Consumer Car Debt Their Own Damn Fault, or Not

Robert Farago
by Robert Farago
consumer car debt their own damn fault or not

If you write for WardsAuto, you know the vast majority of the people reading your bon mots are car dealers. So you can't come out and say "you greedy bunch of bastards are responsible for getting people into cars they can't afford, which is about to turn around and bite you in the ass big time." On the other hand, you can't come out and say "consumers are stupid morons who deserve what they get when they get in over their heads on a new car and can't get the Hell out." Consumers are customers, after all. For an example of how to play it straight down the middle, alienating both camps, I recommend you click on Steve Finaly's latest editorial " The Dealer Made Me Do It," riffing on the LA Times article “New Cars That Are Fully Loaded – With Debt” (blogged on TTAC here). "First off, I’m not excusing auto dealers. Or lenders. They have a moral and business responsibility to try to stop their customers from doing something stupid, such as buying a vehicle with a sticker price that will stick them with an oppressive debt… But so many consumers today buy too much vehicle. Then, when the financial squeeze becomes eye-popping, they look for someone to blame. The dealership and lender make nice targets. Seldom do the debt-ridden blame themselves." Well, why would they?

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4 of 44 comments
  • 50merc 50merc on Jan 16, 2008

    Some complaints about banks being too quick to loan money remind me of a guy who ran a pizza shop. The shop was in a college town, so many of his customers were college kids whose financial management skills were, um, not fully developed. A lot of checks bounced, and he took that as a personal affront. He'd call the bank and angrily ask "Why do you let these people write bad checks?" Do you recall when the rap against banks was "red lining" and their unwillingness to lend to people of modest means? Seems we fixed one problem just to create another. Now we need to appoint guardians so borrowers can't do foolish things!

  • KixStart KixStart on Jan 17, 2008

    Red-lining was not banks' unwillingness to lend to people of modest means. Red-lining was the banks' practice of denying loans, indiscriminately, to minorities or to entire neighborhoods whether or not the people applying for the loans had the means to pay.

  • Landcrusher Landcrusher on Jan 17, 2008

    NickNick, Your scheme works great on paper, but financial experts have found that it doesn't work in real life. Ninety percent of people will fail to have the discipline you admit it takes to play the game. Also, you will likely lose money from the start because you bought a new car to get the low rate. If you do the math, you will find that a used car would have saved more money than the interest spread will make you over the term. I am not saying no one should buy a new car. I am saying that a new car is a luxury. You should not borrow on a luxury. If you can't pay cash, don't buy the car.

  • NICKNICK NICKNICK on Jan 17, 2008

    Landcrusher-- you're right about the used car saving more money than the interest game on a new car. sometimes finding the right used car is tough, though. i like good cars that are very reliable, and unless i personally know the seller, i have a hard time saying yes to a used car more than a few years old. in my area a two-year-old civic will run you about 12,000 vs 15,000 for a comparable new one. by the time i get new tires and fluids in the used one, i'm at 12,500 or so. after i play the interest game, the new one will cost me 14,500. if i pay cash for the used one, i have an opportunity cost of maybe $500 in lost interest. if the real costs are 14,500 vs 13,000, i'll pick new every time. however, i have come across some great used cars from people i know, and those have been far more than 2 years old. in those cases, when they've depreciated down to $4,000 or so, cash it is. but $4,000 cars from strangers? nope. my car/mechanical skills aren't good enough for me to trust that i'll find everything that needs fixing. i will take a gamble for $500, though.