More People Than Ever Have Negative Equity In Their Auto Loans At Trade In

If you're going to 72 or 84 month loans to get the car you think you need, a lease may be a better option. I find it dismaying how many crazy finance schemes there are.

How about: "Name your monthly payment..." on a lease "We'll just tack the extra on a balloon payment."

When I work the actual finance desk, I normally refuse to go beyond 60 months. If a customer wants 72 months, he had better have a stellar credit score otherwise I won't write it. 84 months does not happen and new/inexperienced salesmen get pissy, but they aren't the kind of sales staff we want so they can be fired pretty easily.

What people don't realize is that the financing is not with you and the dealer. It is with you and the lender. But when they are upside down in a loan and are pissed off, they blame the dealer and I don't like that kind of backfire.

Of course, a car is a liability that depreciates not an asset (with a few ultra rare exceptions for collectors).

We have a curious, self-reinforcing cycle at hand:

1) Hoards of consumers who don't understand the true implications of their decisions.

2) Hoards of money-lenders who are eager to make a profit by lending money, without due regard getting repaid.

3) Financial institutions that repackage debt, misrepresent it, and resell it to...

4) Investors who are eager to buy "products", such as repackaged debt, without doing their due diligence... because it's a great deal.

5) And most recently, we have a government administration that wants to roll back legislation that compels lending institutions to act in the borrower's best interest (i.e., fiduciary obligation).

This was the setup just before the subprime mortgage collapse, which led to the collapse of financial institutions worldwide.

It truly is staggering how many people are fiscal idiots.

These are the same idiots that "if" they do own a home they are mortgaged to the max or have a HELOC sapping any equity and accruing interest, several credit cars all maxed out or are too broke to pay for bankruptcy trustee fees.

I used to be in the debt consolidation business where we would help home owners pay off all their high interest debt and create a doable financial plan to make them debt free on average 13 years earlier and save over $120K in interest charges alone. 90% of the people we would help would be back in the whole cards maxed out/new car/vacations within 6 months even though they knew better. It was so frustrating that I had to walk away from a very lucrative business for my own sanity.

Moral of the story is you can't fix stupid!

Amen! Preach it, brother!!