old Loans: Report

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Here are some fun facts for you to think about late at night when you can’t sleep: In the U.S., private-sector wages rose about 4% to 5% annually during the pandemic, on average. That trend is projected to cool to a more “normal” 3%-4% this year, returning to pre-pandemic levels. In the same pandemic period, Bloomberg reported this week, the cost of new cars rose 20% and used cars went up a whopping 37%, thanks to inflation, weird supply issues, dealer markups and other factors.

It’s no wonder, then, that people are struggling to make their car payments. Moreover, given the paltry supply of cars and their commensurate price increase, the practice of rolling in negative equity—when you combine what you still owed on your trade-in with a new loan of some sort—has been skyrocketing as of late.

Dealers who spoke to the business-focused news outlet say they’ve seen an uptick in people owing $10,000 or more on their trade-ins, taking out loans for seven years or more and stretching their budgets beyond what’s comfortable — all in order to deal with sky-high new and used car prices.

That Bloomberg story opens with an anecdote from a couple who needed a bigger vehicle after their fourth baby was born, but they still owed money on their two current cars. So they did this instead, but they don’t have a good feeling about it:

The couple proposed an unusual two-for-one deal with an Atlanta-area auto dealer in 2020: trading in both of their vehicles so they could afford a three-row Ford Explorer. Their total loan after factoring in negative equity, a service contract, fees and other costs ballooned to $66,000 on the $49,000 Explorer.

Despite a lot of progress on the debt, he feels uneasy. “I don’t want to be paying interest on cars that I don’t even have anymore.”

“The cars are too damn expensive” is a trend we’ve been covering for a while now. You probably know the issues, and you’ve possibly even had to deal with some version of this yourself. It’s best to keep a vehicle as long as you can, maintain it, then pay it off completely, but as with that couple above, life sometimes throws curveballs your way. And the longer your loan term, the longer you’re on the hook for a car if something unexpected happens to you and your family.

My biggest piece of car-buying advice always used to be “Don’t ever buy above your budget,” meaning that above all else you should make sure you get something you can actually afford. But let’s be real: That’s gotten pretty squirrely in recent years, with new (and then used) car prices being all over the map. Sometimes you have more kids and need something bigger. Sometimes your current ride has too many problems you’re sick of paying to fix, and it’s time to move on. Stuff happens, is what I’m saying. Lately, it’s just not that easy to figure all this out.

Amid all this Economic Uncertainty® and rampant layoffs across multiple sectors, people’s financial situations can change rapidly, but deep debt isn’t going anywhere. In fact, it’s getting worse, and those high prices are quite the trap:

In January, severely delinquent auto loans hit their highest rate since 2006, based on Cox Automotive data.

One wild card for consumers is the fluctuation in used-car values. After a historic climb during the pandemic, values fell 13% from their peaks as of January, but suddenly climbed again in February, according to the Manheim Used Vehicle Value Index. If they fall further, anyone who bought at the top of the market will fall further into the trap of negative equity.

So what actual advice can I offer people right now, who may be facing this situation? I’m not so sure. It’s a bizarre car market and I don’t think it will normalize all that much in 2023, and again, I try not to judge people’s situations when our systems are designed to trap users in debt.

However, I can say that generally, negative equity should almost always be avoided, especially if it’s anything more than a few thousand dollars (and even then we’d probably agree that isn’t great.) If you can hold off on making a car purchase you really don’t need, or want to pay down what you have in the meantime, that’s the best path. And as always, start the car-buying process with what you can actually afford and work back from there.

At least these increasingly automated cars can’t repossess themselves yet if buyers fall behind on payments. Oh, wait. Shit.

What’s your car-buying advice to your friends, family and associates in 2023? If you’re reading this site, I bet you’ve been asked that. Share your wisdom with the Autopian crowd, if you’re so inclined.

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106 thoughts on “Lots Of Car-Buyers Are Now $10,000+ In Debt On Old Loans: Report

  1. I’ve had a lot of conversations with people I know about car-buying, especially people looking for creative answers to the current market situation.

    *My response: Either hold on to what you have, and be willing to make repairs even if it exceeds the value of your vehicle, or replace it with something reasonable that meets all of your needs, with, and this is important, the understanding that you made an awful deal and you need to hold onto this car for a decade. I already know two people who have bought a car in this environment, decided it was a bad car choice, and replaced it. Engaging in this market more than once for the purpose of buying a family or commuter car is insanity.

    *For regular people without the means to blow 40k on a car.

  2. That’s just crazy…that’s how much my car cost, been paid off for a while & will last a long time! (Knowing the car & how good a shape it’s in, & keeping it that way)

  3. None of this strikes me as new. I sold cars in the late 1980s and trading in two cars for one new one happened a lot. The customers always seemed relieved, like they were getting away with something. Even on regular deals I saw a ton of people who grossed $1000 a month happily accept a $400 monthly payment. FWIW, Maximas, 300ZXs, and Pathfinders were the major money makers.

  4. Well that’s easy for you to say I guess.
    Have you ever been there Taco Truck Dave?
    Just getting by financially when suddenly someone gets pregnant, again?
    Do you ever stop to think if your dad felt the same way when you came along?
    Oops, but there you are.
    Filled with vehement, one sided, unlearned opinions about a stranger living a life you will never fully comprehend.
    Contraceptives weren’t always as effective as they are now.
    How can you seriously give this stranger shit to the point that you believe his kids shouldn’t have ever been born based on your tiny understanding of his financial motivations when buying a car?
    Maybe your dad should have doubled up on the rubbers.

    1. Your point about contraceptives not always being as effective is moot because this did not happen in 1947, it happened in 2020 which, if you’re keeping score is before the Supreme Court decided to abandon all pretense of neutral justice and kill off Roe because the Christian Taliban told them to. Multiple forms of contraception existed which was close to 100% effective when used properly (hint, doubling up on rubbers reduces their effectiveness) and if they’d managed to beat the nearly unbeatable odds, they could have terminated the pregnancy.

      Beyond that no one, not even people who decided to overpopulate the world with 4 of them, *needs* an SUV because they have children. They certainly didn’t need a $49,000 SUV – even as insane as used car prices are now, they could have gotten one much cheaper if they hadn’t insisted on getting a brand new one (which they must have for $49,000 since that’s how much the Limited edition, which is not the base model, goes for). They wanted it, and they chose to go further in hock to get it. That’s on them.

      They need to stop making babies, and they need a financial life coach because they also need to stop making terrible financial decisions. The last bit of that quote brought it home – the part where he doesn’t want to pay interest on vehicles he doesn’t even own. Then stop being upside down on car loans, and stop replacing two perfectly good vehicles with one more expensive one that makes you even more upside down.

      These are not people who are upside down because they have no money, these are people who are upside down because they’re more interested in coming home with new shiny things than they are in being financially responsible by exercising restraint. I don’t have kids and my wife and I make a very good income and we still don’t own a $50,000 vehicle because we make financially sane choices. Absolutely nothing wrong with pointing out that these people are being stupid, because there is no scenario in which they aren’t.

    2. I mean…I get it but this ignores the sacrifices everyone else makes to not be that guy. My wife and I are both engineers, and make good money, but are seriously considering stopping at one kid, in part because of the financial implications of giving her a good future/paying for her college. If we do have a second, then I’m getting snipped as soon as we feel comfortable there will be no complications. So no, we really don’t have to feel sorry for someone who ‘accidentally’ has four kids.

      Also, they ‘need’ a brand new truck? We could afford new Mercedes but spent $32k each for our cars, which we expect to get at least 10 and 15 years of service from. My truck was 5 years old when I bought it because fuck a $50k pickup. This dude sold two cars he was underwater on to buy a bigger, very nice car. And I’m supposed to feel bad for the guy who dropped 60% more than me on his ride, before accounting for an additional 75% in fees?

      The system might be rigged but you don’t have to choose to partake. This dude chose poorly and pretending it’s the systems fault is just normalizing stupid behavior, further propagating the cycle of debt. He has to make decent money if they are letting him take on a loan this big and this far underwater. He just makes shit decisions and society needs to recognize this before our kids think it’s acceptable and do the same thing.

      1. Have you ever watched Idiocracy? I wouldn’t stress that much about paying for a first class ticket to privilege for your kids. I paid for college myself, paid off my student loans, have four kids, and will be able to help them with college, etc. It’s not easy to beat the effective caste system in America, but it can be done. If the Explorer owner just owns the car for a decade and focuses on saving then they’ll be ok. It’s more of a question of is this a one time thing or a pattern. Also, I don’t know how to not participate in the system. From what I understand, society frowns upon people living off the land. Finally, congratulations on your success! It sounds like you’ve done well in life, which is a good thing since there’s so many pitfalls that can trip people up.

        1. It’s not even a first class ticket I’m discussing-just making sure basic needs are met, we live in an area with good public schools, and have some money set aside to get them through whatever technical school or reasonable public university suits their interest. I earnestly disagree with the idea that a middle class lifestyle is now ‘privilege’, particularly as people seem to think it devalues everyone else’s hard work and sacrifices. Being responsible for your kids is supposed to be the norm. Part of that is being financially responsible, living within your means, and saving money on a regular basis.

          Regarding the system, I meant nobody is forcing you to take on a ton of debt. My credit card company will literally had me a check for 2-3% of most stuff I buy because I pay it off every month, whereas other people will buy shit they don’t need and end up paying 25% compound interest. Yeah some people use credit cards for bare essentials and are struggling, but a lot is self induced (or triggered because they never bothered to save money when they had it). This dude falls into the latter category and as such shouldn’t be pitied. This kind of thought process

          1. The household income while I was growing up was under the federal poverty line so a middle class lifestyle would have been quite luxurious from my perspective. As a result, I took on a lot of risk with credit cards, student loans, car loans, and mortgages to bet on myself and my family. Thank goodness it all worked out, but there were certainly times when people, understandably so, questioned whether the risk was a good idea. I do view my kids as being privileged though, especially compared to how life was for me. It was a real slog to start a race so far back from everyone else, which makes my sympathetic to others who are in the same position.

            In general, one of the problems that I see today is that there really isn’t much of a middle class anymore since you’re either educated and wealthy or you’re not. I do applaud your prudent decision making. That’s how I live now that I can afford to. It’s just that sometimes people take some crazy risks in the pursuit of life, liberty, and happiness.

            1. And that’s awesome you were able to do so. Unfortunately a lot of socioeconomic factors are stacked against you when your in an area primarily below the poverty line, so I get the issue. You used those resources to invest in yourself, setting you up for a lifetime of benefits. That’s certainly different than taking out $200k in loans for a degree that doesn’t increase earnings potential, putting expensive dinners or trips on credit cards, or buying a car you don’t need/can’t afford. The people in that story likely meet your definition of middle class but are at risk of bankruptcy due to living outside their means.

              I do disagree though that you need an education to be wealthy. Many tradesmen clear six figures every year-you need to learn a skill rather than sticking with manual labor or something a teenager could do. it’ll probably take me 15 years to match the lifetime earnings of my brother who’s a firefighter. He’ll never be rich but will have a damn good life, and a decent pension by 50. Our society has put so much emphasis on education as the key to the American dream that we forget about technical skills.

    3. Thank you. The amount of thumb ups for what I’m assuming is a tongue in cheek joke about having kids is disheartening. I’m not defending anyone rolling negative equity into a vehicle loan but there doesn’t seem to be enough information in the article to pass judgement. Life can change fast in unexpected ways.

    4. Trust me i have had to make some tough decisions. Most of my car purchases used cheap econoboxes i didnt like but what i could afford. Places i have lived not the safest or most beautiful. Heck i saw a gun battle from my deck in Houston. When i bought my houses rundown decent neighborhoods do the work myself in my spare time while living there. I follow my own advice on children. I wrap and make sure my partner is on a low fertile end of her cycle. As for my dad using a rubber, which one? The unnamed idiot who got some unnamed female pregnant or my real parents who adopted me? See from birth I was all but reuse and recycle.

    5. Forget the comment below. I would like to apologize for those who were offended. Because yes the comment was in jest it was also meant to be instructional. I could have written a dull economic treatise about the unwise decision of the article. But 2 sentences in everyone would have scrolled past the math and learned nothing. An old Isaac Asimov story once opined to make education stick make it memorable. Now the 44 stars does show it stuck with many readers. Pro and Anti Condom alike. Of our educational system wont teach people how to properly make life changing decisions we need to help people out. Yes to late for the family in the Explorer Story but just think how many people followed this post who may be better off learning the different options so many learned Auropians here have posted. I could not have imagined the different stories that my post would inspire but if we get people thinking before they make these mistakes isnt it worthwhile?

  5. I just had to buy a used car because of a $4000 transmission repair estimate on my wife’s car (still runs but who knows how long).
    I set my search parameters at $5000 and 150,000 miles max. Found an old reliable beater that’s cheap and easy to work on for under $4000.
    $66,000 for an Explorer?! I have zero sympathy for these types.
    I don’t understand the need a bigger car for more kids argument. You have four kids and two cars, that math works just fine in my head. So you can’t all pile in one vehicle on the rare occasion that it’s actually necessary.
    So what?
    My mother had seven kids and a Chevy Malibu (sedan). Not everyone needed to get there together, and when we did we borrowed or roped in friends/family/neighbors with cars and filled their seats with our beggar butts.
    Or we were stuck sitting out that activity, waiting at home unless we could pedal a bike, walk or catch a bus there.
    That sad story of the stupid parents spending more than they can is a classic example of confusing the words “want” and “need”.

    My car buying advice:
    Don’t confuse want with need.
    Learn to sacrifice a little.
    Don’t ever let your ego get its hands on your checkbook.

    1. While these people clearly have made some very dumb decisions, applying an ancient standard of “all seven of us just pulled into the Malibu” isn’t helpful or honestly, relevant. If this family is like any other family I know, jobs and other obligations force one parent to drive all the kids around at one time.

      1. And if they had to get a new car because of the 4th kid, it sounds likely they were already putting the family of 5 in a 5-passenger/2-row vehicle.

        The survivorship bias when people get judgey about people getting a larger car when they have a kid instead of making do with whatever compact car they had is tiring. There are more recommendations and laws on kids in car seats and safety restraints in general than there were 40 years ago, and the car seats themselves seem to be larger and larger.

        The community aspect of hitching a ride from a neighbor or taking a bus is great, but not realistic for a lot of areas, even suburban ones. But that’s a different conversation.

  6. Eeesh, tough crowd here. Kinda giving ‘old site’ vibes.

    People don’t always make the best decisions, no disagreement there. Not defending the actions of the guy in the article, I certainly wouldn’t have done as he did (and we don’t know the whole story but that runs the risk of more whataboutisms). But remove that guy’s situation from it and think about the blanket “advice”…

    I took a look in my area, a $15-25k Odyssey or Sienna has 80k miles or more, the main difference in that range being the years. Even a used Dodge Grand Caravan is only a couple grand less, maybe 60-70k miles, and I think most here are less inclined to trust the Chrysler van at that age.

    So you’re looking at a vehicle that will need repairs at some point. Even just the routine stuff – tires or brakes at some point, tune up ~100k, on the Honda you’re looking at a timing belt job within the next couple years. There’s peace of mind knowing you have a warranty for any parts failures, and a few years and many thousand miles from any major maintenance items. Especially if you’re not as mechanically inclined or have the know-how to do it as many folks here, and/or don’t have the time for both working on a car or for the downtime without the car while it’s getting repaired.

    The guy in the article doesn’t sound broke, but even for someone in a good position, the idea of the new vehicle can certainly sound more secure when you’re staring down a hefty loan payment.

    1. As someone who literally this morning spent $1400 on a belt, pump, brake, and oil job: a $20k car + an extra $1500/year in repairs is still WAY WAY cheaper than a $66k car with repairs covered by warranty, even before you figure depreciation.

      I’ve never bought a car new, and never will, even though I’m now in the enviable position to buy any car i would want save from wacky exotics.

      Buying new is almost always dumb unless the loan costs less than the yield on your cash and used models are hard to come by. Especially with CPO programs everywhere.

      1. Again – speaking more broadly than that guys specific situation and vehicle – and it’s not merely about the net cost. If you’re already feeling squeezed, paying more on top of a payment inflated by negative equity plus the time factor of being without your vehicle while the repairs get done. (That’s a nuisance to juggle even for my under warranty vehicle getting routine maintenance taken care of, trying to arrange transport.)

        Plus the banks are more favorable to a loan with negative equity rolled over on a new car as mentioned in these comments. I’ve seen people go in to dealers on a used car to keep payments low and get moved to a newer car because it’s better for getting approved on. “Why are you going to a dealer? Buy a used car on Craigslist!!” ok, that’s more time to search for a vehicle, go see it, drive it, hopefully get it checked out if they’re smart.

        Yeah, people make bad decisions or wind up in crappy decisions. It’s easy to fall into those and harder to break out of.

        And – for many makes that hold their value (Honda, Toyota, Subaru) so that buying a lightly used one would be more expensive than a new one – that’s long been the case and only worsened for all cars now with the lack of supply for new cars in the current market. Buying *any* car now, new or used, means you’re potentially screwing yourself down the line.

        I will add, if we do look at this guy’s situation, if he needed a bigger car after having a 4th kid, they were probably getting by with 3 kids in a 5-seat vehicle. He probably would have been better off buying something with 3 rows the last go-round, he’d still be upside down but at least wouldn’t have to repeat the cycle again now.

  7. If you just had a fourth kid, you’re in the danger zone for a fifth kid. Does an Exploder even have room for a stroller with 4 kids?

    When I got my 5th kid in a car seat – I skipped straight to the Mega Van, and there were options at the time for 10 passengers in the $33k range brand new.

    Now that’s not the case any more, but it’s a struggle to travel with an Exploder and 4 kids. Plan for what you need tomorrow, not what you need today.

  8. I’m sure I get trashed for this opinion, but at this point in the history of humankind, I question the sanity and intelligence of *anyone* who bears an offspring. Another person who will be barely educated by a failed public school system, if they choose to go to college will be saddled by a lifetime of debt. I could go on, but I’m depressing myself.

    1. Having children has always been a rough proposition for the masses. People look at prior eras with rose-colored glasses; affording to raise a family has never been simple.

  9. I will start by saying I do not condone what the buyers in question did here. Rolling over negative equity is not a wise move in almost any conceivable circumstance.

    With that said, the oft-repeated advice to “just buy something used and cheap” is not a panacea either. The ability to turn a wrench, the ability to diagnose a noise, smell, or vibration, the space to do work, the ability to call off a day of work if your car is broken, and many other things that we on enthusiast blogs often take for granted are not easy or even possible for many people. There really are a lot of folks for whom the certainty of a monthly payment in exchange for a reliable new vehicle with a warranty makes a lot of sense.

    1. I’m going to agree with you, passionately on this.

      A lot of folks have perpetuated the idea that used is always financially the smarter choice. For someone without the skills to do their own maintenance, used is actually a bet placed on the maintenance done by others (risky), and reliability of the car in general (also a risk). I’ve gotten into this debate with a lot of people, especially the “why buy a new Corolla when you can buy a way nicer ____ used.” It drives me nuts. That new Corolla has a warranty! The first 5 years of car ownership (should) only involve basic maintenance!

      When someone has 25k (likely mostly in borrowing) to spend on a car, and they get pushed towards a 25k used car instead of a new one, they’re going to inevitably pass on the years of light maintenance for the potential horrors of taking the same 5 year loan on something that’s already 5 years old.

      5 years ago when every vehicle that came off lease was 10k cheaper than new, used above all else was at least a better argument. Now that sacrificing the first 3-5 trouble free years gets you a 2k off coupon, it does not.

      1. I completely agree.

        I do work myself, to the point where my brother and I post DIYs to help others fix stuff. Most of my cars are used with lots of miles and I keep them running in perfect shape.

        I think if you cannot/will not work on cars yourself, you should not buy used.
        There are cheap brand new cars with warranties.
        Whenever I see a Mitsubishi matrix, the cheapest new car in America, and see its little 15 inch wheels and tires, I’m reminded that whoever bought that car is not an idiot. 10 year 100k mile warranty! Dirt cheap brake and tire replacements! Perfectly viable in winter with winter tires!
        When I see older cars, whether it’s an explorer or an X5 or whatever, that is old as hell and find out they don’t work on it themselves, I just facepalm. It’s a good way to guarantee they will be poor for life.

    2. I agree that it is reasonable to have a monthly payment to buy a reliable car. I am a car enthusiast, but I suck at fixing cars. If my vehicle breaks, it goes to a mechanic.

      I am going to disagree that a warranty is necessary or that it is worth paying more to buy a new car or CPO/newer used car with a warranty. A 5 year old Honda or Toyota with low/moderate miles will not have warranty, but is likely to be trouble-free (or close to it) for years. Vehicles don’t stop being reliable when the warranty expires. Plus, with a lower down payment and monthly payment, you can save the difference in an emergency fund which will help cover any repairs that may be necessary.

      1. The trouble with this line of thinking is that everyone knows it by now. There’s simply not a lot of savings vs. new in a 5 year old Toyota anymore. My wife’s Sienna is almost 4 years old and is worth ~85-90% of what we paid new. So where’s the advantage?

        1. I agree that there is no advantage to buying used if it doesn’t save much money. I was in the same situation when I bought a Wrangler in 2012. New was $28K; 3 year old used with 40,000 miles was around $25K. I bought the new one, obviously. The new vs used discussion is more nuanced than it was in the past. It depends on the vehicle (my mother bought a 3 year old E Class at a 60% discount compared to new), and it also depends on how you will use this vehicle (someone who drives 5,000 miles a year and lives in an area with decent public transportation has different needs than someone who lives in a rural area and drives 30,000 miles per year). Also, it is possible to get a nearly trouble free 10 year old car today. A 5 year old Sienna might not be a good deal, but a 10 year old Sienna could be a great deal depending on your transportation needs.

          I still think warranties are highly overrated, though.

  10. As an european who recently moved to the USA, I find the world of US (predatory) car loans strangely fascinating.
    I cannot wrap my mind around the thought process of people converting TWO underwater loans for an even bigger loan that is guaranteed to be underwater as soon as they leave the dealership.

    FFS, If you need a bigger car, just buy a used mini-van.

    I am a certified gear-head and am I constantly drooling over new cars, yet I am driving older cars way below my paygrade.
    At least I can confidently say that I am not compromising my kid’s future just trying to keep up with the Joneses…

    1. Yeah, cars here in the States are more than just transportation, aren’t they…they’re a talisman of the American dream to a lot of people (not just us, I mean) – and if there’s one thing that can cause us Americans to act emotionally when we should act rationally, it’s that. It’s perhaps simultaneously one of the worst and best things about the USA.

      1. I’ve driven past areas in the U.S. where the people were literally living in a truck camper set unevenly on the ground and there was a jacked-up 4×4 and a Cadillac in the driveway. I’ve seen people locally that were renting a cheap 1 bedroom apartment and driving a Corvette. Way too many people try to make statements with their cars.

  11. The automotive news story about this topic had this eye popper:

    Shawna Ballou, a 45-year-old mother of five from Tacoma, Washington, feels “trapped” in her Ford Escape. Four years ago, she traded in a Chevy Malibu and bought a six-year-old Escape for around $16,000. After including the negative equity on her trade, taxes and other fees, she financed more than $25,000 and is paying it off over seven years.

    It is crazy to me how many people out there just say ok to big negative equity numbers just because they want something new. I’ve had a couple times in my life where I went to buy a new car, got told I was upside down on my trade and just decided that I didn’t need the new car that bad, and waited till the math was in my favor.

    1. So she sold a late-aughts Malibu, arguably the best one GM put out lately, for a 2012-13 Escape. That’s a downward trade for sure. Less space and the same or worse fuel economy. Especially in Washington, the land that rust forgot!

  12. Was the customer laying the debt onto a much lower-interest rate loan? Doubtful in this market, but it could make sense if you had a couple of high-interest loans on the old vehicles, and you got 0% on the new loan, you roll those old loans from 14% in the old loan into the 0% loan…and actually save a ton of money on interest. You still have debt, but is at 0%.

  13. As a Dad, I can appreciate the want of a larger family, even if it’s not my personal choice to have 4 children. With that said, smarter financial planning says that a used minivan is what he needs and not a likely new Explorer.

    1. I am one of 4. My mother had a long commute, so she drove a Ford Escort. The family hauler was a $500 Chev Caprice station wagon. The folks in the anecdote would be fine with a cheap van and less debt.

  14. My advice to friends and family who ask is the typical Dave Ramsey method of saving up and paying cash for a slightly used vehicle.

    But given how that advice always tended to get bashed any time someone brought it up on the old site I’ll keep it to myself.

    1. Paying cash is obviously good advice. I also think the 20-3-8 rule is reasonable, though (20% down; 3 year loan; payment no more than 8% of your monthly gross income). Anything is better than 8 year loans/negative equity bullshit that people are using today.

    2. The vast majority of people can’t afford to pay cash for a car that actually runs. People are stuck in cycles of debt and minimum wage jobs with no benefits, rising rents and tuition, and inflation in general.

      Maybe you get bashed because it’s not realistic nor is it charitable to assume someone is morally or financially defective when they spend every dollar they make on food and shelter and can’t save $50 a month, much less $10k every 5-10 years for a new car.

    3. The Ramsey advice is too restrictive for those who could actually follow it and too often out of reach and preachy for those whom it would help.

      A “slightly used” vehicle these days is at least $20,000, can we agree on that?

      If you have the financial means and discipline to save $20,000 or more in cash, you don’t need to be petrified of debt and can almost surely make better use of your money than writing a check for a car.

      If you’re so bad with money or so poor that you actually need to follow the extreme no-debt plan, asking you to save $20,000 might as well be asking you to save $20,000,000. It just isn’t going to happen.

  15. Same as it was last year: don’t unless it’s absolutely necessary.

    We’re climbing the steep parts of the S curve of EV adoption. Those are way cheaper to run. With a lot of competitive models coming next year holding onto an already depreciated ICE vehicle for a cheaper to run vehicle is a great idea. Well, if you are planning on buying a new car anyhow.

    1. False. You don’t need to spend $35,000 on a minivan. A brief search of the interwebs shows numerous 5 year old Honda Odysseys in good condition for $15,000 – $20,000. These are perfectly adequate and will be reliable transportation for years to come.

      I get tired of hearing sob stories about people getting thousands of dollars in debt because they “needed” a new $50,000 vehicle. For the vast majority of people, the most expensive vehicle you truly need would be around $10,000. Anything beyond that is a luxury. People need to stop buying cars they can’t afford!!! The couple that bought the Explorer made a dumb decision and someone needs to tell them that.

      1. If buying new or late model used, that is. Chrysler has money back on the hoods of Pacificas right now. Or if AWD is wanted, there are 4-5 year old Siennas out there in that price range.

        1. A $35K minivan would have been a better idea, but it still wouldn’t have been a great decision given they owe a lot of money on the vehicles they traded in. They clearly don’t have money for a luxury purchase like a brand new car.

          I don’t understand why people think they need to buy a new car instead of a nice used car (I see nothing wrong with buying a new car if you can actually afford one, though). Almost all of us are driving a used car at this time, even if we bought that vehicle new in the past. I bought a new truck in 2021, but that “new” truck is now a 2 year old used truck with 40,000 miles. If my current “used” truck is adequate but I needed a different vehicle due to changing life circumstances, it would be a lateral move to buy a 2-3 year old used vehicle with 40,000 that met my needs. Buying a new vehicle would be a luxury upgrade.

          Used cars are relatively expensive today compared to used cars sold in the past, but that is mostly because they are more reliable and last longer. A 2 year old used car might not have depreciated enough to be a great deal, but a heavily depreciated 7 year old car (that could be expected to be reliable transportation for another 10 years/150k miles) could be a great deal. There are some vehicles where buying new makes more sense than buying used (for example, a Jeep Wrangler which doesn’t depreciate much until it is old enough to be unreliable), but for most vehicles, used cars are a better deal. To say a “new” car is a rationale purchase or a necessity is almost always wrong.

          I don’t mean to rant about this, but I’m so tired of hearing people complain about how they were forced to buy a $60,000 new SUV. Sob stories like the one involving the couple only make things worse by normalizing bad decisions. It is time to start calling out bad decisions instead of pretending people who made these decisions are victims. I have sympathy for people who are genuinely struggling financially, but not for those who are struggling based on choices they knowingly made.

          (I’m done ranting now.)

      2. The only issue with this is it is much easier to bury negative equity into a new car than a used one, where banks employ their own valuation models and typically cap approvals at 125% of that.

        Thankfully, I am well past the need for a ‘growing family’ vehicle, so I’ll never have to concern myself with such matters.

        1. If you have negative equity, you couldn’t afford the vehicle. The ease of rolling over negative equity is an asinine excuse for buying a new car.

      3. Also, is it possible for a couple to live in Atlanta with four children and only one car? I live at the western edge of Long Island and do not start my car in the week (train commute) but with two kids the weekends would be nearly impossible to negotiate without the second car.
        Can’t wait until this couple trades in the Explorer for two other cars and end up owing $85K…

    2. I remember “needing” a minivan (we only had one kid). Luckily my neighbor had a ’98 Silhouette for $350 because he didn’t want to spend the $1200 to get the leaking lower intake manifold gaskets fixed on the 3.4. I bought it and a month later had it back on the road. Ended up putting new rear shocks, front wheel bearings, front rotors, a muffler, and front pads on it shortly thereafter. With a good interior scrubbing, it turned out to be a nice hooptie – it even had a functioning VCR from the factory! Sold it for the total $800 I had into it to one of the neighbor’s friends a couple of years later. Coincidently, they used it to move to Georgia.

  16. If something were to happen to my car that required me buying another, I’d be looking for an older Corolla or similar until prices normalize.

  17. ‘That Bloomberg story opens with an anecdote from a couple who needed a bigger vehicle after their fourth baby was born’

    Just buy the damn (used) minivan!

    1. While I agree with that view, there’s a number of factors we don’t know without assuming they’re just of the “ew minivan” mindset.

      The price differential on new vs. used – let’s say the dealer isn’t marking up above MSRP on new cars (yes, there are dealers not doing that, because it’s better for their rep or they know they’re just screwing themselves down the line by burying that person in the car now), but for used cars they’re pricing on market values – the new car is cheaper. Add to that, the bank is more likely to buy the loan with rolled over negative equity on a new car than used, and Ford’s probably got some dealer cash out there on Explorers because despite the waiting lists for Mavericks and Broncos…an Explorer is probably easier to find. Certainly more so than most of the minivans out there.

      Not trying to get into whataboutisms especially because it’s a $49k Explorer, just those are scenarios that happen. People go into a dealer knowing they still owe money and looking for a used car expecting to keep payments lower, and get moved into a new car – there’s cash on the hood to absorb the negative equity (well in the past anyway), and it looks better for the bank to buy the loan.

        1. I literally said in my first sentence “there’s a number of factors we don’t know.” Life happens. Everyone’s critical about their past choices that got them there. I think they’re well aware of the hole they’re in now.

    2. No the answer is they shouldn’t have anymore kids. Just like the Amazon ad of family that got a dog during pandemic, post pandemic dog is a menace, the solution?! get another dog… The answer to one stupid dog is not get a second one! If you are struggling to afford a decent living with 2 or 3 kids, don’t have any more you idiot!

      1. The exception to that rule is if you have a farm. More kids = more free labour. When I left for university, my dad still had 3 helpers at home.

      2. I’m not saying it’s bad or good but many welfare programs will give you more if you have more kids, And you can qualify at higher incomes. In the case of Healthcare this can be a life changing difference (~$600/mo)
        From personal experience extra kids aren’t that expensive if you are good at spending wisely.

    3. Kids are grown, I still want a Previa. Preferably the supercharged one. PS. my cars are all from the last century save my wife’s Ionic which we got at the beginning of COVID at a reduced price since it was prior year model and 0% interest for 7 years. Yes. Zero Percent. Which means we will be paying them back with $$$’s that are worth less than they were when purchased. I still want that Previa. (sold the Saab, Del Sol is rebuilt and fun, VW Cabriolet should be done soon and the Lexus treehouse camper is indestructible. So a 93, a 94, an 86 a 99 and that other thing.). Anyone have a Previa they want to sell? Cannot have rust though.

      1. Lexus treehouse camper? I’m imagining an LS400 with a wooden treehouse on the back half. Or do you mean a Lexus SUV with a roof tent. That would be sensible but far less exciting.

  18. Never finance a car if you don’t have a sizable downpayment or trade in. If your loan starts out at 5+ grand less than the cost of the car you have a layer of protection built in. That way, if need be, you should be able to get out of it if worst comes to worst, your financial situation gets changes, etc. You’ll also be able to ride it out if (when) the market does wonky stuff, unlike the bozos who stretch financed Teslas recently and woke up underwater. That’s bad.

    I’m sure we have some NEVER FINANCE EVER folks here and that’s fine but I don’t think it’s realistic for many people and if you aren’t getting boned by interest rates it’s really not that big of a deal to finance in my opinion. But yeesh…if you’re underwater badly on a car you you bought too much car…or were the victim of predatory financing, in which case you have my sympathy.

    I’m pretty financially conservative and I’ve always gone with the 10-15% rule, however I use post tax income rather than pre tax. If your payment is in that range or less you’ll probably be a okay. If it’s more you’re asking for trouble. As much as I love cars I’ve always bought less than what I can afford and not had to feel anxious because of the low payments.

    1. Agree with your point but I will give one caveat where I think you’re better off not having the big down: leasing.

      Why?

      In a normal market that car drops in value the second you drive it off the lot, and leases include GAP insurance. All you’re doing is prepaying some of your lease and covering the potential GAP for the leasing company. They save on insurance, and you’re likely to not get your down back if the car gets wrecked. Instead keep that down and factor those funds into what you can afford per month. Net net its the same amount of money out but you’re keeping your funds safe in a bank account.

      1. I forget but I think it was the old site (maybe the auto buying guy Tom) that had a piece on using leasing as a way to break the negative equity cycle. Yeah, the payment is still going to suck, but afterwards you’re free and clear.

        I’ll add to that, if the interest rate on the loan is low enough relative to what you’re making on investment (obviously not everyone is in this situation or this article wouldn’t be as notable), keep the cash invested. This may not work as well now with interest rates rising but I digress…

        Also in support of the mention against the “never finance ever” crowd – this is probably a topic bordering on that Tiktok with the bad advice on down payments being “illegal” but there is sometimes an incentive for financing with the OEM *not* at the special rate – i.e. in lieu of 0% or whatever. Nissan I know did this a lot. In that case, check on the prepayment penalties, and long as that still nets out at a lower overall price, take the crappy rate and the lower price and pay off soon as you’re past that period.

        1. Yeah often there’s a $xxx cash on the hood or 0% financing deal. Sometimes you’re better off taking the cash, but I’d say in the current rate environment that will be less likely to be the better deal. It was the best thing to do when you could get $5k off and still get 2.3% at US Bank or BofA though.

          I’m in the business and I haven’t seen a prepayment penalty on an auto loan in about 10 years.

          We often would convert cash buyers with the invest the money and take this super low or 0% rate and invest your money instead, and if you hate it, pay it off in 6 months.

          Most dealers won’t get paid their fee on the loan if you pay it off immediately, so waiting 120 days puts everyone in a who cares position except the bank.

          1. Yeah, I think for Nissan it usually went like, “0% or $xxx cash back” but you had to finance through NMAC either way and the latter was a standard rate.

            Good to know on the prepayment penalty, been a while since I have heard about it but have thought of it as an option depending how interest rates continue to go.

      2. Absolutely. If you lease, hang on to your money. Even if you buy it at the end, holding that money means you can put it to work for you. Even just a CD for the life of the lease is better than putting that money down on it.

    2. Sometimes it makes better financial sense to finance the vehicle even if you can pay cash for it. Right now for people with excellent credit, new car loans are available for a little under 3%. I bonds are at 6.89%. Take the loan, buy bonds with the cash you had set aside for the car, and you’ll be financially ahead of where you’d been if you’d just paid cash.

  19. I wanted a new car. My 2014 Kia has been paid off for a few years. It’s got 86K miles, but a new engine/transmission (MT)/ new front wheel bearing all thanks to Kia warranty. Now I’m thinking to keep the thing a long time and just get it painted (clear coat is gone from being an outside car it whole life in AZ and now East coast). My son has a Kia with 130K on it, so his will probably die before mine, so I could give it to him.

    I was just at the Kia dealership (This one is unusually nice and straight forward) and they’re still asking for $2-6K in markups over MSRP. One sales guy did try to pitch a new car to me, I said sure, $1K over invoice and we got a deal. He laughed and said not when I can get at least that much over MSRP.

    Now hearing that OEM are idling plants just to keep inventory tight, makes me think this is going to be the new future for car prices.

  20. My advice to anyone thinking of buying a car this year is still the same as last year. Don’t do it if you can avoid it! If your car still works keep it, if it needs a repair that’s in your budget then fix it. If it’s too far gone then good luck because you’re going to need it! If you can get away with a sedan then go for that instead of an SUV. Prices are crazy but the last time I looked sedan prices were at or below MSRP.

    1. I will add to this that focusing on manufacturers and models that have a high days supply is the best way to find a deal in this environment. Things that are sold before they hit the lot are still MSRP and above.

  21. Interesting how these anecdotes involve being forced to make a bad financial choice after making a couple previous ones. That couple was in trouble simply by having a growing family and two (evidently) large car payments, even before the fourth kid arrived. Looking at Atlanta Craigslist right now, there are 1st and 2nd gen Pilots and a whole mess of older Sienna minivans for under $20k, many under $10k, all capable of transporting a family of six and easily obtained with a credit union loan if they didn’t already have that second auto loan weighing them down.

  22. There aren’t any great answers in the current market. I would advise hanging on to what you have for as long as possible. Don’t assume that you need to replace an older car because of an expensive repair. Even a $1,500 repair on a $3,000 car can be a good investment if it lets you hold off a year of these inflated payments.

    As for rolling two old loans into a third super loan, don’t do that. Just… don’t. You cannot possibly come out ahead with that much negative equity tied up in a single depreciating asset. I don’t have a perfect answer for their situation, but I can confidently say don’t do that.

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