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Early 1900s — Cash or Bust When cars first became popular, you either paid cash or you didn’t drive. Automakers quickly realized most people couldn’t afford full cash payments, so installment plans appeared. 1919 — GMAC changes everything General Motors created GMAC (General Motors Acceptance Corporation) in 1919. For the first time, people could finance cars through loans tied to the manufacturer. This exploded car sales and cemented financing as the “normal” way to buy. Post–WWII — Banks step in As demand grew, banks jumped into auto lending. They made it easy to get loans, but they structured them so they’d profit from interest over long periods. The standard car loan went from 12 months in the 1950s to 72–84 months today. 1980s–2000s — Leasing & subprime boom Leasing became popular in the 1980s as another way to stretch payments. In the 2000s, subprime auto lending grew rapidly — banks realized they could charge higher interest rates to people with lower credit, securitize the loans, and sell them off (just like the mortgage market). Today — A $1.65 trillion machine • Americans owe $1.655 trillion in auto loans. • Average loan: $41,720 for new cars. • Average monthly payment: $745. • Terms have stretched up to 7 years, trapping borrowers in negative equity cycles. • Over 1 in 4 trade-ins are underwater, meaning people owe money even after they give the car back. How banks win: • They make billions on interest, fees, and loan securitizations. • The longer your loan, the more they profit. • Negative equity means when you trade in, the old loan gets rolled into the new one — keeping you in debt while the bank collects more interest. How people lose: • Cars depreciate faster than loans are paid off. • Many borrowers end up paying 150%+ of the actual car value over the loan’s life. • Subprime borrowers get hit hardest — high rates, higher default risk, and fewer options. The result: Car financing wasn’t designed to give people freedom — it was designed to sell more cars and lock people into debt streams that enrich banks and manufacturers. That’s the cycle AristoCarWare is trying to break with subscriptions: flexibility instead of 7-year contracts, transparency instead of hidden fees, and no negative equity.