Millennial Repo

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An interesting data nugget percolated the other day about a “sharp worsening” – that is to say, an increase – in the number of car loan defaults among borrowers under 30 years old. According to Bloomberg Financial News, the rate for the Millennial demographic was 4.04 percent last quarter vs. 2.36 for the general population, or about twice as high.

But it’s not just The Youth who are in danger of having their cars repo’d.

The overall delinquency rate last quarter was at its highest level since 2012 – and the total number of car loans (new and used) as well as leases is up by 5.2 percent.

More people, in other words, are buying cars they can’t afford.

What’s especially interesting is that the increase in delinquencies isn’t happening in parallel with a recession. Unemployment is at a 50-year low. So people aren’t defaulting on their car loans because they lost their jobs.

Their jobs just don’t pay enough to support a car loan.

This shouldn’t surprise anyone who has been following the car business even casually. It now takes roughly twice as long to pay off a new car loan as it did in 1970 – about six years vs. three once upon a time. Because the cost of cars has geometrically outpaced what people are earning.

But not all cars.

In fact, today’s entry-level cars cost about the same as their analogs of almost 50 years ago.

For example, in 1970, you could by the all-new Chevy Vega (God help you) for just $2,090 – the equivalent, adjusted for inflation, of just under $14,000 today. Which could buy you a car like the 2019 Mitsubishi Mirage I recently reviewed. See here for that.

And the new Mirage does not have a self-melting engine, as the Vega did (Chevy decided to install the pistons in the aluminum block without iron cylinder liners) but does have air conditioning, power windows, locks and even cruise control – things which only Cadillacs had back in 1970.

The problem is the cost of the average new car.

It approaches $35,000 – which is almost-Cadillac money. Well, it was – once.

You could buy a ’70 Sedan deVille for $6,118 in 1970 – equivalent to $40,740 today, or only slightly more money than people are paying for average cars.

But average people are not earning Cadillac money – while trying to finance cars that cost Cadillac-equivalent money.

Wherein lies the rub.

If lending standards were stricter, there might not be a problem. It might even solve some other problems.

One of the reasons – probably – that most people don’t raise a ruckus about the cost of endlessly proliferating government regulations and mandates is these costs are made less noticeable to them by extending the time it takes to pay for them.

Six years now vs. three years then. 

If loans were still three or even four years, it would be impossible for probably half or more of the people currently buying cars to do so.

This would impose market discipline on government regs and mandates, motivate average people to take an interest in cost vs. benefit.

As opposed to believing, like little children, in the Free Lunch.

They might question, for instance, the value of a car that “saves gas” by costing them $3,000 (or more) to buy, because it has a direct-injected rather than merely fuel-injected engine. Or a micro-turbo’d four that costs 10 percent more to buy than a slightly thirstier V6.

Stricter lending standards – loans issued based on people’s ability to repay them – would also serve the salutary purpose of encouraging people to live within their means and even possibly below them.

To purchase what they can afford – as opposed to what some shyster bank will lend them. The bank being shystery for making the loans it knows borrowers can’t afford and because it knows it can offload the inevitable delinquencies onto someone else in a kind of musical pickpockets game.

One hand doesn’t wash the other – it filches the cash out of the wallet of the other. 

People might have to drive cars like the $14k Mirage rather than $38,000 Camrys with 300 horsepower engines that get them to 60 in 5 seconds, climate control AC, a cheerily glowing LCD touchscreen and such. But they’d own the thing after making three or four years of manageable payments – and wouldn’t have to worry about making a payment on the car – or paying the rent.

They might even have a couple hundred bucks in actual cash money in their bank accounts, to pay for an unexpected expense – without having to charge it.

Oh, the humanity.

. . .

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107 COMMENTS

  1. I have no idea where you got the inflation numbers, Eric, but the situation is far worse than what you are saying.
    Consider this: The Constitution says that only gold & silver are to be legal tender in the USA. That was true until 1964 for silver, and 1972 for gold. In 1964, one dollar was one ounce of silver. Dimes had a tenth of an ounce of silver in them. Quarters a quarter ounce etc. In 1965, the fedgov stopped minting silver coins and went over to coins made of copper and nickel. Today, an ounce of silver is $15.00.
    Back in 1964, a brand new Chevy Malibu cost $2538 silver dollars. Today, a brand new Chevy Malibu costs costs $26, 620. Or $1774.67 ounces of silver.
    So, the same vehicle is actually $763.33 LESS despite having all the creature comforts, and safety features.

    • Back then practically anyone with a job could go down and sign up for a new car on a three year loan. Can’t do that today, so no matter how one figures the relative dollar worth math, cars are far less affordable.

      I don’t even know that cars didn’t last as long as today. When new cars were so easily affordable, there was not as much incentive to maintain and repair them. Instead, just buy a new one and let the dealer fix it up and re-sell it to someone ever poorer. It was that way up until the mid-1970s and no one had a clue that it would end. The price of a new pickup doubled in about five years.

      • True, all you have to have is a drivers license and a pulse to get a 7-year loan now.
        There are currently 7 million auto loans in up to 90 days of default, issued to 18 to 39 year olds.

  2. Eric, let me tell you about whats available for purchase in the rest of the world (not us, europe, china japan, etc) where small diesel have been effectively outlawed. Mid-size 4cyl turbo diesel powered crew cab pick-up trucks that easily do 35 to 40+ mpg. They burn clean with no catylasts, although they do come with engine destroying EGR systems that are easily disabled. They typically come in 2 displacemements (2.5 & 3.0L) The 3L engine is not necessary for all but the most severe applications and will easily out torqe a 5.7L V8 gasolene engine up to about 2000RPM. The Japanese mfgs control this market, led by Toyota Hilux and Isuzu D-Max rounded out by Nissan and Mitsubishi, although I think Ford has a new entrant under the Ranger badge. They are by far the most popular vehicle in “rest” of the world and control well over half the new vehicle market in these countries where regs have not, yet anyway, made these practical, durable and efficient vehicles illegal.

  3. Wanted to ask this out loud — if the acquisition of raw resources for most things is getting easier, the transformation of those into usable material is getting easier and cheaper, the taking of those materials and turning them into sub-assemblies is getting easier and cheaper, taking sub-assemblies and combining them into usable products is getting easier and cheaper — mostly automated as well — why is it getting harder to maintain a standard-of-living that was achieved just 60 years ago?

    • Because the increase in inflation is outpacing the government’s willingness to respond with the appropriate adjustments in every payment in the economy.

    • Because we are not merel “Maintaining” the same standard of living. Remember a few things back then.. fuel was 19 cents/gallon for far better quaity (no EtOH)Our houses had minimal insulation single pane windoes, and simple heat, usually natural gas forced air, maybe two simple three piece baths. Dad bought his work comomute cars for $150 and ran them till they barely did and traded that one in on the next once every four years or so. Manual trans, four or six cylinder, single downdraft carb, simole heater.. want it hotter, slide the button and/or click the three speed fan up a notch. A new Fridge, a bit one, cost maybe $150 and lasted thirty years. Feeezers about the same. Car insurance you only had to have if you HIT someone, it was YOUR FAULT< and you couLD nozt pay the damages, Even then it was maybe $30 per year for bare bones basic. Doctor's office visit was twenty bucks. A three pund tin of FOlgers ground coffee cost maybe two bucks, and the Sunbeam stainless (high end back then) = 8 cup percolator cost about $12. Music consisted of the new fangled FM radio, pick up a small battery transistor set for about tne bucks. Electricty was under a penny per KwHr.
      Now gummit DAMANDS under penalty of law that our houses are hermetically sealed, ridiculous;y expensive heat and air conditioning systems, incuding heat exchangers to save the heat.cold comoared to outside, complex three stage incfemental heat levels, energy saving doo dads that raise the cost of building a new house by about forty percent, AND raise the cost of homeowner's insurance by more than that, cause if mine burns down they have to replace it to today's standards. Homeowners on my present home was about $135 every half year. Now its $80 every month, for same coverage. Car registration in cAifornia was $13 per year, my 2 year old van here now costs about $180. Entertainment? Theold B&W TeeVee set, that actually had stuff that was worth watching, is now replaced by I don't know what all, but those huge screens and the computers, receivers, etc to feed it ain't cheap. Can't buy a car anything like we could back then…. today they hav to have fofteen air bars, SEATBELTS, cushion everything, automatic compouter controlled this and that.. no more button to slide to make it a bit hotter inside. Antilock brakes mandated (I was SO HAPPY when my system packed in.. now I am the one controllingthe brakes, thanks ever so much), and while the four speed w/OD automatic gearbos is amazing, and functions perfectly, my van is 20years old, today it would probably have an 8 speed auto that no way will last the 350K this one has already provided. And costs four times as much to rebuild….. insurence on it, loesst limits availab,e add comprehensive, underinsured, and I'm at aobve a hudnred bucks PER MONTH!!!! That's more than the monthly ayment on the first used car I ever financed. Oh, nd the van has NO bckup camera, though the side mirrors ARE too small, but I make do.
      Our "standard of living" is so far above what it was that long ago we cna't compare.Things only dreamed of by the very rich are now daily necessities, the level of co[lexity is increaded exponentiaolly….. I've scrapped out cars built in the late 1960's. Never even bothered to save the wiring for the copper, but sometimes i'd save the harness in case I neded to repair a different car. I do't think there was 200 feet total of wire in the entire car. Some might not have topped fifty feet. Recetnly broke up a twenty year old Caravan…. musta been two miiles of wire….. "power centres' in three parts of the car, huge buncles of tiny too-delicate wires travelling from one end to the other. For what? I can open my eyeballs once a month and do a walkaround to make sure all the bulbs are working. Even with todays failed bulb warnings, have the cars on the road travel about with busted tail lamps, headlamps, markers, turn signals…. so what's the benefit from the useless expensive "feature"?

      IF we could even buy and be content with the thigns that were standard back then, we'd be a whole lot better off today, but Nannie in the Mosquito Swaml alongside thePotomac has decreed otherwise. And it is killing us after running us broke.

      AND the cost of "government" today is so high "tax feedom day", the day of the year on which we stop woirking to feed the machine and can now begin to ffeed ourseles, has gone from some time in early February back then to late July today. A major part of that cost of government feeds them whilst they figure out how to force us to spend more money on everyday thigns we dont need or or want. y grade school had 55 students per classroom, wne we got a GRAET education……. today's schools have maybe 17, 21 at most, and the product they crank out is abysmal.. kids can't even count back change if the register tells them how much to return, they are illiitarate, and have few real world skills. So no, we are NOT living at the sams standard we did fifty years ago.. In many ways its far worse.

  4. But this practice does make buying cars cheaper for those of us who tool around in twelve year old Civics and Corollas. On the other hand, when we go to sell them on Craigslist and hope that they’ll pass inspection…

    But wait, won’t the New Green Deal ban affordable cars for us proles?

    • They won’t have to pass inspection as long as they will fit into the crusher where increasing numbers of trade ins are going, to prevent them from competing with late models.

  5. I hope this is good for the used market. The sad part of financing is the resale value of some these cars is so high that its worth buying new and financing is easier new than used. I’m looking at used highlanders and they’ve only depreciated 30% with over 100k miles.

  6. Another very good article by Eric !
    The financial conditions in our US market are threads in a larger economic quilt. The extended financing of transportation needs is just a slowing of the speed of heating the hot water in which the frog gets boiled. But it still gets boiled and that is just fine with the money mongers.
    Here is another perspective on the screw job we face at the hands of the Judaizers:
    Some years ago, I started noticing that the people driving new mid-range Mercedes did not look like the historical owners of this marque I grew up with. Then I noticed that public school teachers, other public employee females, and the like were sitting behind the wheel at stop lights. By chance, I was introduced to a used car operation that specialized in almost new, but used MBs. These cars were ratted out, badly maintained, or damaged by the very persons I observed in then with incredulity. The owner-operator of the used car lot told me he bought these MBs at third or fourth tier bank auctions, patched them up, and pushed them back out and on to the status seeking, but unsuspecting public. I had been taken there buy such a dweeb.
    And here is the key: These cars were sold new to subprime buyers (the ones I originally saw at the stop lights). The dealers sold the financing to banks, or the banks financed them directly. When the financing failed, the cars were injected into the secondary market, and the debt was written off by the banks. The used car market then restarted the financing, and the cycle repeated. Blood cannot be extracted from turnips, so the original subprime buyers skated, the dealers got their slice of the pie, and the banks did their part to support QUALITIVE EASING (QE) at the local level.
    This whole scenario is in service to the Fiat Money PONZI scheme being operated daily by the Oligarchs that have stolen the US and the world.
    Usury is their tool, world domination and control is their goal.
    2005 VW TDI
    1988 Citroën 2CV6

  7. There is another driver for loan defaults, and a really sad one. Friend of mine got hmself buried. Boght a near new Nissan Frontier, good condition, he’s had it a few years now, been paying on it since he bought it. Couple months back he took it in to the dealer to check a coupe things that didn’t seem right. Seems they (Nissan) had cut corners on the radiatork specifically the trans oil cooler as it sits in the bottom tank of the cheap composite rediator. Spring a leak, water then got dragged all through the gearbox, resulitng in crazy or sluggish shifting, the reason for the visit. water pump, ,brakes all gone, tyres nearly worn out, cat convertor partially clogged………. would not pass smog partly because check engine ight can’t be turned off. Needed to know what it would take to fix it all again….. but he OWES more on the stuid truck than he could sell it for IF it was running OK. So he parked it. Grams had called to ask him to come get his real sweet .92 Mercedes 300CE Kabriolet……. and GRamps paid the shipping to send it out from Michigan. So he’s stylin, meanwihile continues to pay on the Frontier each month, and I find myself sondering wht ppermanent damage the water sitting in that automatic greabox is doing anat he’d rather it not be doing.
    Too many cars don’t last long enough to return any value…. cost of repair nearl equal to p=market value on the car when its runing fine. And he owes more than that on it? Hes lamenting the fact it did not get stolen about six months ago. Or have a big Doug fir fall across the roof when it was parked… no, a bigger one than that. Squished like a bug…. and thus worth far more to him that way.

    I wuz gonna ask him how much he still owes, but he gave the impresion it would hurt too much to admit the numbers.
    I’m thinking Gramps’ free Benz will still be running long after the Frontier has been turned into a sea frieght can of toasters.

    • Hi T,

      Repair costs vis-a-vis depreciation is without question a big problem – one that is getting worse as vehicles become more and more complex. They generally work well for the first several years (and in any case are usually under warranty during those first several years). But they shed value alarmingly during those first years, especially. Then something expensive breaks. Now you’ve got to consider whether it’s worth spending potentially several thousand dollars to fix it – and because it’s no longer under warranty, it’s on you to fix it.

      But because of the high cost of new cars many people haven’t got several thousand or even several hundred dollars available to pay for repairs.

      Do they put it on the credit card with an 18 percent interest rate?

      Or do they toss the car and buy a new one because the loan seems more affordable?

      • I have a 2003 Lexus RX300 with 241k miles – I know the timing belt has not been changed in the last 75k miles. I am having trouble convincing the wife that it is better to do the belt and all 4 tires for $2000 than to buy a few years newer car for 6 or 7K.
        Can you give your opinion? I like the VW Touareg, the Honda Pilot, or another midsize AWD SUV. We do have real winter here and a couple of gravel roads we use regularly.

        • Hi Ken,

          The big question is… do you like the Lexus? If the answer is yes – and the vehicle is otherwise sound – then spending $2k to bring it up to snuff vs. 2-3 times that to get a comparable replacement is money very well spent. I like the Touareg and Pilot; but the issue (I’m assuming) is money, in which case fixing the RX is sound policy.

        • KEEP THE LEXUS

          Get the belt done well before specified interval. I’ve done those, they are not bad but could be easier. Worth it. That engine is likely good for another couole hundred thou.
          As to tyres… check out Discont Tyre.. they’ve most often got th ebest pricing on identical tyres to other shops. I’d been quoted close to $300 each for my van, they hd to bring in my pair as I was specifit WHICH Toyo I wanted…. $200 each on the van, they ate the sales tax. they also offer financing through what used to be GE Capital, six months no interest.
          Try to sell your Lxus, add $2K and see what you can buy… nothing close without going deeply into debt. ANd your Lexus is now well proven. They build a VERY soiid car. Keep it.

          And I DO recommend Toyo as a brand…. and I’ve tried most of them.
          but I MUST stand contrary to Eric on his endorsement of the Tuareg.. its out of Wolfsburg, the VW folks. They have never had their quality control OR engineering where I think they should have. Repairs to ALL their cars are outrageously expensive as they don’t lan for it to be repaired. Stuypid things like their pwer windows… instead of replacing a fifty dollar motor in half an hour the entire inner pan of the door comes as a sealed unit, $350, and oversized shipping, then it has to be fitted….. come ON guys…..

          • For years I’ve lamented how Touareg drivers can’t seem to go the speed limit. Get behind one on a two lane road with lots of traffic and you’re stuck till they pull off or turn. Obviously I didn’t get that opinion from just being stuck behind one.

            It was sorta like the 12-14 Super Duty’s that registered 75 at 72. A couple of them could build up a mile of traffic at the end of the day when everyone was headed to the house. I had to drive a Speed limited Volvo some times back then. I’d go how ever many miles it was to a place I could pull off and let half a mile of traffic go by. Those SAIA drivers didn’t even try in their 60 mph rigs.

    • VQ40 engines since 2005 DO have issues, but can easily be fixed and kept for 300k miles if you can turn a wrench. Should have read the forums for preventative maintenance.

    • If he can’t wrench, this person should find a person who is a shade tree mechanic, who can turn a wrench. I have a fellow like this, my repairs are about 25 to 40 cents on the dollar of dealership prices, including parts. Then get a laundry list of parts you need. Get them wholesale from a auto parts store (your mechanic can ask for wholesale). Then get the bigger or more expensive parts from a business that sells used LATE model parts , like Snyders, Holland, TX. Very good prices. THEN have mechan. do the work, then SELL the car. Buy a better built USED vehicle. I bought a plain, plain 2009 Ford F150 single cab, 40k miles. Paid $9,999 from a dealership who just wanted it off the lot, since it had scratches in the clearcoat. Had a few things to fix (minor because I have a great inexpensive mechanic), but seems to run smooth. I won’t touch anything with a turbo, thanks to Eric.

    • My mother had an XTerra with the exact same problem. Made a moaning noise under heavy load, shifted weird sometimes, but the dealer could never hear the noise. Never understood how the coolant and transmission fluid could even get close enough to mix, guess I know now. In any case, hers kept on going for years until it took a moose across the hood (fortunately, she wasn’t hurt). Cost to straighten the thing out would have exceeded what she paid for it, let alone what it was worth, so she let the insurance take it. Now has a Dodge Journey V6 with problems of an entirely different (usually electrical or electronic) nature.

      • Yep. I never did like the idea of a transmission oil cooler buried inside the radiator.Especially made by an outfit that shaves things as closely as do Nissan. One easy/cheap cure, saves the cost of a new radiator, would be to spend maybe ten bux at a you pick boneyard, or maybe fifty bux outrignt for a large capacity new liquid to air aftermarket trans cooler. That way if the dumb thing decides its time to go pee on you, the only thing that will happen is lose enough fluid the trans can’t work. Pour in more red oil and git along agin. But when the different metals in the ciolling system begin to eat each other up (galvanic corrosion) seems the cheap alloy they used on the trans cooler was at the bottom of the feeding chain. Stupid.. why not use high grade bronze, or even good brass ,maybe pure copper (I know… $7K/T is a bit dear, but how much actual COPPER is in that little cooler anyway? Three ounces?) or stainless. That fault has likely eaten up a few million dollars’ worth of NIccan gearboxes. I’m sure they have the same one in everything they make. Mercedes do the same thing, but they use REAL metal, and in all the years I’ve owned/driven/worked on those care I’ve yet to see a trans cooler leak… only one was when the car was in a front end prang, and the plastic tank at the bottom of the rad had been creacked… that was a COOLANT leak to outside, not into the fluid. I did scrap that radiator….. since bottom tank was cracked, I finished the job and removed the internal cooler after I finished busitng up the lower tank. I was curious. That cooler was a MASSIVE casging of solid brass not stamped microthin sheeet stock. Must a weighed in at close to three/quarters of a pound. No wonder they work extremely well and NEVER fail.

        As to the Jeepie thing, not surprised. Since the big ram got tangled up with Flea Yacht, quality control went AWOL. And Fiat have been notorious for cutting corners on electrical systems. Sorta goes with the ownership programme on their products.

  8. I can’t see myself ever buying a new car again. I lived in Europe the past 2 years, and while I was there, bought a 2013 Dacia Duster with a 1.5 Diesel Engine. The only “bells and whistles” it had was air conditioning and a CD Stereo. No LCD screen, No GPS/NAV system etc. The Duster averaged over 40 MPG, and would cruise at 80 MPH all day long (But not much faster, lol). I paid about $6,000 for it.

    When I returned to the USA, I started hunting for low mileage used cars. The first thing I bought was an 08 Ranger with 48K miles, for about $7,000. This is a “real” Ranger, not that bloated thing that Ford calls a Ranger that you can buy now. A small, economical truck, with a usable bed you don’t need a ladder to access. I have owned Rangers for a long time. Just wish I could have found one with the 2.3L and 5 Speed Transmission because those are better on gas than the 3.0L automatic I currently drive. I have moved houses twice with only using a Ranger to move all my furniture/household items (They were short moves with the houses being less than 3 miles apart.) Why doesn’t anyone make a truck like this anymore? All you have is the bloated monstrosities hogging up a lane and a half of asphalt.

    I next picked up an 03 Escape for again, about $7,000 that had 62,000 miles on it, well maintained with all the service records. Beautiful SUV, all leather, AC, stereo etc, but doesn’t have an LCD screen, and who needs one of those in a vehicle?

    So, for about the price of a Mitsubishi Mirage, I have 2 vehicles that will serve me well for a long time. Paid cash, so no debt. I could have bought 5-6 of these for the price of an “average” car, but why would I?

    • Liberty, I would love to find a ranger, they are SO DARNED expensive for a good one. Cheaper to buy the full size , which I did (above comment) recently for $9,999. I see them all the time running past my house, sometimes I will see two or three in a sequence. I bet a gal like me could wrench it myself with a little study/help/youtubes? Not a complex Regulatory monstrosity like what all the makes sell now.
      re: your Escape, Relative got in a bad wreck in one of that era, he was fine, thank heavens, must be a solid little buggy.

  9. The thing that’s always annoyed me is the selectivity of people’s complaints.

    Cars have many expenses associated with them, but the only one – THE ONLY ONE – that people actually whine about is the price of a gallon of gas.

    Not the monthly payment.

    Not the insurance bill.

    Not the cost of the inevitable repairs and routine maintenance.

    Nope, just the gas.

    The cost of gas is almost a rounding error compared to the others, but it’s the Big Deal.

    • LOL.

      I have seen people complain about the price of gas ($1.20/L Canadian) while drinking $2.00 per 1/2 L bottled water.

      Gas is just the thing they see daily. It is like talking about the weather.

      Payments, insurance and maintenance are infrequent enough to be rarely considered by the terminally distracted majority.

    • I don’t like to mention this, be we were actually given a 2yo car about 10 years ago, that was way more economical on gas that what we had. After a couple years of paying nearly new registration and full coverage insurance, I figured that we had actually spent more than we would have on gas for the bigger vehicles.

        • My mandatory insurance bill = 72% of the Blue Book value of my putt putt. Then add these other fees plus excise tax, and in a year or two, the cost to insure, register, inspect and tax my wee Civic will exceed 100% of its value. Add to that the carbon penalties the state is thinking of imposing on older cars and trucks whose cylinders are a bit worn and whose exhaust manifolds aren’t what they used to be. The days of the backyard mechanic are going the way of the horse and buggy. Except, for this reason, the horse and buggy may be making a come back!

          • Amen, Imbroglio –

            My biggest expense with regard to my 2002 Frontier is insurance; then property tax. Together, it amounts to about $500 annually. My truck is worth maybe $4,000. So in the course of the past seven years – roughly – I have been forced to pay almost 100 percent of its current value in various forms of theft euphemized by such terms as “insurance” and “taxes.”

            • If it makes you feel better, to insure my $1200 1995 S10, $985.

              That is zero coverage in the lowest rate region in BC. The minimum coverage possible to get plates. And, that is also with the maximum safe driver discount possible. Never had a claim.

              Simply theft benefiting the incompetent who crash regularly and the bureaucracy that leeches off 80-90% of the funds.

              • Good grief!

                We only pay about half that annually for liability on FOUR vehicles in Montana.

                I’m sure glad that they turned me down when I wanted to move to the Prince George area 40 years ago.

    • haha, you’re so right Ice Age. It boggles the mind. I have had relatives trade in cars because of mpg, and small differences at that. Unbelievable. A $2 calculator would tell the tale.
      It’s gotta be something else right? They must have other (hidden) reasons for doing what they do??????

    • Those of us who pay for things when we buy them do not have to complain about payments we do not have.
      Those of us who can drive defensively do not need insurance beyond that required by government, which is far cheaper than comprehensive, etc.
      The cost of repairs is less onerous if the money has already been saved and secured for the time the inevitable occurs.
      There is a local petroleum dealer who sells regular gas at two different prices. Out front, it is the prevailing $2.429. Out back, the pumps charge those willing to walk inside and pay cash only $2.199. Those who complain the most about the cost of gas seem to be the same ones who leave every light like it is a Christmas tree at a dragstrip and will do everything necessary to wind up in front of me at the next light. They are also the ones most often seen waiting for the towtruck at the accidents they usually cause.

  10. The problem regarding the crappy loans being issued to insolvent people is because the bank has incentives to make crappy loans in the first place. If a bank actually had to operate like a free enterprise business and must answer to the inventors and depositors (who can take their $ and leave if they knew the financial health of the bank) then these crappy loans wouldn’t get issued in the first place. Moreover, the banks get a bailout if things go sideways from the taxpayers and the Fed Reserve. In other words, your banking institution can loan cash to your deadbeat brother in law and others like him until the bank is loaned up then take these loans to the Fed as collateral for more $ to loan to more deadbeats. This house of cards always has a tipping point where there are more deadbeats than payin customers then the financial woes start and more loans from the Fed until they declare a financial crisis then the big payout from the government. Government in exchange adds new rules and regulations to assure the public all is OK until things smooth over in a few years then loosen the rules for the bankers again.

    • “This house of cards always has a tipping point where there are more deadbeats than payin customers then the financial woes start and more loans from the Fed until they declare a financial crisis then the big payout from the government.”

      Due to (((their))) fractional reserve banking system, it only takes a few deadbeats to topple the house of cards.

    • Banks don’t make money on loans they do not make.
      Real estate and stock brokers only make commissions on things they sell.
      I’m looking forward to the day that everything I’ve ever wanted to buy will be worth pennies on the dollar for those who have the pennies. Until then, I’m hoarding pennies.

  11. The debt class is essentially propping up the U.S. auto industry. They couldn’t exist without the gotta-haves buying their gadget-laden trucks and SUVs.

    • Hi Handler,

      I have always been interested in What if? scenarios, both historical and otherwise. I often wonder what if GM or Ford or some other company offered a full-size truck like they used to make them: Truck-design six cylinder or V8, no excessive tech; capable of serious work, with manual-engagement 4WD and no electric baubles – just AC, a decent stereo – and priced around $25,000 – would it sell?

      • Yes, no question. I’ve always said the 90’s trucks were about perfect. The way I see it is they have to keep the regs and rules changing so the ’90’s’ truck can’t be built and sold here now by the 3rd world. And I think you’re spot on, they would be about $25K pretty good trucks. And the funny/sad part is they would get 14-16mpg, which isn’t very far away from what they get today. So in effect, because of our precarious economic situation, created by ourselves (uncle really), we pay 30-50% more for the truck and save only about $3000 in fuel cost assuming 5mpg differential over 75000 miles at $2.50 per gal.

      • Would be better if once again they would just offer a six passenger V-8 RWD car.

        Then the people currently buying pickups would just buy those instead and then GM/Ford could make pickups for the folks that really need them.

        • Yes!!!!!!!! And why I went to trucks in the 90’s, cause there were no more big sedans/wagons left.
          I’ve been in trucks since the 90’s and only recently have been fortunate enough to keep a truck for my truck needs and also be able to daily drive a sedan. I took a long time looking and the 300 V8 was my choice. I really love it. Big, powerful, comfortable, etc.. I actually wish it were a little bigger, but they don’t exist next to a MB S at more than twice the price.

      • Jack Baruth once pointed out that you can buy a new vehicle to satisfy nearly every desire – power, speed, environmental friendliness, whatever – except longevity, because such a car would essentially be a mail truck with zero features beyond the most basic mechanical systems.

        And no one would buy it.

      • My daily driver is a F150 with the tried and true 300 L6. Bought it for $3500 used with 117k on the ODO and have put 260,000 miles on it since. If Ford ever started building a truck like that again I’d be all over it for $25k. Doubt that it’ll ever happen cause trucks that are sold to guys in suits are way more profitable. Always dumbfounded by how many times I see a guy driving a Raptor wearing a shirt and tie with nary a scratch or spec of dirt on the damn thing.

  12. well.
    this is an automotive blog. so there is that.
    however.
    if you ever want to start a college loan blog. just change one or two words in this posting and you’ve got a good article.

  13. Good point about the Vega vs. the Mirage in todays dollars. I’m always seeing millennials complaining online that the past generations screwed them with open borders, sending good paying jobs overseas, ramping up the price of housing, electing poor leaders, poor parenting/broken homes etc. As a gen x’r a new car was something unobtainable in my youth. Making min wage, I could only afford gas. A new car never crossed my mind. I understand their complaints about their plight, but this is their fault for not having discipline. Just because the bank will give it is no excuse.

      • There’s a good bit of evidence that the middle class would actually be moving up the social-economic ladder if it weren’t for all the rent seeking industries behaving like monopolies.

      • Hi Handler,

        I often write about the rip-tide effect; about how those of of us who try to live modestly are carried along by the current of other people’s decisions not to. This raises the general cost of almost everything. For instance: Almost (probably every) new car has a proprietary design headlight assembly – unique to that particular make/model. These generally cost several times as much to replace when damaged as the old generic sealed beam headlights you could buy at any parts store. Sometimes, they cost several hundred dollars each. The generic halogens cost $20 or so each. They are also made of glass – not plastic – and never go glaucomic (haze over, because of the yellowing of the plastic lens).

        Now, it’s absolutely true that the new “assemblies” practically light up the night; visibility is better – agreed. But there is no denying the fact that it has come at tremendous cost. A minor parking lot fender bender/deer strike is now a plastic cracker – and can cost hundreds and even thousands of dollars. These “assemblies” also don’t last as long. The plastic yellows in as little as three or four years (sealed beams, made of glass, can last decades and remain looking like new) and they usually will need to be replaced for one reason or another long before the car itself needs to be replaced.

        Unless you buy a car more than 15 years old, it is pretty much impossible to not buy the “assemblies,” too.

        Here’s another: Washing machines. I was in the market fairly recently and discovered how difficult it is to find a simple/basic (and not ludicrously priced) machine without a Star Trek-like flatscreen display and various such to dazzle the people who find blinking lights and flat screen panels so entertaining… in the manner of a seagull pecking at a piece of tinfoil on the beach.

        My point being that the middle class to some degree impoverishes itself by lavishing money on transient things like disposable appliances rather than focusing on the accumulation of capital in the form of home ownership, savings/investments and so on.

        And because of this, the typical middle class person has very little net worth, but lives what appears to be a pretty lavish lifestyle relative to his 1970-era forbear. But his 1970-era forbear was arguably much better off in that a man could afford to support a family without the wife having to earn a full-time income; they were able to afford college educations for their kids. They did not end up as Wal Mart greeters in their 60s…

        • Interesting that you bring up proprietary issues. It’s a growing problem for sure.
          When I started my biz 20 years ago, customers would complain about the cost of proprietary products when needing replacement. They would be 3-4 times the cost of similarly functioning products (but wouldn’t ‘fit’).
          I made it a message of my biz to promote and sell non-proprietary products, a risky proposition. 20 years later it worked, but only to customers who cared. Our customers base is loyal, smart, and understands value, etc…. They are willing to pay more for our engineering efforts with premium non-proprietary products. A niche for sure and hard work to find/create great customers.

        • But that headlight assembly is easy to build in an outsourced factory and installs with a few clips and a wiring plug. Saves time in the high-dollar Ford plant and shifts the workload to the Mexican or Chinese subcontractor. Also helps with aerodynamics, which helps improve fuel economy, which serves the purposes of Uncle.

        • The european headlamps from the sealed beam era are even better Eric. They are the glass lamp but with a replaceable bulb. Now the early aerolamps had to be glass. The ones in the ’86 mazda I had were glass.

          My washer and dryer are 37 years old. They do what they are supposed to do. But get this. A while back my washer’s spin cycle stopped working. I traced the problem to the wig-wag solenoid. I went through the junk I have from my grandfather. Found a wig-wag and it tested fine. I put it in. This wig wag could be a decade or more older than the machine but was identical except for the plating color and some surface rust. Same part number stamped on it.

          • A few years ago our old whirlpool stop agitating. I looked it up online and it was three little pieces that cost about $5 with shipping. The replacement was a little interesting; you had to hold your mouth just right (old saying the kids don’t know).

            When it’s finally time to sell my mom’s house, I’m thinking about hauling her ancient washer/dryer up here because it’s probably better than ours. Also, there’s a GE refrigerator that’s literally 50 years old that would probably last longer than a brand new one.

            • Mostly,

              Bad dogs on the old Whirlpools.

              One of the biggest reasons people get rid of them. If you see one on the side of the road on garbage day, they are worth picking up.

              Five bucks and fifteen minutes of cleaning and you can sell them for $125-175 all day long to people who are on their third or fourth digital controlled/safety feature laden/broken washer.

              • I bought this w/d set from a guy down the road who married a lady from out of state who had a newer w/d set that they hauled in from her place. This must have been more than ten years ago now and I think I paid $100 for the pair.

                Other than the “dogs” and routine cleaning the water inlet screen, no problems. Who says you can’t live cheap?

                • Unusual Size,

                  That is literally less than 3 pennies a day.

                  Think about the folks that put a $1600 high efficiency w/d on a credit card. What is the interest per day?

                  If they last 8 years (which they won’t without a major repair) that’s double every year what you paid BEFORE the interest.

                  Everyone I know with the high efficiency/safety laden units have switched to perfume/dye free detergent because good old Tide makes them itch.

                  Apparently high efficiency means skipping the part about rinsing the soap residue out of your clothes.

                  But LED lights and SMART phone interface are much cooler than dials.

                  And who doesn’t just love the audible safety latch – for the children!

                  • I recently tried to work for “a major department store”, made it through 3 days of training before I had to quit for these exact reasons. They wanted you to do everything in your power, including outright manipulative word-tricks, to keep people from thinking about the price, and if someone wouldn’t stop focusing on price, then you were supposed to convince them that they could easily afford it with credit and leasing. Anything to keep their mind off the bottom-line cost of the transaction, just like a sleazy car salesman. Layaway was an option of last resort only if someone successfully resisted those options. And they wanted to convince you that you were helping people by doing this!

                    “Oh, you’re on a tight budget? But with your active family, this high-efficiency model will save you a lot of money!”

                    “Oh, you’re busy all the time? This steam dry makes your clothes come out wrinkle free so you never have to iron!”

                    “Hey, would you like a $2,000 adjustable foundation with that new mattress? Here, let me show you how comfortable it is! Oh, it costs too much? Here, we’ve got one that only costs $1,500 but has less features. Don’t worry, you can put it all on the new credit card I’m going to ask you to sign up for!”

                    I’d come in under the impression that I could guide people to products that truly matched their needs and desires, but it turned out to be all about convincing people they couldn’t live without things they hadn’t even known existed.

                    Oh, and that’s the other thing. Those freakin’ high efficiency washers. They told me, and wanted me to tell customers, that those things, with their no agitators and their tiny puddles of water, would get clothes just as clean as a traditional washer while saving them money on water. My instincts said that was bovine excrement. So did a family friend who has one and whose clothes are apparently always coming out of it dirty.

        • People have gotten so dumb and greedy that they have no idea what it’s like to live a quality life. For example, the nearby tract housing development (located next to the dump) found plenty of suckers for their 3000 sq. foot cookie-cutter McMansions. It leaves you speechless. They’re basically symbols of debt, collectivism, and cultural decay.

        • If you want a reliable, old fashioned washer and dryer, buy a Speed Queen. You might recognize the name, they make most of the commercial washers and dryers used in laundromats but they make them for home use as well. 5 year warranties (instead of 1 year like everyone else) and you can get them with old fashioned knobs instead of electronic screens.

          • Googled Speed Queen.

            Sounds like Speed Queen changed their design in 2018, and the results aren’t good. Sounds like you need to find 2017 or earlier models. Pity

              • Craigslist and Kijij.

                Usually a few free or <$50 washers and dryers listed. Often working.

                I try to pick up the free ones whenever I am in the area where offered. Working or not there are lots of fasteners, timers, brackets, relays, valves, wire and tin that are useful to the project hobbyist. Most of my greenhouse water/feed system is built out of a washing machine. Stainless tubs best. Feed chems will rot anything else very quickly.

                Sometimes they can be fixed for a couple of bucks and a few minutes work, then resold for $50-100. Anyone who tries this should also offer $50 installation and free old machine disposal. Their old unit is usually just needing some maintenance. Repeat.

                Won't get rich but it beats sitting in front of the TV. Definitely beats a 'real' job.

                And yes, old Speed Queen units are some of the best.

        • Eric if you still need a washing machine, two words: Speed Queen. All metal and all mechanical, no electronics. The same machine that laundromats use. They are pricey but see if you can get a used one. We dropped $800 on a new one about 7 years ago due to a long running debacle with Sears models always breaking since the wife had to have a new one that was computer controlled. SQ will last you the rest of your life and basically don’t break. Go online and look at reviews. I thought it was crazy expensive but realized it was cheaper to spend more for the sturdiness, durability and quality up front and having no repairs or breakdowns to speak of like other brands. And with 3 kids and 2 adults using it almost daily, it has proven to be worth its weight in gold for cleaning clothes. The worst part of breakdowns is that your time is worth money and no choice but when its broken but to go to laundromats to clean clothes. Thats when I noticed almost all the machines there were SQ and I did the researching from there before getting ours. Best money we ever spent on cleaning clothes.

      • Debt has been substituted for income allowing the illusion of a middle class. Between taxes and debt there isn’t what was traditionally middle class. That is people with well, assets. There’s still a middle class by income.

    • The crazy thing is, back in 1970, one could buy a Volvo 140 series (2, 4, 5 door) with the ONLY engine optioin availble, mthe two litre pushrod four cylinder sipping petrol through a pair of SU carburetters, and feeding a four speed overerive gearbox. Four wheel disc brakes, they would cruise at 85 mph all daylong and return 40+ miles per gallon of cheap grade petrol, and do that for a typical 350 to400 thousand miles. They handled like sport car, could be driven like a ittle old lady’s town car, or, with a set of alloy rims and Goodyear BLus Streaks and Koni shocks all round and a fifty dollar rear muffler easily keep up with most of the English sports carbut never draw the eye of a stater on the highway. A plsne jane boxy sedan….. WHO was crazy enogh to fork over the two grand for a VAYguh? Peesajunque, gutless, maybe got mid 20’s for fuel use. handled like pigs, lousey brakes, the real wonder of those cars is that GM actually SOLD so many of them.

  14. In the future there will be a glut of used electric vehicles that are not worth bringing back to their original intended functionality. I offer this win-win solution to millenials. In order to save the earth but mainly yourself, your task is to strip the innards of the used electric vehicle of your choice, selling into scrap and resale markets the engine, batteries, transmissions and computers with other parts such as radiators and rear seats saving brake function as possible. You will be adapting this hollow shell for the installation of one of the air cooled chinese diesel engines. It’s up to you to work out the details. You are going to use this rig for hauling firewood or coal and other stuff like food and water to the 8×12 shed that you will be living in. I find no humor in this and neither should you. The cities will not be inhabitable given the trajectory we see them on.

      • Me, me, me, I can answer that. The first I saw were WWll camps in Germany. Tens of thousands of prisoners were kept in them. They were open air in the worst of German winters. The main thing seemed to be they were golden if an internee could only make it a dozen yards beyond the fence before being gunned down.

        Do a bit of research if you already haven’t. You won’t be proud of Allied internment camps and the freezing and starving bodies kept therein. You certainly won’t be proud of Japanese camps for the Allies either. While history would write the Japs were more prone to torture, I’d guess it would be a close race with Allied camps.

        FEMA is just another way to say “nobody gets to see what happens”. I do recall some pics of native American camps built by those paragons of virtue, Grant and Sherman. They looked peachy. So you think I’ll be disarmed because????

    • Ticky, the people doing this won’t be doing much laughing or cheering. I’ve always thought getting a couple of oxen would be swell under these circumstances. No fuel to buy or barter for since they eat what they like and have access to. I saw a lot of oxen in Mexico. They seem to be less cantankerous than mules, probably eat better too.

      I’m not sure there’ll be anyone to buy much of anything in the future. My wages haven’t changed since 1985 but prices sure have.

  15. The average new car payment last year was $530. That’s crazy to spend that on something that’ll be a pile of ferric oxide in 2 decades or less.

  16. Even if longer term loans could be justified from a consumer standpoint, they eventually will devastate new car sales. If people remain in debt for six years, it’s gonna get harder and harder to have a down payment for their next purchase.

    Up till now, dealers have compensated for this problem by giving buyers an overinflated price for trade ins, and inflating the new car purchase price by enough to pay off the remaining loan amount on the overinflated trade in. Lenders have loaned on these inflated sales prices just to keep the ball rolling. but that can only go on for so long. Soon, the majority of the new loan will represent artificial “value,” created out of thin air. Those loans will be impossible to sell in the secondary market, and funds for future car loans will disappear.

  17. “One of the reasons – probably – that most people don’t raise a ruckus about the cost of endlessly proliferating government regulations and mandates is these costs are made less noticeable to them by extending the time it takes to pay for them.”

    And cause the youngin’s don’t know any different.
    It’s a similar analogy that colleges use to kick fraternities off campus. They change a little rule every 1-2 years so the outgoing Sr’s get only a little mad, but the freshman don’t know any different.

    My brother and I used to run GM’s 8.1L trucks that got at best 12mpg, and when questioned by the average joe, we would boast that we got 12mpg just to get a reaction. And reaction we got. It was comical, especially when we did the quick math with them on buying a new 17mpg truck for $50K.
    Hammer down, haha…….

    • Pulling my boat down the road at 90mph with 4.10 gears didn’t get nearly that but I could have slowed down and got 10 or so. I gave $3200 for the 4WD 3/4T pickup I was driving. I could replace suspension parts, a/c parts, all kinds of parts and never top $5000. That old 454 just kept on keeping on. I guess the 4L80E was indestructible as was the one ton rear end. The bed was/is galvanized. Rust that out.

      I still have the sliding gooseneck hitch I designed and built. I’d slide it all the way to the back to the gooseneck would clear the endgate(I detest pickups without endgates) when going across really tough stuff like steep terraces that were washed out. Once up on a paved road, I’d lock the trailer brakes and slide it forward a foot and a half and haul ass with a load of cattle.

  18. I thing the vast bulk of this is culture. We do the same thing with houses.

    That said, cars are far better built these days. Vegas notwithstanding, I don’t think I’ve owned a GM product that didn’t start falling apart at 100K. The trucks have been better, but not much. At one point, a company I worked for had toyota pickups in it’s fleet. These things were unbelievably tough. They’d go every day, all day, up to 400K miles with little but oil changes, brakes and tires. The Astros they got to replace some of them ate tires, brakes and gas like no ones business, and the Dodge Caravans fell to pieces, needing transmissions and front ends at like 50K miles.

    These days, many cars rival Toyotas for longevity and dependability. So you can score a nice vehicle, 5-8 years old, under 50K miles for 10-12K here. Hell, over a decade ago I bought an 03 ES300 for like 10K, with maybe 40K on the clock. The car felt almost new.

    So it can be done. We choose not to do it.

  19. Eric you already know this. Building a new 1500 silverado LT with at least the same features as my 13′, including the unwanted packages that have the features i had in 13 + all the unwanted junk in 19, comes out to $47,900. My 13’s sticker price, again with the same features, is $41,000. Almost a $7000 difference. Also given I bought my 13 as 1 of 3 remaining nnbs on the lot and they were trying to make room for 14’s they cut an even bigger deal. No way Cash-hemorrhaging GM is going to sell me that same truck today with a $48k sticker for $33k of what I paid 6 years ago. GM is playing the Comcast game of only offering everything or nothing in a package and even fewer options and a la carte items. I wonder what fun or frustration I could cause by bringing in my old sticker and demand them to offer the same truck at the same price.

    Reading this same article in Linkedin I saw many (bot?) comments that this was because millennials were using uber instead of lyft and that the market is shifting to self driving vehicles as the cause of this uptick in delinquencies. One of the reasons why I think Linkedin is filled to the brim with fake accounts to make fake numbers and make fake comments on stories to give an appearance of acceptance but that is another story.

    Take the 2 paragraphs above, intentional price gouging through CAFE and unwanted garbage + loose loans + push for anti-driving gets you the desired environment today. Taking control of the wheel away form fluoride drinking humans is the next step.

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