By on January 13, 2015

1024px-2007_Dodge_Caravan_SXT

“Mr. Smith?” The Finance and Insurance manager, a genial but tired-looking man, stuck his head outside the door of his office.

“Yes?” Mr. Smith, known more affectionately as “Dad” to his two children, and “John” to his wife and friends, jumped nervously to his feet.

“My name is Andy Marshall. It’s my job to walk our customers through our financing process. Please, come into my office and let’s talk a bit.”

John had been sitting in that chair for what had seemed like hours, watching through the glass of the finance office as the F&I manager had made numerous phone calls, looked at reams of paperwork, and even sent faxes. He knew his odds of getting financed on a newish car were slim, but he had friends who had been to this dealership before who had even worse credit than he did and they had been able to leave with a car. So maybe there was hope after all.

Bad credit. Honestly, those were two words that John had never thought would apply to him. Back before the recession, he had been steadily employed his whole life—even upwardly mobile. There had been the first round of layoffs, but those were almost an excuse. Everybody knew that corporate had just been looking for reasons to get rid of certain people. But then there was a second. And a third. And, finally, a fourth.

That fourth layoff was the one he couldn’t escape. So there he was, a suddenly over-qualified, over-educated candidate for nearly every job out there. The savings evaporated quickly. Bills that used to get paid automatically now drifted into 30 day status. But he found another job, albeit one that hadn’t paid quite as well, so he was able to scrape and claw and catch everything up to a “current” status. Nothing had gotten TOO out of control, and although he had to use some credit cards to survive during that period, he had been able to salvage at least part of his credit.

The killer had been the car that he had to get when the twins showed up. John’s little Mk III VW Jetta was no match for everything that comes along with twins—two strollers, two diaper bags, two of everything—so they had gotten a 2008 Chrysler van in 2012. Unfortunately, his FICO score had slid all the way down to 610, so the only loan he could get was at a crippling 14.9% rate. To make the payments affordable, the loan had been stretched out to 66 months. That meant that he had barely paid any principal at all when the transmission started having troubles in 2014. The quote from the shop to fix it was ridiculous, but they had suggested that he might be able to trade it in on a newer model.

And that’s how he ended up in that Finance office that day. John was nervous, even a little afraid, of what was going to happen.

Andy picked up the phone. “I’m going to page your salesman in here. There are a few hurdles we need to overcome.” Immediately, John felt a gushing of bile leap up from his stomach into his throat as Andy used the dealership intercom to ask his salesman, Jimmy, to come into the office.

“What’s up, Andy?” Jimmy came into the office and sat down in the chair next to John.

“I wanted to bring you in because we might need to look at another vehicle.” Andy slid some paperwork across the desk for Jimmy to take a look at.

“Oh, man.” Jimmy looked at the papers with a grim stare. All joviality had disappeared from his face.

What is it? What do the papers say? John wondered.

“Mr. Smith,” continued Andy, “We have lenders who we work with on what we call ‘special financing.’ I’ve been able to procure financing for you on that 2011 Odyssey you’re looking at, but only if we can get twenty percent down from you. Are you able to do that today?”

“Twenty percent?” cried John. “That’s going to be like four thousand dollars! I don’t have anything like that!”

“Well, then, we might have to look at something a little less expensive. Jimmy, do we still have that 2008 Odyssey available?”

“2008?” John shook his head. “That’s no better than what we already have. What’s the problem with getting the financing?”

“Mr. Smith, you have a considerable amount of negative equity in your van. We can’t find anybody willing to roll that negative equity into a loan for you on the 2011, considering your credit history. But we have a little more wiggle room on the 2008.”

John, visibly flushed, stood up. “No, thank you. I think I will try somewhere else. Thanks for your time.”

Before anybody could say another word, John walked out of the office, and down the hall to where his sputtering van sat waiting in the repair bay. How did I ever end up here, he thought. How did I ever end up here?

——————————————————————————————————————————————-

A story like this might normally end up in Sunday Stories. Unfortunately, this story isn’t fiction for the millions of sub-prime buyers across the country. The credit bureaus generally consider anybody with a FICO score of less than 620 to be “Sub-Prime.” There is no shortage of lenders willing to make car loans with rates around 15% APR to borrowers with 550-619 credit scores, and rates over 20% to “deep sub-prime” customers with scores under 550. In fact, many industry analysts would consider there to be too many willing lenders. According to Experian, sub-prime loans now account for over 27% of car loans, the highest number since they began tracking such data.

In short, for sub-prime buyers trying to get a new car, it’s not a financing problem. It’s an inventory problem.

When lenders are considering a loan for a subprime buyer, they look at the price of the vehicle being financed and they compare it to black book values. Whereas a Tier 1 buyer might get approved for 125% or more of book, a subprime buyer might only get approved for 85-100% of book. Obviously, if a customer has no down payment, or if he has negative trade equity, this becomes a problem for both the customer and the dealer.

Anybody who has ever worked at a dealership has at least a dozen tales of a subprime customer who landed on a car, was sent to the finance office, and was immediately told, “Sorry, you don’t qualify to buy that car. We’ll have to find you a different one.” Imagine that you’re that customer—how excited would you be to be bumped to a less expensive car (or, more likely, one with a bigger margin on it)? How likely would you be to just extend your middle finger to the F&I manager and head to a different store?

Most car dealerships don’t separate their subprime business from their regular business, even though they are two different businesses and need to be managed as such. Obviously, this includes their inventory, as well. If a dealer paid market value or above for a piece of inventory, whether it was a help make a new car deal work or because a bidding war took place at the auction, there won’t be enough margin between book and retail for the dealer to price the car appropriately. As a result, the lender won’t approve the deal.

However, if dealers had a way to identify sub-prime inventory at an auction, and could then match customers to inventory based on the customer’s credit profile, all this could be avoided. But how?

Check back with me in a couple of days, when we’ll discuss a new piece of software that might just change the way this entire segment of the business works.

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161 Comments on “Bark’s Bites: The Plight of the Sub-Prime Customer...”


  • avatar
    JohnnyFirebird

    Uhhhh…. why does this sound like an ad from the vAuto guy?

    • 0 avatar

      The software that does this is “Promax.”

      I wonder if the minivan’s owner wishes he’d purchased a service contract, which would be paying for this repair instead of forcing him into the situation he finds himself in. After the service contract pays for the repair, he’d have a LOT less negative equity.

      Also, getting negative equity mixed in with poor credit score seems to imply that people with poor credit have trade negative equity. While that is true, MANY with 720 FICO and above ALSO have negative equity. While they can qualify for more advance from lenders because of their good credit, it isn’t a slam dunk ESPECIALLY when their DTI (Debt to Income) situation is edgy.

      Sub prime and BHPH help millions rebuild their credit scores. Dealers who engage in this business have to have incredible discipline. Repo rates run a third. Deficiencies are substantial. Collection costs are through the roof. Many crash and burn in this business without the discipline.

    • 0 avatar

      Also, just because a dealer buys a vehicle “right” doesn’t mean he has the obligation to sell it for less than market value or whatever he can negotiate.

  • avatar
    28-Cars-Later

    Nice article, ultimately though what you describe is a multi-layered macro economic problem which started in the mid 1980s.

    Additional: Whatever software you or whomever else has developed I doubt will solve the problem you describe for several reasons.

    1. Yields are near zero and the only game in town is the stock market, which even being somewhat “rigged” presents some level of risk especially to Joe and Jane Six Pack who don’t understand it. Big fish like low risk easy money even if yields aren’t so great, trouble is yields are near zero and if the Fed follows the ECB, you might even see negative interest rates. So the banksters LOVE subprime because of the double digit returns and also the fact many of its new members might actually have tangible assets to sell in order to make payments. In a normal economy, subprime buyers are typically the lower socioeconomic rung of society with outliers in the hard luck or new to credit areas. Now you have relatively responsible people in the pool due to the ongoing economic malaise.

    2. The whole point is dealer auctions is Joe and Jane Six Pack have no idea what true valuation is or should be for their automobiles. This is on purpose. If even with the Manheim buyer’s fees and a dealer house pack Joe and Jane can get auction pricing, you will further blow up already high valuations *at the auction* due to the increased number of new bidders (in the form of Joe and Jane Six Pack) playing with Santander’s Monopoly money.

    • 0 avatar
      JohnnyFirebird

      I’ve had two sub-prime car loans, the SRT4 at 16.9% and the V70 at 10.9% (a few months ago). I’m slowly getting all the black marks off my credit report so that when the V70 is paid off in a couple of years I’ll be able to, if I need to, get a loan at regular rates. It’s a shitty situation that I, and not the government nor evil car companies nor banks got myself into, and I can also get myself out of. Refinancing at 6% less for a much, much shorter term helps with this.

    • 0 avatar
      28-Cars-Later

      You want to help these people from a macro level here’s how you do it:

      1. Hold CUVs to more stringent fuel standards than sedans, the sort of which they cannot meet easily to temper demand. I’ve argued the reason the so called “large” sedan is on the decline is simply because the CUV is a less fuel efficient version of the same thing and sedans were intentionally compromised. Today’s large sedans are so cramped inside and priced so high no wonder Joe and Jane opt for the smallish CUV, this despite the fact a properly configured LWB sedan can best the CUV in fuel economy. Why does the world prefer either a wagon, a true “mini” van, or in some cases the LWB for the more well-to-do? Because they are not stupid like Americans and they understand the facts I have laid out here.

      2. Drop the emissions obsession by standardizing on a national particulate level for a ten year period, and from a regulatory standpoint focus on vehicle longevity and ease of repair. Nothing blows up a poor person than having to fix either something that was cheapened out on or something which just “goes” such as a transaxle but required 8 hours or more by the book to replace in labor alone. They are building cars more and more complex which are ever jam packed in a small engine bay. Why? Why is this acceptable? Why are the jack booted thugs all over emissions, CAFE and its holes, and to a lesser extent safety (which is the most important), but nobody mandates a minimum service life or ease of repair matrix? I’m being totally serious. Think of the resources wasted every year building throwaway cars.

      • 0 avatar
        mkirk

        So because some people have bad credit choice should be limited to those of us who don’t? I’m not passing judgement as I have been on both sides of that coin but last time I shopped there were plenty of used Camry’s and Altimas on every lot.

      • 0 avatar
        mkirk

        Duh…just go get a payday loan and use it to cover the down payment. You’re welcome.

      • 0 avatar
        sportyaccordy

        How is forcing people into large sedans a macroeconomic plus?

        How does a large sedan that gets the same gas mileage as and costs more than a small CUV any better for a consumer for whom a CUV better fits their needs and wants?

        The lengths people go to rationalize their preferences and biases never ceases to amaze.

        • 0 avatar
          joeaverage

          Let the poor guy go out and learn to work on his own vehicle. I did that when I was young and poor. I do it now that I’m not poor. I enjoy it. I spent hours of my evenings and weekends studying repair manuals I bought used and did all sorts of repairs with cheap tools that I have replaced and improved upon as necessary over the years. When the C-4 auto went out on my Mustang years ago, I put it up on ramps and pulled the transmission and had a clutch kit put into it by a transmission guy who worked in the evenings from the shed of his house. ~$200 back then. When the heater core went out. I did that too. I was 16. Took all day to do the heater core replacement. No special tools. Steering column laying in the seat, dash out, etc.

          I’ve done these tasks countless times on my cars over the years b/c I made less per hour than the mechanics who I would need to hire. I’d need to work 10 hours for minimum wage to get simple things done that I could do for myself for free (plus parts) in much less time.

          This weekend I bought a cheap second car from a friend b/c I could and a good second car seemed wise. My wife & I been car pooling 100% of the time for a couple of years to save money. Why not? It fits our schedule easily 99% of the time. That 1% of the time would be much easier with a second car. I have the interior of my other “second car” out for R&R in prep to sell it. Main daily driver is getting long in the tooth (nearing 285K miles but still getting the job done easily and reliably).

          We COULD afford to buy a new car but would rather save and invest for the future instead. Also, need to put a roof on my house this year. Want to do that with cash. A good friend mentioned he was selling his car b/c they had bought something sportier from his parents and they had too many cars for two drivers and two parking spots in an apt complex.

          $1500 later we have a 140K mile, 16 year old, clean, loaded Malibu to fall back on as a second car and/or first car for our teen who is a couple of years away from driving.

          Would be a great vehicle for a low income person who needs to haul twins and all the baby paraphernalia. Its not a COOL car but I wanted it for it’s utility – what it can haul (us) and what it saves us over buying a new(er) car. A $1500 car will be worth $1500 for several years regardless of it’s mileage.

          There is a video on YT that suggests a person buy a $1500 car. Take care of it and save the payments. In a year – sell it and use the savings plus the original $1500 to buy a $5K car. Repeat. Once you get to a ~$10K start investing that payment. In five years replace that car with something for similar money and for cash. You’ll retire a millionaire they say.

          I don’t see any reason to be poor if a person is reasonably intelligent and able-bodied. Especially with the internet available to most of us. Geez, whatever needs to be done has probably been detailed in a video by somebody for free. And there are the vehicle forums and the library.

  • avatar
    DeadWeight

    “Check back with me in a couple of days, when we’ll discuss a new piece of software that might just change the way this entire segment of the business works.”

    Ahhh, an algorithm contained in secret code that will enable the laws of relative valuations in what are now financialized commodities AND people (and their “scores”t)o be fundamentally altered…

    • 0 avatar
      JohnnyFirebird

      As a used car manager I hear this pitch a few times a week.

      • 0 avatar
        28-Cars-Later

        A good UCM should already have valuations in his head on a general level and be able to speak to the customers directly as to what is realistic for their situation, IMO.

        • 0 avatar
          JohnnyFirebird

          Yup. I do get customers who can’t really afford what we have – I prefer having recent CPO vehicles versus ones in the four-digit range, although having a variety of inventory is usually a good thing. We have a VW dealer in the group, so I frequently suggest lower income clients look at stuff like a new 2.SLOW Trendline which they’re more likely to get approved for than a used vehicle, or if buying cash something like low-mileage 2008-2010 Jetta / Golf Citys are dirt cheap and the 2.SLOW is reliable engine. You can get a Jetta City with 50,000 kilometers (30k miles) for under $7000 which will run for a long, long time in Quebec. Plus the 12 year rust warranty is awesome.

        • 0 avatar

          A good UCM is trying to maximize the profit for his/her store, NOT to be a fountainhead of knowledge for consumers.

          There aren’t a lot of really good UCM managers left. The kids think its all about the book, MMR, etc.

      • 0 avatar
        Lorenzo

        Is the pitch selling the program as a tool to help streamline the process, or is it being touted as the cure-all that replaces what you’re doing?

        • 0 avatar
          JohnnyFirebird

          From the questions a client asks a good salesperson can usually get the sense for what kind of car and what kind of loan the client will qualify for.

          • 0 avatar
            redliner

            I suggest that delerships adopt my secret formula for decerning subprim buyers. It is a secret, but i will share it with the B&B. It consists of the following questions:

            Do you drive a Mitsubishi, Pontiac, or 15+ year old Cadillac?

            Do you currently owe arrears on a child support order?

            Can you twerk?

            Answering one of these questions affirmatively means a person is probably “sub-prime” while positive answers to two or more is guaranteed “sub-prime”.

  • avatar
    danio3834

    John’s financial choices seem to be perpetually bad. Finance the transmission repair on the ’08 van if you have to, but don’t dump the negative equity into a situation setup for even more negative equity.

    • 0 avatar
      28-Cars-Later

      John’s initial purchase of a Jetta Mk III speaks volumes as to his level of financial decision making.

      • 0 avatar
        BobinPgh

        Actually, he could have been OK if he just kept the Jetta. Somehow, before minivans, people with families got along fine with sedans, so what if it was a bit tight in there. Oh, but now, you have to have space for all the Pampers too, hence the minivan.

        • 0 avatar
          28-Cars-Later

          Jetta Mk III isn’t a very large car inside or out. There was a time where sedans did offer more interior space but with the exception of things like Accord, they have been neutered in favor of FUVs and large “mini” vans which actually can be used for children.

          • 0 avatar
            never_follow

            As a MK3 owner, the trunk is HUGE, like 2 hockey bag huge. 4 adults aren’t going to have a fun time spending more than 30 minutes in there, but for 2 adults and 2 kids? John would be fine.

        • 0 avatar
          joeaverage

          Dunno – a friend had a Dodge minivan which didn’t have any luggage space with the third row in place.

          I think in this case there are any number of sedans and CUVs that might make more sense.

          I agree though – fix the transmission rather than getting in deeper on yet another vehicle.

    • 0 avatar
      djsyndrome

      Finance the transmission repair how, exactly?

      At 610 no credit card or bank will extend him the four figures needed to fix the transmission. The dealership shop only takes cash, (good) checks, and credit cards. He doesn’t have the first two, and the third one (if it wasn’t closed by the banks when he was failing to pay) is maxed out.

      He’s at the dealer trying to escape from a bad car because it’s either that or taking the bus.

      • 0 avatar
        28-Cars-Later

        He’s trying to Escape his troubles but the dealer needs to give him a little Flex in credit so he can Focus on his family and get the Edge in his finances.

        • 0 avatar
          Lie2me

          I think he knows that now that the credit manager told him he could only aspire to a, um… Aspire

          • 0 avatar
            28-Cars-Later

            I like it.

            He was told his credit was so bad it could only Aspire with hard work and time, so he threw a Fiesta.

          • 0 avatar
            Lie2me

            He’s a Mountaineer and you know what Troopers they are. He may need a Navigator to help him Scout his options. Maybe he’ll turn a new Leaf before throwing another Fit, because that just makes him a Pajero

          • 0 avatar
            CoreyDL

            If he could come up with 3000GT for the down payment, he could hire a better Navigator, to help him Traverse the difficult Journey through Superleggera bank balances.

            Maybe his friend Eddie Bauer could lend him a Nautica for an interview. Hopefully he doesn’t check his Cartier, or Bill Blass won’t be too impressed, even if he sings a sorry Frank Sinatra tune, his name will be Mark Crossed right off that candidates list.

          • 0 avatar
            Lie2me

            This sounds like all trim and no substance to me

          • 0 avatar
            28-Cars-Later

            Nice use of the trim names Corey.

          • 0 avatar
            CoreyDL

            Those references to trims will be increasingly outdated now :( no letter-numbers can replace them!

      • 0 avatar
        danio3834

        Many repair facilities support access to auto repair financing services that specialize in fixing up people in Mr. Smith’s position. Even if the rate is as high as what’s being offered on a replacement vehicle, financing 2k at 20% is better for his financial health than the replacement vehicle plus remaining negative equity at that rate.

        If financing can’t be securad via a specialized repair financing service and his situation is so bad that he can’t come up with ~$2k between cash, savings, lines of credit, credit cards, valuables that can be pawned etc., taking the bus might be what Mr. Smith needs to do until he can get his sh1t somewhat even remotely together.

    • 0 avatar
      RHD

      He could get a junkyard transmission, and have it installed at the local community college auto shop. Or, if he has some skills and tools, install it himself.
      It’s unfortunate how many people have no idea of even how to change a tire any more.

    • 0 avatar
      dude500

      There’s actually an industry of companies that will provide up to $2k-4k loans for auto repair. Here’s one I found:

      https://www.springleaf.com/personal-loans/autoloans.html

      25% on a $4k loan is tough, but 20% on $20k is worse.

  • avatar
    SCE to AUX

    I was slightly underwater on my 05 Odyssey when I traded that hateful thing in 2007 for a 98 Grand Caravan (ironically, the opposite scenario from the story here).

    Yes, I was trading a 1.5-year-old car with 28k miles for a 9-year-old car with 99k miles. Why? The Oddy lemon suit had finally settled, and I wanted to part with it ASAP, and get out from under the $535 payment. My credit wasn’t a problem.

    So I willingly agreed to pay $4k list for the GC, plus the $500 gap on the equity of the Odyssey. I drove away very happy, and debt-free. I kept the GC for 3.5 years; it wasn’t a bad car.

    However, in this fictional story (financing problems aside), the owner should just keep and repair the Caravan. Odyssey trannies are iffy; sometimes the grass isn’t always greener elsewhere.

  • avatar
    Cactuar

    Mr. Smith’s problem is that he still had car payments when everything was going well. When things were good and income steady, it was time to attack debt and get out of bondage before things turn ugly. No vacation, no toys, no life; not until all debt is gone. Then if something terrible happens, he doesn’t need to turn into a beggar and lose his dignity in the process.

    (not pontificating BTW; I was almost in Mr Smith’s shoes at one point, by God’s grace I turned things around before it was too late.)

    The answer to Mr. Smith’s problems is not more debt, it’s financial education.

    • 0 avatar
      JohnnyFirebird

      Yep. Working on that this year myself. Dropped from a subprime loan to a regular one swapping my SRT4 Big Mistake vehicle to a low-mileage V70, and refinancing the leftover at six percent less interest. No fun stuff or toys until any red marks on my credit report are gone.

    • 0 avatar
      jmo

      “Then if something terrible happens, he doesn’t need to turn into a beggar and lose his dignity in the process.”

      Wouldn’t the solution be an emergency fund vs. less debt. If he paid off the last of his debt and lost his job – with no savings he’s still SOL.

    • 0 avatar
      Dirk Stigler

      Easier said that done, for at least a couple reasons. One being simple human nature–it’s hard not to indulge when times are good. The other being the appalling lack of basic financial understanding among most people, including plenty whose outward success would make you think they knew better.

      • 0 avatar

        In addition to my normal savings account, I have an emergency fund – about 3 month’s salary – tucked away in an internet-only bank that I have no other accounts with. When I log into my normal bank, I don’t see it. I pretty much forget it exists, except every 3 years I get a letter from the bank saying that if I don’t sign a notarized statement I’ll forfeit it as abandoned property.

        • 0 avatar
          clivesl

          Not to be that guy, but the story mentions that he and his family burned through his savings. So he did have some savings, but that doesn’t do you much good when you can’t find a new gig.

          • 0 avatar
            BobinPgh

            Not only that but the markup on Kindercrap like toys, potty chairs, baby food and Pampers is incredibly high, the only way to escape it is to not have kids but if you do, you have buy all that expensive stuff that’s not much fun.

      • 0 avatar
        burgersandbeer

        I don’t see how a MkIII Jetta followed by a four-year-old Chrysler van is indulging.

    • 0 avatar
      burgersandbeer

      You make it sound like John was maxing out every bit of credit he had and spending every dollar he made when things were going well. Note that he had a MkIII Jetta until twins arrived on the scene. He had an outs1de shot at making due with the old Jetta with one kid, but not two. And it’s not like he splurged on a new Tahoe LTZ when he found out it would be twins; it was a four-year-old Chrysler van.

      Mark went out of his way to show that this kind of thing can happen to fairly successful people with good judgement and not just financial morons, yet you still missed it.

      • 0 avatar
        PonchoIndian

        I fully expect the majority of the righteous on here will take the low road and do their armchair quarterbacking on this situation.

        Unfortunately this isn’t such an uncommon thing to happen to people in the last decade or so. Of course things could have been planned better, but life doesn’t always follow plans (see twins instead of single birth).

        At least the infallible on here give me a chuckle with their criticism of the guys life.

        • 0 avatar
          CoreyDL

          Still, even with everything else the having a child/s is totally optional, and their choice.

          • 0 avatar
            FreedMike

            Right, but once you have kids you can’t just give them up, as much as you may WANT to from time to time…

          • 0 avatar

            Oh. Abortion abortion abortion abortion.

          • 0 avatar
            PonchoIndian

            Children are not always “optional” one way or the other. Things happen sometimes no matter how things are planned or hoped for. Unless of course abstinence is suddenly this week’s way to keep a marriage and partnership together in the long run.

          • 0 avatar
            FreedMike

            @Ponchoindian:
            “Unless of course abstinence is suddenly this week’s way to keep a marriage and partnership together in the long run.”

            Yeah, my ***EX***-wife tried that method.

          • 0 avatar
            CoreyDL

            He had the children WHILE his life was already in the dumps.

            You can do birth control to not have them in the first place, that would be the best idea for this poor and unfortunate and foolish man.

          • 0 avatar
            PonchoIndian

            Birth control is not always 100% effective. But I can see this isn’t an discussion that you’re going to bring any reason into. It isn’t black and white all the time.

          • 0 avatar
            28-Cars-Later

            @Corey

            I think its a complicated issue and it varies from couple to couple. Once the females hit 27 they start to want things like this and after 30 it becomes more and more complicated medically to pull it off. My proposed solution is to have an age cutoff around 25-26 for your woman and go back into the pool as they hit it.

          • 0 avatar
            PonchoIndian

            Did you notice the part that when he had the kids he had been able to pull himself back into being “ok”? Didn’t realize it was twins so probably assumed he’d be ok with the VW? Life threw him a curve ball and he needed to upgrade to something larger (I don’t really agree with that need but I’m not him), and then the something larger took a large dump on his shoe.

            Maybe he could have put life on hold for a decade, waited until the economy picked up and he had a really good job again and lots of financial freedom. Oh wait, he might have been 40+ by then and the time to have a child might have passed him by and it isn’t an option anymore.

          • 0 avatar
            CoreyDL

            LOL

            Poncho, birth control + condoms is VERY VERY effective. So you’re right, not 100%. Glad this couple is the 1% for whom birth control escapes them.

            28, I rarely feel like dealing with other people :)

          • 0 avatar
            PonchoIndian

            Corey

            You rarely feel like dealing with others because you don’t live in reality. You can go back to judging others from that pedestal you live on now. That is all. Come back when you have some life experience that will make you more reasonable to have a conversation with.

          • 0 avatar
            28-Cars-Later

            @CoreyDL

            Stop thinking like me. The other me who is the reverse of me, 82, keeps trying to convince me variety is the spice of life. Ah but the normal me, 28, keeps reminding him of the inherent risk of such a scenario.

            Also on the overall subject: British citizens in US fly home to UK for their medical treatment due to Obamacare. So people who belonged to the previously most maligned health system on Earth, NHS, now prefer it to what’s going on in this country. Higher costs = fewer children. Winning… for Agenda 21 that is. Should be interesting to see how it works out for the imported illegals and their penchant for reproduction.

            http://www.theguardian.com/money/2015/jan/12/us-healthcare-system-leaves-brits-baffled-enraged

            “British-born Helen Colquhoun moved to Boston roughly 12 years ago and is a senior medical director working in clinical trials.

            Colquhoun loves the lifestyle but she is not impressed by the healthcare system.

            “Massive liability insurance premiums means defensive medicine is practised,” said Colquhoun.”

          • 0 avatar
            CoreyDL

            Poncho I’m so glad we’re talking again. It’s so nice to see you accept someone else’s view so easily. I do very much live in reality, and that’s what causes me to not feel like dealing with other people (which I learned from life experience). See?

            @28 I am telling you the inherent risks aren’t worth it! 82 has it all wrong, lol.

          • 0 avatar
            Lie2me

            OK, new rule, no f*cking without a decent size bank account and a good credit score

            Now, let’s move on to something easy like climate change

          • 0 avatar
            28-Cars-Later

            Ah but 82 reminds me without risk their is no reward. Truthfully part of me will wake up one day and aged man and I don’t want to look back with complete regret, I’ve got enough of that already. I’ve had probably ten years worth of stuff, good and bad, happen to me in the past eighteen months. I’ve done more living in that time frame than in at least the eight years prior.

            Remember Patton:

            “Take calculated risks. That is quite different from being rash.” – George S. Patton

          • 0 avatar
            CoreyDL

            Tonight, I declare that my calculated risk will be:

            Peppering my salad a bit too much.

            We’ll see how it goes.

          • 0 avatar
            Lie2me

            “The road to hell is paved with good intentions”

          • 0 avatar
            28-Cars-Later

            “If you tell the truth, you don’t have to remember anything.” – Mark Twain

        • 0 avatar
          PonchoIndian

          Corey,
          its not that I don’t accept other people’s views, its that I have seen this happen to people I never would have thought it could happen to. I guess that until you’ve seen it, or had it happen to you, you can never really appreciate just how unpredictable life is. Sometimes the right choices aren’t so right.

          I sincerely hope you never fall on hard times. No one deserves this. It can really hollow out your soul and change your life forever, even when you get back on your feet.

          • 0 avatar
            Lie2me

            Sometimes I think the lucky ones are the ones who got knocked on their butt and came back, they can see both s1des, but I also know a lot of people who have nice trouble-free lives who are happy well-rounded folks, so there’s that

          • 0 avatar
            28-Cars-Later

            “Sometimes I think the lucky ones are the ones who got knocked on their butt and came back”

            I am living proof of this.

  • avatar
    JCK

    Agreed, but many, many people make the same choice. You see it all the time, even on these pages. There’s an irrational fear of repair costs I see everywhere. The repair costs are almost always lower than the replace costs.

    “OMG, I’m going to have get new brakes that are going to set me back $800. I guess I should spend $8,000 trading up to a new car instead.”

    Granted that transmissions can be an exception to the general rule, but if this guy is getting a 15% rate on the new car and needs to put $4k down, I’m guessing he should just put the transmission cost on his credit card and roll with it.

    • 0 avatar
      SaulTigh

      This. I’ve known dozens and dozens of people in my life that had the “irrational fear of repair costs.” Hell, I worked in a facility in which 6-7 people in a single year, on a single shift, finished paying off their car loans and within a week had traded in on a “new” car with a new loan. The most extreme example was a woman who traded her car in every three years as soon as the warranty was up, and rolled the negative equity into the next loan. Her excuse? “I got a kid and can’t be stranded.” She had a good job too. Easily a more than living wage with full benefits.

      In the same time frame, I got 10.5 years out of a Grand Marquis daily driver and averaged $700 a year in maintenance/repairs.

    • 0 avatar
      DeadWeight

      Yep.

      If one is not mechanically inclined, with a little legwork, it’s possible to succeed in finding competent indie mechanics to PROPERLY diagnose problems, and to repair and replace necessary components for LITERALLY 1/5th to 1/3rd what a dealership would charge.

      Obviously, a truly broken tranny is going to need to be replaced given how expensive it would be to rebuild a modern automatic transmission (rendering it financially idiotic), but even here, a used, good condition transmission that fits can be sourced relatively easily from the many salvage yards that are now providing online quotes for requested parts, in a highly competitive process.

      How do I speak of all this with such conviction?

      I’ve helped so many family members and friends get their vehicles repaired properly for a fraction of what some stealership quoted them that I’ve lost track of them all.

      • 0 avatar
        joeaverage

        What makes a modern automatic that much more complicated to repair than a 25 year old example? Its clutches, torque converter, solenoid valves and a hydraulic pump.

        Ten seconds on Google shows that a rebuilt transmission for a Dodge minivan built within the past decade ranges from $700 to $1500. A rebuild kit is $65 to $175. The kit contains gaskets and clutches more or less.

        That said I enthusiastically agree with everything you said. I operate as you describe.

  • avatar
    Secret Hi5

    “In other countries, people make-do with smaller vehicles. That Jetta would’ve been sufficient for 2 kids.”

    On another note, is Steven Lang no longer contributing to TTAC?

    • 0 avatar
      joeaverage

      Just need to be careful choosing baby seats. There are seats that fit in smaller cars very, very well. If Europe can use a MKIII as a family hauler, then we Americans ought to be able to do the same.

      Years ago we drove our MKIII Cabrio to Florida carrying me, my wife, baby plus seat, and a week’s worth of luggage. It got the job done.

  • avatar
    SCE to AUX

    I was slightly underwater on my 05 Odyssey when I traded that awful thing in 2007 for a 98 Grand Caravan (ironically, the opposite scenario from the story here).

    Yes, I was trading a 1.5-year-old car with 28k miles for a 9-year-old car with 99k miles. Why? The Oddy lemon suit had finally settled, and I wanted to part with it ASAP, and get out from under the $535 payment. My credit wasn’t a problem.

    So I willingly agreed to pay $4k list for the GC, plus the $500 gap on the equity of the Odyssey. I drove away very happy, and debt-free. I kept the GC for 3.5 years; it wasn’t a bad car.

    However, in this fictional story (financing problems aside), the owner should just keep and repair the Caravan. Odyssey trannies are iffy; sometimes the grass isn’t always greener elsewhere.

  • avatar
    Master Baiter

    I fail to see what the problem is here.

  • avatar
    PonchoIndian

    Where are all the jerks claiming that Mr. Smith didn’t invest in himself which is what put him in this situation to begin with? :)

  • avatar
    vvk

    Here’s what I don’t get. All these “Mr. Smiths”. Are they able men with a head on their shoulders and two good strong arms? Or are they invalids? Because if they are not invalids, why not go to the library and get a repair manual for that Chrysler van. Then go to a few local u-pull-it yards and pick up a cheap transmission and replace the one that is acting up. Many yards will even give you a warranty on something like that. I can understand people not able to do this in Germany, for example, where you are prohibited from working on your car in the street. But here in the good old US of A we have liberties that allow us to take matters into our own hands. Isn’t that so much easier than spending hours “in that chair” and being humiliated like that? For an able man with a head on his shoulders? What gives?

    • 0 avatar
      319583076

      There is an entire industry predicated on making people feel stupid and charging them $100 to do 15 minutes worth of paper work – see any Tax Refund shop. They’ll also take a percentage of your money right now if you want to walk out with “your” refund!

      This “liberty allowing us to take matters into our own hands” has been systematically eliminated from the majority of our citizens.

      But, hey, the smart people let me download skin shots of my favorite movie stars onto my phone. Who has time for thinking or problem solving?

    • 0 avatar
      FreedMike

      Come on, vvk, not everyone knows auto mechanics. Sheesh…

      • 0 avatar
        vvk

        Like it’s hard. Certainly a lot easier than to beg.

      • 0 avatar
        joeaverage

        Start learning. The next time you need to change your oil – do it yourself. Then spark plugs. Then rotate your own tires. Etc. Etc. Etc.

        If I could do it at 16 with a book then a grown man or woman ought to be able to do it too. FWIW my wife taught herself how to change her own oil when she was younger and poorer (college kid). She also assembled an engine for our family hauler after we were married. Book plus a myriad of questions.

        Make some friends. Some different friends perhaps than your normal beer and football crew. I invited a young engineer to stop by our house a few weeks ago to repair his Jeep. He knew what needed to be done but not necessarily what to do nor did he have the tools. There are gracious people that will share.

    • 0 avatar
      sirwired

      If Joe lives in an apartment or a townhouse, he’s not swapping out that transmission himself. If he simply hasn’t worked on his own cars in the past (the opportunity costs of performing your own auto repairs are not trivial), he’s not replacing that transmission himself. If that’s his only car, (and he can’t make emergency parts-store runs for this or that widget that breaks during the job), he’s not doing the job himself.

      It’s silly in the extreme to assume that every US citizen is capable of performing their own auto repairs, no matter how able-bodied.

      • 0 avatar
        vvk

        It is not difficult to replace that FWD minivan transmission. Don’t make it sound like rocket science because it is a trivial repair. You try to replace a steering rack in the street in February in an ice storm like I once did. Took me three days on my back in freezing water but I did not go begging. Cost $100 vs. $1500 at my mechanic. Good thing it was a long weekend because I was flying out at 7am on Monday for a business trip.

        People should learn to solve their problems. And yes, every able man is capable of performing their own auto repairs. Opportunity cost is just an excuse. Mr. Smith is not billing his time out at $500/hr.

        • 0 avatar
          28-Cars-Later

          Damn vvk, you’re hardcore.

          • 0 avatar
            Lie2me

            As long as you’re succeeding it’s easy to think like vvk, one major setback and it’s a whole new ballgame

        • 0 avatar
          ajla

          1) What salvage yard to you go to that gives you more than 30-90 days guarantee on self-installed parts?

          2) In almost all cases, replacing a steering rack is easier than replacing a FWD transmission. However, both would be especially big tasks for a first timer. He’s not putting a new TH-400 in an Olds 98.

          3) I agree with you in spirit but I think that you could get your point across without waving your huge internet balls at everyone.

          • 0 avatar
            28-Cars-Later

            You echo my earlier thoughts on FWD being a PITA vs traditional RWD only setups.

          • 0 avatar
            vvk

            Actually, I would not be suggesting this if this was a RWD transmission because those suckers are HEAVY. You really need a second person or at least a transmission jack, in my opinion.

        • 0 avatar
          PandaBear

          When you have twins to take care of, and your van cannot be down for too long, your only option is to hire someone to do it.

        • 0 avatar
          Exfordtech

          Does he have a lift? No. So his options are to drop the subframe while supporting the engine and taking the transaxle out from below, or if it fits (doubtful) split the tranny from the engine and lift it out the top. Is he going to rent or buy the tools to do any of this, because if he already had them then he’d have already fixed the van. I’d be willing to bet adding the cost of tool acquisition will put this in the ball park of paying someone else to do the repair. Does he have an air compressor or is all this done by armstrong? Swapping the tranny isn’t rocket science but it is far from trivial especially if he has no mechanical skill or any of the necessary tools and equipment.

          • 0 avatar
            joeaverage

            Have you never been in a Harbor Freight store? Tools aren’t that expensive. Also the parts stores often loan weird tools for free if you need that. Is this man without friends or relatives?

        • 0 avatar
          joeaverage

          +1. I agree vvK. I did a Honda Accord clutch years ago in front of my little house in 25F weather. Finished at midnight. HAD to b/c I was poor and had classes AND work the next day so I needed wheels. Guess what? Bicycled to the auto parts store for a couple of things I needed. Could have called on friends for transport too. We’ve done that in the past – trading a ride to work. We pay it forward. We pay it back later in a shared meal or movie night at home with friends.

          Pulled and stabbed a C-4 Ford transmission by myself also. You have to lay under it and catch it with your hands, arms, belly and knees. It sucks but I’ve done it. Did rely on a helper to start the bolts when I put the transmission back in.

          Helped my father full a 4WD S-10 transmission and transfer case back in the 80s. T-5 ate itself right at the end of the vehicle warranty. We did it with a garage floor, jack stands and two steel vehicle ramps from Sears. Dad borrowed a trolley jack and bought a second one too.

          Took it out, had it repaired, put it back in.

  • avatar
    CoreyDL

    I know what you should do when you’re under-employed and down on your luck, behind on bills, racking up debt, stressed and etc.

    Have a child! Whoops that ended up being two children. Congrats on your $400,000+ 18-25 year finance obligations. Makes that Jetta seem really appealing now, doesn’t it?

    • 0 avatar
      RHD

      A child born today will cost about $242,000 to raise, according to the CDC. So Mr. Smith just put himself into $484,000, spread out over 25 years, which makes his trouble at the car lot just the tip of the iceberg.

      • 0 avatar
        CoreyDL

        Maybe a little less than the $242 – because lets face it with this kind of parent the kids are not likely college-bound.

      • 0 avatar
        S2k Chris

        That study is stupid, as the largest portion is “housing and transportation” of $107k. Built in is the assumption that you live in a 1BR apartment and must move to a bigger place with each kid I suppose; personally, my wife and I lived in a 3BR/3BA house before my kid was born, and the same house afterwards, with $0 net change due to the cost of the kid. Further, we didn’t change any of our vehicles, so aside from some extra kid-related trips, our transportation costs didn’t materially change either.

        Don’t get me wrong, kids are expensive (I have the $1500/mo daycare bills to prove it) but that quarter-million dollar study is still stupid.

      • 0 avatar
        bball40dtw

        My daughter will cost me $60000+ in just daycare before she steps foot in Kindergarten. I hope the twenty years after that only cost me $180,000.

        • 0 avatar
          S2k Chris

          $242k only gets you to 18, doesn’t count college. :(

          • 0 avatar
            bball40dtw

            Son of a….

          • 0 avatar
            28-Cars-Later

            Don’t sweat it Bball, I suspect “college” will be radically different in twenty years and possibly cheaper. Didn’t you also say you were half Canadian as well, doesn’t that make your children as such too? Perhaps a Canadian university is in the cards?

          • 0 avatar
            bball40dtw

            Yes, I have dual citizenship. Canadian father and American mother. Well, now my dad is only a US citizen, and I am the only person in my immediate family that has dual citizenship.

            I am no immigration law lawyer so I don’t know how that all works. Since my daughter was born in the US I think I would have to apply for her Canadian citizenship, and I don’t know if she can keep US citizenship.

          • 0 avatar
            28-Cars-Later

            You’d have to check it out but I think by nature of your situation she may be already by birth because you are a Canadian citizen.

            My limited understanding of dual citizens is the USG tolerates them if they are incurred/granted as the result of circumstances beyond the person’s control (so birth or automatic granting via marriage etc). However its gets murky when you consciously apply for it as your US citizenship can be revoked. Evidently USG doesn’t like it much when debt slaves want to have options in escaping the plantation – unless you become Israeli. Funny how that works.

            https://www.facebook.com/notes/we-are-all-vittorio-arrigoni/list-of-politicians-with-israeli-dual-citizenship-/175479365845092

      • 0 avatar
        S2k Chris

        STUPID EATEN COMMENTS TTAC.

        Cliffs: $242k includes $107k of “housing and transport” which is a stupid assumption unless you HAVE to buy a bigger house and car every time you have a kid. In reality, housing and transport costs stay pretty much the same.

    • 0 avatar
      FreedMike

      Corey, what’s the guy and his wife supposed to do – give the kid up? Have an abortion? You’re trolling.

      • 0 avatar
        CoreyDL

        Read my above response. The children occurred while life was already sh!t for them. He can’t handle the financial responsibility of a used VW, but he thought it okay to have a kid?

        • 0 avatar
          S2k Chris

          Yawn/eyeroll. You’re making way too much of a hypothetical story. Yes, it isn’t necessarily the most responsible thing to have a kid while out of work. BUT, no one knows how long that work outtage will be. My wife and I were in the process of trying to have a kid when I was laid off. I coulda been this guy, but I got a new job before the old one ended, and a raise, and everyone was happy. But it could have been a lot worse.

          I know everyone on the internet doesn’t make any decision or purchase until they’ve paid every debt off, have a 12-month emergency cash fund at all times, and wouldn’t think of having a kid unless their mortgage was paid off and they had a fully funded 529, but in the real world things are different.

        • 0 avatar
          S1L1SC

          Fine, so assume the kid happened before the layoff or was already on the way – doesn’t change the underlying problem being highlighted.

  • avatar
    Landcrusher

    Anyone borrowing 125% value of a car is very unlikely to remain Tier 1 credit for very long. Am I being cynical to suspect that’s why they are happy to loan 125% on a vehicle?

    Perhaps the tens of thousands of pages on finance and debt collection should get amended so that the officers of the lending company are personally responsible for loans over 95% vale of the security and the borrower is only ever responsible for 100% value of any secured loan.

    Just say’n.

    • 0 avatar
      S2k Chris

      “Perhaps the tens of thousands of pages on finance and debt collection should get amended so that the officers of the lending company are personally responsible for”

      Whenever I see a statement like that I know I am reading the angry writings of someone who is trying to get even in class warfare, not someone who is trying to understand an issue and solve it constructively.

      • 0 avatar
        Crosley

        Yes, and the same people that think institutions should turn people down for “their” benefit will be the first to scream for class action lawsuits because they’re only lending to the “rich.”

        That’s the issue, you can’ win on either side. If you deny lending to those that can’t afford it, you’re a villain. You’re also a villain if you do.

        I think the law should be written that people can make these sort of voluntary contracts, but I would rather people got some religion regarding being a debt slave and choose not to go down this path.

      • 0 avatar
        Landcrusher

        Lol, certainly it was a bit of passionate hyperbole. I would be interested on what you think that post says about a person’s outlook more specifically. I’m not on top of the food chain, but I am not at all worried about anyone’s wages. What I am worried about is our future if we keep letting the Chiefs run around without any real consequences for real irresponsibility and in total fear of government fiat.

        Things work better when the big guys are more responsible and the guys taking big chances are betting their own money.

    • 0 avatar
      FreedMike

      Not necessarily…there are lots of people with plenty of money who’d rather borrow than liquidate assets.

      • 0 avatar
        Landcrusher

        There are at least ten total fools for every guy leveraging his car that knows what he is doing. Even then, why? Use unsecured loans or business assets, not your own car.

        • 0 avatar
          S2k Chris

          Eh? I chose to leverage my cars all the time using nothing more exotic than a 401k, IRA, and mutual funds (ie, stuff cash in those and leave it there rather than put it towards a car). When a car loan is <2%, who the heck wouldn't? My most recent car loan: .9%. My annual return on my 401k: 12% PLUS match PLUS it's pretax dollars. Yeah, sure would be smarter to pay more towards that car instead of stuffing my retirement accounts.

          • 0 avatar
            Landcrusher

            Perhaps you are the one, or perhaps things go sideways and you become one of the ten. Just say’n.

            PS When you know enough bankers, you hear stories.

          • 0 avatar
            Landcrusher

            Perhaps you are the one. Perhaps things go sideways and you are not.

            I’m not saying not to do the 401k, but you could just spend less on cars.

          • 0 avatar
            Landcrusher

            Reply eaten twice.

            Never mind.

  • avatar
    APaGttH

    Yes, we can get you into this 2008 Honda Odyssey with a sputtering transmission – hey wait a minute!

    • 0 avatar
      geeber

      The automatic transmission problems with the Odyssey were largely fixed by the 2008 model year. The Odysseys with the glass transmissions were built between 1999 and 2004. Some 2007-08 Odysseys had a problem with the torque converters, but this could be fixed with a software change, from what I’ve read.

  • avatar
    Crosley

    Ultimately, I think adults should be allowed to make bad financial decisions for themselves, but I do think you can make a good case that much of the subprime borrowing should be outlawed as predatory, similar to these “checks cashed” places that are basically loan sharks.

    If the purpose of the story is to feel sorry for the guy, I really don’t think driving around a 4 year old vehicle is a horrible indignity. I honestly think it would be good for this guy to not be able to get financing for new(er) car, repair the one he has, and save up to where he can GASP! put down 20% on a car.

    • 0 avatar
      FreedMike

      Car loans are a whole different animal than payday loans – you can’t really end up owing more than you borrowed plus interest. Not so with payday loans.

      • 0 avatar
        Crosley

        People can roll in their trade in that has negative equity into the “new” car they’re buying, so it snowballs to where they are paying off a car they no longer even own.

        I see it as all part of problem where too many consumers become slaves to debt.

        Most of the check cashing places just charge a crazy high interest rate, I’m not even talking about the extreme examples.

        Again, ultimately I think we should allow voluntary transactions like this, but I would rather consumers not make these mistakes.

        And the same people that call the people that give the loans “villains” would also call them villains if they didn’t approve the loans.

  • avatar
    ciscokidinsf

    It happens. Sometime the equation of no transportation equals loss of income. Sometimes time = money and you have to get desperate. No transportation and an expensive repair bill in a tight financial spot is much harder to deal with than people think in a down economy. This is the tragic story of how I ended up with a 2008 Base Nissan Sentra at an 11.99% rate for 5 years.

    A couple of years ago, I was in between jobs for a while, doing some consulting to scrape by at like 70% of pay from previous year. Savings were about gone. Post 2-year Divorce credit score, so you can imagine. I had a nice 94 Honda Civic 4 door as a daily driver for the family to move around, and had just paid off my pride and Joy 2004 VW Phaeton a year before with a reasonable 5.99% rate. In New years day, bastards stole my Honda Civic to dismantle it completely. Guess who had to pay the $500 bill to dispose of it (sniff)

    I had just finally got a 6 month contract steady, and although 90% of the job could be done remotely, the boss insisted of me being there every day, no matter what. His blood pressure went up when I even suggested to work from home. So I had to be there.

    So, of course that Sunday on the 2nd week of my contract, the Phaeton decided it was time for a new thermostat/water pump. I didn’t want to overheat the engine so I had to park it. The repair requires basically doing a timing belt job. Economy was such that the Phaeton was the DD. And I had to take kids to school & 2nd wife to work and get myself to work every day, at least 100 miles daily driving. I don’t have family nearby to borrow a car in short notice

    Choices that dark sunday were:

    – Rental car for as long as I could scrape the savings to fix the car (6 weeks). ($1500 fix) Plus I had to at least pay $500 right away on a piddly $2000 limit Credit Card that was high on the balance. So first I need to wire a payment to the CC, then hope it posts to get a rental. Furthermore that means, even for an economy car, about $500-600 to spend, so probably rental + fix = $2500-$3000 if all the stars align right. I only have a $1000 cushion in my hands. I do 50% of the work myself with some very talented buddies, but we couldn’t do the timing belt ourselves. Indie shop it had to be.

    – Piss off the job and lose on income and all hell breaks loose with the family with no transportation. Public works for the kids, and they did take the buses back home, but for work it didn’t (driving to different cities to work for me and wife)

    – Take my $1,000 and take a Craigslist Gamble on a $1000 car – which, if it fails, it will be an epic tale of blown gaskets and towing charges, missed work and a hole made even bigger and deeper. I’m not trusting my luck here.

    So I took option D – I went by a Franchise dealership a mile away that Sunday at 6pm, I took my $1,000 and looked around – saw a Nissan Sentra 2008 – you rental dump special with 64K miles and not even cruise control. A $1000 later and some haggling, I had reliable transportation (at a high finance price, yes) but no income loss, no loss of sanity, no gambling on CL. I would NOT have taken that high of a loan rate in any other circumstances, but there was no choice that day. And, yes I managed to fix the Phaeton a couple of months later.

    ‘That’s crazy-
    ‘Yes. But we’re desperate’

    Bowfinger

    • 0 avatar
      joeaverage

      All good reasons to have a third car cooling it’s heels in the back yard or garage or shed. Leave the insurance off if you can, etc. Then when everything goes sideways, call the insurance agent and get it insured and drive it. Its worth $750 and presentable but you’ve got wheels.

      I have friends with whom I trade chores. I fix their truck and can borrow it. I fix their computer and can borrow the truck if I need it. Vice-versa – if they need a spare car, we’ll loan them one because they dog sit for us or they’ll pick up the kids from school in an emergency. And no, we don’t have family here either.

      Friends looking after friends.

  • avatar
    honda_lawn_art

    I think we’ve got a wrong thinking that auto financing is more acceptable than it is.
    One girl I know paid $6,000! for 21 year old GMC Jimmy, HALF OF IT DOWN! $2,500 would’ve bought that truck on CL.
    Tranny went out a few weeks later, and the B.H.P.Y. Dealer did fix it, but not before she lost her job, and the truck was repossessed. She probably drove it 600mi as long as she owned it.
    I blame her dingbat boyfriend for that malady.

    • 0 avatar
      bball40dtw

      Was it a Typhoon? Because if it was a Typhoon, I want it too.

    • 0 avatar
      sirwired

      There’s nothing wrong with the concept of auto financing. There’s nothing wrong with the concept of sub-prime lending even; even folks with poor credit still need to commute to work, or they aren’t ever going have good credit.

      Paying $6k for a 20-yr old thing worth not much more than scrap value is an entirely separate problem.

      • 0 avatar
        honda_lawn_art

        It certainly is a problem, especially when you had $3,000 to work with.
        I agree passionately that even people without $3,000 cash need to get around, but the financing terms leave them immediately upside down in an investment, and the likelihood of them paying off the loan is slim.

  • avatar
    FreedMike

    Easy to judge…not so easy to work your way out of that situation once you find yourself in it. And don’t f**king kid yourself – it’s REAL easy to find yourself in “Mr. Smith’s” shoes, even if you work hard, pay your taxes, save money, and don’t splurge (and I’d hardly call a Jetta and a Dodge van in your driveway “splurging”).

    Instead of judging the guy, we should all be grateful…but for God’s grace, that’s how any of us could end up.

  • avatar
    87 Morgan

    Having been the guy on other side, having to re-car someone because their was no feasible way to put the customer into the car they wanted, I think some here may want to consider extending some empathy to the plight of many citizens out there.

    Not all sub prime customers are finanancially ignorant, bad things happen to good people. What we don’t know is where does ‘mr. Smith’ live? It’s a lot easier to put money in the bank when you live in Indiana then say the NW, Cali, NE or various parts of the MTN west where housing is quite expensive realize to income. Too many unknowns to carte blanch pass judgement on one let alone an entire industry. If the sub prime auto lending and retail industry was legislated out taxes would sky rocket, I am not up for funding the public transportation infrastructure necessary to handle the influx of new ‘customers’.

    As for the repair it yourself. I get that, it was the first thing I thought of. But, what about tools, jack stands, jacks a place to do it. If your skill set ends at changing a flat tire a tranny r&r is a daunting task and if your social network is one that does not include someone who has those items you are SOL.

    7 years ago, when new car sales were stout, there was plenty of inventory you could get far enough back of book to lay the negative equity on and this problem is starting to ease, but for several years this was tough as used inventory was tight that even rental rocket chrysler vans brought full book. I can’t see how a computer algorithm is going to solve the worlds problems of identifying cars that are good sub prime units. a low mileage W body Impala is pretty much the one that is left even those at a fair price are becoming harder to come by.

  • avatar
    eggsalad

    I drive a 10-year-old Scion. It just so happens that I like the car, but the real impetus behind picking a Toyota product is because they last.

    I could have paid cash, but I borrowed against my cash instead, hoping a small loan would help the (then) dismal credit score I had, owing to divorce.

    It’s paid off now, and the Scion is barely depreciating. So I sock away money, because nothing lasts forever.

    Hopefully, by the time my contract ends in 2018, I can buy a new car for cash, thus not having to worry about how to make the payments until the next job comes along.

  • avatar
    DenverMike

    The poor have to move away from loans altogether. Most are too quick to spend and too slow to save. I hope that sounds condescending. But it’s how we’re raised as kids. Or not raised. You got 5 dollars a week for allowance or what ever, and it was gone before lunch the 1st day. No one ever called you on it.

    So what’s the difference now? OK, you’re an adult. And you’re dealing with lots more revenue and lots more expenses, but it’s still the same ol’ same ol’. You may think you’re not “poor” because you own a nice home and a new car, but do you really OWN them? Most Americans are couple paychecks away from homeless, on foot and starving.

  • avatar
    PandaBear

    Having kids is not really financially irresponsible if you are grown up, have a stable job, and have some savings. Shit happens but there are ways around it instead of buying a van when he had twins.

    What about just driving 2 cars everywhere with his wife, 1 for kids and 1 for all the junks. Yes it is inconvenient but it works, and what about bringing fewer junks out when you go out?

    So let’s say twins need a van, and now he needs a repair. In this case I’d just rebuild the tranny and keep it running for as long as possible. Sure a rebuild tranny may not last 60k miles, but even the shittiest work would have a warranty of 12k miles and for $3k, that’s enough time to buy him more cash reserve, pay down the debt, and rebuild his FICO.

    Who knows, by the time he is done with the loan he may not need a van anymore and can just use a mid 90s Camry that last into the 300k miles.

    • 0 avatar
      joeaverage

      Two cars is how we avoid owning a third row vehicle that we rarely need but would always need to fuel, drive and maintain. Need to haul a gaggle of kids to the movies or to some birthday event? Break out both cars… Of course there are people who look at this solution as strange but then maybe they are in debt up to their noses. Dunno. Don’t care. ;)

  • avatar

    Almost as soon as I paid off my personal bankruptcy, pre-screened offers for a new autoloan started showing up in my mailbox on a daily basis. Skipping through the sales speak extoling me that one of the best ways to rebuild my credit is with a car loan, down in the fine print (which was usually printed in about 60% grey)…25.9% APR.

    Debt=credit=debt

    I didn’t take them up on the “offer”, and actually found the website to get myself off the pre-screened list. There are much better ways to rebuild your credit than taking on more debt.

  • avatar
    DC Bruce

    Well, I do feel for the guy; but the reality is that life is full of uncertainties . . . and people need to assume that and account for it by being aware of the risks that they are assuming. I’ve always paid cash for my cars, beginning with the 1968 Karmann Ghia that I bought used in 1972 with money I had saved by living with my parents the first full working year of my life. Auto debt is, for the most part, nasty debt because you can’t liquidate the debt by selling the car (at least not for the initial period of the loan and assume you finance it 100% as most people seem to do). AFIAC, that’s its worst characteristic, not the interest rate. Two of the cars I bought, I bought used from private sellers when the car was less than a year old. In both cases, the reason for the sale of the car was a need to get out from under the car payments. I can’t remember, but I’m pretty sure that after they got the check from me, they had to write another check to the bank to deliver a clean title. That’s nasty.

    As the father of 3 kids, I’m not going to slam this hypothetical couple for having kids . . . but family planning is a reality and conceiving a child when you’re in the financial toilet is just not a smart idea at all.

    Our grandparents (or great-grandparents for some of you younger members of the B&B) lived through the Great Depression. Seared into their brains, based on that experience, was a strong aversion to credit, which was far less available then than now.

    I’m not suggesting going to a “cash-and-carry” life, but people have to understand the risks of credit much better than lots of folks seem to do.

    One of the nice things about paying cash for a car is that you really appreciate the purchase price in a way that you don’t when the difference between economy model X and zippy model Y is just $200 month in a car payment, or a stretch out of a 48-month loan to a 60-month loan.

  • avatar
    -Nate

    Good article indeed .

    Hopefully it’ll make some folks think a bit .

    -Nate

  • avatar
    stevelovescars

    Sometimes bad shit just happens despite having rainy day funds, a good education and a good job. In my case, it was getting layed off, but starting my own company. It was going well then my wife was diagnosed with cancer. I was paying for good insurance but the copays and extra expenses still added up (plus the $1500/mo premiums I couldn’t ever let lapse else she would lose her insurance in pre-Obacare days). Because she could no longer care for our two young kids I also had a sudden need for reliable childcare so I could continue to work.

    Anyway, from a car standpoint I think the best way for a guy like this to do better would be to buy a car from a private party rather than from a dealer. Unless it’s a CPO, you rarely get anything from the dealer for the extra cost. Except, of course, access to financing.

    Direct loans, like from a credit union or online bank, often preclude one from buying a car except from a dealer. I never understood this… Seems the loan would be more secure if the collateral wasn’t underwater the moment it was driven off the lot, no?

  • avatar
    -Nate

    “Secret Hi5
    “In other countries, people make-do with smaller vehicles. That Jetta would’ve been sufficient for 2 kids.”

    On another note, is Steven Lang no longer contributing to TTAC?”

    He’s out there but some here couldn’t stand his honesty or something and drove him away , more’s the pity .

    He writes for Yahoo Autos and other outlets , I have not figured out how to subscribe to his articles .

    I agree , the guy in this story doesn’t make good choices but also , many here live in some sort of bubble or ivory tower ~ I was grindingly poor most of my life , I was lucky to be Mechanically adept so transportation wasn’t a big problem but expecting some folks to just man up and swap that tranny , is absurd .

    I’m old now and close to retirement and I still have fears of not having enough to eat or living in a rusty trailer out in the Desert if things go sideways ~ one never knows , that’s why I didn’t scatter the landscape with Children like so many do .

    -Nate

  • avatar
    mkirk

    The obvious answer is a payday loan to cover the down payment. Problem solved.

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