Americans Owe More Than A Staggering $1 Trillion In Auto Loans - Average Length Is 68 Months

Geezis! The average is 68 months??? "There are also an increasingly high number of people opting for long-term loans between 85-96 months" I'm gobsmacked.

What that means is that dealers are writing a lot of unscrupulous loans. If you're a dealer and you write a loan that long, you run the risk of the car having a major component failure which pisses off a customer that still paying on it and they will blame the dealer.

When customers are payment sensitive, we suggest a lease, but writing beyond 72 months is a major no-no for us. We simply do not want the backfire. We've actually had people walk because we won't do 84 months, but once you get past 60 months, the person really cannot afford the car they are trying to buy.

There are going to be a lot of people underwater on their loans.

I think this car loan stat is just the tip of the iceberg about rampant "E-Z Credit" problems that will soon be percolating thru our economy.

My mother-in-law is a recent widow and lives in Wichita, KS. She and her husband built a nice house in a new golf-course community (phase 1 of development) about 9 yrs ago. Cost about $400K.

Now by herself, she doesn't like the house layout (mobility issues!) and is moving to one of those "Courtyard" communities (1/2 mile away from her current home in the same development (now in phase 9 out of perhaps 14 sales phases). These homes are basically 2/3 of the home on 1/2 the land as what she will be moving from but she wants to live there for the "lifestyle" it affords - all on one level, reasonably nicely finished, and because several of her friends live there. Cost = about $400,000. Being from NYC, I wonder how the income there supports developments like this (lifestyle is nice because things are cheap but there is no income growth and few high-end jobs. She is fortunate enough to pay cash for the new home.

So I was there recently helping her plan the move and I met several of her new neighbors - ALL 4 of the couples I spoke to, afforded their $400,000 patio home by getting a reverse mortgage (and some of these people were as young as 58 yrs old).

Its going to be credit crisis all over again in a few years. Sad.

Many folks lose sight of what the real problem is. Imagine someone who can't afford the car they want, and they can't afford the the loan they need to get the car. These folks exist. There's lots of them! But when someone (a lending institution) offers them a low-interest loan with a 72-month (or longer?) amortization period. Do you really think the borrower will walk away? "Oh no, don't offer me that. I can't afford the car I want. I'll just do without." Yeah, right ;-)

Look to the lenders for playing a big part in creating this situation. Simply put: they lend money to people who can't pay it back. And then look at the folks who repackage bad debts, misrepresent them, and sell them on the stock market at a profit. And then look to the people who lived through the last global financial crisis, didn't learn their lesson, and didn't see it coming again.

Some facts about Global Financial Crisis, The Original:

- The stage was set around the Obama Era. Google Subprime crisis for details. The political machine at the time stood by, and did nothing to stop the crisis as the stage was set, as events unfolded, and as it blew up.

- Some folks attempted to pass stricter legislation for financial institutions in the US. That obvious did not fly. Yeah, "self regulating" is best.

- In financially conservative Canada, which has rigid laws (regulations) for financial institutions, they skated through the crisis relatively unscathed. TD Canada Trust, who is known for their conservative (that's "small C") financial practices, still made huge profits during the financial crisis, even as others collapsed. No Canadian bank collapsed as that crisis buried thousands of institutions across the globe.

- In the US, after the financial collapse and bankruptcy of numerous financial institutions, instead of putting laws in place to prevent this from happening again, the Obama administration threw many billions of dollars at select, failed financial institutions, to save them (AKA Bailouts). Yeah, the punishment for being so bad at finance that your money-lender company goes bankrupt: The government borrows billions, gives it to you (the Money Enterprise), and then sends the bill to the taxpayer.

- In case you haven't noticed, the current US administration and president are also doing nothing to avert this round. They favor fewer regulations, believing the Garden of Eden we call "Capitalism" works perfectly if you just let the Big Corporations and the fabulously wealthy do what they want... and it's even better when the government passes laws to support this principle (e.g., fewer restrictions, and yet more tax breaks for the rich).

What we with these car loans, is just the Cycle Of Greed, working its magic again.

The presumption is that the government will bail out the crisis.

MDarringer: Personally, I believe there will be a government bailout only if enough uber-wealthy and influential people would suffer for the lack of one. This was the case with the subprime financial crisis.

BobM: Uhg! Racism is NEVER cool :-( Not even if you believe your racist views can be sanitized by using otherwise benign terms, or by referencing Wikipedia, or by verbally attacking those who point at you and accurately identify you as a racist. Racism is ugly. Pure and simple. Ditto for those who embrace it, and/or promote it.


Temporarily putting your ugly racism aside, as much as I acknowledge that former President Obama did nothing to slow or stop the financial crisis, and ditto for the administration at the time (the Democrats controlled the house and senate, right?) and then they threw billions of dollars at select failed financial institutions, I observe that the current prez and administration are also doing nothing to prevent this specific looming crisis.

When it comes to political parties, I don't believe that one side is stocked with angels while the other is a pack of devils who are bent on destroying our nation. That is the mindset of radical extremists (political, religious, or otherwise). I see widespread corruption in our politics, and rule by The Ruling Class: the fabulous wealthy and influential. That's why all the voters combined make less of a difference than one powerful and effective lobby group, who gets laws changed and funds allocated to support their self-interests.

Nothing like buying more car than you can truly afford. If you can't put about 20% down and only finance for 36-48 month, you don't belong in it!!

20% down with a 36-48 month payout has not been even remotely near the norm during my time in the business. 10% and 60 months is more common. But I agree with your advice.

Locally you can get 84 months on a Mitsubishi Mirage.

can't wait for the next investment opportunity (crises)

If you can't pay the car off in 60 months or less then you need to drop down a level in your car buying.