Bright Future For Auto Lending in 2014

The banks cannot have such guarantees - that's the nature of risk taking in lending. Sheesh. It takes 30 years to pay for a house, they're expensive! I'm in year 2 of 30 now.

If the current average age of the US vehicle fleet is something around 10 or 11 yrs, why consider someone lucky to have a car that lasts 74 mo?

@Corey Lewis The entire concept of the 30 yr mortgage is out of sync with the times we live in.

@Corey Lewis BTW banks have no risks...when they fuck up they will get a bailout via the taxpayer but don't worry the government regulators we pay for will "fine" them and maybe they will lose their respective jobs

@cartunez What would your recommendation be?

@Corey Lewis 3/1 ARM, stop paying on it, wait 4 years for stupid BofA to foreclose, than have your spouse buy it from BofA at half price or less.

@Corey Lewis Rent. Even at today's lower interest rates, somebody taking 30 years to pay off their house is paying almost the entire financed amount over again in interest. Nuts to that. This home buyer is also giving up the temporal and geographic flexibility that comes from not having a six-figure interest in something that is stuck on one particular piece of dirt.

@Corey Lewis I like renters, they give me income every month on a paid off townhome.

@Corey Lewis Your "entire financed amount over again in interest" is just wrong, ESPECIALLY at these interest rates. Assuming first homeowner at 3.875% for 30 years, you'll pay $338,572 total on a 200k loan. That's 69% of the value over again. Not the entire financed amount. Go rent for 30 years. That $1,200 a month rental payment for an equivalent home/apartment (if you're lucky). What do you end up with at the end? $432,000 in your landlord's pocket. And you own zilch. Yeah, that's better. At the end of the loan, you have a paid off asset. Go sell your lease to someone, see how that goes.

@bball Nice scam on the ARM. What I'd really like to do is the feudal system. I'll go seize a small town by force and declare myself lord of the land. Eventually the plebs will accept it and in a generation it will be the norm.

@Corey Lewis I said *almost* the entire financed amount. If you prefer, feel free to substitute "a significant majority" of the amount financed. Doesn't change the fact that you've paid the bank and the tax man the better part of 200k for the privilege of being stuck in one place for the next 30 years. Maybe it's different where you are, but anyplace that I've ever lived to rent a house costs 2/3 as much each month as a 30 year mortgage for the same place; not even accounting for taxes and maintenance/repair. Of course, since I am free to change houses whenever I want I can drop my rent further because I don't need to pay for space and amenities now that I won't need for 15 years. The day I need more bedrooms I can just find a place that has them; in the meantime I'm in a cheaper smaller house. I now have that cash free to invest in other things with a lot higher paypack than a house. So if my rent is 2/3 of your mortgage, after 30 years I'll have $144k in straight cash if I just bank the money. Plus the savings from paying no taxes, plus the savings from doing no maintenance or repair, plus the savings from not paying realtor fees or closing costs, plus the savings from not owning a "family house" for a family that does not yet exist, plus the returns from the investments I made with all the cash I saved by not owning a house. Yeah, that *is* better. I've run the numbers both ways and have a hard time making a financial case for home ownership; at least in this part of the country. I'm also not tied to the fortunes of any one particular area or employer. I wonder if the people who bought houses in Detroit 30 (or even 10) years ago think it was a really grand idea now?

@Corey Lewis You haven't factored in the fact that rent will go up. My mortgage payment won't, save for the escrow portion for taxes and insurance.

@Corey Lewis There was an article (I think it was in Forbes) a few years back (post-crash) and it challenged the 'home ownership as financial stability/growth' argument. The premise was that few (if any) current buyers should reasonably be in a traditional 30-year based on their lifestyle, and the reality was in many cases, if you rent at a competitive rate and invest the difference between the rent and a 15-year on the same property, you generally at least match the market. Also, while you can lock in a term on your house that means the payments won't go up - there is always that annoying asterisk at the bottom that says investments can go down as well. The best part of renting is that when the real estate market is in the toilet, you get your pick of the litter. Granted, there is a strong argument that "Mmmm, it's good to have land..." (Thanks Stewie!) but much of that traditional wisdom is the same that drives people to cash out and buy a pile of gold. I guess it comes down to whether you expect the social systems we have set up over the last 2-300 years to be here in 30 :p

@Corey Lewis 28- Its only funny because its true. Some of the loopholes are closed, but I've seen that situation happen at BofA. The week I left, I talked to a customer that hadn't made a mortgage payment since 2007. I even verified it in the system. He was still in the house but it was worth 10% of his original purchase price. I knew BofA didn't want the house. It might cost them more to take possesion of it than just writing it off. bikegoesbaa- As long as you aren't in the city of Detroit, most people are up from ten years ago. If you bought five years ago, maybe not. If someone thirty years ago thought their property in Detroit was going to continue to appreciate, they were delusional. My family owned a bar in the city, and the liquor license and fixtures were worth more than the bar's building in the 90s.

@bball So what would legally happen to the man who took a 90% [!] loss on this property? Would he just get a deed in the mail if it was charged off? @ellomdian Stewie was certainly on to something but the problem is you never really own your land. Besides the obvious taxes and fees and repossession of said land for failure to submit to the gov't tribute, there is also the fact your land can be seized under a number of statutes. I can't find a good link but from what I was told there is a federal statute in which if it is proven (or possibly alleged) major drug activity has occurred on a property *at any point in history*, DEA can legally seize it. So if your house was the site of a major coke smuggling operation in the 70s long before you owned it, in theory it could be seized. "Asset forfeiture is a form of confiscation of assets by the state, pursuant to law. It typically applies to the alleged proceeds or instrumentalities of crime" http://en.wikipedia.org/wiki/Asset_forfeiture "I guess it comes down to whether you expect the social systems we have set up over the last 2-300 years to be here in 30 :p" We can guarantee cash benefits as far as and whatever size you like, but we cannot guarantee their purchasing power - Alan Greenspan http://www.youtube.com/watch?v=gqUzQjXNliU

@Corey Lewis 28- Anything could happen. It depends how the bank sells the mortgage and to whom. I think in this case the bank sold the IOU to a collection agency, but it became an unsecured debt. The former customer was in the process of claiming that BofA didn't have an interest in his property because they sold the promissory note but not the mortgage.

@cartunez Some people don't mind the concept of staying in the same place for 30 years. My parents did it. Now they own two houses outright and are on their third mortgage.

@cartunez Yea but with interest rates where they are it makes no sense to do it shorter. Take the money you save from doing a 15 year rate and invest it in a roth and pocket an extra 5 % a year.

@Corey Lewis bbal, well put! There is something very comforting about people actually paying you money to have a roof over their head. Without renters, my lifestyle would be the pits.

@cartunez Bailouts, handouts and nationalization are the new 'selective' normal in America. So are "loans" that will never be repaid like Solyndra, A123 et al. This is what the majority in America wanted. This is what they voted for. Not just once, but twice. I say, let them pay for it.

@cartunez In the 1930s, you bought a house with a down payment, paid nothing for 6-8 years and paid it off with a balloon payment. The 30 year mortgage was considered a more rational plan, with the banks protecting themselves from inflation by front-loading the interest. Now both buyer and lender have to deal with something that was never supposed to happen: property values actually going down. What's the new, improved solution?

@cartunez Banks DO have risks, google a list of banks that have been taken over or forced to be merged with a healthier bank. The bank owners lost their investment, though depositors were protected. Sure, there are bailouts of sorts, but the government has a powerful interest in a healthy banking system - the economy runs on credit, and collapses when banks can't provide enough of it. Our government - ANY government - considers bailouts preferable to economic collapse, though they would rather see consumers pay a bit more than openly use taxpayer money to keep the banks in operation. That latter course is politically untenable, so back door measures like negative interest rates are used wherever possible instead of bailouts.

@Corey Lewis IMHO one should not buy more house than one can afford on a 15 year mortgage. They are much easier to get and carry a lower interest rate. AND you'll be actually paying for house, not so much the loan money.

@redav The average age of cars on the road now are at about 11.4 years. Most of those weren't purchased new. Most people don't properly maintain their vehicle. They've been forced to make repairs instead of buy a newer one due to the economy.

@Corey Lewis Renting (forever) is good, but owning (at a young age) is better. I wasn't that young, but at 25, I saved 1/3 the price of the style of ranch I wanted to buy. Found a seller that would carry the rest (full asking) and zero interest for 10 years. He was salivating at the lump down payment. Easily paid it off in 5 years, but asked for 10 years just in case. Living rent free for the next 15 years, I've paid cash for rental property, started a business from scratch and bought another. Just a different approach than most is all.

Where I work, its 700-740 depending on the type of loan. Many auto finance comapnies have a different scoring method than a traditional bank though.

@bball40dtw Cool. My three credit scores range from 723 to 746.

While you initially do need a high credit score, you can get it on average credit as your ability to stay strong at the table. If you continue to reinforce that you will walk away unless a certain interest rate is met, they will eventually come down to it. Remember, YOU can buy that car next month. But that salesmen needs his paycheck now.

@Reino I just bought a condo in SoCal and going rent is $1800 in my building. My mortgage, insurance and taxes is $2000. Even though I'm paying $200 more than the going rate for rent, who knows what the rent will in the next 10 years. I have a few friends who's rent is being raised by a couple of $100's due to recent renovations. In 7-10 years, if I decide I want to buy a house; I'll be looking forward to collecting rent on my place.

@April bball is right. But in my area you can also get a better loan from a credit union than a bank or dealer-affiliated lender. With a 700-740 rating in my area you can get financed by a credit union for 84 months at 120% of the value of the new vehicle you buy, all other liabilities considered. 2014 looks very good from many economic stand points, if you have a job.

@Wscott97 In California there are usually laws that limit sizes of rent increases so owners can't use the tactic to drive people out. It sounds like your friends' landlords found the "substantial changes" loophole.

Depends on the brand of vehicle. Sometimes an OEM captive will open up the best subvented interest rates to the first three tiers, but mostly just to tiers 1 and 2. Sometimes only the top tier. But there's more too it than just credit score. Job time, previous car loan history, job time, mortgage experience, debt to income ratio, etc., all play a role.

@highdesertcat If I pulled the trigger on a new car I'll probably put 15-20% down and go with a 36-month loan. Must be a responsible car buyer... :)

Reino @ Good to know. I'm a decent Poker player. ;)