Why so many motorists are underwater. Combination of factors raises negative equity

[Wingnut]

Some people are to stupid to be approved for Auto loans.


Negative-equity levels are at record highs as lengthening loan terms, rising transaction prices and falling used-vehicle values combine to take a toll on consumers and the industry.

In the first quarter of 2017, the percentage of trade-ins on new-vehicle sales that had negative equity reached a record 32.8 percent. The average amount of negative equity, at $5,195, was also a high, Edmunds data show.

Average negative-equity amounts have exceeded $4,000 on average since the third quarter of 2013. The higher levels came as the economy recovered after the recession, according to Ivan Drury, Edmunds' senior manager of analytics development.

From 2009-11, negative equity fell "simply because people couldn't get a new-car loan," Drury said. As vehicle financing dried up during the downturn, many consumers were forced to hold onto their vehicles, so they paid down more of their balance. "When they finally went to the dealership," he said, "they didn't owe nearly as much."

Now that most consumers have recovered from the recession, they are more likely to trade in their vehicles earlier, often before their loan terms expire. The practice contributes to higher amounts of negative equity.

http://www.autonews.com/article/20170612/FINANCE_AND_INSURANCE/170619991/why-so-many-motorists-are-underwater

[Smokin Joe]

I have six on the pavement. The youngest will be old enough to vote this year (18). I can still do a lot of the work on some of them, most everything on a couple (except rebuild the automatic transmission in one). I won't ever own a new vehicle unless I win one in a raffle, and I'm okay with that. The ones I have should go another 3-4 hundred thousand miles, and unless I start running back and forth to Texas or Nevada for work, that should be just fine. If I do, what I charge for mileage will buy the next batch.

[RoosGirl]

Now that most consumers have recovered from the recession, they are more likely to trade in their vehicles earlier, often before their loan terms expire. The practice contributes to higher amounts of negative equity.

http://www.autonews.com/article/20170612/FINANCE_AND_INSURANCE/170619991/why-so-many-motorists-are-underwater

If they can't pay off the vehicle they already own then they haven't recovered from the recession.

[EC]

If you can't afford it, don't take the loan. It's not rocket science. 

Never had a car loan in my life, always paid cash. Meant I learned to mechanic early on. And even with modern electronic cars, you'd be surprised how much you can do with the old diagnostic tools (and a paper clip to reset the EMS).

[Fishrrman]

"Why so many motorists are underwater..."

When I first glanced at the title, all I could think was "Ted Kennedy"...

[Smokin Joe]

"Why so many motorists are underwater..."

When I first glanced at the title, all I could think was "Ted Kennedy"...

That one's a little complicated. Start with a staffer who just can't get her punctuation on time...add whiskey and an Oldsmobile and a ruthless political climber....

[Frank Cannon]

I call bullshit. This is all about the car companies having way too much inventory and doing whatever it takes to get cars off the storage lots. Hell, the subprime car loan crisis on the horizon is because dealers now are back up to 90+ days of inventory on their lots that companies are forcing dealers to take. They (Santander Bank) are bundling these bad loans, of which only 8% have verified incomes, and selling them as an investment. Companies are up to $4000 cash back and 0% financing too to unload these overpriced units. It's a recipe for disaster.....as we will see in the next couple years when used car prices collapse by 50+% and auto plants start to be shuttered.

[Smokin Joe]

I call bullshit. This is all about the car companies having way too much inventory and doing whatever it takes to get cars off the storage lots. Hell, the subprime car loan crisis on the horizon is because dealers now are back up to 90+ days of inventory on their lots that companies are forcing dealers to take. They (Santander Bank) are bundling these bad loans, of which only 8% have verified incomes, and selling them as an investment. Companies are up to $4000 cash back and 0% financing too to unload these overpriced units. It's a recipe for disaster.....as we will see in the next couple years when used car prices collapse by 50+% and auto plants start to be shuttered.

Remember "Cash for Clunkers"? Where solid used vehicles that happened to be big enough to burn gas faster than a gallon every 20 miles were to be summarily crushed? It not only seriously hurt the supply of salvage parts from the vehicles involved (no part was to be removed from the vehicles), it put some salvage yards on the brink over vehicles they hadn't been paid for and couldn't sell parts off of taking up space.
One of the effects, though, was to make the supply of used vehicles smaller, which meant the price of used cars went up. Now that that drought is over, used car prices are coming back down, which means a trade-in is worth less.  They've been playing the 0% down, don't pay for three months, cash back game for a while. Dealers here are overstocked because they ordered more than they could sell (thought the oil boom was going to go on forever.)

[rodamala]

Remember "Cash for Clunkers"? Where solid used vehicles that happened to be big enough to burn gas faster than a gallon every 20 miles were to be summarily crushed? It not only seriously hurt the supply of salvage parts from the vehicles involved (no part was to be removed from the vehicles), it put some salvage yards on the brink over vehicles they hadn't been paid for and couldn't sell parts off of taking up space.
One of the effects, though, was to make the supply of used vehicles smaller, which meant the price of used cars went up. Now that that drought is over, used car prices are coming back down, which means a trade-in is worth less.  They've been playing the 0% down, don't pay for three months, cash back game for a while. Dealers here are overstocked because they ordered more than they could sell (thought the oil boom was going to go on forever.)

I recall seeing a YouTube video (I think it was one of the first times I saw Youtube) of a Cash for Clunkers destruction of an Olds Aurora's Northstar powerplant by pouring sand and water in the crankcase and racing the engine to catastrophic failure.  I was completely disgusted by what I saw.

[Smokin Joe]

I recall seeing a YouTube video (I think it was one of the first times I saw Youtube) of a Cash for Clunkers destruction of an Olds Aurora's Northstar powerplant by pouring sand and water in the crankcase and racing the engine to catastrophic failure.  I was completely disgusted by what I saw.

The guy who owned the local salvage yard had the parts I needed but couldn't sell them to me. Just the little clips that hold the end of the sunvisor. I had to find them on e-bay. The guy who sold them (only two on the site) knew what he had...I have paid less for a rebuilt alternator, in the box. Nope I couldn't just go down there and take them, that's be taking Federal Property and a felony.

[Frank Cannon]

I recall seeing a YouTube video (I think it was one of the first times I saw Youtube) of a Cash for Clunkers destruction of an Olds Aurora's Northstar powerplant by pouring sand and water in the crankcase and racing the engine to catastrophic failure.  I was completely disgusted by what I saw.

Having been the idiot that bought a 94 and 2000 Northstar DeVille, it probably ran better and leaked less oil after the seizing treatment. Those engines are effing garbage and GM knew it. They didn't fix the GD head bolt issue until one of the last years they made it.

[Smokin Joe]

Having been the idiot that bought a 94 and 2000 Northstar DeVille, it probably ran better and leaked less oil after the seizing treatment. Those engines are effing garbage and GM knew it. They didn't fix the GD head bolt issue until one of the last years they made it.

Yeah. A granddaughter insisted on buying a little Caddy with the Northstar engine. Knowing she was not one to check the oil, a friend of mine who was an A&P (Airframe and Powerplant mechanic for aircraft, and who could wrench on anything from a weedwhacker to a lear jet) told her "NO! Do not buy it, the engine is junk!" "I told her "I don't care how pretty it is, it will gather dust in your driveway within six months. It isn't worth anything to you if you can't drive it." Three months later, it was done.   

[Frank Cannon]

Yeah. A granddaughter insisted on buying a little Caddy with the Northstar engine. Knowing she was not one to check the oil, a friend of mine who was an A&P (Airframe and Powerplant mechanic for aircraft, and who could wrench on anything from a weedwhacker to a lear jet) told her "NO! Do not buy it, the engine is junk!" "I told her "I don't care how pretty it is, it will gather dust in your driveway within six months. It isn't worth anything to you if you can't drive it." Three months later, it was done.   

After about a year of buying the '94 Concours, it started blowing oil out of the tailpipe. As I started taking it back under warranty to fix it I noticed all the bays  were filled with other Northstars getting the engines pulled (you have to literally drop it from under the car). The dealer actually bought a pump to run solvents through my engine as a way to stop the blow by. I told them that wasn't going to do shit and I was proven right. They ended up dropping my engine. Then the computer controlled suspension went to hell. Bought a '00 because they said they had all that stuff fixed. Like hell. It didn't lose oil, but it blew the head. Five minutes after that bullshit I was down the street at the Lincoln dealer trading in on a Town Car. I drove that Town Car over 300,000 miles and barely had to fix anything and at the end I was doing yearly oil changes because I didn't give a shit. After the damper door broke for the climate control and it only blew heat I sold that car and still got $2500 for it.

Northstars suck. That's why you can pick one up for nothing. They have a really bad rep. When they are running though, they move out like a raped date.

[Smokin Joe]

After about a year of buying the '94 Concours, it started blowing oil out of the tailpipe. As I started taking it back under warranty to fix it I noticed all the bays  were filled with other Northstars getting the engines pulled (you have to literally drop it from under the car). The dealer actually bought a pump to run solvents through my engine as a way to stop the blow by. I told them that wasn't going to do shit and I was proven right. They ended up dropping my engine. Then the computer controlled suspension went to hell. Bought a '00 because they said they had all that stuff fixed. Like hell. It didn't lose oil, but it blew the head. Five minutes after that bullshit I was down the street at the Lincoln dealer trading in on a Town Car. I drove that Town Car over 300,000 miles and barely had to fix anything and at the end I was doing yearly oil changes because I didn't give a shit. After the damper door broke for the climate control and it only blew heat I sold that car and still got $2500 for it.

Northstars suck. That's why you can pick one up for nothing. They have a really bad rep. When they are running though, they move out like a raped date.

I had two Lincolns. One had the 400 modified, an engine that was supposed to be warmed up on the move. That doesn't work in ND. You have to have defroster to move, didn't like it, but it was a nice car. I had a town coupe, which had the 460, which was another story. Leaked oil like a blown out well when I bought it (bad sending unit). Changed out the sending unit, problem solved, and I got the car cheap because of the oil leak. Drove the two of them for a few years when I wasn't working, Mrs. Joe had the Town Car, I had the Coupe, Gave the Town Car to a granddaughter who managed to take nearly 8 months to beat it up, the town coupe went to a nephew who traded it off on a pickup. I would own a Lincoln again. Nice cars.