Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Too many people are buying cars using financial products they do not understand

timharford.com

Post reply on HN
Print view View original

281–290 of 330 posts

Re: Too many people are buying cars using financial products they do not understand

#281

Post by TrickyRick »

CamTin wrote: post #249
mynameishere wrote: post #115

Earlier quoted context omitted.

interest-only home mortgages are almost always a bad choice for most consumers Just for future reference, if anyone lets you make an infinitely leveraged 500,000 dollar bet that you can walk away from at any time, you take that bet.

On the other hand, if someone offers to let you make an infinitely leveraged 500,000 dollar bet that you can walk away from at any time provided you are OK with the consequence of being unable to access another mortgage loan or to rent (because of outstanding housing debt) , then probably don't take that bet.

But wasn't a big part of the '08 crisis the fact that you actually could walk away from all of it as a home owner and the banks were stuck with the loss? Sure it sucks to be homeless but it suck a hell of a lot less than being homeless with huge debts.

Re: Too many people are buying cars using financial products they do not understand

#282

Post by TrickyRick »

maxerickson wrote: post #8
jordanb wrote: post #5

So I guess the whole car thing is probably going to be this cycle's mortgage bubble? Considering car sales are falling off a cliff I guess we're in 2007 right now.

No one buys a car expecting the value to go up so the vehicle market probably won't unravel in a collapse (vehicle debt is also about 1/10 the size of the mortgage market).

No, but they expect the value to be a certain amount in 3 years time. If a lot of consumers jump on this and a majority of them jump on the next 3 year contract after that then there's going to be way more used cars on the market in 3 years time than initially expected, causing values to collapse. You don't have to assume a rising value in order to have a bubble.

It is true however that it's a really small market compared to housing, car companies also aren't critical to the economy as a whole in the way banks are but it would still be bad.

Re: Too many people are buying cars using financial products they do not understand

#283

Post by buro9 »

Pica_soO wrote: post #231
buro9 wrote: post #228

Earlier quoted context omitted.

In the UK a new car purchase/lease requires comprehensive insurance for the duration of the lease. Only after the lease has expired and you've purchased could you opt for 3rd party, fire and theft insurance. The maximum exposure during the period of a lease is whatever the excess on the policy is. The GP comment can't be applicable to the UK.

Most people dont know, but insurances regularly wriggle themselves out of anti-debt-insurance that are usually sold with leasing contracts.

In the UK this does not happen.

You are required to get your own fully comprehensive insurance, and can select from the whole market. The vehicle will not be released to you from the car dealership without proof that you possess such insurance.

Please declare which country you are talking about, as the article described the UK and your claims are not true with regard to the UK.

Re: Too many people are buying cars using financial products they do not understand

#284

Post by sugarrush »

buro9 wrote: post #228
pzh wrote: post #226

Earlier quoted context omitted.

I thought full insurance would be an unwaivable requirement in those cases of leasing. How could they be in debt for accidents?

In the UK a new car purchase/lease requires comprehensive insurance for the duration of the lease. Only after the lease has expired and you've purchased could you opt for 3rd party, fire and theft insurance. The maximum exposure during the period of a lease is whatever the excess on the policy is. The GP comment can't be applicable to the UK.

I never take a loan to buy a car or motorcycle, but I have written off a few vehicles (all my fault, and none involving other people. One amusing-in-distant-hindsight-only case was when I spilled paint all over the interior of a car, written off by the insurance company as beyond economic repair).

In each case I only got the value of that vehicle as per the lowest price the insurance adjustor could find, taking the mileage and age into account. That was never enough to buy something of equal value to me, and I assume totally inadequate to pay off the outstanding loan amount.

Re: Too many people are buying cars using financial products they do not understand

#285

Post by sugarrush »

buro9 wrote: post #283
Pica_soO wrote: post #231

Earlier quoted context omitted.

Most people dont know, but insurances regularly wriggle themselves out of anti-debt-insurance that are usually sold with leasing contracts.

In the UK this does not happen. You are required to get your own fully comprehensive insurance, and can select from the whole market. The vehicle will not be released to you from the car dealership without proof that you possess such insurance. Please declare which country you are talking about, as the article described the UK and your claims are not true with regard to the UK.

There are many UK car dealers that will sell you a 7 day insurance certificate to 'drive away today'. This is quite convenient usually as it allows them to tax the car as well for you, so it becomes road legal.

Re: Too many people are buying cars using financial products they do not understand

#286

Post by sugarrush »

to3m wrote: post #162
vonmoltke wrote: post #72

Earlier quoted context omitted.

Perhaps not in the UK, but in many parts of the US the leased (low-end) 3-series or C200 is the car if the so-called $30,000 millionaire (i.e., people living a lifestyle they can't actually afford by renting all the trappings).

The lower end BMWs are not fancy cars in the UK either. I don't know if they'd class as "cheaper" or "downmarket", but the typical example probably isn't exactly the opposite either. There are a lot of 3-/4-cylinder 1-4 series on the road, and the 520d is common too. Something similar applies to Mercedes and Audi as well. (see, e.g., https://www.whatcar.com/news/the-10-most-popular-cars-in-the... )

Interestingly, lesser cylinders is spreading up the range of BMW (and other marques) and no longer an indicator of a cheap model. The 2017 330i is equipped with a 2.0-liter turbocharged four-cylinder...

Re: Too many people are buying cars using financial products they do not understand

#287

Post by justincormack »

tobylane wrote: post #240
justincormack wrote: post #238

Earlier quoted context omitted.

The UK is not debt averse. It also has the highest new car purchases in the EU due to the availability of car credit

That's a new phenomenon, I've heard it described as a new thing in the last 9 months and an upcoming bubble.

No, uk car sales have been rising rapidly since 2012 http://www.telegraph.co.uk/finance/newsbysector/industry/117...

Previously there were other types of credit based financing available.

Re: Too many people are buying cars using financial products they do not understand

#288

Post by astrostl »

evilDagmar wrote: post #15

I was under the impression that the whole point of auto-financing was to get even even more money out of the consumer. When I bought my last car, I just bought it outright (because it wasn't particularly expensive) which appeared to baffle the dealership. I was actually a little concerned that the dealership told me it was the largest check they'd ever seen (for ~$14k). Getting people to sign off on a contract they d…

Similar experience. With a recent car purchase, the dealer's management was ready to let me walk at the end, even though the price was posted on the internet and verbally reconfirmed. This was simply because I "revealed" that I would not be financing it. Worse came to worse, and with the tacit consent of the salesperson himself I ended up financing it - maxing out the amount I could put on an AmEx in order to bank reward points, and paying off both the AmEx and the entire loan balance as soon as I received my first payment notice.

As it turns out, they receive a kickback from their financing partners if the loan is held >= 90 days. So, in the end, I got the car I wanted at the price I wanted, plus some cash back from AmEx, and minus a whole bunch of wasted time by everyone involved.

Re: Too many people are buying cars using financial products they do not understand

#289

Post by StavrosK »

alltakendamned wrote: post #239
StavrosK wrote: post #151

Earlier quoted context omitted.

When you guys say "cash", do you mean "not credit"? Because my dealership did not seem to appreciate it at all when I gave them 30,000 euros in stacks of 50 euro notes.

Also illegal in many euro countries. Which country was this in?

Greece. Would you trust our banks with your money? :P

Re: Too many people are buying cars using financial products they do not understand

#290

Post by StavrosK »

briandear wrote: post #218
StavrosK wrote: post #151

Earlier quoted context omitted.

When you guys say "cash", do you mean "not credit"? Because my dealership did not seem to appreciate it at all when I gave them 30,000 euros in stacks of 50 euro notes.

In France that would be illegal-- cash can't be used for transactions over €1000 because they're afraid of terrorism apparently.

Hmm, I think there's a limit like that here now (not in 2013 when I bought the car, AFAIK), but I think the limit is higher? Maybe not, I'm not sure.
Post reply on HN