Records have been set in practically every metric for auto loans, as of late: Americans owe a record $1.1 trillion in loans; a record 20 percent of new car loans have 72 month terms; people are overall paying record amounts for a new car; and a record 6.3 million people are 90 days or more behind on their loans.
Even this won’t cause the next Great Recession, but it ain’t good.
CBC Marketplace did a great piece on this issue recently.
It’s interesting to see how people get sucked into such lengthy terms. The segment touched on slimy dealerships convincing people to roll over loans from a trade-in and ending up underwater straight out the gate.
We’ve gone from paying cash for cars to 12 24 36 48 60 72 84 month financing. There are now 96 month and even 120 month loans available for new cars. Some banks offer 240 month financing for recreational vehicles. That’s 20 years.
People are financing $500 phones. If you can’t come up with $500 for a phone maybe you shouldn’t buy it. We are financing almost everything now.
Very few people actually save up for purchases. Most people think in terms of monthly payment. “Can I ‘afford’ the payment? Yes!
According to the federal government auto, mortgage, student, and credit card debt are all at record highs. Even when adjusting the numbers per capita and for inflation it’s clear we are sicking much deeper into debt.
Sub prime mortgages are also back. But instead of calling them “sub prime” they are now called “non prime.”
h/t bareley