no. they won’t. not under the present system. unlike student loans, auto loans can be discharged during bankruptcy (it is difficult to do with student loans) and you can easily sell the asset to pay off all or part of the balance (can’t sell your transcript or degree, just yourself to an employer).
Right? This is the stupidest fucking article. Like you can even have the car repossessed and the loan terminated.
Auto loans may legit be one of the safest type of loans available to students.
Where it gets spicy is:
Buying (financing) a new car, and then having it repossessed at half the purchased value (still 50%) debt to pay
If people have cars repossessed en mass, the second hand car market will be affected, prices for used cars go down (because the supply goes up). This makes repossessions not cover the whole loan, see above point
Finally, as more and more Americans no longer have access to cars, they also lose access to… A lot of society (work, education, healthcare). If this affects a large enough percent of the population, there will be macro effects.
Hopefully everyone stops paying their car loans and it deflates used car prices because they are insanely too expensive.
Banks suddenly getting burned when a bunch of bad loans stop getting paid at around the same time? What could possibly go wrong?
Getting some 2008 vibes. Thats what we need.
Meanwhile housing market is nuts. Nobody wants to sell because they’ll just have to buy and loose their sweet 2.75 refi. So now homes are still at jacked up prices because supply is low, but average 30yr mortgages are still at 7.8. So buyers, especially first time buyers, get stuck with an overinflated principle and a higher interest, getting the worst of both ends, and hoping either values hold or rates fall and they can refi in a few years.
If you remember 2008, it wasn’t the bank execs that were burned, it wasn’t even really the bank employees that were burned (although some did lose their jobs)
It was everyday people that lost their homes, their jobs, their lives.
I’m all for a bit if chaos in the name of redistributing wealth, or resetting some madness that has worked it’s way into society, but I don’t think this is it
If it’s getting repossessed at 50 percent value, that means it’s getting repossessed in the first year, and probably shouldn’t have been financed in the first place. BUT, let’s say they did, gap insurance is a thing that exists, for cheap, to cover that exact situation. Regardless, that debt can be cleared via bankruptcy, and is peanuts compared to most student loan debt. Smaller plans, multiple outs and protections available from the get go.
On top of that, student loan debt already prevents people from buying cars due to high debt to income, and already low post-grad income tied up paying loans, which are often as high as a new car payment, not to mention insurance and registration. On top of that, it makes them higher risk, raises their interest rates, and makes financing even more challenging.
There is no sane argument between the two.
I’m not an expert but in my very brief googling, it doesn’t look like GAP insurance covers getting repoed.
https://pocketsense.com/gap-insurance-cover-car-repossessed-8067238.html
I don’t know mu h about USA student debt, I’m in the UK. That does sound pretty different
I was trying to point out how a wide spread auto loan defaults could have far reaching consequences
To play devil’s advocate, used car prices do not follow supply and demand. They follow perceived supply and demand by a conflict of interest. If you try to buy a used car, your salesman gives you info to push you to pay more. They have other lots to make it seem like there’s low supply.
Carvana and CarMax operate similarly.
And if you feel like knowledge is power, Manheim/Cox numbers don’t matter when you’re purchasing through a greedy middleman.
Totally, however, to play devil’s advocate of that… There is only so much inventory that these companies can hold. It’s similar situation to house price crashes. Banks are left with too much stock.
However, with property, banks can rent them out… Maybe we will see a huge industry of second hand rent-from-large-corporation-and-never-own-anythings popping up soon…
Conspiracy hat on.
Banks have gotten high on their own power. They realize they can compete in residential real estate and starve out the market by artificially decreasing supply and hiking prices. They know the US loves circle jerking (American) auto makers, and will funnel tax money to make them survive.
Banks will want in on the action and will back automakers to follow suit, cut supply/artificially decrease it, and increase prices (more than they are).
In that scenario 1 of 2 things happens, 1) we pay more cash for cars that are necessary for American life 2) we lease/finance ridiculous prices and the bank makes even more profit.
It’s win win for them to support auto industry and supply them with the real estate they’re holding on the side lines.
But don’t cars depreciate a lot? I get that this article is clickbaity. But I think with the elevated cost of cars the autoloan debt is still something to take seriously. Even the response of “its not a big deal, you can always go bankrupt” is pretty wild.
You don’t even have to go bankrupt you can just give the car to the bank that has your loan. You’ll be fine. Just without a car lol
Not if you owe more than the car is worth, you’re on the hook for the difference.
If someone can’t pay a $400 payment, they certainly don’t have the money to pay the car off. Something something blood from a stone.
Not if they take the car for not paying lol that’s where the not paying part comes in. You just get bad credit. Not the end of the world like people make it out to be
They’d legally still on the hook for the difference, and if it’s a large enough amount for the creditor to care about they’ll come after you for it using the variety of means available. In the US that can include taking the money from the debtor’s bank account or having their employer take it out of their paycheck before paying the debtor.
There are some ways around that. You can self-employ and ignore the garnishment request, but that works best if you have a constantly changing client list, like a roofing contractor or wedding-dress-maker or whatever. You have to be careful about keeping cash in your business because they can show up with the sheriff and take any cash, or in extreme cases they can seize non-exempt property (like, they wouldn’t generally be able to seize the lawnmower you use for your lawnmowing business).
Also, just not having any money is a pretty good defense. There are limits to wage garnishment for example.
But yeah, in a lot of cases it’s not even close to being worth the effort to chase someone down to collect, so you get a ding on your credit report for a few years, and then almost nobody cares.
Then you can buy your own car at auction for pennies in the dollar. As long as you don’t need to get a new loan for 7ish years you are free and clear.
As long as you don’t need to get a new loan for 7ish years
Yep, and depending on the severity of the debt and other factors you’ll mostly just pay higher interest rates on loans for several years. You have to fuck up pretty bad before nobody will loan you money (though that probably depends on a lot of demographic factors too).
This is what gap insurance is for (well, one of the reasons) although I’m aware that lots of people don’t get it.
Federal student loans are not just difficult to discharge, they’re practically impossible to discharge. There are so little valid cases for it, you could count them on one hand. And that does not even take into account the fact that the sitting President and their cabinet can just say, “No, **** you.” Even after you qualify and a court agrees with you.
Edit: Just gonna point out that the only guaranteed way to discharge student loans without the federal government possibly overturning the ruling is to simply die. Its an excellent system perfectly designed to ensure that both the public sector and private sector can continue reaping the benefits of social mobility while preying on the most vulnerable segments of the population.
Discharging student debt in bankruptcy is so hard, it made the national news, https://www.forbes.com/sites/adamminsky/2020/01/22/a-judge-just-wiped-out-this-mans-221000-in-student-debt/amp/
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I mean tbf that says household, meaning usually 3-4 people.
Average is 2.5 people.
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Okay color me wrong.
The important part is that you found a way to feel superior
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It’s great your path is different from many others’ for whom this is a real issue. I wish you strength with your own challenges and I wouldn’t think to demean them by proclaiming they aren’t my troubles.
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For reference my rent alone is half of that in downtown of a major city.
$3k other expenses is a little high, but not out of the realm of reasonable.
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Rent or mortgage plus daycare will easily take up 3/4 of that.
Study: Median American’s Savings Account Balance Is $1,200
That seems high
Good god, according to census.gov:
Real median household income was $74,580 in 2022
Which works out to $6,215/month. Less than $200/month for emergencies, nobody is saving money with these figures. Our economic system is broken.
Add it to the pile of broken systems.
Our expenses are a little less but my wife and I have two kids. Although if we had bought a house around now instead of 7 years ago, it would easily be much more. If we had decided to buy a new car, add that on top.
But one thing to note is that is the average so that is anywhere from a single person to someone with six kids.
For the first time? Go back a generation and student loans didn’t exist.
Not to mention auto loans can be discharged in bankruptcy. Try doing that with student loans and you’ll quickly find out it isn’t possible.
Damn, it’s almost as if making a country almost entirely car dependent is a terrible fucking idea.
To be fair, the automobile centric city has worked for about 70 years.
The cost of cars is being driven higher by demand for more features. The car companies can make a really cheap car, but consumer’s want air conditioning, power everything, fancy infotainment systems, heated seats and quick 0-60mph times. Then additionally the government mandate for safety and emissions increase the cost further.
You can buy a new car in India for under $5,000 USD.
To be fair, the automobile centric city has worked for about 70 years.
I’m not sure I buy this. Countless communities have been obliterated by overpasses/freeways paved through their neighborhoods. We have horrible suburban layouts we’ve embraced that are completely defined by parking lots that cause water management and housing issues. We’ve completely ripped up the little public transit we had and made few gains in that time.
Cars have created tons of problems over the 20th and 21st centuries.
Has it really worked, though?
but consumer’s want air conditioning, power everything, fancy infotainment systems, heated seats and quick 0-60mph times.
This is the same lies that the big three have been trying for decades. I want a normal boring fucking car. I want to spend as little money as I can on repair maintenance and fuel. I don’t want some garbage bullshit infotainment system.
And no I can’t buy a new car in India. Go ahead and sell me one.
So I looked up the specs for the first 5K-ish India car I found.
https://www.cardekho.com/maruti/alto-k10/specs
As far as I can tell, it has every feature you’re saying is responsible for western automakers charging around 6 times the cost of this car… sans heated seats and purported safety standards.
Chevy charges an additional $1K for the package that adds heated seats to their Bolt EV.
So, am I to take you at face value that you’re inferring that safety concerns and standards are responsible for the remainder of the price gouging?
You can get a golf kart with tye same accessories. Safety, reliability, and quality are a big part of the cost. So is profit.
A 5k car is a golf cart with doors.
asdfasfsdf
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Nope. Still gonna need at least a little work.
sadfasfasdf
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At least you can declare bankruptcy on an auto loan…
I grew up believing all loans is money banks lend you from their own money they have on hand. But that is a lie. That money is created by the fed reserve when the paperwork is signed. And all the bank has to do is follow rules their lobbyists write.
Why do we even need private banks? I bet people could handle their own fianaces a lot better if we had direct access to fed money creation and we didn’t let bank lobbyists write the rules.
asdfasf
Rich people are rich because they use other peoples money. Banks do the same.
60% of known species are parasites. However, the animal most well known (human) has 110 species of parasites hinting very very strongly that the 60% is a huge undercount.
The CEO of the corporation I work at took a one month vacation this year and everything was fine. One of our service techs took last week off and every order was late.
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At least auto loan debt isn’t enshrined into law as “life debt” like student loans are.
What, thats crazy. I bought my car certified pre-owned, fully paid it off, and have been driving it for 8 years with hopefully another 8 more to go. I know car prices have been going out of control though, whats going on?
Harder and harder to do that. My goal was to buy a used car then finally a new electric car.
My 2012 pre-owned car was paid in cash for $7k about five years ago. And my goal was to save $25k cash, and trade this one in for a newish car.
My 2012 exact car can now be bought for $9k. And newer cars are now in the $40k range. AND they have shitty subscriptions for features.
It’s wild when I was looking to do something similar and instead ended up buying a newish electric vehicle because it was about the same price as what I’d otherwise have gotten.
This is exactly what happened to me.
Near the start of the pandemic, all the car rental agencies sold off a bunch of their cars because the cars weren’t making money. And with the pandemic in swing, car companies were making less cars, because of health restrictions as well as supply chain issues. As the pandemic slowed down, car manufacturers weren’t able to keep up with demand for new cars, and prices on used cars soared. Now manufacturers have decided they like the money flowing in like that and they’ve hiked their prices and are making fewer of the entry-level cars many people bought.
Auto loans are terrible and I always pay them off as soon as I can, but they will never really be that big a threat because you CAN sell your car and buy a substantially cheaper one, in most cases. Sometimes you can sell your car and just use public transit or bike/walk.
Boy do I wish I could sell my college degree
I wish they would repo my degree…
Imagine being able to trade in your college degree for a newer model
I quit the career my major gave me after 7 years and now I’m doing something totally different… I won’t say I regret it because my old industry is how I got the new industry connections to make them change but yeah… I’m using none of what I learned.
Be careful about turning your hobbies into careers, kids! You just might start associating it with work stress and stop doing it entirely
Same. I use almost nothing that I learned. Engineering if you are curious.
Opposite for me. My degree is editing/motion graphics but my first job killed that passion pretty hard. Now I’ve got “engineer” in my title but I wish I went to school for mechanical engineering
Used cars literally cost more now than the 3/2 townhome I bought in 2012. I don’t understand how most people survive in this economy.
When I was a kid auto loans would be for 2 years or 4 years maybe, now. They’ll give you a 10-year loan on a car.
This is probably by design. The “system” keeps cities designed and built in a way that they are impossible to traverse without cars, which forces people to buy cars. Youngsters are earning shit wages but can’t get to work without a vehicle so they get into debt. It’s all fucked. I live in the Netherlands and can do everything I need to do with just my cargo bike. It rocks.
I wish automakers were able to/would actually import some of their cheaper electric vehicles from east asian markets.
The Honda N-Van e would suit the needs of the vast majority of people. 124mi of range and only ~$8,000.
Can I say I love that derpy little thing and I hope they sell it here?
i would love them here, too… but kei cars would not fair well on u.s. roads vs all the heavy, oversized pickups and suv.
they would also not be nearly as economical, in terms of purchase cost or efficiency, when built for the u.s. market.
True, not to mention the road conditions as well.
It wouldn’t meet the safety standards. A substantial portion of the cost in a modern vehicle is the safety systems and then the emissions systems.
It wouldn’t meet the safety standards.
This may partly be because basically all of them are legal for highway use, so even if all you need is a car that is safe to drive a couple of miles to the grocery store at 35MPH, the safety features and engines (and thus emissions system capabilities) have to be designed with the expectation that the vehicle will be used at 80MPH beside all the other vehicles out there.
It might help to have a wider variety of vehicle licensing options to allow for low-speed, lower-spec ‘city cars’. Though enforcement would probably be an issue, and the safety standards would still need to be robust enough that people in small cars wouldn’t be too badly killed by the gigantic pickup trucks they have to share the road with.
then the emissions systems
It’s an EV.
I wouldn’t mind a Tuk Tuk. Could use about half the year without issue. My daily commute doesn’t involve highways and for repairs any motorcycle shop could handle it.
Only 124mi? Isn’t that like the average American’s commute to work one-way?
The average American drives 33 miles per day total.
didnt think id need an /s to joke about how car dependent we are :p
Certainly car loans can be predatory, and it is worth improving oversight, limiting what loan providers are allowed to offer. While I’ve seen plenty of people in trouble with car loans, it was always predictable/likely and my first thought had been how could a loan provider have approved that. I’m sorry if people are desperate for transportation and short of options but it’s not helpful to offer rates like credit cards, nor roll over previous loans, nor offer loans at high percentages of people’s incomes
There’s a reason my car is old enough to drink 👍
Mine’s almost old enough to vote!
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I just looked up, the median commute distance in the US is 10 miles and time is ~25 minutes. You can get a vehicle that will get you 10 miles away in about that time for ~$600. Ebikes are great. Regular bikes can be found for the cost of a fast food meal, if not free. As much as people say “cars are mandatory”, that might be an untrue assumption to start from. However, the car-focused layout of American cities has made it less safe to use bikes, which would be great to push back against.
Just gonna hop on my ebike to make the 10 mile journey in -40° weather… brb
Ah yes, the one theoretical counter-example that completely nullifies my argument. You’re right, all hail Cars. What percent of Americans experience -40 degree weather again?
