Car owners can't afford their loans any more. It's bad for everyone.

[superdave80]

The title of this article is just plain wrong: "Car owners can't afford their loans any more."

That would only be indicated by what percentage of people are falling behind on their car payments. Having 'negative equity' has nothing to do with being affordable.

I currently have negative equity on my Mache (I put 0 down). I make my payments each and every month, and will continue to do so until it is paid off. The current market value of my vehicle has no bearing on my loan/payments.

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[Dear_OP]

Schools should re-introduce basic finance in classrooms.

 

[Space_Pony]

You paid cash for your first house?

Did your house depreciate?

 

[Mach-e4x]

I paid MRSP for the very first time, in August of 2021, but I also put some money down and at the time got 2.2% financing for 46K, I'm doing ok, it is the best car I have ever owned.
I read about some Mach-e buyers were paying 5-10K$ over MSRP during 2021-2022!

 

[jgcom]

Easy way to "solve" this "problem".... drive it until the wheels fall off....

I drove one great car for ~230,000 miles; it just wouldn't die. Then my faithful and considerate car helped me by skipping its timing chain, making the catalytic converter glow red. This started a gentle, nearly smokeless fire one evening as I drove near my house. After the fire department left, I gazed at Comet Hyakutake as I walked home that clear night. My next car, a GM product, didn't last as long.

 

[Kamuelaflyer]

Maybe, but I'm not in debt.

Mortgages are decisions as to what is the best use of your money. Ignoring the tax code, as mortgage interest may not be deductible for most individuals any longer, it’s a simple calculation as to whether the money not paid towards the house is going to generate sufficient gains to exceed the mortgage interest rate.

So on a hypothetical $100,000 house (because the numbers are easier to work with and not because that’s what a house costs), the standard down payment would be $20,000 and finance the remaining $80,000 over 30 years. So if you’re investing the $80k instead of paying the house off and your return is more than the mortgage rate, people are better off dollars and cents wise. Mortgage rates are lower than S&P 500 returns over the long run. Investing the 80K an index fund would put you ahead.

If, on the other hand, the hypothetical buyer is not capable of saving money, then paying cash might be a better deal. There’s also a psychological benefit from not having a mortgage.

Most folks though are not capable of paying cash for a home. That changes the question. Housing considerations can include proximity to schools for children (for those families), proximity to work, proximity to to extended family and other issues (safety, environment, etc). Buying only what you can pay cash for is not necessarily a good thing. Nor is being debt free a slam dunk decision. Having debt is also not an inherently bad thing. Total debt servicing in relation to income are all considerations.

The total payments for debt are why the increasing costs for housing and cars, particularly in light of the 20% tariffs due to kick in today, are a serious issue that goes beyond a single individual.

 

[Kamuelaflyer]

Did your house depreciate?

Yes. Both homes I owned in California did. One significantly and the other modestly.

 

[ARK]

One upside to fast depreciation if you plan to hold the car is that your insurance cost is likely decreasing as the fair market value of your car drops. Of course the flip side of it is that if it gets totaled in an accident, your payout is much less too.

 

[JDP That's Me in My MachE]

Sounds like a personal problem.

 

[DennisD]

So... no.

Don't they call them "Trailer HOUSE"...................... So..yes.

I used to live in a Trailer House/Home and it sucked but it was my "home".

 

[apwelsh]

I've shared that my 2022 MME Premium is worth about $16k less than I owe. This is a growing and troubling trend.

"The share of trade-ins with "negative equity" — meaning the owner owes much more on their loan than their car is worth — was hovering at about 25% at the end of 2024, according to data from the car-shopping website Edmunds. That was up from about 20% in 2023."

https://apple.news/AywQqA_ktSY-gA86ZxYN4Gg

If you trade in a car you still owe on, this is when you should be choosing a lease option instead. The lease will get your payment down, as you only pay for depreciation and interest of course. But if you keep your car the full duration of the loan, this is t a problem. I don’t see how an EV is any different than an ICE when it comes to new vehicle depreciation. Sure it may depreciate faster than desired, but that is always a risk for any model of any car.

 

[DennisD]

If you trade in a car you still owe on, this is when you should be choosing a lease option instead. The lease will get your payment down, as you only pay for depreciation and interest of course. But if you keep your car the full duration of the loan, this is t a problem. I don’t see how an EV is any different than an ICE when it comes to new vehicle depreciation. Sure it may depreciate faster than desired, but that is always a risk for any model of any car.

This is so crazy. If you borrow enough money that you are upside down, you basically over extended and you should not purchase a new car period.

How is this such a hard concept to accept?

Leasing would be equally as bad for those that are financially strapped.

There are a vast majority of people living paycheck to paycheck but yet they still feel obligated to drive a new car because of the slick sales approach by many Sales people to lead them to believe that they can afford it.

Now granted, the people that purchase these cars are not the brightest but there are many that do get taken advantage of and are mislead.

It is like the credit card. Before the CC, many people only purchased things they actually could afford. Now (with CC), many people are literally living on borrowed time.


The title of this thread should read, "There are many people that purchase new cars (that should not) and it is bad for those that can afford new cars". Someone at the end of the day typically bails out the ill advised/informed that leave debt and the people that manage money well are left paying the debt in the long run.

It is so frustrating that so many people can't manage money but yet they wonder why they are upside down?

 

[GreaseMonkey]

The title of this article is just plain wrong: "Car owners can't afford their loans any more."

That would only be indicated by what percentage of people are falling behind on their car payments. Having 'negative equity' has nothing to do with being affordable.

I currently have negative equity on my Mache (I put 0 down). I make my payments each and every month, and will continue to do so until it is paid off. The current market value of my vehicle has no bearing on my loan/payments.

Yes, but the loans they are talking about are on a new car that they are:

1) trading an old car in with MASSIVE negative equity, and
2) getting charged OUTRAGEOUS interest rates on the combo (new car price + old car negative equity)

So after charging significant markups on cars they sold during covid, dealers are now crying about depressed resale values that keep new cars unaffordable…at a time when the auto industry is cycling.

It is the dumbest thing I’ve heard in a while on both the customer and dealer side.

Of course as you rightly said: drive your car till it’s paid off and stop being a Karen (or a Ken).

 

[ipca204]

One upside to fast depreciation if you plan to hold the car is that your insurance cost is likely decreasing as the fair market value of your car drops. Of course the flip side of it is that if it gets totaled in an accident, your payout is much less too.

HAHAHAHAHAHAHAHAHAHAHAHAHAHA! Sure, your insurance cost drops! Whatever you are smoking, you need to share it with the rest of the class!

 

[ARK]

HAHAHAHAHAHAHAHAHAHAHAHAHAHA! Sure, your insurance cost drops! Whatever you are smoking, you need to share it with the rest of the class!

I don’t smoke but I do recommend you shop around if you feel like the huge hit to EV values has been invisible on your insurance renewal price, especially after the first year when depreciation is greatest.

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