I’ve seen some crazy stories on YouTube about people trading in cars they’re already underwater on just to finance an even more expensive one. I can’t understand why banks keep lending money for deals like that.
Why more people don't keep their cars long term has always been a mystery to me. Sure, I had plenty of them in my 20s when I was young without a bunch (3) of responsibilities roaming the earth. But currently, counting my oldest kid's (19) car, we have 4. I don't worry about any of them. 2008 Land Cruiser and RAV4, 175k on one, 185k on the other. Both bought used. 2013 Sienna, bought new (with a huge discount) - 161k. 2022 RAV4 Prime, 55k, bought new. Zero car payments, zero upcoming 20k battery replacements in my future. I'll sell the Prime in probably 2-3 years for $30k (thanks, Toyota resale value) and get another reliable wife-mobile.
I just read that the average price of a car is now more than 50k. People are insane to buy these with huge loans. There are plenty of very nice cars in the 20k-40k range but somehow people feel compelled to spend a ton of money on their cars.
I've read that the average going above $50k for the first time in the US is largely due to two things:
1. There is enough financial uncertainty that many people are putting off buying a new car for now. The people most worried are also the people who would be buying one of those $20-40k cars. It's the upper end buyers who aren't being affected much by the uncertainty, so the average has gone up.
2. A lot of people bought EVs, which are more expensive than similar ICE cars, in the first 3 quarters to beat the end of the tax credits.
Shouldn't they have seen this coming when insurance premiums, rent, etc started shooting up? It's not just healthcare either.
Used to be that you could winter paid off 'fun' cars at nice (live security, climate controlled, fire suppression, low risk zip code) storage units for the steep discount on the auto insurance.
Where I'm at, the cost of units like this are up by >20%. The introductory rates at new places are minor and only good for 1-3 months. The insurance discount (which was previously as much as -35%) is gone because of the risk from increased tenant churn at the storage places, and the insurance is up almost another 20% anyways.
If you think outright financing is bad, try leasing a car and then giving it back when they screw up the residual value estimate. Dealers will try to Jack you with every imaginable fee to get you to buy the car from then at the end of the lease.
You also need to walk in the door with your own financing. Even if they give you financing through your preferred bank, it's not uncommon for them to juice the interest rate for some additional profit without any kind of disclosure.
> You also need to walk in the door with your own financing
But also check out what the dealer/manufacturer offers. Sometimes there are factors other than just the terms of the loan to consider.
For example I financed my new car (2025 Hyundai Kona SEL Electric) through Hyundai because Hyundai was offering $7500 off if you financed through them. I could have gotten a better interest rate from my bank, but I'm going to pay the loan off early and even if I could have somehow gotten 0% from the bank it wouldn't have saved enough over the time I'll actually have to loan to come anywhere near matching that $7500 from Hyundai.
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[ 1.5 ms ] story [ 42.7 ms ] threadFor instance, the Geome Xingyuan is $10k, Hongguang Mini EV is $5k.
Instead we have the average cost of a new car at $50k.
1. There is enough financial uncertainty that many people are putting off buying a new car for now. The people most worried are also the people who would be buying one of those $20-40k cars. It's the upper end buyers who aren't being affected much by the uncertainty, so the average has gone up.
2. A lot of people bought EVs, which are more expensive than similar ICE cars, in the first 3 quarters to beat the end of the tax credits.
Used to be that you could winter paid off 'fun' cars at nice (live security, climate controlled, fire suppression, low risk zip code) storage units for the steep discount on the auto insurance.
Where I'm at, the cost of units like this are up by >20%. The introductory rates at new places are minor and only good for 1-3 months. The insurance discount (which was previously as much as -35%) is gone because of the risk from increased tenant churn at the storage places, and the insurance is up almost another 20% anyways.
You also need to walk in the door with your own financing. Even if they give you financing through your preferred bank, it's not uncommon for them to juice the interest rate for some additional profit without any kind of disclosure.
But also check out what the dealer/manufacturer offers. Sometimes there are factors other than just the terms of the loan to consider.
For example I financed my new car (2025 Hyundai Kona SEL Electric) through Hyundai because Hyundai was offering $7500 off if you financed through them. I could have gotten a better interest rate from my bank, but I'm going to pay the loan off early and even if I could have somehow gotten 0% from the bank it wouldn't have saved enough over the time I'll actually have to loan to come anywhere near matching that $7500 from Hyundai.