By on June 27, 2013

car-loans-large

Over at Autobytel, Juan Barnett (better known as DC AutoGeek) takes a look at the history of auto financing, originally intended as a way for the common man to be able to afford an automobile some 90 years ago. The most striking thing is how attitudes have changed so dramatically over time.

Initially, bankers were calling for a ban on financing of personal automobiles, fearing that it would lead to financial imprudence. How times have changed.

In a 2008 letter to the Security and Exchange Commission, a collection of automotive finance companies argued against a proposed federal rule that would have made 60 months the maximum term for an automotive loan. The group said “[that the] 72 month term has become the industry standard,” and that it was critical to the American economy to allow banks to determine independently the risk as it relates to automotive loans.  They argued that any mandated term limit would cripple the automotive industry. They were probably right.

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55 Comments on “A Look Back At The History Of Auto Financing...”


  • avatar
    sirwired

    The previous “standard” Auto Loan was 48 months… the idea being that after four years, the car ran a decent chance of suffering from a grenaded engine or transmission, making the temptation to dump the problem on the bank rather strong.

    However, cars have progressed so much in quality over the past 15 years or so, the risk that the car will be rendered worthless by an uneconomical mechanical problem prior to the payoff of the loan is remote, at best. The risk that the car will be rendered worthless by a severe accident is rather easy to quantify and include in risk pricing. The same applies to the risk of job loss or other non-ability to pay.

    I’m not saying that rates are currently properly risk-priced, just that the extended terms themselves are not inherently an issue.

    That said, the extended loan terms do appear pretty short-sighted; the longer the car is upside-down, the longer until the consumer can trade it out for another car. A right-side-up consumer can trade-in at will.

    • 0 avatar
      Power6

      The mantra over the years has been that cars last longer but as such cost more, so its worth buying a more durable good for a more money which may require longer financing, it works out in the end. That seems to be true through the 80s, maybe 90s?

      It seems that the longer term financing since 2000 now is just to buy a fancier vehicle. Just my perception would be interesting to know if the statistics bear that out, I know luxury vehicles market share has been trending up.

      • 0 avatar
        darkwing

        It may also be worth paying more for safety (a 2014 Camcord comes with more airbags and nannies than you can shake a stick at; a 2000 Camcord was lucky to have ABS) and fuel economy, so there’s more than just quality to consider.

        Remember that the majority of that luxury market share volume is at the bottom of the range. An A4/3/C that stickers for the same price as a Camry is hardly worth considering a luxury car, for these purposes at least.

        • 0 avatar
          Power6

          Good point what is that luxury car that they are talking about, just based on brand or what metric?

          One should be careful with safety, it can be used to justify almost any flushing of thousands down the toilet. As far as I know no one out there is quantifying how much statistically “safer” you are in a new car vs. 5 year old, or 10 year old. The returns may be diminishing.

          We have a 2005 Subaru that has great safety rating in its day and plenty of airbags. I do have a little more concern in my 2001 Lexus ES which does not have rear airbags (but does have front and side and ABS) and I put my 4 month old daughter back there, but I don’t know that rear side or curtain air bags would make her safer. I am thinking we just might make it through life without having to spend her college fund on a constant stream of the latest cars to keep her alive.

  • avatar
    28-Cars-Later

    I have to agree with the circa 1925 Fed octopus on this one:

    “People will have an automobile and sacrifice paying their doctor bill, their grocery bill, their clothing bill or go without all of them rather than give up an automobile”

    This is essentially true today. Cheap “easy” financing also encourages price inflation, as we have seen in college financing. Its a case of chicken and egg, which came first the unaffordable car or the bank to pitch longer loan periods and thus more interest on the loan?

    • 0 avatar
      hreardon

      Absolutely correct. This is why a local business which runs an auto-title cash/loan operation has a default rate of around 3%: people need cars to get around and they know that they can push the doctor, mortgage, etc. off for longer periods of time before the collector comes calling.

  • avatar
    taxman100

    That was also before banking became socialised and the government decided getting a loan was a Constitutional right. Therefore they would not only required bad loans to be written, but would guarantee them in some manner.

    It also illuminates the vast change in cultural morals and values in the last couple of generations. Instead of the concept of being your brother’s keeper, it has become greed, narcissism, self-indulgence, and the demand to the fruits of someone else’s labor. All of these values have been encouraged by government policies going back to the Great Depression.

    These are all the results of secular socialism, and it will only get much worse going forward.

    • 0 avatar

      So how do you explain Canada’s more-regulated but more-stable banking industry? It’s not really in anyone’s interest – certainly not the public’s – to see banks fail. Creating a system where failure is remote is one of the reasons why the Canadian economy has been so much more consistent than the US one.

      • 0 avatar
        28-Cars-Later

        I agree the Canadian economy has been far more consistent than the US one, but banking regulations are only part of the equation. I would argue a greater part is the how the individual citizen conducts his business and the belief or value system of said individual citizen.

    • 0 avatar
      Conslaw

      Auto lending has not been highly regulated in the United States. At the Federal level, the government has had no regulation on the term of the loan or the amount of interest. The government simply requires that you disclose the APR and finance charges accurately. Individual states might limit interest rates, but only for the most extreme terms, say 36% annual interest for example.

      As a consumer lawyer and advocate, I’d have to say new car loans are one of the areas of least concern for me. A 60 month new-car loan today is as safe as a 48-month loan was 20 years ago. With a decent downpayment, a 72 month loan is even okay in most cases. Used car loans should be shorter as a general rule, but if the car has been fairly priced to begin with, the loan is rarely the problem; rather the problem is with the car or due to problems with the buyer’s income.

      As a matter of public policy relating to consumer lending, more attention should be given to student loans,which are out of control, and mortgage loans, because the mortgage industry is still a mess. Also telecommunication bills have shot up. It’s not uncommon for a family of 4 to have a $400/month cellphone bill. Cable TV, internet and home phone can add another couple hundred dollars. Incomes aren’t growing nearly as fast as telecommunication expenditures. That means consumers have to cut back on spending, saving, incur more debt, or a combination.

      • 0 avatar
        hreardon

        Great points, Conslaw. There are a few major cost of living issues that people face these days and the two largest are healthcare costs and telecommunications.

        It’s amazing that people forget that just 15 years ago most people did not have a cell phone, just a land line at $29-$39/month. Now you’ve got multiple phones in a family, many people who like to upgrade annually, plus internet, etc. The costs are staggering. My wife and I were just discussing telco costs the other day and realized that between AT&T for her phone and our internet+cable TV and Verizon for my cell phone that about $300/month disappears from our household.

        That’s insane, and we don’t have anything but basic cable and the lowest tier cell phone plans available in terms of data and minutes.

        I can attest that the lack of income growth is what is killing our household right now. While we are DINKs and should be swimming in cash, between increases in healthcare, local taxes/utilities and both of our stagnant wages (neither of us has seen a salary bump in three years), we are at best treading water.

        I’d love to replace my 8 year old car, but at this point there’s no money in the budget for it. It’s painful.

    • 0 avatar
      jmo

      “That was also before banking became socialised and the government decided getting a loan was a Constitutional right. ….It also illuminates the vast change in cultural morals and values in the last couple of generations.”

      Huh? Then how do you explain the Banking Panics of 1819, 1837, 1857, 1884, 1893, 1907 and 1929…?

    • 0 avatar
      corntrollio

      ::All of these values have been encouraged by government policies going back to the Great Depression.::

      So are you saying that all governments’ policies contributed to this? Because, for the most part, the credit bubble was pretty widespread, well beyond the US.

      I don’t disagree that our current bankster situation is a problem. Instead of bailouts, we should have sold their companies off for parts — and the incompetent idiot banksters should have been fired (and faced jail time in a number of cases) instead of being given bonuses.

  • avatar
    DC Bruce

    It’s probably worth remembering that, in the 1920s, most houses were not financed . . . or the term of the loan was quite brief.

    In essence, your piece is an argument against credit (“neither a borrower nor a lender be”) which is really kind of a 17th century notion.

    There’s no question that credit increases risk; but it had benefits as well. The real question is whether these long-term loans are priced correctly (i.e. does the interest rate reflect the lender’s risk?), just as many home loans pre-2008 were not priced correctly, given the lender’s risk. If the car is 100% financed, the longer term extends the period when the car is worth less than the outstanding loan balance. That’s the big risk for the lender; it repossess the car but doesn’t clear out the loan balance when the car is sold; and pursuing the borrower for the relatively small deficiency (probably less than $10,000) is just not economic.

    For the borrower, the transaction looks “costly” only if you fail to account for the opportunity cost of the borrower’s capital tied up in the car, if he pays cash. Just to use some numbers, suppose a borrower borrows $30,000 for 7 years at 6%. If he put $30,000 of his own money in the car, he would not have that money to invest during the 7 year period. Maybe he would get an investment return of 5% on the money during the period (or maybe much better), so the real cost to him of borrowing the money is 1%. And, somewhere in there, we should add, that people who don’t have the ready cash and aren’t allowed to borrow are SOL. For most people in the U.S., a car is a necessity, not a luxury.

    If you want to rail at something, rail at leases, which principally serve to put people in cars they otherwise could not afford . . . in effect encouraging them to overspend.

    Or rail at credit card debt, which is extremely expensive and all too common and arguably is not necessary, since people should have enough cash around to buy the stuff that comprise most credit card purchases.

    Finally, I think the analogy with student debt and the price of a college eduction (or an advanced degree) fails. Up to this point at least, institutions of higher eduction do not compete much on price. It is not a competitive market. If you don’t believe me, ask yourself how an undistinguished private college can get away with costing nearly the same as an Ivy League college. So putting more money into this market has just allowed colleges to raise prices.

    The market for automobiles, by contrast, is quite competitive. If there is a price floor for cars that is higher than it used to be, that’s because of regulatory requirements. To take one well-known example, the VW Beetle (which was cheap in its time) simply could not be sold today. It fails multiple regulatory requirements for passenger safety and emissions. I’m not saying those requirements should be eliminated, but all the stuff they dictate be included in the car certainly doesn’t come free. The wonder, frankly, is how cheap cars are that meet all of those requirements.

    • 0 avatar
      sitting@home

      “ask yourself how an undistinguished private college can get away with costing nearly the same as an Ivy League college.”

      Isn’t that the supply side of the supply/demand curves ? While there isn’t supply to meet demand, even lower quality is valuable. Cars, on the other hand, have almost no supply constraint.

    • 0 avatar
      Waterloo

      “If you want to rail at something, rail at leases, which principally serve to put people in cars they otherwise could not afford . . . in effect encouraging them to overspend.”

      I have never really understood this statement. Aren’t lessees really getting better value for their money? Or spending less for the same car? It also plays in to opportunity cost seeing as, when leasing, you are only paying for 55%-65% of the car (plus interest)over the term of the lease. When I have leased the residual has often been higher after 4 years than what the car is worth meaning I saved even more money.

    • 0 avatar
      Power6

      Your opportunity cost assumes the buyer has the full cash amount of the car available and then chooses to finance. This does not seem to be the case for the typical buyer. If you are borrowing against your future cash earnings that you could then save the cost is over your 1% estimate. You are also assuming they are buying the bare minimum of transportation and they have no less expensive options, that is hardly the case.

      My problem with the extending terms and all that Fed stuff making cheap money is it distorts the pricing. Houses, college and cars have seen demand/price fluctuations based on availability of financing and interest rates, i.e. the monthly payment. You’d think the average person would know better than just monthly payment but it doesn’t seem that they do.

      I’ve no problem with the risk involved if the bank thinks it is a good bet and someone wants to pay for a car for 6 years fine with me, as long as I don’t have to bail them out again! I’ll just drive older cars that aren’t as nice as my neighbors. I still lament the mortgaging of our future a bit. But saving and retirement is a comparative thing on a macro level, so if others are spending their money now it just makes my retirement that much sweeter, don’t know if I necessarily feel good about that.

    • 0 avatar
      sgeffe

      Credit cards should be used only to avoid carrying wads of ca$h around, as well as to facilitate online purchases; they should be paid every month in full!

      That attitude helped me to hit an 849 (out of 899) FICO score when I took out my recent new car loan.

      That Applebee’s dinner suddenly seems less appetizing if you’re still paying for it 6 months later at usurious rates! Better to hit the drive-through, or make PB&J or Ramen noodles at home!

  • avatar
    Beerboy12

    There is no commercial, industry or private individual reason or incentive for limiting or regulating auto loans. It is the the governments job to do this and we should let them… for our own good, because we all know, all to well, what happens when credit is given freedom. It’s a party with a tequila grade hangover!

    • 0 avatar
      danio3834

      It’s also the Government bankruptcy legislation that allows people to walk freely away from huge amounts of debt obligations. If private industry was allowed to collect 100% of what they were owed there would be a lot fewer defaults. But Government policy has made it possible for people to repeatedly and legally screw others because of their mistakes. So no, the free market isn’t the problem, no matter how much the regulators and state worshippers say so.

      • 0 avatar
        corntrollio

        “It’s also the Government bankruptcy legislation that allows people to walk freely away from huge amounts of debt obligations.”

        So you’re suggesting that Coda should have kept running as a business in order to make sure it paid its loans back? Saying “a deal is a deal” would allow for a large number of less than ideal scenarios.

        Bankruptcy allows the redeployment of income-producing assets and probably increases efficiency overall, even if there are individual winners and losers. It’s also not a cakewalk and is not an inexpensive or unintrusive process.

        The reality is that most debt agreements have a variety of different remedies already written into them, and many of them are far easier than bankruptcy for a debtor to undertake.

      • 0 avatar
        Beerboy12

        I don’t blame the free market at all… Poor or, better still, non-existant government regulation did absolutely lead to the passed credit crisis. Government needs to step up to the plate and regulate (properly this time) because no one else will. As unpopular as it will be it is necessary. It’s no a matter of worshiping regulation its a matter of protecting the economy…

        • 0 avatar
          darkwing

          Repeating the same action (or worse, doubling down) and expecting a different result is textbook insanity. If you want to convince me that more regulation is necessary, first convince me that the moronic regulators aren’t fundamentally flawed and just going to screw up again.

          Otherwise, yes, it absolutely is fetishizing regulation for its own sake.

          • 0 avatar
            Beerboy12

            Sigh… If you read what I said carefully you will notice that I did not call for more of the same or a repeat of regulations that where done before, I said “do it properly”… It can be done and it should be.

          • 0 avatar
            darkwing

            I ask for reason; you respond with blind faith. That’s very telling. (And unconvincing. See above.)

      • 0 avatar
        darkwing

        In an optimal market, required down payments and interest rates would adjust to price the deadbeats out of the system.

        The real problem here is a combination of politicized regulators enriching their dependent constituency at the expense of the banks’ risk, and the moral hazard that leads too, the “too big to fail” mentality, where poor business practices aren’t punished by failure.

      • 0 avatar
        Power6

        Yes debtors prison, that is the solution!!

        • 0 avatar
          hreardon

          I don’t think darkwing is advocating debtors prison, simply that rational requirements can curb a lot of the ill from the system.

          If we look at mortgages one of the key reasons why so many people have been willing to simply walk away from deeply underwater homes is the lack of, or very minimal down payment requirements. Further, low or zero down payments were a great way to lure people into mortgages they otherwise never could have afforded.

          • 0 avatar
            Power6

            I was replying to danio3834, just the oddity of the way this platform threads replies.

            There were and are a lot of reasons that people walk away from loans, the banks know the risk that is why they price it into interest, they are sophisticated investors.

            Traditionally we have believed in the US that people deserve a second chance, and that is good for the economy rather than having a certain segment of the population indebted for life.

            I personally am more worried about moral hazard of bailing banks out. I do not recall that the gov’t paid any bodies mortgage for them, walking away from a house and loan is not exactly a huge benefit, not like the benefits provided to those who backed the loans.

            If people are taking risky loans, those who are giving those loans should adjust their market prices and offerings. Free market at work right there.

  • avatar
    danio3834

    The length of the terms shouldn’t matter as long as the loans are paid. It’s the lack of accountability on the part of people who think they can regularly walk away from debt obligations without a scratch that is the problem. In many cases, they can walk away and be right back in the same place within a few years.

    Personally, I think we should bring back debt slavery in a real sense to keep people accountable instead of heaving their obligations on to others.

    • 0 avatar
      28-Cars-Later

      I would argue debt slavery is what the economy is built on post 1913, its already “back”.

      • 0 avatar
        jmo

        As opposed to equity slavery? How do you suggest an economy fund itself?

        • 0 avatar
          darkwing

          The haves buy cars in cash; the have-nots take the bus. Of course.

          It’s how the NPR set justifies redlining.

          • 0 avatar
            KixStart

            “The haves buy cars in cash; the have-nots take the bus.”

            A) What bus?
            B) That would reduce the SAAR from something like 15 million/year to … practically zilch. End of auto industry.

          • 0 avatar
            krhodes1

            @Darkwing

            If you are a have who can afford to pay for a car in cash, you are also most likely a have who can get very near free money interest rates. You would be a fool to spend the cash on a car – buy the car with Other People’s Money and come out ahead in 4-5 years.

            If you are going to pee away money on new cars, at least do it in the most financially prudent way possible.

            I have two car loans at <2% for cars I could very well have paid cash for, but not a snowball's chance in hell that I would have at that rate!

          • 0 avatar
            darkwing

            I think you folks are missing my point, which was that railing against debt in the name of the poor is foolish at best, and deliberately deceptive at worst, because the poor are better off for it. (I notice this trend a lot with progressive and liberal policies designed to help the poor.)

        • 0 avatar
          28-Cars-Later

          Honestly I’m no economist and I don’t have the answer, I just know a debt based economy cannot continue forever and the theory of fractional reserve lending is a fraud of the highest order.

          • 0 avatar
            darkwing

            That’s probably because you’re assuming the economy is a zero-sum game. It’s not.

          • 0 avatar
            jmo

            “I just know a debt based economy cannot continue forever”

            How do you know that?

            “the theory of fractional reserve lending is a fraud of the highest order.”

            So, full reserve banking would work better? What evidence do you have of that?

          • 0 avatar
            jimbob457

            You actually don’t really get a choice about “fractional reserve lending”. It is the natural order of things. It takes draconian government regulation to prevent it – assuming that is what you want.

    • 0 avatar
      Power6

      The risk is priced into the product. The banker has no problem with a few customers who aren’t able to meet the terms, why should you? Sounds like you want the gov’t to interfere with the free market.

      • 0 avatar
        jimbob457

        Uhhh…. You really wanna do business with Billy Bob Madoff’s Bank. Whenever a trade in financial claims is involved, a little government regulation of the proper sort actually helps the free market work better. Kinda like the Health Department inspector helps the free market work better in the restaurant business.

    • 0 avatar
      hreardon

      danio3834 -

      In the mortgage collapse please keep in mind that many people were easily fooled into mortgages they could not afford. The people writing the mortgages knew full well that these people were out of their league, but they wrote the mortgages anyhow. Why? Because the mortgage writers and servicers had not risk because they were selling the mortgages off, the banks didn’t care because they packaged the loans into MBS and sold them off and the theory went that if we pooled all of these deadbeats in with the good loans, the risk would be minimal.

      Hogwash. It wrecked the whole system because everyone was playing a game of hot potato and the big guys knew it. But, they were making so much money they all looked the other way…until the house of cards came crumbling down.

      Sure there are a lot of people who knew full well what they were signing their names to, but at the end of the day it was the responsibility of those in the banking industry to look at the documents being sent to them and to refuse them if the numbers didn’t look right. Who in their right mind approves a $400,000 mortgage for someone making $40,000/year?

      Someone who doesn’t have any responsibility or bear any risk – that’s who. It’s little different from those people whom you accuse of just walking away, they just tend to have better contracts and legal counsel than do the others.

      • 0 avatar
        jimbob457

        True. Everybody knew it. As long as the rating agencies vouched for them and/or Freddie/Fannie guaranteed them, you could resell them just like they were the real deal. The only problem was that if you were in the biz, you always had an inventory of the stuff (i.e. had a long position), so when it eventually collapsed, you stood to take a hit.

        Of course, there was a division of AIG that would sell you insurance against that very thing. AIG, the largest and richest insurance company in the world. What could possibly go wrong?

  • avatar
    corntrollio

    ::Initially, bankers were calling for a ban on financing of personal automobiles, fearing that it would lead to financial imprudence.::

    Mr. Kreindler, I think you may have misread the article or maybe you’re being imprecise and meant Central Bankers instead of just bankers. The Fed was trying to get banks to limit their loans for automobiles, and it appears the banks disagreed — the article from 1920 that it references was advocating on behalf of the banks:

    ::“The “pursuit of happiness’ is one of the inalienable right that was woven into the Declaration of Independence and even tho it may appear to some of us that a man engage in this pursuit foolishly, yet so long as he remains within the law, pays his debts, and harms no one, his conduct should be free from the restricted action of the Federal Board and all other Governmental agencies. This is Democracy.”::

  • avatar
    Waterview

    As a banker, I try to guide people with the thought that “just because it’s permissable (or being offered to you) doesn’t make it a good idea”. Thus, while 72 month financing is offered, I believe it (along with leasing) generally pushes folks into more car (read: debt) than is wise.
    But, as a car-guy, I also understand there are folks who place a nice car (or newer car) at a higher priority and are willing to devote a larger portion of their budget to the cause. That said, if wealth creation is your goal, finance it for a shorter term and drive it ’til the wheels fall off.

    • 0 avatar
      KixStart

      That’s a good thought but how often do you get to provide advice nowadays? My last two loans were handled entirely electronically, no human interaction at all. And many people will go to the finance guy at the dealer, who’s going to encourage additional spending, rather than recommend putting the brakes on any transaction.

      • 0 avatar
        hreardon

        Kix -

        Yet another reason why it is so darned critical that we teach our children responsible finance at home and at school. None of this stuff is rocket science, if anything it’s a game of self control and forethought.

        • 0 avatar
          KixStart

          I don’t think it’s “teach” as much as “set the example.”

        • 0 avatar
          sgeffe

          Damn straight!!

          I tend to take the value of a dollar, well taught to me, to the extreme, however, since, for example, I firmly believe that a cell phone is a luxury, just as the recent Piston Slap threads showed; I don’t need to spend $90/month to be available 24/7 or to surf Facebook, which I can do on my laptop! (See my position on credit cards further up these Comments for another example!)

          (I am researching prepaid smartphones, however, so I will eventually drag myself into the 21st century, kicking and screaming! :-) )

      • 0 avatar
        Waterview

        Good question. More often than not, I’m counseling folks after they’ve gotten themselves into a difficult situation (too much debt and no assets to show for it)and are looking for easy solutions. I’ve seen folks empty out their IRA’s to buy cars, pay for a wedding, etc. — it just makes my head hurt.

        Interestingly enough, I would “parse” the situation you described into two parts, 1) the decision to purchase, and; 2) securing the most cost effective financing. Your decision to seek the most cost effective financing (via internet or wherever) is wise. Unfortunately, most folks screw up the “decision” part of the process and purchase a car that is well beyond their means.

  • avatar
    Big Al from Oz

    The longer a banks can keep a loan going the more money they make.

    I really do think the period of time is a little to long. If a person can’t pay off a car in 48 months logic would indicate that maybe you are spending to much.

    There are alot of people out there who need to be ‘spoon fed’ with finances. They just aren’t able to make good financial judgement.

    For the people who want to buy a vehicle over a longer period, there are financial tools available to allow this to occur.

    Drive what you can afford.

    As for the auto industry relying on debt to keep afloat, this needs to be addressed. This approach by the finance sector of loading debt to keep economies churning and burning requires a little restructuring, along with governments who do the same thing.

    Banks influence on economies isn’t balanced, the influence isn’t proportional to the size of most economies, sort of like unions, small in numbers, but to much power.

    Banks seem to be the ones calling the shots. Then whine and expect to be bailed out when they screw up, blame the governments for allowing themselves to become indebted. Much the same as the way unions operate.

    • 0 avatar

      Years ago, banks were the adult in the room. They had to be, they held the paper. Today, banks do the deal, take a commission, and sell the paper, so they no longer care if you default. The paper becomes “securitized”, sliced and diced six ways-so you now want to sell the biggest loan you can to anyone who can qualify, no matter the result…you won’t be there for the default.

      When that borrower defaults, he can’t renegotiate the debt with anyone as there is no one to talk to…your loan is part of a larger package and they’d rather lose the whole thing for tax purposes than renegotiate or forbear even an impossible loan. (This is why a bankruptcy judge cannot change terms for a home loan…business gets workouts every day, but YOU cannot….this is the result of bank lobbying)

      This is also why you can’t adjust the mortgage rate easily…the mortgage process is designed to be as difficult as possible.

      At least in Auto Lending it is much less cleaner.

  • avatar

    Durant created GMAC to extend terms for willing but not able buyers.

  • avatar

    Longer terms, and Lease then sell for CPO, are why companies now toss in “free maintenance”. I’m sure a significant percentage of folks who lease would never change the oil, etc, as they knew that the car went back in two years and they’d never see it again. This probably showed up in CPO warranty claims so it became cheaper to do very minimal free maintenance (15k oil changes) that eat CPO warranty claims. (I’d love to see an article about this issue…folks who buy a car and NEVER do any work…what percentage ?)

    The longer terms are a combination of higher prices (when I bought my 2003, gas was $2 per gallon, and let us not discuss my monopoly priced health “insurance”) and the fact a new car has a lot more “stuff” than years ago. If the car lasts the longer term of the loan, then it can be a reasonable deal, even if not historically ideal. You pay for a house 30 years but you expect it to last the term of the loan.

    The game is rigged at the very top, and those of us not at the top 1 % don’t determine the music.


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