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Car Repos Are Exploding. That’s a Bad Omen

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Re: Car Repos Are Exploding. That’s a Bad Omen

#31

Post by taneq »

javajosh wrote: post #8

Why do people borrow money to buy a car? Why not save money, maybe invest in something safe(ish), and buy your car in cash, preferably used? I get it that people get emotional about cars, but good heavens, this impulse puts you in the hole for years. It's almost as bad as cheating on your wife (and far, far worse than cheating on a gf).

> Why do people borrow money to buy a car?

Because new cars are nice, and people are bad at time value of money? Also I think it's partially a cultural thing, very few of my friends and family buy brand new cars but I know some people would never even consider a second-hand vehicle.

> It's almost as bad as cheating on your wife (and far, far worse than cheating on a gf).

What a curious point for comparison! Although I get your point if you just mean purely financially.

Re: Car Repos Are Exploding. That’s a Bad Omen

#32

Post by [deleted] »

javajosh wrote: post #8

Why do people borrow money to buy a car? Why not save money, maybe invest in something safe(ish), and buy your car in cash, preferably used? I get it that people get emotional about cars, but good heavens, this impulse puts you in the hole for years. It's almost as bad as cheating on your wife (and far, far worse than cheating on a gf).

[deleted]

Re: Car Repos Are Exploding. That’s a Bad Omen

#34

Post by troymc »

When I read the headline, I thought "car repos" were git repositories associated with car software, such as self-driving car software. Maybe those repos are getting really huge, i.e. with lots of code, hard to maintain?

But that's not the story at all!

Re: Car Repos Are Exploding. That’s a Bad Omen

#35

Post by noirbot »

tomschlick wrote: post #12
javajosh wrote: post #8

Why do people borrow money to buy a car? Why not save money, maybe invest in something safe(ish), and buy your car in cash, preferably used? I get it that people get emotional about cars, but good heavens, this impulse puts you in the hole for years. It's almost as bad as cheating on your wife (and far, far worse than cheating on a gf).

If you have good credit (>760) you can get 0% interest or close to it loans pretty regularly if you wait. At that point there is no reason for me not to take on the loan and just setup autopay.

Yea, for sure. I got a 0.5% loan on my first car and had a moment when I had some spare cash and realized "Wait, I'm essentially being paid money to have this loan after inflation" and there was no reason to really pay it off quicker vs. just saving/investing the money.

Re: Car Repos Are Exploding. That’s a Bad Omen

#36

Post by PheonixPharts »

javajosh wrote: post #8

Why do people borrow money to buy a car? Why not save money, maybe invest in something safe(ish), and buy your car in cash, preferably used? I get it that people get emotional about cars, but good heavens, this impulse puts you in the hole for years. It's almost as bad as cheating on your wife (and far, far worse than cheating on a gf).

I sometimes wonder is I'm living in a different time line than other people.

> The CPI is up over 35% for used cars and trucks as reported by the BLS, versus new vehicles, which are up 12.5% [0]

That is, if you had wanted to by a new or used car last year and followed this advice you would have had to save an additional 12.5-35% to be able to purchase the car in following year.

Please let me know where from 2021 to 2022 I could reasonably planned to have put my money and saw gains north of 10% let alone 30%?

If you had saved for your car while I took out a loan not only would I have had started receiving value from that car a year earlier than you, I also would have saved money in the long run since most interest rates have been lower than inflation. In fact I could sell that car to you (or someone like you) now that you've finally saved up enough paying off my loan, getting to drive the car for a year, and likely still making more cash despite the depreciation of the car. Even if I had the cash on hand it would have been better to put that cash towards some non-depreciating asset or improvement.

If there are low interest loans for anything you need, especially in a time of high inflation, it almost always makes more sense to finance it then pay full cash.

Having more and more of consumer spending being credit based is a well known problem in our current economic environment but it's hardly the result of a moral failing as you paint it.

0. https://www.bankrate.com/insurance/car/inflation-and-rising-...

Re: Car Repos Are Exploding. That’s a Bad Omen

#37

Post by gnicholas »

javajosh wrote: post #8

Why do people borrow money to buy a car? Why not save money, maybe invest in something safe(ish), and buy your car in cash, preferably used? I get it that people get emotional about cars, but good heavens, this impulse puts you in the hole for years. It's almost as bad as cheating on your wife (and far, far worse than cheating on a gf).

A combination of liquidity, lack of discipline, or something in the middle.

As others have pointed out below, some people don't have enough cash to buy a car when they need one.

Other people have enough money to buy a car, but wish to purchase a nicer car because of vanity or enjoyment reasons.

And other people are in the middle: they could afford to buy a low-end vehicle in cash, but they realize that the transaction costs involved with every purchase (sales tax, time spent searching/selling) are not worth buying a $5k car, then a $10k car, then a $20k car in the next 5 years. So instead they finance an $18k car and hope their job trajectory continues as planned.

Re: Car Repos Are Exploding. That’s a Bad Omen

#38

Post by noirbot »

thesausageking wrote: post #18
seanmcdirmid wrote: post #13

Earlier quoted context omitted.

Car financing is a good way to build credit before buying a home. I regret that my credit score actually went down when I paid off my car loan early. The rules are really weird here. Using some credit is better than using no credit if you think you might need credit in the future (mostly to buy a house). Also, buying a new car is much less of a hassle than buying a used one. The price difference between used and new…

> Car financing is a good way to build credit before buying a home. I've heard people say this, but it's never made sense to me and sounds like something the loan industry has convinced people of just to sell more loans. Is it actually true? Every time I've gotten a mortgage, they seem to just care about my income and whether I've had any missed payments on credit cards or other bills before. And credit scores aren’t…

I mean, that seems somewhat sensible? Why would they give a loan to someone with no income to cover the loan payments? Unless you already had the cash to just pay for it in full, but at that point I'd assume they're worried about why you're asking for the loan if you have more than the value of the loan in liquid assets.

Re: Car Repos Are Exploding. That’s a Bad Omen

#39

Post by srvmshr »

tomschlick wrote: post #12
javajosh wrote: post #8

Why do people borrow money to buy a car? Why not save money, maybe invest in something safe(ish), and buy your car in cash, preferably used? I get it that people get emotional about cars, but good heavens, this impulse puts you in the hole for years. It's almost as bad as cheating on your wife (and far, far worse than cheating on a gf).

If you have good credit (>760) you can get 0% interest or close to it loans pretty regularly if you wait. At that point there is no reason for me not to take on the loan and just setup autopay.

Slightly OT: how long does it take to get a credit score of 750+ typically?

Someone I know who recently moved to US, claims his less-than-a-year credit line is already at 770. It sounds a bit dubious but I would like to hear some validation about it. For e.g. it took me 4 years (admittedly on a junior researcher salary) to get to 780, so it surprised me.

Re: Car Repos Are Exploding. That’s a Bad Omen

#40

Post by greenthrow »

javajosh wrote: post #8

Why do people borrow money to buy a car? Why not save money, maybe invest in something safe(ish), and buy your car in cash, preferably used? I get it that people get emotional about cars, but good heavens, this impulse puts you in the hole for years. It's almost as bad as cheating on your wife (and far, far worse than cheating on a gf).

Inflation has been higher than the interest rates most people can get on a car loan. So by paying cash you are losing money.
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