Seven year auto loans

[athena53]

I have seen 0% auto loans from the captive finance subsidiaries of auto manufacturers, but that it a cross subsidy to spur sales. I don't think I've ever seen a normal bank offer a 0% auto loan either, but then I am not the most up to date on these things.

I agree. If you agree on a price and tell them you're getting your own financing, then tell them you want THAT price and zero-percent financing, you generally can't get it. They used to be a bit more honest: you could get either a rebate of $X or zero-percent financing but not both.

 

[Andre1969]

It's really nice not to have to repair all those engine parts that break down with an ICE car.

In my experience, it's usually been everything BUT the engine that would break down, in an ICE car. Although there are maintenance issues, such as spark plugs, belts, hoses, coolant changes, oil changes. Eventually you'll need exhaust work done, although with improvements in the technology, it's been ages since I've had to visit a muffler shop. I think the last time I had to have exhaust work done was on a 1985 Silverado...BUT that was in 2009! I had to have everything aft of the catalytic converter replaced...the pipe to the muffler, the muffler itself, and the dual exhaust pipes that came off of the single muffler, although I had those replaced by an extra large single pipe. Total bill was under $300. That truck had been in the family since new, and I knew its history...that was its only exhaust repair.

But, on something like a Tesla, you'd still have brakes, suspension, I'm sure the thing has some sort of a transmission and differential. Electronics galore. Sensors and such. Power window motors. Power door locks. Windshield wiper motors. Dash displays. Sound systems. Air conditioning. Heat. Defrost. The HVAC control unit. So, I wouldn't expect a Tesla to be totally trouble free for hundreds of thousands of miles. But, getting rid of the ICE engine does take a few things out of the equation.

 

[ncbill]

The air cabin filter has to be changed every 2 years. So tires, wipers and air filters. It's really nice not to have to repair all those engine parts that break down with an ICE car.

Model 3 batteries are expected to last 300,000 to 500,000 miles. Replacements run around 5-7K. That's in todays prices. And car and driver wrote an article on Tesla developing a 1,000,000 mile battery. No discussion on the warranty.

Another poster mentioned the weight of his truck. My Model X weighs 5300lbs.

For those of you that like ICE cars or are unwilling to adapt, continue driving what you want to drive. California is up to 5.6% of new car purchases being EV. A state with 38 million people. I remember when online retail sales crossed the 1% threshold. Now years later the list of retail stores closing is long and mall traffic is nothing what it used to be.

That is Musk's claim...but that's assuming only a few modules go bad, not the entire battery pack.

A new pack is going to be 5 figures out of warranty...and don't forget the multiple drive unit replacements some Tesla owners have experienced, since those aren't cheap either.

I suspect most Teslas simply won't be worth fixing out of warranty, which is fine for those who don't mind just paying for a new one every decade or so.

 

[GravitySucks]

https://www.npr.org/2019/10/31/773409100/the-7-year-car-loan-watch-your-wallet

Reviving as a new related article came out.
Two take aways for me:
I must really be out of touch. I thought 5 loans were still the most common duration. Looks like it been the 6 year loan for over a decade.
While similar car prices have tracked close to inflation people are now spending more by buying bigger, more luxurious cars. So more of that incoming is going out on a depreciating asset every year. If average incomes are tracking inflation (or less if you read some press) were is that extra money coming from?

 

[Andre1969]

I didn't realize 7 year loans got that popular, either. That article states that the average transaction price for a new car is $37,782. Historically, when you adjust for inflation, that's really not *too* ridiculous. I bought a new 2000 Intrepid in late 1999. It was $22,389 out the door, with tax, tags, an extended warranty, etc. Adjusting backwards for inflation, today's average would have been roughly $24,515. Not a huge difference. That would have been like me buying the Intrepid ES instead of my base model. Or a base Chrysler Concorde.

I didn't have any problems making the payments on that thing 20 years ago, with a 5 year term. And I was only 29 when I bought the car. They were offering 0.9% financing at the time though, and my payment was only $347.66/mo.

I just ran $37,782 through the payment calculator in Excel. Assuming you finance the whole amount, and at 5.49%, an 84 month term would be $542.75. A 60-month at 3.29% would be $683.77. I'm getting these interest rates from the NASA FCU website.


My old payment, adjusted for inflation, would be $535.80, adjusting for inflation. I had put $2,000 down on that car, and financed $20,389.


Anyway, while $683/mo sounds a bit high, it should be doable if you're willing to sacrifice. IMO if you need to finance it over 7 years or more, then maybe you need to be looking at something a bit less than $38K. The problem is, too many people think they "deserve" it, "earned" it, etc. And, dealers sucker them in with that low monthly payment talk.

 

[Teacher Terry]

7 years is ridiculous for a car loan.

 

[ncbill]

I didn't realize 7 year loans got that popular, either. That article states that the average transaction price for a new car is $37,782. Historically, when you adjust for inflation, that's really not *too* ridiculous. I bought a new 2000 Intrepid in late 1999. It was $22,389 out the door, with tax, tags, an extended warranty, etc. Adjusting backwards for inflation, today's average would have been roughly $24,515. Not a huge difference. That would have been like me buying the Intrepid ES instead of my base model. Or a base Chrysler Concorde.

I didn't have any problems making the payments on that thing 20 years ago, with a 5 year term. And I was only 29 when I bought the car. They were offering 0.9% financing at the time though, and my payment was only $347.66/mo.

I just ran $37,782 through the payment calculator in Excel. Assuming you finance the whole amount, and at 5.49%, an 84 month term would be $542.75. A 60-month at 3.29% would be $683.77. I'm getting these interest rates from the NASA FCU website.


My old payment, adjusted for inflation, would be $535.80, adjusting for inflation. I had put $2,000 down on that car, and financed $20,389.


Anyway, while $683/mo sounds a bit high, it should be doable if you're willing to sacrifice. IMO if you need to finance it over 7 years or more, then maybe you need to be looking at something a bit less than $38K. The problem is, too many people think they "deserve" it, "earned" it, etc. And, dealers sucker them in with that low monthly payment talk.

Bought our fully-loaded minivan for $25k out the door over a decade ago...based on CPI calculator today should pay $35k, but actual out-the-door price for top trim is now around $42k.

 

[Rianne]

I was all over Carmax, Carfax, Carguru searching used cars...all in the last couple of months. Went from 2012, 2015, 2018 looking for that sweetheart deal. The under 50K mileage. They show you the interior, under the hood, the trunk space. Then, both DH/me realized a used 2017 was only a couple $K less than a new. I mean out the door price.

So we bought a new 2019, fully loaded, took the loan out for the full price b/c dealer took an extra $1K off the price, so total $4K rebate. Within 6 days of purchase, I paid $21K to the dealer finance co. I'll end up paying @ $50 for the financing b/c I'll pay it off in 3 months. Total for the car was $22, 444.

 

[jazz4cash]

From the NPR article, I find this more shocking than the 7 yr term:
“For new-car purchases with a trade-in, about a third of people are now rolling over an average of $5,000 of debt from their old car loan into their new car loan, “

A 7 yr loan is more like a lease.

 

[Music Lover]

7 years is ridiculous for a car loan.

It depends. My brother was buying a new but the previous year's model several years ago and was planning on paying for it outright. Then they offered him 6 years at 0%. So he put the minimum down and made interest free payments for 6 years.

But I'm sure that someone planning on buying it outright is in the minority.

 

[oscar1]

LBYM - Debt to Gross Income Ratios:
Housing <= 28%
All Debt <= 36%

When borrowing money to buy anything, 20% down payment min. If you can’t afford that, they you probably should not get it (LBYM).

 

[brett]

They are dopes.

It all comes down to choices. Forget about this nonsense about these unfortunates. Bottom line...they did not have to buy a new car, they did not have to buy the car that they did. They made their choice. They placed wants ahead of needs and affordability.

A person who borrows/finances more than the price of their quickly depreciating asset gets no sympathy from me. No matter what the interest rate. You cannot fix stupid.

 

[JoeWras]

You cannot fix stupid.

But I [-]want[/-] need it!

 

[SmallCityDave]

I was all over Carmax, Carfax, Carguru searching used cars...all in the last couple of months. Went from 2012, 2015, 2018 looking for that sweetheart deal. The under 50K mileage. They show you the interior, under the hood, the trunk space. Then, both DH/me realized a used 2017 was only a couple $K less than a new. I mean out the door price.

So we bought a new 2019, fully loaded, took the loan out for the full price b/c dealer took an extra $1K off the price, so total $4K rebate. Within 6 days of purchase, I paid $21K to the dealer finance co. I'll end up paying @ $50 for the financing b/c I'll pay it off in 3 months. Total for the car was $22, 444.

What did you buy for $22k otd?

 

[Rianne]

What did you buy for $22k otd?

Hyundai Sonata SEL, 2019 (new).