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Americans can't afford their cars any more and Wall Street is worried

telegraph.co.uk

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Re: Americans can't afford their cars any more and Wall Street is worried

#21

Post by giobox »

bombcar wrote: post #16
giobox wrote: post #11

Earlier quoted context omitted.

> I’ve seen some crazy stories on YouTube about people trading in cars they’re already underwater on just to finance an even more expensive one. This has happened for as long as there has been car finance (i.e. practically since the dawn of private vehicle ownership), it's nothing new. Given most folks cannot purchase a vehicle outright, the customer only really cares about the monthly payment, a sizeable amount of w…

Arguably cars became “unaffordable” sometime when loans became common - what percentage of cars being bought in credit can be argued, but clearly it’s become more and more.

Loans appeared almost immediately alongside the invention of the private motor car (~1920 Ford/GM had to start offering financing on private vehicles to make them affordable), with 60-75 percent purchased this way in the 20s. Today its 85 percent - there wasn't really ever a period private car ownership didn't involve finance, at least in North America.

Re: Americans can't afford their cars any more and Wall Street is worried

#22

Post by JumpCrisscross »

decimalenough wrote: post #12

If only there was a country selling cheap, reliable electric vehicles with extremely low running costs.

> If only there was a country selling cheap, reliable electric vehicles with extremely low running costs

The missing middle in discussions around Chinese EVs is import quotas (and disconnection mandates).

Americans buy over 15 million vehicles a year [1]. Letting China export up to 150,000 EVs into America a year, subject to anti-surveillance measures (e.g. no phoning home), paid for by the importer and thus--ultimately--consumer, would not bankrupt American producers. It would, however, show American consumers what they're missing out on while increasing competition in the American car market. Hell, it might even give some stateside auto engineers some good ideas.

[1] https://fred.stlouisfed.org/series/TOTALSA

Re: Americans can't afford their cars any more and Wall Street is worried

#23

Post by Retric »

Hammershaft wrote: post #9
o11c wrote: post #8

Earlier quoted context omitted.

It's in the bank's best interest to have constant revenue stream, even if that means destroying lives. Cars keep their value much better than, say, houses.

What!? Houses degrade but the land it sits on usually appreciates faster.

Think in terms of banks not borrowers.

Houses are a much better long term bet for buyers, but car depreciation is more predictable. Lend someone 500k to buy a house and during a recession it might tank in value by 20-40% while a bunch of people walk away. Worse the’ll likely pull out their equity before defaulting in mass.

Cars value on the other hand is more counter cyclical. When the economy is bad people still get into accidents etc but they now want to buy used cars instead of new ones. Even better it’s just less money being lent out at higher interest rates.

Re: Americans can't afford their cars any more and Wall Street is worried

#24

Post by JumpCrisscross »

o11c wrote: post #8
vondur wrote: post #3

I’ve seen some crazy stories on YouTube about people trading in cars they’re already underwater on just to finance an even more expensive one. I can’t understand why banks keep lending money for deals like that.

It's in the bank's best interest to have constant revenue stream, even if that means destroying lives. Cars keep their value much better than, say, houses.

> Cars keep their value much better than, say, houses

Cars depreciate faster than houses. Car loans are also frequently issued without a down payment, reducing the lender's cushion.

The only advantages cars have over houses is they're cheaper and marginally easier to seize and resell.

Re: Americans can't afford their cars any more and Wall Street is worried

#25

Post by bombcar »

giobox wrote: post #21
bombcar wrote: post #16

Earlier quoted context omitted.

Arguably cars became “unaffordable” sometime when loans became common - what percentage of cars being bought in credit can be argued, but clearly it’s become more and more.

Loans appeared almost immediately alongside the invention of the private motor car (~1920 Ford/GM had to start offering financing on private vehicles to make them affordable), with 60-75 percent purchased this way in the 20s. Today its 85 percent - there wasn't really ever a period private car ownership didn't involve finance, at least in North America.

Remind me if I’m wrong but didn’t something dramatic occur financially in the 20s?

Re: Americans can't afford their cars any more and Wall Street is worried

#26

Post by DaveZale »

tombert wrote: post #10
DaveZale wrote: post #4

I use the Loud Muffler Index for judging the economy. Traffic gets louder when working people are under financial stress. It's easily measurable.

I wonder if there's a way you could directly correlate this to profits. Like if you could buy or short VOO or SPY or VTI based on muffler noise.

hehe good question. But I believe that we are addicted to AI hopium at the moment. You know the drill, circular financing a la Enron, smartest guys in the room stuff. Your intuition will play out but there may be a delayed effect. Seriously I owned TSLA stock for many years. It was boring and frustrating, and I sold. So the Muffler Noise Index may be predictive of what happens years from now ;-)

Re: Americans can't afford their cars any more and Wall Street is worried

#27

Post by giobox »

bombcar wrote: post #25
giobox wrote: post #21

Earlier quoted context omitted.

Loans appeared almost immediately alongside the invention of the private motor car (~1920 Ford/GM had to start offering financing on private vehicles to make them affordable), with 60-75 percent purchased this way in the 20s. Today its 85 percent - there wasn't really ever a period private car ownership didn't involve finance, at least in North America.

Remind me if I’m wrong but didn’t something dramatic occur financially in the 20s?

If you mean the Great Depression, the invention of mass market car finance predates it by a decade.

Re: Americans can't afford their cars any more and Wall Street is worried

#28

Post by bigstrat2003 »

foobarian wrote: post #14
pengaru wrote: post #6

Earlier quoted context omitted.

Nothing new there. My childhood friend's brother has gone through so many new cars I lost track, and never paid off a single one of those loans. We're talking a pattern that began in the late 90s with this guy. He now lives out of a truck that's.... wait for it, not paid for! "There's one born every minute"

I mean... I guess he's been in new cars his whole life then? And he manages to come up with the money for it. Good for him? Wonder what sacrifices he made in other areas of his life as a trade.

Well, it sounds like he's living out of his truck for one. That's a pretty huge sacrifice in my book.

Re: Americans can't afford their cars any more and Wall Street is worried

#29

Post by intalentive »

vondur wrote: post #3

I’ve seen some crazy stories on YouTube about people trading in cars they’re already underwater on just to finance an even more expensive one. I can’t understand why banks keep lending money for deals like that.

Moral hazard

Re: Americans can't afford their cars any more and Wall Street is worried

#30

Post by jncfhnb »

vondur wrote: post #3

I’ve seen some crazy stories on YouTube about people trading in cars they’re already underwater on just to finance an even more expensive one. I can’t understand why banks keep lending money for deals like that.

Sell the loan to someone else.
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