By on August 9, 2016

Couple buying cat Courtesy chronicleherald.ca

With memories of the 2008 financial meltdown still fresh, American consumers aren’t borrowing wildly anymore — except when it comes to cars and credit card purchases.

As of the end of June, car buyers racked up the highest auto loan debt in U.S. history — $1.1 trillion, according to a quarterly report from the Federal Reserve Bank of New York. Also on the rise? Credit risk.

The second quarter rise in vehicle loans was enough to slightly boost household debt levels, despite a decline in mortgage debt and — for the first time — a reduction in student loan debt. A hunger for new vehicles fueled a multi-year U.S. car-buying spree, so a spike in borrowing isn’t unexpected. Still, there’s risk in those numbers.

Depending on what predictions you listen to, new vehicles sales could soon decline, or hit a plateau. (Recent sales figures seem to show the market flattening-out.) Still, year-over-year sales growth in the past several years was massive. Low lending rates helped spur that growth, with auto loan rates now nearing record lows.

In the second quarter of this year, car buyers added $32 billion (three percent) to the auto loan debt pile. That tally is $97 billion higher than a year ago, enough to spook regulators.

Last month, the Office of the Comptroller of the Currency, which oversees the large banks, issued a warning. Credit risk is on the rise in the auto lending sector, it said in a report, a problem made worse by indirect loans accessed through dealers. Competition between banks could boost the risk further.

The report stated that “because of notable and unprecedented growth” across all types of lenders, “some banks have responded with less stringent underwriting standards.”

It’s not a new message. Last October, the OCC’s Thomas Curry said that some activity in the auto loan sector “reminds me of what happened in mortgage-backed securities in the run-up to the crisis,” according to the Wall Street Journal.

Needless worry, or premonition of another credit bubble? Time will tell. In the mean time, don’t worry, and enjoy the new car. They cost a lot of money.

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88 Comments on “Borrowing Binge: Auto Loan Debt Hits a Record High...”


  • avatar
    SCE to AUX

    “With memories of the 2008 financial meltdown still fresh”

    Apparently not.

    Now that we’ve hit Peak Auto Sales, auto financing is about to have another meltdown. Interest rates are already low, so the only variables will be time and risk expansion, if mfrs want to sell cars. Not to mention cutting their own throats with rebates.

    • 0 avatar
      Cactuar

      Could you elaborate on time and risk expansion?

      • 0 avatar
        SCE to AUX

        Longer loan terms, plus accepting clients with higher credit risk.

        Longer terms will result in more people being upside down on their loans when they trade early, which actually increases their debt and lowers their credit rating.

        • 0 avatar
          Cactuar

          Right makes sense, thanks.

          At the beginning of a car loan, especially if it’s extra long (7-8 years), aren’t the first years pretty much all depreciation? Doesn’t that classify the loan as unsecured?

          For example someone buys a new car for 40k$, the moment he buys it it’s only worth about 35k$ on the used car market. If the bank should repossess the car, aren’t they 5k in the hole? It would seem to me as that would create extra risk for banks, especially if they financed an upside-down trade-in as well.

          • 0 avatar
            baconator

            “Unsecured” is a specific term meaning there is no collateral at all. What you’re talking about is insufficient collateral, and that’s why you can’t get a car loan for 100% of the value of a car.

          • 0 avatar
            krhodes1

            @baconator

            Can’t get a loan for 100% of the value of a car? What world are you living in? Because it sure isn’t this one.

    • 0 avatar
      brn

      Does this mean in a couple years, I’ll be able to get a sweet deal on a slightly used Continental?

      Awesome.

      • 0 avatar
        mik101

        @Baconator

        Three words. No money down.

        The rest of the world isn’t like Lionel Hutz on The Simpsons.
        “No .No. They have this all screwed up. It is supposed to say: Contingency? No! Money down!”

  • avatar
    VoGo

    I’m not clear on whether there is new information here, or just another excuse to yet again use that picture of horsey, her lover and the car salesman.

  • avatar
    chiefmonkey

    Americans continue a tradition of putting the cart before the horse when it comes to vehicle purchases. Harry the Hobo can go to Enterprise used sales and get approved for a 2014 Chevrolet Spark with 53,000 miles on it at a 13% interest rate.

  • avatar
    Corollaman

    You mean to tell me that Pedro the poor peasant can go to Hertz and buy a used Chebbie made in Korea for $88 a month? Ay caramba, I like to live in America.

  • avatar
    Kyree S. Williams

    You used that same stock image on purpose, didn’t you? :)

  • avatar
    APaGttH

    I wonder if the decline in student loan debt is in part because of the government’s strong actions taken on “for profit” diploma mills like Everest and cutting them off from GSL.

    Those places, along with the Art Institute, Le Cordon Bleu, Corinthians and others are/were despicable.

  • avatar
    Pch101

    I don’t get it. There should be about 18 million units moved this year, yet judging from what I see at TTAC, the only people who are in the market for a car are this couple in the photograph.

  • avatar
    Corollaman

    Keeping up with the Joneses is still alive and well. If you can’t, don’t worry just borrow with extra long-term loans. Just don’t be caught dead with an old POS. I am so glad I am over that.

  • avatar
    Acd

    Uh oh. Time for the “I only pay cash for my cars and the last time I bought a car was in 2010 and it was a 2000 Chevrolet Impala” crowd to chime in about the evils of consumer debt.

    • 0 avatar
      2manycars

      I resemble that remark. My parents and grandparents lived through the Great Depression and instilled certain things in me, such as staying out of debt. The idea of a payment book (or the electronic equivalent) leaves me cold. I’ve always paid cash for cars and always bought them used. (What works for me of course might not work for someone else.)

    • 0 avatar
      JuniperBug

      So is it your position that it’s a positive thing to spend money you don’t have on stuff you don’t need, and then pay interest to banks for the privilege?

      Or is it the idea of having to work an extra 10 years under a Damocles’ sword just to have shiny things to show the neighbours that appeals to you?

      • 0 avatar
        Drzhivago138

        If you’re gonna bring up “stuff you don’t need,” none of us “need” anything more than a tent and a pushcart.

        • 0 avatar
          JuniperBug

          True enough that we might not need more than a tent and a pushcart, but it’s nice to have more, and some of us can afford to have it. Some can afford 3 houses and an S Class, too, and I have no problem with that either.

          What I take issue with is people spending money that they don’t have for luxuries that, although nice, just aren’t necessary. Then something unexpected happens (which is inevitable) and they pretend to be surprised that their house of cards fell over and expect someone to rescue them from financial ruin.

          Never mind that we just experienced a mini-depression in part because of this behaviour, people want to pretend that it won’t happen, because GODDAMMIT, I need ventilated leather seats and 3 times more horsepower than I can use for more than 5 seconds at a time.

        • 0 avatar
          Lou_BC

          Drzhivago138 – marketing 101 – how to abuse and manipulate Maslow.

          SELF ACTUALIZATION EQUALS HELLCAT

          Sorry. Couldn’t resist.

      • 0 avatar
        Acd

        No, I just wasn’t looking forward to reading the smug self-righteous comments on a site about the evils of spending money on cars.

        Now if you’ll excuse me I’m going to go back to figuring out what to do with the thousands of dollars over and above what I paid for my diesel Passat that Volkswagen is about to pay me even after financing it when they buy it back sometime in the next 26 months.

        • 0 avatar
          2manycars

          The possibility of an emergency is another reason to otherwise stay out of debt. Being debt-free not only makes for a good night’s sleep but also puts you in a better position if life does take a turn for the worse.

          (Actually this reply was meant for Hydromatic’s comment about medical emergencies and downsizing.)

      • 0 avatar
        baconator

        No, but if you already have $25k saved, you’re better off investing it in a balanced portfolio at 6% and borrowing $25k for a new car at 2%. You make 4% and keep a more liquid balance sheet.

        I don’t know why I’m even writing this, as nobody ever changes their mind in this particular debate. But it’s late at night, so I’m indulging.

        • 0 avatar
          SaulTigh

          I judge you to be correct. I’m a big fan of consumer debt right now, but only at very favorable terms, and only when used judiciously. I for instance just bought a duplex and used a 3.5% down FHA loan to do it, because putting 20% would have wiped out my free cash, and I was unwilling to liquidate any of my investments. I don’t love paying PMI and such, but the rate was good at 3.375% AND with the new income from my neighbor, I’ve actually lowered my monthly outlay by $225 dollars from when I was paying rent, and this is INCLUSIVE of taxes and insurance. I’m flowing more money each month because I chose to take on debt. What a country!

          • 0 avatar
            Scoutdude

            Plus you get a nice tax deduction for that deprecation and interest on the income side and interest on the personal residence side to boost that $225 per month decrease in cash outlay. Stay in this one a year or two and then convert it to rental only and pick up another. Repeat until you have 3 or 4 duplexes and then finally get the house you want. You will then be set for retirement.

          • 0 avatar
            MBella

            I hoping to follow your advice as soon as I find the right property. To me this seems like the best concept for retirement savings. You are not dependent on some hedge fund manager actually doing his job.

          • 0 avatar
            Scoutdude

            @MBella, yes not only are you in control instead of some fund manager you are insulated from inflation as well, with the caveat that you need to own those houses/duplexes in an area where population is not decreasing or in a area with a strong rental market like a college town.

            The 2-4 unit buildings are the best because you can still qualify for a low down owner occupied loan and in most cases they only require you to use your portion as your primary residence for 1 year. The other thing is that most conventional lenders won’t lend you money to buy a 5th property if you have loans on those other 4 properties. Your goal should be to have 3 investment properties that generate the rent appropriate for the income level that you want to sustain.

            In general when the avg person goes to buy a house they will give you a loan that combined with the taxes and insurance that will eat up at least 1/3 of your income. If the properties are in a strong area their value and rent will rise with incomes in the area.

            While 2-4 units typically rent for less than a single family the fact that there are 2-4 rent payments means that the total rent will be higher than a single family of the same value. 2-4 units are bought by investors and investors demand a certain return on their investment while a owner occupant will “overpay” to get what they want.

            So with 3 median price+ rents you’ll have the income of 1 person less expenses for the properties. Now if your residence is also free then 1 will pay the taxes and insurance for all 4 properties (unless they are in an area with outrageous property taxes) and you’ll be left with 2/3 the median income an no housing expense of your own.

            By purchasing a house that you occupy for a while you can purchase it with 3.5-10% down while purchasing purely as an investment you’ll usually need at least 20% down and sometimes more. Less cash out of pocket means you can acquire more properties sooner and it dramatically increases your return on investment.

            Buy a house for 200K with $7k down and when that price increases a measly 2% you are still earning a more than 50% rate of return on your initial investment. Put $40K down and that 2% increase in value gives you “only” a 10% return.

            Do it right and you’ll have a small extra income to start and both the income and your net worth will grow steadily. Part of doing it right is getting in at the right time. I started over 20 years ago and weathered the crash just fine. Yeah I watched my net worth on paper get cut in half, but the rents kept paying the bills and providing income.

        • 0 avatar
          DweezilSFV

          Baconator: you are one of a small percentage of highly functioning, financially knowledgeable people in the country.

          Given the level of economic and personal finance ignorance in this country and the strength of mindless unrestrained instant gratification instincts of the mob, what you are saying is gibberish. It will never make sense to them. Balance a bank account ? What’s that ?

          Your explanation of the use of debt is probably the most concise of any I have read or heard, and that includes watching and listening to the talking heads on all the business shows.

          Not something I would do. I would not take out the loan in the first place and keep the whole 6%, but that’s me.

          You have the sense to pull it off. That’s a level of knowledge that’s totally lacking among debt slaves. It’s just sign on the dotted line and get that rush.

          Beautifully stated comment, Baconator. Wish I was wired like that, but I am risk averse even to the common sense use of debt as a tool. It’s having Great Depression DNA from my grand parents and parents running through my veins

          • 0 avatar
            Scoutdude

            But he is earning more with than 6% with that duplex when you consider the cash flow, income tax reduction and appreciation and the income tax reduction, return on investment due to appreciation, and the renter paying down your principle is greater the less money you put down.

          • 0 avatar
            DweezilSFV

            Scoutdude: I get all of that and appreciate his financial savvy. It’s not for me. He’s doing the thing he sees fit and understands the principle.

            All I can see is the money I borrow still has to be paid back. It’s a heavy weight on my psyche. He has the temperment for that sort of monetary dealings it appears. I am very cautious, probably to my financial detriment, but would do the same thing if I wanted a new car.

    • 0 avatar
      Cactuar

      Of course we’ll chime in, because we’re right.

      *Aaaaaaaaaaahhhhhhh*

      Know what that is? It’s the sound of a satisfied relief that can only be experienced when you are debt free. The buzz is even better when you have a year’s worth of expenses in emergency fund.

      Try it then let me know how the feeling compares to having debt up to your eyeballs.

      • 0 avatar
        JohnTaurus_3.0_AX4N

        But at LEAST he doesn’t have to drive around something he can actually afford, because that’s just an awful fate to bestow on anyone.

        Yes, I may borrow money for a car some day (and I have in the past), but that would be because my work requires a newer vehicle in which case the loan and the car (probably a C-Max Energi) will be a means to an end, not the end itself.

      • 0 avatar
        Hydromatic

        Get back to me when you get blindsided by a medical emergency or get downsized from your current job. Smugness comes easy to a lot of folks.

        • 0 avatar
          JuniperBug

          Isn’t the possibility of a medical emergency or downsizing the perfect argument to *not* carry debt and to have a sizable safety cushion, exactly as Cactuar sugggests?

          Or are you bothered by the fact the he sleeps well at night because he believes in trying to prepare for that possibility, while others don’t?

          • 0 avatar
            Lou_BC

            There needs to be balance.

            Not all debt is a bad thing.

            The simplest way to look at is this, “Do you manage your finances or do they manage you?”

            You can have debt and be in the driver’s seat. Unfortunately most people are just passengers on that runaway train.

      • 0 avatar
        Scoutdude

        @ Cactuar It depends on the type of debt. Debt that was acquired to buy a boat, RV, luxury car, trips or other things you don’t need is bad and can certainly be stressful. However debt to acquire investments with a return that exceeds the debt servicing is how you build wealth quickly.

        You can rent for ever and be debt free but your rent will only increase over time and at the end of it you have nothing to show but a stack of receipts. Or you can borrow with a minimum down loan and even if the total cost is higher than you would pay in rent initially, your costs will increase at a much lower rate than rent. Plus tax deductions can soften that blow. At the end of it you’ll have payed off that loan, the property will have appreciated and you’ll have an asset with value along with all those stacks of receipts that have a lower total on them than the ones generated from renting.

        I was quite content owing near $1m dollars at one point because incurring that debt gave me a positive cash flow and tenants were the ones paying down that debt for me. I must say it does feel nice that one of my properties is free and clear but there is no concern for the debt I do have because it too will be payed off by tenants and I’ve already earned back the initial investments in addition to seeing the balance drop.

        With the example above he has a net cash flow increase of $2700 per year. You would need to invest $45,000 to earn $2700 @ 6%. A $400K building would only require $14,000 down which would make his cash on cash return 19%. Of course there are closing costs that increase the cash outlay and decrease the actual return.

    • 0 avatar
      MBella

      The whole problem right now are the unnaturally low interest rates right now. It has distorted the basic principles of banking. People used to put their money into bank accounts for some interest. The bank would loan it out at a higher interest rate and make a profit. Today, the Federal Reserve loans banks all the money they need, and interest rates on savings is 0%. I was walking by a bank the other day. They were proudly advertising a 18 month CD for 0.5%. A half a percentage point on money you can’t touch for a year and a half!

      • 0 avatar
        VoGo

        The upside of low interest rates is that money is nearly free to borrow. Basically, America has become a paradise for entrepreneurs seeking to start a business. But you wouldn’t know that from the chorus of whiners who would rather spend their time complaining on the internet than actually building a business.

        • 0 avatar
          bunkie

          Vogo, I was going to post something about how, back when I had credit card debt, that much of it was from capital equipment or marketing expenses (trade shows aren’t cheap) for my business.

          But, no, we can’t discuss that here because all debt is bad. Very, very bad.

        • 0 avatar
          yamahog

          Not really. I went to a bank to investigate a small business loan and they wanted me to sign personally on 5% interest rates. The balls they have to secure a loan at 5% when their savings accounts pay out ~.1% and they can get money from the Fed for so cheap.

          • 0 avatar
            28-Cars-Later

            BANK: F*** you prole and pay the spread, we own this country /murica.

            Seriously though aside from straight up greed, I think banks are using the spread to replenish their coffers and keep from becoming insolvent, again. I remember in 2005 my student stealing rate was 8.25% but the Fed funds rate then was about 5% and a markup of about 3% all told I thought was ridiculous on that type of loan (Sallie Puke does employ some of the best criminals money can buy though). Now essentially its 4.5% on a secured business loan it seems (assuming good credit of course and probably some collateral). Banks win, you lose, and only the politicriminal figureheads change.

      • 0 avatar

        I can do a cash advance on a credit card at 0% interest for 18 months, after an initial 2% fee. That works out to a 1.33% interest rate on a loan I can set up online with a few clicks. If I were halfway decent at investing it may almost be prudent to use credit cards to buy mutual funds. I won’t do that because I am too risk adverse. Is it pretty easy to reliably make more on an investment? It is a weird time.

        • 0 avatar
          28-Cars-Later

          Citigroup now demands 4% fee for this service, who is offering it at 2%?

          • 0 avatar
            krhodes1

            I get a 1% for 18 months offer from Barclay’s about every other month. $150 annual fee on that card though (Airline miles card). 2% for 15-18 months every month like clockwork from Chase and Citibank. Those have no annual fee.

            I have a tippy-top credit rating though.

            I have roughly 1.5X my annual income in total debt. Mortgage, BMW loan, student loan, some 0% for X/mo consumer debt, and the HIGHEST interest rate I am paying is my mortgage, at 2.75%. We live in a truly astonishing time. My folks first mortgage in the late ’70s was at 18%.

            I do feel bad for the younger folk who are getting Congressionally raped on student loan interest. Mine is at 1.75%. My roommate consolidated just a few years later and pays 6.5%. Obscene in this day and age, considering the only way to get out of it is to DIE.

          • 0 avatar
            28-Cars-Later

            Thx. I do as well and yet Citibank’s fine print is always 4% per transaction.

            Tell your roommate you can refinance now, evidently at some point whatever law was put in place to prevent students from refinancing was changed sometime between 2012 and 2014. Citizens offers .25% off for existing customers (and CC holders) and .25% for auto payment.

          • 0 avatar

            Chase is offering me 2%. The average offer for my cards is 3%, however. No annual fee.

      • 0 avatar
        skor

        Very low interest rates are a defining characteristic of a liquidity trap.

      • 0 avatar
        DweezilSFV

        MBella: sounds like Chase. One can do much better taking the time to search more closely.It’s really a criminal exercise.

    • 0 avatar

      I just replaced my 14 year old daily driver with a 17 year old car. My weekend car is 25 years old. Despite being an enthusiast, my opinion means absolutely nothing to auto manufacturers. If I wanted to have any influence the car industry I would have to “vote with my dollar”.

  • avatar
    deanst

    The OCC only regulates banks with national bank networks. Firms such as Ally Financial and Wall Street banks without branch networks are regulated by the fed. Any clampdown by the OCC will just send the business to the fed regulated entities.

  • avatar
    Jeff S

    In the near future might be the best time to buy a new vehicle. Wait for the decline in sales and low to no interest loans. I prefer cash but if the interest rate is low enough I will use someone else’s cash and keep my money invested.

  • avatar
    ravenchris

    So about 10% of that 1.1T in annual depreciation, 101B down the middle class toilet. True waste. Wow.

  • avatar

    Most of that money is paid for the Warranty, that vague promise that the car will run to a certain mileage or date….since my annual mileage IS the warranty, I don’t like to pay extra for it…

  • avatar
    Lorenzo

    Eventually, this will take pressure off used car prices. Instead of CPO used cars, there will be a flood of REPO used cars available to keep prices down.

    • 0 avatar
      brettc

      CPO REPO? I’ll take one of those, as long as it still has an interior and an engine. :)

      Once VW buys my car back, I’m planning on something that costs less than what I get back. Seems like a good financial move. I hate owing money and I bought more car than I needed when I bought my Sportwagen. Lesson learned.

  • avatar

    For the auto business to function there must be access to a ton of money at the retail level for customers to buy/finance vehicles.

    The entire model is migrating from ownership to mobility.

    Its mobility for a monthly payment not potential future ownership or equity position after so many months of making a monthly payment.

  • avatar
    John

    If money is borrowed to buy depreciating assets, and the money isn’t paid back – where does the money go?

    • 0 avatar
      28-Cars-Later

      The money is accrued as a debt to someone (i.e. bank or holding company) until extinguished through payment by debtor or bankruptcy/writeoff. The concept of depreciation is absorbed by the proles in the form of payments or possibly the holding company if the leasing cost is calculated incorrectly (i.e. anyone who backed a lease on something like an ELR for example).

      • 0 avatar
        Adam Tonge

        I need to send you a check for “28-Cars-Later Used Vehicle Buying Services”. I am taking delivery of a 2013 MKT today.

        • 0 avatar
          28-Cars-Later

          We will be happy to invoice you. Especially since I think I’m about to lose my actual job.

          • 0 avatar
            Adam Tonge

            That is terrible. Hopefully you don’t lose your job or find something else before it happens.

          • 0 avatar
            28-Cars-Later

            Thanks man. I’m working with recruiters now trying to stay ahead of it. My firm has conducted layoffs the last two years toward the end of August (which is the end of the fiscal year) but never touched a technology group. Now… zee rumours they be flyin’.

          • 0 avatar
            Adam Tonge

            If the worst happens, I have a futon that is convenient located next to a kegerator full of Founders Porter, an HDTV, and the wifi router.

          • 0 avatar
            28-Cars-Later

            Seriously, thanks. I’m not in a bad financial position through a combination of frugality and prudent savings, I just don’t want to be out of the game for long. A good friend was laid off from McKesson Provider Technologies (who owned my former employer, McKesson Automation) and hasn’t worked since much to my surprise but the reasoning is complicated (also he worked Implementation, not a dev or qa).

  • avatar

    Collectively, speaking in terms of personal finances, we Americans are total and complete morons.
    http://www.salon.com/2016/01/14/myth_of_the_middle_class_most_americans_dont_even_have_1000_in_savings/

    We’re ecstatic to commit to spending ~$500 per month for 5 to 6 years for a tool we use maybe an hour a day, then re-commit to spending that again, likely more, for at least the same length of time – OVER AND OVER AND OVER again. It’s not even a question for most people. They just do it. All while our existence hinges on a paycheck that might not be there next month, and without any resources to fall back on.

    It. Is. INSANE.

  • avatar
    LeMansteve

    Chairman Kaga, I think most of the people you describe are one or a combination of the following:

    1. don’t have basic financial knowledge with regards to car ownership (examples: budgeting, TCO, interest rates)
    2. must keep up with The Joneses / consider a car payment to be “normal”
    3. don’t value financial stability
    4. wrap up too much of their personal image in the vehicle they drive, and therefore over-buy
    5. have excellent investment returns and don’t want their money tied up in a car
    6. are not well-off and a high car payment is their only option at the time

  • avatar
    28-Cars-Later

    @Chairman Kaga

    Agree wholeheartedly.

    • 0 avatar
      Lou_BC

      Chairman Kaga – denial is huge. We are very poor judges of risk. The populace is more worried about some Bedouin tribesman or street urchin than their own poorly managed financial lives. Misplaced fear and denial is unfortunately perpetuated by those running the country. Political stripes matter little in this regard.

      Some of my friends are electricians and they joked that they should have been plumbers. “You only need to know 2 things: sh!t don’t flow uphill and payday is every 2nd Friday.”

      Never thought that it would be an appropriate metaphor for the populace at large.

      • 0 avatar
        Scoutdude

        “You only need to know 2 things: sh!t don’t flow uphill and payday is every 2nd Friday.”

        That is funny because I have a friend who’s dad owned a plumbing company that he worked at when he was younger and he has told me the similar line about being a plumber “you only need to know 3 things sh!t flows down hill, payday is every 2nd Friday and wash your hands before lunch.”

  • avatar

    We’ve already shown before that we’ll just bail out people who get in over their heads with hefty vehicle purchases made during fair financial and economic weather. That’s the American way–irresponsible buying or investing decisions are erased by the tax dollars of the frugal.

    I know I’ll catch heat for that, but I’m calling it like I see it. Cash for Clunkers was a great deal for dealers, car salesmen, and those who’d probably bit off more car than they could chew. It was awesome for everyone but the tax payer who hadn’t been part of the problem, particularly the tax payer who wanted to find a good used car after so many went to the cruncher.

  • avatar
    chris8017

    By and large your typical American is a debt slave. Credit/debt should never be used to buy ANY non-essential good…i.e. large TVs, expensive cars, WORTHLESS college degrees, etc. Half of my family are debt slaves. I have a family member who makes six figures who financed a COUCH because they live paycheck to paycheck. I have another family member whose combined income is $250k who has all the toys you can imagine but couldn’t afford to put a new roof on his house so he lost sleep worrying about how he was going to pay to fix the leaks.

    It’s quite amusing to watch – being a weirdo who has 0 debt, buys things in cash and eats PB&J for lunch. I’m not a holier than thou type and I never lecture my family on how to spend their own money – I say live and let live. I prefer peace of mind and not having to excessively worry about money to having the latest and greatest. Just don’t come crying to me or seize my retirement savings because you were too reckless to use your brain. The discipline it takes to live below your means requires foresight and putting aside your ego.

    • 0 avatar
      28-Cars-Later

      I agree with you, but the issue is this is the behavior of the majority of the population and is encouraged by Dot Gov/Wall Street/Fed banking cartel. I would not bet against your retirement being seized in a desperate attempt to keeping the Ponzi going as the years wear on. Party on, Wayne!

      • 0 avatar
        Lou_BC

        @28 – I do suspect that many believe what you say. No sense saving since “they’ won’t let us keep it.

        The old story about the ants working away to save up for winter and then the other insects come begging for food when winter comes springs to mind. In this case one has to worry about a bear digging up your ant hill for a snack.

        • 0 avatar
          28-Cars-Later

          I don’t think the lesson is to not save, even if that’s what “they” would prefer, it is diversify. Wine, art, real estate, firearms, ammunition, collectible timepieces, some cash, and precious metals to an extent.

          I would also add the fact the US federal gov’t enacted FACTA they way they did, this is a sign to me they are trying to keep the inmates from escaping the asylum (this and the “wall” who can keep people in as well as out). Truly big fish always find ways around obstacles, but it is the proles who won’t be able to store their $30,000 life savings in a safer foreign bank in Asia or Switzerland. I’m not up on Canadian law but AFAIK your gov’t has yet to go full Stalin on financial matters. Long term I myself may become an expat and renounce, I’m just not ready to do so just yet. I firmly believe the US will be imploded like the Soviet Union either by plan or involuntarily.

  • avatar
    DweezilSFV

    A lot of this auto loan debt is that there is a voracious demand for ABS: asset backed securities. The loans are sold to Wall Street to securitize and sell to institutional investors, pension funds, mutual funds and public retirement schemes.

    Just like MBS: mortgage backed securities which brought us the Great Meltdown of 2008.

    A lot of these loans are “generate to sell”. They don’t give a frig who gets a loan so long as there’s money to be made in bundling them with a bunch of other loans and when they go bad someone else is holding the bag.

    Watch this sector. I really believe it’s an indicator of trouble ahead.


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