March 26, 2004

38 percent of Americans owe more on their vehicle than it is worth


Westlake Village, California - The number of U.S. new-vehicle buyers who owe more on their vehicle than it is worth - the classic "upside-down" scenario - has increased substantially over the past three years, according to retail transaction data from the Power Information Network (PIN), an affiliate of J.D. Power and Associates.

While only 25 percent of vehicles were an upside-down situation in 2001, today, 38 percent of vehicles are in this category, according to PIN.

This trend toward more upside-down trades is one of the consequences of the intense competition in the U.S. new-vehicle market. To maintain share, manufacturers are keeping monthly payments of new or refreshed models the same by lengthening the terms of finance loans.

The average length of a new-vehicle loan is now 58 months-an increase of almost 10 percent from three years ago when loans averaged 53 months. Thus, retail consumers today who opt for the longer-length loans take significantly longer to build equity in their vehicle.

"If this trend continues, eventually the factory will have to provide a heck of a lot of assistance, which is not good news for the automakers," said Tom Libby, director of industry analysis at PIN. "Right now automakers are legitimately trying to sustain demand and market share through aggressive manipulation of finance instruments, but the long-term ramifications of these efforts are questionable."


SOURCE

 

i think it is a lie, the number MUST be higher because the second they buy it and drive off the lot it can be as much as %20 depreciation, and they owe not only the sticker price but financing as well which will take years to pay down to just sticker price alone. that is more than 25% right there by itself.

 

i hate to say never, but thats exactly why i have never owned a new car or bike.

 

This is one of the main factors behind the rising popularity of leasing. With leasing, you are in effect "renting" the car for 2-4 years and don't have to worry about its value drop and how much you owe on it Just stay in the mileage limit, take care of it appearance-wise, and take it back at the end of the lease and hand the keys over. But ,of course, leasing prevents much of what a lot of people in this forum like in the way of aftermarket stuff.

 

Not necessarily, you just take them off at the end. At least any bolt on mods (rims, exhaust, intake, etc.).

 

Well, MAYBE....some things, yes....but, obviously, it depends on where and how they attach or "bolt" on. For reample, you can't unbolt a spoiler from the trunk, leave a bunch of holes back there where the blots ran through, and expect the dealership not to charge you for trunk replacement or bodywork. And the lease terms may not allow larger-size wheel/tire diameters because they affect the odometer and make it read low. Same with dash kits, aftermarket body stripes, etc.....These are things that can't practically be taken off.

 

i completely agree.. It has to be more than that. Nothign beats my freinds family. Despite makign some money, they just had to have that 2000 toyota echo brand new, and despite having the ability to pay it off within a year, financed it for 6 years.

6 years for a $11,000 car. And the son they gave it to beats the bloody hell out of it. Scratches and dings everywhere, lights that have been burned out for months, 10,000 miles between oil changes... an interior so unbelievably dirty I offered to clean it right out for $50 because I just cant stand to see it like that.

Theres no way the car is worth what they owe on it still... I'd estimate they owe a bit more than 6 grand... no way anyone in their right mind would pay more than 3 for it. At the end of the financing cost, the car will cost them more than 18K.

Then theres my lexus. Bought and paid off in one day for 12K. Makes them look at it in awe, but its people like them that make it possible for people like us.

 

Some people, as SC400-V8 pointed out, deliberately finance even if they can afford to buy it straight out. They do it on the theory that, instead of just forking over the money directly to the dealership, they'll get a dealer loan at anywhere from, say, 2 to 7 percent, and then invest the money that they WOULD have used to pay cash for the car and let the interest they make on that investment pay for the car. Frankly, I don't agree with this.....there are too many variables and risks involved, and my philosophy is not to go into debt unless you HAVE to. But it does in fact work for some people.
So this kid does 10,000 mile oil changes?.....try that with a Camry (or anything else with that 3.0 L V6) and you'll have a siezed-up engine full of sludge and gel.

 

Not following you - what is a lie? The percentages were of new car buyers, not percentage of what they owe.

Also, remember most people do put some money down on a car, and most people don't pay sticker price. Example:

$30000 MSRP car
$28000 purchase price
$10000 down (trade plus cash say)
$18000 financed, with say 5% finance would be $3600 for a total of $21600.

20% depreciation off $30000 is $6000, so value after driving off lot is $24000.

So owner is not upside down at start.

Granted, if person puts little to nothing down they're upside down.

I think main reason for lots of people being upside down is low interest rates, lots of incentives, and tons of people living beyond their means.

 

glad to know im not part of the 38%

its a awesome feeling to have everything paid off for....

 

https://www.clublexus.com/forums/sho...hreadid=102450