No, they're mostly making bad decisions. Taking a loan with an average of $500/mo for 68 mo (yes, those are the current averages) on a hunk of metal that's losing value wether you drive it or not? If you're struggling with that, it's not income inequality or evil banks - it's bad decisions.
Americans are also foolishly suckered into believing they need a new car every few years. It's not a phone. A car should last 10 years and there is absolutely no reason to buy new unless you have money to burn.
My truck is going on 10 years old (bought used) and has low mileage < 100k. Paid a fraction of the cost of a new one (roughly 35% of the sticker price when it was 5 years old).
Same applies to a 600$ service every 3 years or 30K miles. Just to change oil, filters, flush refill all fluids and verify everything is alright. Easily doable under 75$ within an hour or two. My Sedan has been running fine with no dealer service or oil change for the past 12 years, over 120K miles.
Neglecting on maintenance isn't great advice if people are looking for ways to get more out of their vehicles. Nearly every car around will need a lot more than fluids and filters every 120k miles.
In many if not most vehicles, not replacing belts after their specified age is risking serious damage to the engine. Still I agree that the official branded service is often a ripoff.
Not "belts" but timing belt. Check if your car has interference or non-interference engine. The replacement interval is often at 120K miles, after which it becomes a gamble, but may last 200K.
I do service on my bike and car myself. It's not as difficult as most people think. Not only it's cheaper but also more reliable. I've seen too many times how workers at the dealer forget to tighten some nut, or forget to put some cover back after maintenance, or change the brake pads but don't change or grease other brake parts, etc. They are not interested in doing quality work.
I had two experiences that convinced me to start changing my own fluids and doing basic maintenance. One time I took my Honda to a dealer for an oil change and they over tightened the oil pan plug to the point that the threads stripped off. Of course I only discovered this after a period of some time so I had no recourse. I had to pay for a new oil pan and installation.
After that I vowed not to take my car to the dealer so I took it to a well reviewed independent shop. On the way home after a fluid change and radiator flush my engine temp shot up and I discovered they hadn't installed a radiator cap.
Since then I've found a really good local mechanic, but being that he's in demand, his prices are high and getting an appointment on my day off can be a problem. I still take my car to him at least once a year for service and to have him look things over but other than that I do my own basic service. I usually schedule a day with a few friends and we work on our cars together. It makes things more social and less of a chore.
The less maintenance a modern car gets, the better. That is, aside from the oil changes and things like brakes that wear out can be easily done DIY.
In fact, once you start to service your car, that's where the problems start. We are not paying enough for mechanics to pay attention or care. The cars are not always designed for serviceability, some things can simply never be put back together the way they were done in the factory. There are no shops, official or not, that will use the recommended by vendor procedures or swap out all the required parts when doing some work.
Modern Japanese cars seem to last quite fine with zero service (again beside oil changes, brakes, fluids and such) for 200K+ miles/15+ years, after which they are worth so little and work costs so much that donating to NPR is the only practical option.
You are definitely on the money. I hate taking my cars in for any work, there's always a screw missing or something broken that wasn't before. IF you work on it yourself later, you'll notice, which I do. No matter where you go. I prefer to just do it myself but buying the new tools involved and (to a lesser extent) the time involved is prohibitive.
I do change things that aren't difficult such as replacing a turn signal switch in the steering column. But I think the premium for a Toyota or Honda is definitely worth it- paying to reduce probability of having someone wrench on your vehicle, leaving it with a new problem for each one it resolved. Then just hope no one runs into you resulting in the same issue- wishful thinking in an era where everyone is looking down at a phone (which should result in reckless driving charges and jail time).
I suppose it's like expecting even halfway decent QA on software that you purchase. At every place I've worked there is not even a dedicated SQL DBA let alone a legitimate QA effort or team.
Small thread diversion: I do all my own maintenance (excluding tire replacement).
This is one of the things I loved about maintaining my diesel Mercedes. It was clear that thought and great care was put into fastener choice. (Most) Anything that needed to be removed for service was a permanent fastener. No push-through "Christmas tree" fasteners on parts that needed removing for service; it was a threaded insert and a screw. Where the parts needed a plastic fitting, it was a permanent/reusable expanding plastic fastener, not a push-in fitting.
Contrast that with the Honda that needed less service, but so many jobs involved doing the job and then also replacing the broken one-time or few-time use plastic fasteners (after trying to find and buy it). Similar with my older Jeeps and VWs.
MB seemed to design their car to be serviced for 500K km. Others seem to design it to be cheap and fast to assemble and pass the "initial quality survey" and maybe the length of the warranty period without too many defects.
I can attest to Honda cheapening out on some of the fasteners, although I've never worked on a MB. For the minimal maintenance I've done on the drivetrain I haven't really noticed it but a few years ago my radio went out so I installed an aftermarket stereo. The dash and other interior pieces that I needed to remove used a bunch of those break off fasteners that are super annoying.
Have you done any work on the interior of your MB? Were they similarly thoughtful in the way things were laid out?
Since we're already going off topic, I may as well add that one of my dreams is to someday acquire an old MB, maybe a W116/W126, or even an older W108, and convert it to an EV.
A few things (had a window motor go out and installed heated seat element, and then misc small jobs). The door panel used a few of the plastic fasteners, but IIRC, they were more mushroom shaped than Christmas tree shaped (I don't recall breaking any, even though they were 15+ years old by then).
Many of the interior fasteners, even if push-to-assemble were curved bits of metal spring that snapped into an FRP "box" to hold things securely and rattle-free.
As an engineer, I couldn't help but marvel at the care that went into some of the design and service thinking.
That's not to say it was all peachy. Mercedes faces the same realities and tradeoffs that other companies face, and they need to assemble cars to hit a price point that people will pay, and people don't want to see fasteners in the interior, so they use some plastic-on-plastic or plastic-into-metal in some areas.
The worst engineering I saw was that that car was eventually killed by rust, caused in large part by poor factory prep and/or a poor understanding of the durability of the (then) new water-based, low environmental impact primer and paint system that plagued the whole W210 line in snow belts. Perfectly good car sent to the junkyard after only 216K miles and 18 years. What's the environmental impact of that? Could have easily gone another 150K+ miles. Pity.
On old MBs, dad has a 1959 220S cabriolet that he's restored (to nice driver condition, not a show car) after we found it in a barn in PA, a W123 he bought new, a diesel W210 that isn't all rusty (as it's a southern car), an R170, and an electric Smart. With all those cars, the electric Smart gets the most usage...
I love browsing cars for sale online that are 2-3 years old with <30K miles. They're the best value and like you said the price is just 2/3 of the cost new at the time. People need to realize that a car (even Ferraris) loses anywhere between 35-50% within 3-4 years. Good used cars dealerships with online presence move a TON of inventory everyday. Carsense.com uses the online checkout system from drivemotors.com (I used to work here) and the prices they display on their websites are wild. You can literally buy a car from them without haggling.
I've heard this (loss of 35-50% within 3-4 years) and it's not really true. (Or at least, depends on the vehicle.)
A 2017 Honda Accord goes for $20k new. A 2014 of the same model with 45k miles goes for $16k (KBB). A 2011 of the same model with 90k miles goes for $10k (KBB).
Basically, the first 3 years and 45k miles it depreciates $4000. The second 3 years and 45k it loses $6000 more in value.
Arguably it's cheaper to buy new and sell after 3 years than to buy 3 years old and sell after 3 years.
The years 7-9 are when the car stops losing value so quickly. Worth $6700 in year 9 and 135k miles. The last 3 years and 45k miles only depreciate $3300.
It's one thing for new cars that are 20K, but for example, my last car was a Japanese built 2003 Toyota Avalon XLS loaded, 47K new plus taxes, purchased certified in N. Hollywood for 17.5K out-the-door in 2008 with a warranty. Only oil changes and a couple batteries, and I still keep it around after 189K miles! It's not worth much for resale now, but it still drives likes new... go used, take care of it, spend money on more exciting things!
The Honda Accord actually holds value pretty well. It's also pretty cheap as a brand new car, so as you can imagine, it won't depreciate as much as other cars. My figures hold true for most other cars though.
Unless, of course, people want newer engines that are more efficient, want newest technology (carplay / android auto), and want newest safety equipment.
At this point it's maybe not so much that they need one, but that they want one. I for sure don't want to keep cars forever.
Maybe I misread your comment, but keeping a car for 10 years may not be for everyone.
I instinctively agree with you, but the difference between need and want is a tough one to draw these days. I err on the side of believing that 'need' is a narrow category, comprising of only the things which are necessary for the short-term survival of healthy humans, but others have a broader understanding of the term.
Yes. People who work 3 jobs should not worry about getting a new car for the reasons I mentioned above. Maybe my arguments work better for (upper?) middle-class.
> car manufactures generally do a worse job of producing than 3rd parties.
It could at least make environmental sense, but I doubt that most buyers compare the emissions savings from the new more efficient car with the emissions that were produced during its manufacturing.
Some cars are very difficult to retrofit. My 2012 Accord simply cannot get a CarPlay-compatible head unit without redoing the entire dashboard. That's a multi-thousand dollar job that also compromises safety (airbag placement). Not worth it for a minor feature (though I do really like CarPlay).
Same deal for my 14 Ram 1500. Fortunately, UConnect is pretty decent as it is.
That would definitely make more sense. Just today I found out a coworker leased a VW Golf EV last week, which may be more than the Leaf, and they are paying around $150/month.
That's ridiculous and completely impossible, unless you are using voodoo accounting or making crap up. The depreciation on a Leaf alone is enormous, buying one a few years old is clearly the way to go.
>Unless, of course, people want newer engines that are more efficient, want newest technology (carplay / android auto), and want newest safety equipment.
Those changes, generation to generation (2-3 years) will be marginal if even present anyway, except on rare cases.
And even them are more like "want" than need, as you say.
>Maybe I misread your comment, but keeping a car for 10 years may not be for everyone.
Might not be to the mindset of everyone, but that's what the parent addresses.
Slight clarification - my point wasn't to keep a car 10 years. I bought it when it was 4 years old. Kept it 5. Looking to trade it in (it's actually still worth right around what I paid because of the low mileage), but my next car will also be 3-4 years old with low mileage.
Ultimate point being, I drive cars that would have been $35k new, for less than $100/month over the life of my ownership, versus the $500 referenced in the article.
I get the idea of what you're saying, but there are absolutely reasons to buy a new-ish car: safety. Rear facing camera, better structure, abs, traction control, automatic emergency breaking, etc. have all either been added or improved not that long ago. It's not as massive difference as between 1950's and 2000, but there's still a considerable improvement.
It doesn't mean you need a new one straight from the dealer of course. Buying something slightly used will save you lots of money.
Unless you're after the more expensive models, a lot of security features were not available as a standard in cars from ~2007. You can still easily find cars without parking sensors or cameras today.
If you need parking sensors and cameras to successfully navigate in traffic, you might want to consider returning the driving license. Of course this doesn't mean negating the others who're capable of that.
I'm not sure what you're trying to say. Cameras are not for navigating in traffic. They're for not running over people who fit under your back window and door a wide angle view behind your car.
Sure you can drive without them. But however capable you think you are - you're safer with them. I'm not sure why this always have to turn into "I can drive without them successfully" dick-measuring contest. Yes, we all can. But nobody has x-ray vision that will allow them a kid behind their car in a driveway.
An an European I don't understand the careless way Americans are driven into debt. With the economy having 5 years burst cycles any longer loan is just asking for trouble.
(also owner of a 13 yo Alfa Romeo which I got used 8 years ago and it's still kicking asses, paid 25% of original value because, Alfas)
If you care about having recent technology and experience improvements, then 10 years is WAY too long of a refresh period. 5 years is the cutoff for me
Based on my experience working at drivemotors.com, many people with low credit are totally fine with entering into loan agreements with very high interest (9-12%) for 72 months or longer with little to no down payment.
The instant gratification nature of a large portion of our society drives them to recklessly undertake high interest loans on depreciating assets like cars and furniture from places such as Rent A Center, pay day loans, etc. Seems there are quite a few ways to keep the poor, poor.
My father has three old cars: a 2001 truck (to haul gravel/etc), a ... 1997 Nissan Pathfinder (4wd needed for 4 months/year), and the 1998 civic my passenger gave me in trade [1] (so he doesn't have to put miles on his truck, and to save at the gas pump).
This is absolutely retarded. In my my neighborhood I've seen an increase in luxury cars in the last 3 years or so. Porche SUVs, BMW SUVs, Teslas, etc. I think to myself, 8 years ago these folks were crying in a ditch..and they have forgotten about it already.
I've increasingly noticed this myself. I known a number of people who spent like crazy and loaded up on debt prior to 2008. After the RE crash, some of them even went through foreclosure/bankruptcy. For a few years after it seemed like they were very wary of picking up too much debt but that wariness seems to be subsiding with time and I see them falling back into some of the same spending habits.
I think a long economic cycle is probably beneficial to businesses and politicians since time can insulate them from the consequences of poor decision making, but I wonder if a shorted cycle with less severe but more frequent downturns would be better for society. People seem to have really short memories when it comes to this stuff.
First place I'd look is the book(s) that came with your car. Most all of them have a recommended service intervals enumerated.
You can argue whether all of those items are needed, whether items not listed might be beneficial (I don't believe in "lifetime fill" automatic transmission fluid, for instance), but the glovebox is the first place I'd look.
The manual that came with my car includes an overview of the suggested maintenance. Aside from that there are some very good resources online, especially make or model specific forums, and some handy Youtube videos that give step by step instructions.
I have an older car, model year 2000, which probably makes things a bit easier but my friend has a newer 2010 Lexus and doing the oil change on that car wasn't much more difficult. The oil/oil filter was a bit more expensive and the oil filter was a bit harder to reach, but not bad overall.
Doing your own oil change can be pretty darn easy. The oil filter costs me $6 and the actual oil comes to around $10-$15. Warming up my car, putting it on jacks, putting down some cardboard, draining the oil, installing a new oil filter, refilling the oil, and then cleaning up takes me about 20 minutes by myself.
It also forces you to know a bit more about your car than most people which can come in handy even if your aren't particularly into cars.
Agreed. My girlfriend and I are a 200k household and still do quarterly review of various digital subscriptions, which though small can add up to significant amounts. A debt to the tune of $500/month recurring charge makes me... ugh. We recently bought a nice Honda Fit, slightly used, for $16k or so. We paid cash which I think helped us think rationally about our needs instead of starting from what kind of payment we could "afford". Even at low auto loan rates, I feel bad that people are being fast-talked into that kind of debt. The worst thing about this is that it's very hard to save for the next vehicle while making these kind of payments. So when the thing they are driving eventually has to get replaced, they are perpetually stuck in this auto-financing black hole.
I reacted the same when my colleagues discussed their company car plans. "That car is really cheap, it costs you only 300 euros a month!" - Me: "WTF? I'm paying 50 euros a month for my public transit ticket." And that thing holds more value for me (I don't waste time driving to the garage or seeking parking spots, I can read while driving to and from work, etc.).
I bought a Honda Fit last year; It's the smallest, cheapest car Honda sells in the US and I don't think anyone would classify it as a luxury vehicle. I'm paying ~$500 a month on a 36 month loan w/ 2% interest (a bit over the actual terms).
Depending on your down payment and loan length your monthly price may be higher or lower but it seems to me that if you are buying a new car in 2017 then $500 per month is going to be a pretty good baseline.
The reason why I took out a loan at 2% instead of paying cash is because I'm making greater returns than that investing it.
I literally cannot imagine paying $500 a month for a car payment
Why not? Consider: I got a Subaru Forester with $0 down and 0% interest which I pay off over 4 years. With options, it's $650 monthly. Again, no upfront costs.
67 comments
[ 2.6 ms ] story [ 172 ms ] threadIs there going to be a car loan bubble crash?
That's frightening.
And if anyone is wondering about the duration,
"Average term for an auto loan: 68 months — this is the longest average term ever seen by Experian."
http://www.cnbc.com/2016/06/02/us-borrowers-are-paying-more-...
No wonder people are driving their cars for 12 years+ now. They can't afford not to.
My truck is going on 10 years old (bought used) and has low mileage < 100k. Paid a fraction of the cost of a new one (roughly 35% of the sticker price when it was 5 years old).
After that I vowed not to take my car to the dealer so I took it to a well reviewed independent shop. On the way home after a fluid change and radiator flush my engine temp shot up and I discovered they hadn't installed a radiator cap.
Since then I've found a really good local mechanic, but being that he's in demand, his prices are high and getting an appointment on my day off can be a problem. I still take my car to him at least once a year for service and to have him look things over but other than that I do my own basic service. I usually schedule a day with a few friends and we work on our cars together. It makes things more social and less of a chore.
In fact, once you start to service your car, that's where the problems start. We are not paying enough for mechanics to pay attention or care. The cars are not always designed for serviceability, some things can simply never be put back together the way they were done in the factory. There are no shops, official or not, that will use the recommended by vendor procedures or swap out all the required parts when doing some work.
Modern Japanese cars seem to last quite fine with zero service (again beside oil changes, brakes, fluids and such) for 200K+ miles/15+ years, after which they are worth so little and work costs so much that donating to NPR is the only practical option.
I do change things that aren't difficult such as replacing a turn signal switch in the steering column. But I think the premium for a Toyota or Honda is definitely worth it- paying to reduce probability of having someone wrench on your vehicle, leaving it with a new problem for each one it resolved. Then just hope no one runs into you resulting in the same issue- wishful thinking in an era where everyone is looking down at a phone (which should result in reckless driving charges and jail time).
I suppose it's like expecting even halfway decent QA on software that you purchase. At every place I've worked there is not even a dedicated SQL DBA let alone a legitimate QA effort or team.
This is one of the things I loved about maintaining my diesel Mercedes. It was clear that thought and great care was put into fastener choice. (Most) Anything that needed to be removed for service was a permanent fastener. No push-through "Christmas tree" fasteners on parts that needed removing for service; it was a threaded insert and a screw. Where the parts needed a plastic fitting, it was a permanent/reusable expanding plastic fastener, not a push-in fitting.
Contrast that with the Honda that needed less service, but so many jobs involved doing the job and then also replacing the broken one-time or few-time use plastic fasteners (after trying to find and buy it). Similar with my older Jeeps and VWs.
MB seemed to design their car to be serviced for 500K km. Others seem to design it to be cheap and fast to assemble and pass the "initial quality survey" and maybe the length of the warranty period without too many defects.
Have you done any work on the interior of your MB? Were they similarly thoughtful in the way things were laid out?
Since we're already going off topic, I may as well add that one of my dreams is to someday acquire an old MB, maybe a W116/W126, or even an older W108, and convert it to an EV.
Many of the interior fasteners, even if push-to-assemble were curved bits of metal spring that snapped into an FRP "box" to hold things securely and rattle-free.
As an engineer, I couldn't help but marvel at the care that went into some of the design and service thinking.
That's not to say it was all peachy. Mercedes faces the same realities and tradeoffs that other companies face, and they need to assemble cars to hit a price point that people will pay, and people don't want to see fasteners in the interior, so they use some plastic-on-plastic or plastic-into-metal in some areas.
The worst engineering I saw was that that car was eventually killed by rust, caused in large part by poor factory prep and/or a poor understanding of the durability of the (then) new water-based, low environmental impact primer and paint system that plagued the whole W210 line in snow belts. Perfectly good car sent to the junkyard after only 216K miles and 18 years. What's the environmental impact of that? Could have easily gone another 150K+ miles. Pity.
On old MBs, dad has a 1959 220S cabriolet that he's restored (to nice driver condition, not a show car) after we found it in a barn in PA, a W123 he bought new, a diesel W210 that isn't all rusty (as it's a southern car), an R170, and an electric Smart. With all those cars, the electric Smart gets the most usage...
A 2017 Honda Accord goes for $20k new. A 2014 of the same model with 45k miles goes for $16k (KBB). A 2011 of the same model with 90k miles goes for $10k (KBB).
Basically, the first 3 years and 45k miles it depreciates $4000. The second 3 years and 45k it loses $6000 more in value.
Arguably it's cheaper to buy new and sell after 3 years than to buy 3 years old and sell after 3 years.
The years 7-9 are when the car stops losing value so quickly. Worth $6700 in year 9 and 135k miles. The last 3 years and 45k miles only depreciate $3300.
Basically, luxury goods depreciate a lot. Luxury cars depreciate a lot.
At this point it's maybe not so much that they need one, but that they want one. I for sure don't want to keep cars forever.
Maybe I misread your comment, but keeping a car for 10 years may not be for everyone.
Losing a bunch of money as depreciation for a marginally more efficient car doesn't really make accounting sense.
>android auto /carplay
These are accessories that car manufactures generally do a worse job of producing than 3rd parties.
It could at least make environmental sense, but I doubt that most buyers compare the emissions savings from the new more efficient car with the emissions that were produced during its manufacturing.
Same deal for my 14 Ram 1500. Fortunately, UConnect is pretty decent as it is.
As a very frugal owner of a 17 year old Honda who doesn't know much about leasing, can you expand on that? How is this possible?
Those changes, generation to generation (2-3 years) will be marginal if even present anyway, except on rare cases.
And even them are more like "want" than need, as you say.
>Maybe I misread your comment, but keeping a car for 10 years may not be for everyone.
Might not be to the mindset of everyone, but that's what the parent addresses.
Ultimate point being, I drive cars that would have been $35k new, for less than $100/month over the life of my ownership, versus the $500 referenced in the article.
It doesn't mean you need a new one straight from the dealer of course. Buying something slightly used will save you lots of money.
Sure you can drive without them. But however capable you think you are - you're safer with them. I'm not sure why this always have to turn into "I can drive without them successfully" dick-measuring contest. Yes, we all can. But nobody has x-ray vision that will allow them a kid behind their car in a driveway.
(also owner of a 13 yo Alfa Romeo which I got used 8 years ago and it's still kicking asses, paid 25% of original value because, Alfas)
Some people have more vehicles than they need.
My father has three old cars: a 2001 truck (to haul gravel/etc), a ... 1997 Nissan Pathfinder (4wd needed for 4 months/year), and the 1998 civic my passenger gave me in trade [1] (so he doesn't have to put miles on his truck, and to save at the gas pump).
[1] http://www.taxiwars.org/2016/09/the-perpetual-quest-for-dece...
He could easily buy a new car, but doesn't see the point of dropping all that money on a depreciating asset. Maybe when he retires...
I literally cannot imagine paying $500 a month for a car payment, even as a young single person making $100k. People are insane.
I think a long economic cycle is probably beneficial to businesses and politicians since time can insulate them from the consequences of poor decision making, but I wonder if a shorted cycle with less severe but more frequent downturns would be better for society. People seem to have really short memories when it comes to this stuff.
You can argue whether all of those items are needed, whether items not listed might be beneficial (I don't believe in "lifetime fill" automatic transmission fluid, for instance), but the glovebox is the first place I'd look.
I have an older car, model year 2000, which probably makes things a bit easier but my friend has a newer 2010 Lexus and doing the oil change on that car wasn't much more difficult. The oil/oil filter was a bit more expensive and the oil filter was a bit harder to reach, but not bad overall.
Doing your own oil change can be pretty darn easy. The oil filter costs me $6 and the actual oil comes to around $10-$15. Warming up my car, putting it on jacks, putting down some cardboard, draining the oil, installing a new oil filter, refilling the oil, and then cleaning up takes me about 20 minutes by myself.
It also forces you to know a bit more about your car than most people which can come in handy even if your aren't particularly into cars.
Depending on your down payment and loan length your monthly price may be higher or lower but it seems to me that if you are buying a new car in 2017 then $500 per month is going to be a pretty good baseline.
The reason why I took out a loan at 2% instead of paying cash is because I'm making greater returns than that investing it.