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

timharford.com

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

#131

Post by skookumchuck »

losteric wrote: post #110
skookumchuck wrote: post #100

Earlier quoted context omitted.

I doubt it was silly. He likely offered you a deal that would have lost money if not for the financing.

Call me old fashion, but I think car salesmen ought to make their money off of selling cars instead of exploiting consumer's ignorance of financial tools and more complex math. This is so much more nefarious.

When I've bought mortgages, I was required by law to sign a document that says "I have read and understood these loan documents." I've seen many people in the newspaper complaining that they neither read nor understood the terms.

At what point do you expect legally competent adults to pay attention to and take responsibility for what they're doing?

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

#132

Post by valuearb »

pnutjam wrote: post #128
valuearb wrote: post #86

Earlier quoted context omitted.

You have it backwards. Buyers demanded the ability to buy homes they couldn't afford, the government required Fannie Mae, Freddie Mac and banks to finance them and the US Government guaranteed some of the loans. The buyer behavior was rational, at least on the surface, because homes almost always appreciate over long periods and were appreciating like crazy during the bubble. We are pattern matching monkeys, all of u…

Your wrong, people with money were looking for "safe" places to park their money and make interest. Savings accounts suck, thus all these​ financial products were born.

Saving some accounts don't suck, they are excellent at what they do. Which is providing a very secure place for your money that is quickly accessible and even pays a small amount of interest.

There's obviously higher return investments, but they provide those returns by taking more risk, and more variance.

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

#133

Post by SilasX »

kemiller2002 wrote: post #127
kcanini wrote: post #111

Earlier quoted context omitted.

So the hispanic couple thought they were being given a free car?

Yes, I don't know exactly how he convinced them of it, but it was pretty much the "That's how things are done in the U.S."

In fairness, the system has gotten to the point that logic no longer seems to apply. Others have reported dealers offering a price discount for using their 0% financing. That's not how it's supposed to work.

I'm losing my ability to say "obviously they can't mean that".

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

#134

Post by [deleted] »

endianswap wrote: post #20
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…

That seems insane that it'd be the biggest check they've seen. I've bought an 80k BMW and an 80k Jaguar outright, and they both shrugged at me paying by check. BMW let me use a personal check, Jaguar wanted a bank check (easy enough). Edit: A normal down payment for a luxury car of any brand can easily be 20k up front.

[deleted]

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

#135

Post by cmurf »

skookumchuck wrote: post #131
losteric wrote: post #110

Earlier quoted context omitted.

Call me old fashion, but I think car salesmen ought to make their money off of selling cars instead of exploiting consumer's ignorance of financial tools and more complex math. This is so much more nefarious.

When I've bought mortgages, I was required by law to sign a document that says "I have read and understood these loan documents." I've seen many people in the newspaper complaining that they neither read nor understood the terms. At what point do you expect legally competent adults to pay attention to and take responsibility for what they're doing?

No non-lawyer is competent to understand all real estate transaction documents. But they might be competent enough to acquiesce to the grand stupidity of our culture [1] and hire a real estate attorney. Mine reviewed all the relevant documents and come to the closing, for a flat fee that I thought was rather reasonable, in particular compared to the hand cramp I got from all the ridiculous paper work I had to hand sign.

[1] Consider: the banks, the title company, the county, all want hand signed documents. But we accept computerized voting machines to manage elections.

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

#136

Post by TomMarius »

eru wrote: post #120
no_wizard wrote: post #82

Earlier quoted context omitted.

I've always locked in the price and flat-out refused to talk about how I was paying for it until the price was agreed upon. It worked for me, took more time I will say, but I got a good deal on a brand new car that I'll drive for a very, very long time.

Why does buying a car in America involve so much (or even any!) negotiation at all? I guess it's a form of price discrimination? I just tried to figure out (via Google) whether it's common in eg Germany---but what I found what mostly only about negotiations for used cars.

It's normal in Europe. I've never paid the sticker price for a car.

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

#137

Post by chestervonwinch »

ethbro wrote: post #45

> What auto finance needs — what most consumer finance needs — is for key information to be made simple and salient. Competition cannot work if consumers struggle to understand what they’re being sold and what it will cost. And if you agree with that, then let me tell you a story about the healthcare industry...

Healthcare, phone plans, internet/cable plans, vehicles ... they're all variations on the (financial) security (for the seller) through obscurity.

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

#138

Post by rjsw »

endianswap wrote: post #20
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…

That seems insane that it'd be the biggest check they've seen. I've bought an 80k BMW and an 80k Jaguar outright, and they both shrugged at me paying by check. BMW let me use a personal check, Jaguar wanted a bank check (easy enough). Edit: A normal down payment for a luxury car of any brand can easily be 20k up front.

I paid for my current car with my debit card. I asked my bank beforehand whether they needed to authorize that size of transaction but was told that they can tell which accounts are for car dealers.

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

#139

Post by skookumchuck »

cmurf wrote: post #135
skookumchuck wrote: post #131

Earlier quoted context omitted.

When I've bought mortgages, I was required by law to sign a document that says "I have read and understood these loan documents." I've seen many people in the newspaper complaining that they neither read nor understood the terms. At what point do you expect legally competent adults to pay attention to and take responsibility for what they're doing?

No non-lawyer is competent to understand all real estate transaction documents. But they might be competent enough to acquiesce to the grand stupidity of our culture [1] and hire a real estate attorney. Mine reviewed all the relevant documents and come to the closing, for a flat fee that I thought was rather reasonable, in particular compared to the hand cramp I got from all the ridiculous paper work I had to hand si…

> No non-lawyer is competent to understand all real estate transaction documents.

I understood them well enough. It isn't that hard. The misunderstandings people would complain about were not about subtleties or legal hare-splitting. It's also established legal doctrine that a contract written in ambiguous, confusing, or tricky language isn't going to hold up in court. Judges take a dim view of that.

I also actually read them. Amazing. Although this would visibly annoy the escrow officer.

You did the right thing by having a lawyer review it if you didn't feel confident about it. There's no excuse not to if it is a large transaction.

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

#140

Post by blibble »

eru wrote: post #122
blibble wrote: post #34

Earlier quoted context omitted.

it's just another form of competition right? all car firms offer lower and lower loans rates to try to get you to buy their product, and eventually the rate reaches 0%

If that was the case, why stop at 0%? Why not negative?

would probably confuse people
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