Stingray Corvette Forum banner

1 - 16 of 16 Posts

·
Senior Member
Joined
·
18,666 Posts
Discussion Starter #1
Car longs are no longer 84 month limited under some circumstances, and from a Corvette friend who is in the RV business, I just learned that RV loans of 20 years duration are now commonplace. I would personally characterize both as “troublesome,” but with non-aftermarket-customized, just OEM pickups now going to over $100,000 in price, I can see why this is occurring.

Jalopnik said:
Your average car payment is now a record $523/month! (By Ryan Felton)

Car buyers are taking out loans with exceptionally long, record-setting terms–in some cases approaching 96 months–and yet that still hasn’t stopped average monthly payments from continuing to grow. Now, CNBC reports, the typical loan payment for new cars has reached a record $523 per month. Wahoo.

There Are More People Taking Out 96-Month Auto Loans Now

That figure comes to by way of analyst Experian, which reported that in the first quarter of 2018, the average monthly loan payment for a new vehicle increased $15 compared to a year ago, and now it’s at $523.

And with SUVs and crossovers generating insatiable interest from consumers, records continue to be broken.

From CNBC: The credit analysis company’s review of new and open auto loans for the first three months of this year found buyers of new cars, trucks and SUVs borrowed an average of $31,453 – also a record high.
Experian based its review off an analysis of 4.7 million auto loans, according to CNBC.

The increase in monthly payments for new vehicles is not surprising given the rise in interest rates. In the first quarter, the average interest rate for a new vehicle loan was 5.17 percent, up 31 basis points compared with a year ago, according to Experian.

It’s a notable trend. Consumers want to keep their monthly cost as low as possible, so lenders are more willing to extend the tern length to what’s now a record 72 months. But buyers continue to take out record-setting amounts for loans. Experian’s latest review found the average has climbed again to $31,453, up from $31,099 a quarter prior.

And while, according to CNBC, Experian found that 30-day delinquencies tailed off and decreased to 1.86 percent of all auto loans, the percent of loans that are 60-days delinquent remained steady. But here’s an even more concerning figure: 90-day delinquent loans increased this past quarter to 4.3 percent from 3.8 percent, according to the latest figures from the New York Federal Reserve.

You gotta wonder if this record-setting trend is going to eventually wind up causing major pain for the industry and economy.

Anyway. Congrats, everyone, on this latest milestone.
https://jalopnik.com/your-average-car-payment-is-now-a-record-523-per-month-1826450154
 

·
Registered
Joined
·
631 Posts
"Troublesome" would be an understatement...so many consumers under water.
 

·
Registered
Joined
·
3,718 Posts
String it out long enough, anybody can "afford" what ever they want. Yes "troublesome" especially since defaults can spread like wildfire throughout the economy as demonstrated by the 2007 housing crash that morphed into the Great Recession.
 

·
Registered
Joined
·
866 Posts
"Those who ignore history are doomed to repeat it". Can't remember who said this (or something similar) but I would prepare for the next "Great Recession". Especially with the recent loosening of the bank restrictions that were put in place in the aftermath of the last one. Personally, I am just going to bury my head in the sand. And drive the Z06 like I stole it.--Bob
 

·
Registered
Joined
·
5,026 Posts
Reminds me of friends I had in the town where I went to college. A not very prosperous, blue collar sort of place. Many of them were still making payments on used cars they no longer owned, or no longer ran.
 

·
Registered
Joined
·
631 Posts
This will boost new car sales at the expense of used car sales, which means that new cars will depreciate faster - thus putting those long term loans further underwater.

As some of you know, I'm a lawyer in the consumer banking/finance industry; our biggest recent concerns with respect to coming defaults has been student loans, not car loans - this is a fairly adverse development, though. It will merit careful study as we determine its effect on the overall risk.

Consumer finance a very interconnected system, and if a consumer is underwater on an expensive car and has little in the way of savings, he can't upgrade to a new home, get another new car, etc. Just as a rising stock market leads to more spending because people feel wealthier (even if they actually aren't because only their 401K improved) being underwater on a big loan (home, car) has a damping effect on consumer spending and the overall economy.

Don't want to go too deep here, with no data, but generally speaking, this isn't a healthy development.
 

·
Registered
Joined
·
3,718 Posts
our biggest recent concerns with respect to coming defaults has been student loans, not car loans ... just as arising stock market leads to more spending because people feel wealthier (even if they actually aren't because only their 401K improved) being underwater on a big loan (home, car) has a damping effect on consumer spending and the overall economy.
Great post IMO. Do the student loan folks also have a 96 month car loan (rhetorical)? Who knows what will tip the scale. Could be a black swan.

The "wealth affect" you refer to does work both ways. Suggest use of paragraph spacing.
 

·
Registered
Joined
·
631 Posts
Agree as to spacing. Working quickly on the phone while out and didn’t see it properly.
 

·
Registered
Joined
·
866 Posts
This raises an interesting question: Why not lease? If one finances say a $40,000 total financed cost car at 3% for 96 months, the payment would be about $468/mo for eight years, at which time the car would have about a zero residual value, probably 100,000 miles on it and will have been out of warranty for five years, so probably quite a bit of maintenance expense over and above the finance cost. If one leases the same car with a total capitalized cost of $40,000 for 3 years at a money factor roughly equivalent to 3% annual interest, driving 12,000 miles a year, the payment would be about $681 per month, less if driving only 10,000 miles a year. And many manufacturers significantly subsidized lease payments (by raising the residual amount) to sell new cars so the payment could be even much lower. While the monthly lease cost is more expensive, there would be no additional maintenance costs (car is under warranty the whole time) and after three years you repeat the process for another three years, always having a new car. Now granted, the people needing 96 month financing are probably struggling to meet credit and income requirements for the lower $468 payment and might not qualify for the higher lease amount, but if you are not, why not lease? Just a thought. --Bob
 

·
Registered
Joined
·
3,197 Posts
This could be great for ZR1 sales.
 

·
Registered
Joined
·
352 Posts
Sounds like both lenders and borrowers are testing the limits again...plug one hole and the pressure opens another...got to lend that money. Let's see.
 

·
Registered
Joined
·
7,930 Posts

·
Registered
Joined
·
3,197 Posts
Bryan, now everybody can afford an entry level C8 Masterpiece. :nightmare:

SF
Rick
I project by the time the ME hits the street we may see 108 months! :welcoming:

As a comparison, my 2015 Z51 was 5 grand more than our first house in December 1995.
 

·
Registered
Joined
·
182 Posts
Ironically, so was my 2016 Z51....$60k vs $55k (in Oak Cliff, aka SW Dallas) but in ‘83. However, if I remember correctly, the interest rate on my house in ‘83 was 6%...maybe a bit more, for 30 years. Shortly after that came negative amortization loans and the “teens”.! Yikes! Was an ugly period....for home mortgages.
 
1 - 16 of 16 Posts
Top