Auto Credit Bubble To Burst?

cawacko said:
Cars are a depreciating asset and a horrible investment. You and the wife were smart to not spend much money on them. But this is America and people have a love affair with their cars. (Living in SF we can get away having only one car and that's with a baby).

Low interest rates push people to buy more than they can afford. But rates don't stay low forever.
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Have you ever bought (or not bought) a car specifically due to the interest rate on the financing of that vehicle?
 
Mott the Hoople said:
It opens the market for lower end, lower margin, less profitable vehicles. The facts are that right now, Americans want large, high occupancy, versatile vehicles, are not concerned about gas prices and are willing to pay inflated prices for those big assed vehicles. That's currently where the profits are and Americans are will to pay premium dollars for their big assed vehicles.

Of course they could end up back in the same trap that almost killed them in 2008 when gas prices sky rocketed and the bottom dropped out of the truck/SUV market. However this time it appears GM is hedging it's bets by investing in more fuel effiecient technology for when the bottom falls out of the market for big vehicles again as its bound to do. Ford is doing the same thing.

I do think there is some validity to Wacko is pulling an issue out of thin air that's currently a non-issue. It could become an issue if Americans decide to stop spending such a large percentage of their budgets on big assed cars but currently this is hardly a bubble. It's more like a strategic redeployment. It's not like GM and Ford will stop making sedans all together. They will just make these less profitable vehicles else where.
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If it's not an issue why they drop in sales as interest rates have increased and the layoffs/restructuring by the big automakers? The issue isn't big or small cars.
 
Mott the Hoople said:
Have you ever bought (or not bought) a car specifically due to the interest rate on the financing of that vehicle?
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Yes. I've done the same with a home. It's all a matter of what do I want and what can I afford. If I can't afford the car or home that I want I'm not buying anything. And rates play into that determination.
 
It's why I pay cash or Finance 2 years Max ...

It doesn't make any common sense to be paying for something that deteriorates faster than the drive home.
 
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Mott the Hoople said:
It opens the market for lower end, lower margin, less profitable vehicles. The facts are that right now, Americans want large, high occupancy, versatile vehicles, are not concerned about gas prices and are willing to pay inflated prices for those big assed vehicles. That's currently where the profits are and Americans are will to pay premium dollars for their big assed vehicles.

Of course they could end up back in the same trap that almost killed them in 2008 when gas prices sky rocketed and the bottom dropped out of the truck/SUV market. However this time it appears GM is hedging it's bets by investing in more fuel effiecient technology for when the bottom falls out of the market for big vehicles again as its bound to do. Ford is doing the same thing.

I do think there is some validity to Wacko is pulling an issue out of thin air that's currently a non-issue. It could become an issue if Americans decide to stop spending such a large percentage of their budgets on big assed cars but currently this is hardly a bubble. It's more like a strategic redeployment. It's not like GM and Ford will stop making sedans all together. They will just make these less profitable vehicles else where.
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Less profitable offer higher margins. I would disagree with SUV's still being as in demand as they once were, but we will see. Young people cannot afford new ones and old people are getting too old to climb in and out of them.
 
Auto Manufacturers and Auto Financiers are not making long-term strategy commitments right now.

These current changes in US Auto making and financing are certainly not static.

They are shaping policies that live for the moment only, and by what it looks like on the ground this minute, because of all the uncertainty of the Trump Administration.

Trump could be here one minute, and gone the next, for all they know.
 
Hello reagansghost,

reagansghost said:
you got it, I've been in the low six figure bracket for years and still buy only 5-6K sweet used cars, saved thousands and thousands and get great mileage
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Same here. Save to pay cash. Buy good quality used cars. Let somebody else take the depreciation hit, have their wealth extracted by Wall Street interest.

I make one payment on the cars I buy.

I never bought a new car in my life, even though I now have the cash to walk in and buy nearly any car without payments. But I won't do it. Don't want 'em. No thanks. A car is not my destination. It is simply a vehicle to get me there.

Another huge savings is on the fuel.

Most people don't realize how important it is to conserve fuel. It's expensive. Over the life of a car, more will be spent on fuel than on buying the car in the first place. For this reason, I buy vehicles with good MPG, and learned to hypermile. Hypermiling can be summed up quite simply: Drive like you have no brakes. (but use 'em when needed!) Learn to time the lights. Let everybody else fight for position at the traffic signal. Let them all race up to the next red light. Time it right and you come rolling up behind them just as they are taking off again when the signal turns green. And you never stop. I only rarely wait at red lights. That's because I simply adjust my speed so that I never have to.

You cannot believe how long tires and brakes last when hypermiling.

And there you go. Even more savings.

And then you find out that drive times are not really affected very much at all by saving gas, tires and brakes. Turns out, it's not how fast you race up to the next signal that determines how long a drive takes. It's how many red lights you have to wait for. And unless you can race ahead of everybody and speed really a lot, you won't make it to the next cycle. And even if you do you will burn so much fuel that it won't be worth it. You might get a ticket or kill somebody. And all that gets you is a few minutes per light. So you have to drive very dangerously and waste a lot of money for a few minutes of time. Simply not worth it!

Good used cars and hypermiling will save you thousands, give you more spending cash, and allow you to amass a greater nest egg for retirement.
 
cawacko said:
If it's not an issue why they drop in sales as interest rates have increased and the layoffs/restructuring by the big automakers? The issue isn't big or small cars.
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Yea...yea it really is. Look at the plants that are being closed or workers laid off and what they are making. Then look at both to volume of Trucks/SUV's being sold by GM & Ford vs sedans, look at their gross sales dollars for Trucks/SUV's vs sedans and look at the gross profits in Trucks/SUV's vs sedans.
 
Don't blame Trump, the auto industry wasn't sustainable with high paying jobs. China will now take over as the world's largest auto manufacturer.
 
Hello Mott,

Mott the Hoople said:
Have you ever bought (or not bought) a car specifically due to the interest rate on the financing of that vehicle?
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No. I pay cash.

And recently I've encountered buy here pay here lots that make so much on the financing that they have zero interest in selling a car for cash. They won't even talk to you if you don't want to fill out a finance application.
 
Hello AT,

Adolf_Twitler said:
Auto Manufacturers and Auto Financiers are not making long-term strategy commitments right now.

These current changes in US Auto making and financing are certainly not static.

They are shaping policies that live for the moment only, and by what it looks like on the ground this minute, because of all the uncertainty of the Trump Administration.

Trump could be here one minute, and gone the next, for all they know.
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TV ads don't even give the price of the vehicle any more. They talk about 'savings,' payments and cash back.

Now who in the world is so stupid they would take out a loan which gives them cash back? I can hardly believe that still works.

Man, if you can't scrape together enough cash to make a down payment and still have plenty left over, you have a cash flow problem.
 
cawacko said:
Yes. I've done the same with a home. It's all a matter of what do I want and what can I afford. If I can't afford the car or home that I want I'm not buying anything. And rates play into that determination.
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You may be the only person on all of JPP that has done that. Unless the financing is crazy low or high the interest rate on financing a car is going to be way low down on the list of factors most people consider when buying a car. In fact in all the cars I've bought (10) interest on the financing was only a factor in one of those purchases and it wasn't the deciding factor. Four of those cars I paid cash for and interest wasn't a consideration at all.
 
Mott the Hoople said:
You may be the only person on all of JPP that has done that. Unless the financing is crazy low or high the interest rate on financing a car is going to be way low down on the list of factors most people consider when buying a car. In fact in all the cars I've bought (10) interest on the financing was only a factor in one of those purchases and it wasn't the deciding factor. Four of those cars I paid cash for and interest wasn't a consideration at all.
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When I've bought cars I wanted a certain car. Either I could afford that car or I wasn't buying anything. So financing costs definitely played a role in whether I had enough in the budget.
 
cawacko said:
When I've bought cars I wanted a certain car. Either I could afford that car or I wasn't buying anything. So financing costs definitely played a role in whether I had enough in the budget.
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that's some fascinating shit Barry Jr

now explain why you're so ashamed to admit being a libertarian
 
Mott the Hoople said:
You may be the only person on all of JPP that has done that. Unless the financing is crazy low or high the interest rate on financing a car is going to be way low down on the list of factors most people consider when buying a car. In fact in all the cars I've bought (10) interest on the financing was only a factor in one of those purchases and it wasn't the deciding factor. Four of those cars I paid cash for and interest wasn't a consideration at all.
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What you are saying is anecdotal. It is a going concern within any interest rate sensitive purchase. Those buying on credit can afford more with lower interest rates. That is part of what drives the markets. Of course people who pay cash don't give a shit. Thanks for that nugget captain obvious.
 
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PoliTalker said:
Hello AT,



TV ads don't even give the price of the vehicle any more. They talk about 'savings,' payments and cash back.

Now who in the world is so stupid they would take out a loan which gives them cash back? I can hardly believe that still works.

Man, if you can't scrape together enough cash to make a down payment and still have plenty left over, you have a cash flow problem.
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Since I retired, I quit trying to keep up with the Jones's buying new cars every 2 years- whether I needed them or not.

It's been more fun buying used, and selling them for a little profit, for me now. It's just another hobby for me now.
 
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