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

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Wubby

Wubby

Member
Oct 27, 2017
3,872
Japan!
Hot on the heels of the 'Average price of new vehicles tops $47K; payments cross record $700/month' thread from the other day I saw this pop up:

www.barrons.com

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

A surge in repossessed autos reflects broader economic problems. The question: How might a bursting of an auto bubble affect the broader U.S. economy?
www.barrons.com www.barrons.com

he says he has never seen so many people making $2,500 a month owing $1,000 a month in car payments. That's about double the maximum portion of income many financial advisors recommend allocating toward a car payment. "The idea that the economy is strong? Anyone who is actually doing business sees things are not strong," says Lopez. "We had a housing bubble in 2008, and now we have an auto bubble."
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Holy heck at spending $1000 a month on a car payment when you only pull in $2,500.
 
Resident Guru

Resident Guru

Member
Oct 28, 2017
919
My payment is $715 on my new hybrid touring Accord. Only a 4 year note at 1.75% thought. However the car payment is a very small portion of my income. I see way too many people overextend themselves on cars. Dummies out there making 50-60k a year driving new Tahoes.
 

Deleted member 13798

Banned
Oct 27, 2017
12,374
Freezasaurus said:
Didn't this happen years ago with tons of people being able to buy houses they couldn't actually afford?
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It mentions the housing bubble as a direct comparison. This is a little bit different though, as inflated car prices and stock demand being high is driving monthly payments up to even say $700, which is absurd for your average income, so this is coming to a boiling point regardless. It's a little more complicated than spending out of your means across the board, though that's no doubt a factor for a lot of people too still.
 
entremet

entremet

You wouldn't toast a NES cartridge
Member
Oct 26, 2017
60,654
Automobile monoculture messed up the US big time.

It's not durable for stuff like this.

Thanks, GM.
 
sfedai0

sfedai0

Member
Oct 27, 2017
10,050
Remember the mortgage crisis back in '08? We got a nice auto loan bubble brewing now.
 
Freezasaurus

Freezasaurus

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Oct 25, 2017
57,103
Fury451 said:
It mentions the housing bubble as a direct comparison. This is a little bit different though, as inflated car prices and stock demand being high is driving monthly payments up to even say $700, which is absurd for your average income, so this is coming to a boiling point regardless. It's a little more complicated than spending out of your means across the board, though that's no doubt a factor for a lot of people too still.
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I bought a new car earlier this year when availability was next to nothing and I still got out of there for only $300/mo.
 
Septy

Septy

Prophet of Truth
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Nov 29, 2017
4,090
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My neighbor had two of his cars repod the other day. He tried to fight the tow truck driver. Then as he drove away he tried jumping in the cars and starting them lol
 
Skunk

Skunk

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Oct 28, 2017
3,085
Yeah car prices are getting out of hand, and as someone who has followed the automotive industry for 20 years; it's not all in inflation, increased production cost or the chip shortage/current used market bubble. Manufacturer's are increasingly pursuing higher margins and it's a bit worrying.
 
Tavernade

Tavernade

Tavernade
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Sep 18, 2018
8,731
Septy said:
My neighbor had two of his cars repod the other day. He tried to fight the tow truck driver. Then as he drove away he tried jumping in the cars and starting them lol
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I kinda hope one of the other cars was for a family member, cause otherwise the guy who apparently couldn't afford one car spent the money on a second one.
 
chuckddd

chuckddd

Member
Oct 25, 2017
23,308
I've never had a car payment in my life. Always paid cash up front, even if it didn't make sense economically it's not worth being upside down imo.
 
MercuryLS

MercuryLS

Banned
Oct 27, 2017
5,578
chuckddd said:
I've never had a car payment in my life. Always paid cash up front, even if it didn't make sense economically it's not worth being upside down imo.
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I usually either pay it off with cash I saved up or use line of credit to pay it and then aggressively pay off the LOC as quickly as i can. The only long term interest trap I'm willing to get stuck in is a mortgage.
 
x3sphere

x3sphere

Member
Oct 27, 2017
978
Wonder if this is in part since home values have went up so much, a lot of people are feeling so flush with cash on paper that they don't mind taking on a lot more debt.
 
Drakeon

Drakeon

Member
Oct 25, 2017
6,322
Skunk said:
Yeah car prices are getting out of hand, and as someone who has followed the automotive industry for 20 years; it's not all in inflation, increased production cost or the chip shortage/current used market bubble. Manufacturer's are increasingly pursuing higher margins and it's a bit worrying.
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So, what your saying is, like many other industries, they're exploiting consumers by raising prices and then using inflation as an excuse and blaming the increased price solely on that.
 
Marnie

Marnie

The Fallen
Dec 3, 2018
794
I pay $408 w/ 1.75% interest for my equinox. My wife and I make about $100k a year, and even with that, I feel $408 is way too much for a car. I can't imagine paying over $700 for a car.

Wild that the auto industry forced cars upon us and destroyed cities and public transit and that is now screwing the nation over. I imagine that the "worker shortage" (really a wage shortage) is going to get even more intense now when people can't get to work form the burbs.
 
GalvoAg

GalvoAg

Member
Oct 30, 2017
2,385
Dallas
Got to be a real idiot to sign up for $1,000 monthly's and not be able to afford it.

Don't really feel sorry, so many try to flex with a car.
 
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Pein

Pein

Member
Oct 25, 2017
8,280
NYC
I dunno, it's always crazy to me how much people go out and finance big expensive new cars like nothing.

I could afford a 100k car but to me it just doesn't make sense to throw that into a car that's gonna depreciate like crazy. I've always bought used and kept my old cars in good condition.

Too much people sell or trade in their old car or get rid of them instead of doing maintenance and keeping up with repairs.

I had a old Lexus with near 200k miles that was perfectly fine before some drunken loser crashed into it. But appearances I guess, I'd rather own a well taken care of car that I paid 5k and did another 5k or maintenance than have a car note for an accord or rav4 lol.
 
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Nif

Nif

Banned
Oct 25, 2017
1,716
The loan people at these dealerships are slimy as hell. Glad I was preapproved for my loan last year. The guy did some kind of check, thought I didn't have one, and tried telling me the lowest I could get was an APR much higher than I had been approved for.
 
steejee

steejee

Member
Oct 28, 2017
8,726
Decided to do a little math seeing this.

Spouse and I are high earners and our vehicle costs have been:
Her: Used $9000ish or less, early 00s model compact hatchback, bought in 2006ish, totalled in 2017 (off a low speed accident)
Me: New $6400 (Motorcycle) 2008, sold in 2017ish for $3000
Me: New $18000 (subcompact) in 2010, totalled on 2018 (low speed accident)
Her: Used 2015 model (compact sedan) for $14,000 in 2017, still driving, had some issues lately but mostly due to mileage and plan to keep it unless something goes REALLY wrong
Me: Used $21000 Compactish "Rather achievable almost dream car" - 2016 model purchased in 2018. Still driving in good condition., still love it.

So two people and between us we've spent a total of $53000 in purchase costs across 5 vehicles in the past 20 years (total is deducting insurance payouts). I took mass transit before my motorcycle.

To see that the average cost of a single new vehicle is just shy of that total is crazy to me. Of course the number of expensive high trim trucks I see in areas that really don't have many high earners makes it a bit less shocking.
 
Rellodex

Rellodex

Member
Oct 29, 2017
2,187
Pein said:
I dunno, it's always crazy to me how much people go out and finance big expensive new cars like nothing.

I could afford a 100k car but to me it just doesn't make sense to throw that into a car that's gonna depreciate like crazy. I've always bough used and kept my old cars in good condition.
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I've always though it was weird that the primary argument against buying new is the depreciation. Like cars are an investment or something.

A new car is obviously, in the present world, a pure luxury item and status symbol.

I seriously cannot fathom not buying used for any other reason.
 
louiedog

louiedog

Member
Oct 25, 2017
7,393
I've known so many people who stretch themselves pretty far on their car payment. They basically go up to the most they can possibly afford. Like, people who work from home and live by themselves buying huge ass SUVs and then needing family to help take over payments when an unexpected expense pops up.

When I got my car the people at the next desk were denied a loan for a huge SUV that was 3x the cost of the car I was buying. You have to really fall below what you can afford for the dealership to turn you down. They were adamant they needed that class of car.
 
entremet

entremet

You wouldn't toast a NES cartridge
Member
Oct 26, 2017
60,654
Pein said:
I dunno, it's always crazy to me how much people go out and finance big expensive new cars like nothing.

I could afford a 100k car but to me it just doesn't make sense to throw that into a car that's gonna depreciate like crazy. I've always bought used and kept my old cars in good condition.

Too much people sell or trade in their old car or get rid of them instead of doing maintenance and keeping up with repairs.

I had a old Lexus with near 200k miles that was perfectly fine before some drunken loser crashed into it. But appearances I guess, I'd rather own a well taken care of car that I paid 5k and did another 5k or maintenance than have a car note for an accord or rav4 lol.
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A big part driving (no pun intended) higher car payment is the preference for bigger vehicles, which a higher than average price.

This is an older article--pre-pandemic--but the trend hasn't change. Taste is hard to change.


Fueled by years of low gas prices, consumers aren't just demanding longer feature lists; they're wanting bigger vehicles. In the last decade, there has been a dramatic shift from compact and midsize cars to SUVs and crossovers. According to J.D. Power, sales of cars have dropped to just 27 percent of the market, compared to 40 percent in 2014, as sales of SUVs, crossovers, and pickup trucks have surged. Between 2017 and 2018, the number of new cars that sold for less than $20,000 fell by a whopping 19 percent, according to their market data. There are few SUVs available under $20,000.

Automakers are rushing to the market with dozens of new SUV models, ranging from subcompacts such as the 2019 Hyundai Kona to 3-row family haulers like the 2019 Subaru Ascent. Cadillac recently added the subcompact 2019 XT4 to their lineup. Lincoln, Cadillac, and BMW have all-new 3-row luxury crossovers arriving soon.
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Look at those F-150s. Those are not being bought by tradespeople only. They're being bought by regular ass people who practically don't need those things, but they look cool.
 
Instro

Instro

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Oct 25, 2017
15,124
People are crazy with the kinds of cars they buy and how often they do it. I'm particularly baffled when I see renters way overspending on cars. I've watched several friends over the years doing this kind of thing.
 
RedMercury

RedMercury

Blue Venus
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Dec 24, 2017
17,734
I feel like a lot of this goes back not just to a status symbol but also concerns about safety, can't even count how many times I have heard people say they need a big truck or SUV because if they get into an accident they want to not take the worst of it, especially with my kid and her friends getting close to driving age like every parent is saying the same thing, they want their kid in a big-ass car while they are learning. Then it becomes a race to the bottom because everyone wants to feel more safe. I can even say for myself, before I got my most recent car and was driving my wife's CX-3 I got real used to being higher off the ground and feeling like I could kind of see more around me which was nice, it was kind of hard to go back to a sedan.
 

Radd Redd

Member
Oct 27, 2017
8,076
I make more than that a paycheck and still get mad paying $250 a month on our car. I don't know how they some can manage $1000 a car note making $2500 a month.
 
Skunk

Skunk

Member
Oct 28, 2017
3,085
Drakeon said:
So, what your saying is, like many other industries, they're exploiting consumers by raising prices and then using inflation as an excuse and blaming the increased price solely on that.
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Not exactly.

I mean, price increases have been outpacing inflation since long before the current inflation crisis. I'd say it really started getting egregious a bit over ten years ago. It's been a combination of things, but the biggest has been structuring vehicle lineups and trims to be more exploitative. For example, the boom in crossovers has allowed manufacturers to slot multiple trims of CUVs under their SUVs. A *loaded* top trim full-size SUV was less than $40K 20 years ago (and they typically had a *lot* of cash on the hood domestically), you're looking at over $80K MSRP now in a lot of cases and that's for a regular brand. Luxury full-size SUVs are breaching well past $100K now. I could actually go on for paragraphs, but basically economy cars have not seen that level of change; but the delta between those and larger models/anything luxury/anything performance/etc is getting wider and wider.

And then... they are *also* raising prices and blaming inflation/supply constraints/etc right now, but those MSRPs are not coming back down.

Edit: Also, what's making this spread in lineups/trims more apparent is now even the typical mid-size stuff which makes up the bulk of the market is starting to get out of hand, hence the increasingly higher average vehicle cost.
 
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Fat4all

Fat4all

Woke up, got a money tag, swears a lot
Member
Oct 25, 2017
94,147
here
im very glad my 2011 corolla is paid off

its fucked how car-dependent i am tho
 
Joshua

Joshua

Member
Oct 27, 2017
3,786
Lopez says he recently bought a Bentley, McLaren and two Aston Martins—all purchased by buyers using PPP money as down payments, and all repossessed after few or no monthly payments.Another recent acquisition: a Silverado repossessed from a borrower with a solid 700 credit score who made two payments
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/Facepalm to the EXTREME

From reading this article I wonder if people were doing the same thing with home loans?
 
Damaniel

Damaniel

The Fallen
Oct 27, 2017
6,544
Portland, OR
I paid $430/mo for my Mazda 3 until I paid it off last year, and that was almost more than I felt comfortable spending - and I definitely make more than $2500/mo. I can't imagine spending $1k on a car payment, ever.
 
turbobrick

turbobrick

Member
Oct 25, 2017
13,157
Phoenix, AZ
Skunk said:
Not exactly.

I mean, price increases have been outpacing inflation since long before the current inflation crisis. I'd say it really started getting egregious a bit over ten years ago. It's been a combination of things, but the biggest has been structuring vehicle lineups and trims to be more exploitative. For example, the boom in crossovers has allowed manufacturers to slot multiple trims of CUVs under their SUVs. A *loaded* top trim full-size SUV was less than $40K 20 years ago (and they typically had a *lot* of cash on the hood domestically), you're looking at over $80K MSRP now in a lot of cases and that's for a regular brand. Luxury full-size SUVs are breaching well past $100K now. I could actually go on for paragraphs, but basically economy cars have not seen that level of change; but the delta between those and larger models/anything luxury/anything performance/etc is getting wider and wider.

And then... they are *also* raising prices and blaming inflation/supply constraints/etc right now, but those MSRPs are not coming back down.
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Exactly. Just like you say that price increases are outpacing inflation, but there's still plenty of affordable cars out there. Manufacturers are raising the price of higher trim models, however people shouldn't be buying them if they can't afford them. There's nothing wrong getting a base model car, or even a cheaper model.

We just had a thread with the average new car costing $47k. Yet there's still plenty of under $30k cars on the market even despite low stock. People would rather stretch themselves thin to get the most car they can, even if they can't really afford it.
 
PHOENIXZERO

PHOENIXZERO

Member
Oct 29, 2017
12,189
kIdMuScLe said:
Banks are so screwed because there's no way to remake these car loans. A lot of those loans have huge markups!
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That's part of the problem, dealerships pulling their "adjusted dealer market" bullshit to exploit the supply issues, increasing the price of a vehicle by thousands of dollars to where people are upside down in the vehicle before they're even out the door.

Never mind how many subprime auto lenders there are out there these days that I'm willing to bet make up a good number of those $1,000 a month loans.
 
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