By on April 5, 2021

The subprime auto market looks to be in poor health as the number of borrowers with outstanding loans that are more than 60 days overdue continues increasing. While the number has a tendency to rise and fall between seasons, the general trend toward indebtedness has been going up since 2015, with increasingly more customers boasting lackluster credit scores becoming incapable of footing their transportation bill.

Delinquencies skyrocketed in 2020, as government lockdowns pushed many out of work and now appear to be increasing due to a recovery plan that primarily seems to be serving cooperate interests and the wealthiest socioeconomic classes. Though it should be said that middle and lower-class families had been losing ground for decades, at least according to the latest Pew Research data. Pandemic-related complications only served to accelerate the existing financial disparities on all fronts. We are now on course for poorer people to have even less money moving forward, especially in the world’s most developed countries.

I wonder why so many people are defaulting on their car loans…

The Wall Street Journal provided some hard figures regarding the increased number of U.S. delinquencies this month and framed the matter as one stemming from an “uneven economic recovery and a deep divergence between those who can navigate the coronavirus downturn and those who can’t.”

Sadly, those who cannot are likely to see their vehicle repossessed as they experience another ding to their already low credit score.

From WSJ:

A greater share of people with low credit scores has been falling behind on their car payments in recent months, a sign of stress among consumers whose finances have been hit hard by the pandemic.

Some 10.9 [percent] of subprime borrowers with outstanding auto loans or leases were more than 60 days past due in February, up from 10.7% in January and 8.7 [percent] a year prior, according to credit-reporting firm TransUnion. It marked the sixth consecutive month-over-month increase and the highest level in monthly data going back to January 2019.

More than 9 [percent] of subprime auto borrowers were more than 60 days past due in the fourth quarter, the highest quarterly figure in data going back to 2005.

“We are seeing the separation between the consumers who are back on their feet and those who aren’t,” said Satyan Merchant, head of TransUnion’s automotive financing arm.

While breaks were issued to some renters and business owners, average folks tended to benefit most from postponements on paying back federally backed student loans and mortgages. The Wall Street Journal suggested this gave a potentially unfair advantage to homeowners and college graduates, both of which are likely to have stronger financial footing than someone claiming neither attribute. Some lenders also decided to provide temporary relief on monthly payments at the start of the pandemic. But that leniency began to evaporate by the middle of 2020, which resulted in a surge of defaulting customers beginning last April.

We are now in a situation where the number of subprime borrowers has declined too, with many people becoming disinterested in accumulating debt or incapable of being approved for a loan. But those with excellent credit scores appear to be able to make their payments with historically good consistency. That’s likely to offer little consolation to those occupying the former group, however.

[Image: pathdoc/Shutterstock]

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62 Comments on “Subprime Auto Market Looking Extra Rough in 2021...”

  • avatar
    Mike Beranek

    Just to be clear, it wasn’t “government shutdowns” that reduced business activity and cost some people their jobs.
    It was the pandemic.

    • 0 avatar

      You are correct, because at no time while restaurants, bars, gyms, salons, parks, beaches, etc. etc. were shut down, was there ever a shutdown of any significant element of -government-.

    • 0 avatar

      Pandemic was invented by The World Government in Switzerland.

    • 0 avatar

      In fact we should have had a lot more shutdowns, maybe we wouldn’t be the greatest country in the world (at getting COVID).

      • 0 avatar

        “ In fact we should have had a lot more shutdowns, maybe we wouldn’t be the greatest country in the world (at getting COVID).”

        Yes let’s shutdown even more (despite being proven over and over that shutdowns, like masks, do not work at all) for a virus that has a 99.7% survival rate. Makes total sense.

    • 0 avatar

      @ Mike: Respectfully disagree. It was governments reacting to a viral infection from which 99.73% of those who contracted it recovered that put us in the economic situation we now find ourselves in. Perhaps if governments would have reacted with ‘reason’ instead of fear things from an economic standpoint would be much different today. Put another way, if the response would have been akin to the ‘Great Barrington Declarations’ advice a large percentage of folks would still be working, businesses that went out of business would still open and the economy would be in much better shape than it currently is.

  • avatar

    This story should have a couple of links to recent stories about increasing car prices (new and used)

    Lots of easy loans = ability of seller to hike prices beyond the real market clearing price.

    (cough)college tuition(cough cough)

  • avatar
    SCE to AUX

    The only victims here are people who are suddenly unemployed due to factors beyond their control. And they may have started with good credit ratings, anyway.

    Other than that, subprime customers are by definition poor financial planners. Advice about buying used vs new, buying less vs more, and fixing rather than replacing are lost on many people. I didn’t take a loan for a car until 8 years after I started buying cars, and didn’t buy new until 14 years after that.

    As for new car prices closing in on $40k average, the mfrs are increasingly catering to higher-income customers with higher-margin vehicles. The only way to counteract this trend will be through a sustained new market contraction and surge in the used car market.

    • 0 avatar

      I don’t know whether the auto dealer has to eat any of the costs of collections or repos, but my guess would be “no”.

      That’s been farmed out just like subprime mortgages, to someone else who thinks he can count on a bailout from the taxpayers, just like 2008.

      Don’t think I have ever heard of a salesman asking “Are you sure you can handle the payments on this car?”

      • 0 avatar

        Unless the dealer is shown to have committed fraud in the transaction, they aren’t going to be on the hook for repo costs. The worst that usually happens is a dealer gets busted inflating the value of the vehicle and the bank penalizes them.

        Salesmen have zero incentive to ask if the buyer can actually pay for the car. And no one in any other business confronts their customers about their financial health either. People are going to make dumb financial decisions. No amount of nannying is going to stop that.

  • avatar

    “Delinquencies skyrocketed in 2020, as government lockdowns pushed many out of work and now appear to be stalled due to a recovery plan that primarily seems to be serving cooperate interests and the wealthiest socioeconomic classes.”

    I do not understand this sentence. Government lockdowns are stalled? The recovery plan meaning infrastructure plan? Stimulus payments? The PPP money was definitely a handout for the rich, the most recent stimulus, not so much.

    In any event, I would echo that this is problem that has always gone hand in hand with subprime lending. I actually find it encouraging that it isn’t higher given all that has happened over the past year. I would also echo that vehicle prices are out of control, in several segments, typically large vehicles which of course are very popular right now.

    All I can say is bring on the Chinese cars, maybe the Indian cars too. The pickup truck companies are going to price themselves out of the general market and lose that share when it happens. There has to be an enormous market and pent up demand for inexpensive new vehicles.

    • 0 avatar
      SCE to AUX

      “vehicle prices are out of control, in several segments, typically large vehicles which of course are very popular right now.”

      Prices are not out of control if people keep buying them. The only control is for people to *not* buy them.

      My comment above about rising car prices doesn’t mean I blame the mfrs; I blame the market. Let’s face it – nobody wants the $29k stripped F-150 or Silverado. Instead, there are 720 FICOs trying to swing $50k trucks. Instead, these same customers should be looking at lightly used trucks for half the price.

      • 0 avatar

        “Instead, these same customers should be looking at lightly used trucks for half the price.”

        Not to disagree with your overall premise, but this statement suggests you haven’t checked the truck market for the past 15 years. This stuff was jacked up before 2008, let alone before let’s blow up the economic world.

        • 0 avatar

          No, no, trucks are totally affordable!

          Serious, this. I was looking at trucks for my ex’s kid and I was mortified what people were asking for them. We’re talking 2011 Rangers with 100,000 miles, vinyl seats, 4WD and air…for ten grand.

          If you ask me, truck prices are totally Looney Tunes.

          • 0 avatar

            Back on Earth the 3rd gen Rangers with 4WD (4.0 auto only btw) were already ridiculous as I looked hard in 2017 and 2018. I saw this primarily as a function of every truck becoming gigantic and GM’s gen 1 Colorado being such a dismal failure (it being larger than Ranger but still manageable). I have not looked but Tacoma’s early 00 examples would be interesting to see in terms of pricing since its the “super” Ranger (minus the frame damage).

      • 0 avatar

        “lightly used trucks at half the price…”

        This reminds me of something my Dad told me about his time in Greenland: “There’s a girl behind every tree!”

      • 0 avatar

        Used truck prices are crazy. Some of the auction prices on 1 year old trucks are only 10% less then the MSRP when new and that’s wholesale. I assume that only works because the dealer is going to make all the money on financing fees and trade in but still crazy.
        At a recent an Auction a 5 year old ram 3500 with a cummins and 125k miles and blown transmission sold for 28k wholesale.

        • 0 avatar

          “Some of the auction prices on 1 year old trucks are only 10% less then the MSRP when new and that’s wholesale”

          Its been this way for some time, I had the exact conversation about 2015/16 when discussing the pre-aluminum F-150 though I think it was 5% not 10%. It works that way in part for the reasons you named but also because they dealers are incentivized to push trucks by the mfg (financing has a lot to do with it too, as pickups of just about any stripe are very popular/easy to finance).

          This is nothing new for diesel. In 2006 I sat in an MY02 Ford F350 7.3 Powerstroke with 353K on the clock which sold in the as-is sale for $10K which then shocked me.

          Cummins is a $9,100 option and more on the dually, so depending on the cab chassis it came with and overall condition its high but not too surprising. Mega cab would have been $60K plus without the dually or 4WD, $3K in a tranny rebuild and $31/32K plus auction fees all in doesn’t look so bad if you must have diesel.

          “The standard-output turbodiesel is an extra $9,100; the high-output version for the 3500 dually is $11,795.”

          • 0 avatar

            Yeah I agree diesel and mega cabs have always been crazy but the every day trucks are much higher then I would have thought. 2 years ago I was looking at stripped out 3-5 year old half tons (just 4wd ext cabs) with 40-60k miles at the time you could get one for 18-22k, same trucks now are 28-30k. That’s one hell of a jump in 2 years.

          • 0 avatar


            You didn’t specify V8 or V6 but here is what 4×4 V6 Tradesmen are doing now:

            MY17 RAM 1500 4WD V6 CREW CAB 3.6L TRADESMAN

            9/17/20 $24,400 17,479 4.8 6G/A Gray Regular Southeast Orlando
            6/18/20 $20,750 18,564 4.4 6ET/A White Regular Southwest Texas Hobby
            12/29/20 $23,200 18,744 4.0 6ET/A White Regular Southeast Orlando
            5/20/20 $20,000 26,522 3.4 6ET/A Gray Regular Southwest Dallas
            9/8/20 $23,500 27,191 4.0 6ET/A White Lease Northeast Baltimore-Washington
            10/1/20 $22,250 37,190 4.6 6ET/A White Regular West Coast Phoenix
            4/30/20 $16,200 38,247 4.2 6G/A Black Regular Midwest Milwaukee
            10/21/20 $24,000 46,743 5.0 6ET/A Black Regular West Coast California
            4/3/20 $14,600 51,181 3.6 6ET/A Gray Lease Midwest Louisville
            6/11/20 $13,600 56,303 2.2 6ET/A White Lease Southeast Mississippi
            6/12/20 $18,600 58,056 – – 6CY/A Silver Regular Southeast Orlando
            12/29/20 $13,500 86,152 3.0 6ET/A White Lease Southwest Dallas
            11/5/20 $14,800 99,001 3.2 6ET/A White Lease Midwest Northstar Minnesota
            5/7/20 $13,000 103,411 3.9 6ET/A White Lease Midwest Northstar Minnesota
            1/27/21 $11,100 148,499 2.9 6ET/A Black Lease Midwest Minneapolis

            Just re-reading it I don’t see more than one 2021 date there and its April. Seems the inventory shortage is real.

          • 0 avatar

            Shocked at the wholesale prices being that low. I have a family member who works at a wholesale auction but usually handles off lease sales from manufacturers who don’t make many pickups so i don’t hear about these.
            Lots of those are going to sell for 6K or more markup, which is pretty damn good in my prior experience.

          • 0 avatar

            I am too, though a few were in the midst of the greatest wholesale decline in a decade if not ever. I’ve heard inventory is scarce and dealers have been overpaying at times just to have something to sell on the lot.

      • 0 avatar

        I agree SCE, the market is certainly capable of swinging the pendulum in the opposite direction. But lets face it, the popularity of pickup trucks is a marketing triumph that defies, in many ways, common financial sense. The average household income in this country is only in the $55k annually range. Yet the average transaction price for new pickups is approximately $50k per edmunds. They are selling millions of pickups every year, granted many of them are to fleets, but I seriously doubt that all of the well heeled in this country are buying pickups and that a large portion of pickup truck buyers, struggles to afford them as evidenced by the rapid downturn in truck sales when gas prices skyrocketed in the early 2000’s. A few hundred dollars in extra fuel charges per month broke the bank for many. I am sure that the same applies to a lot of German luxury cars as well, but I digress. The marketing genius behind the pickup boom has created demand where it would not naturally exist. Sort of like the cigarette advertising in the mid 20th century. “You must not be a man if you aren’t smoking X brand of cigarettes”, just like every single pickup truck ad ever made in the past few decades. If you are a patriot, you buy a giant American Truck. If you are a man’s man, you buy a giant American Truck……etc, etc. There are even ads that suggest women prefer men who drive trucks. While I am sure there are some out there, I think most women would prefer a man who makes sound financial decisions moreso than seeing an insecure manboy pilot a bohemoth around town. I think you can see where I am going with this. This is driving the 96 month terms for new car financing and probably a good portion of the subprime troubles.

        There are parallels, but few where you can find so many average income people willing to pay so much for something that makes so little sense. They are overpriced, they are not economical to operate, they are not easy to drive where most people live, etc, etc. Like I said, a marketing triumph.

      • 0 avatar

        Lightly used trucks are 80%-90% of the price, not half the price.

        I blame a culture that has told every man in a large portion of America that if he doesn’t have a newish full-size truck, preferably lifted with bigger tires, then his manhood is in question.

        $50k income earners aren’t buying these trucks, but plenty of $80k income earners are, and it’s just stupefying. If I bought a car that represented the same portion of my income I’d have a loaded S63 AMG, and my finances would be a smoking crater.

        • 0 avatar

          Pickup trucks maintain a good resale value because they are well engineered and last a long time. It’s easy to buy a new truck every few years when you can get a good trade-in for your old one every time.

          As for people with middle incomes buying higher trim trucks, remember that an $80K income goes an awful lot farther housing wise in the Midwest/South/Mountain West than in a coastal city (where skepticism about truck ownership is usually highest). It’s not unreasonable to get a large family home in a decent to good school district for $1000-1500 a month. Dropping $700ish a month on a truck payment (less if they traded in their old truck) isn’t going to break the bank for those people the way it might if they had to pay $800K for a 2 bedroom condo.

          • 0 avatar

            Yeah the trade in thing is interesting. I know a bunch of people in trucks you wouldn’t think they could afford because they payed the price for entry a decade or two ago and trade in every 3-5 years.

          • 0 avatar

            Yes but if rent/mortgage is that low in an area average incomes are also lower.

          • 0 avatar

            Yes, incomes are lower, but not in the same proportion as housing costs.

            Example: It would be fairly straightforward for me to make double or even 2.5X my Midwestern engineering salary if I moved to Seattle, the Bay Area, or NYC. I could not duplicate my home within commuting distance of those places even if I paid eight times as much as I actually did.

            And that’s for me as a white collar worker where salaries are a lot more flexible based on location and industry. I’d be surprised if a construction worker or a welder can even make double on the coasts what they do here, and unskilled workers even less.

          • 0 avatar

            The resale value point is a good point, but even then you’re looking at at least $500/month in payments, likely more for Laramie/Lariat level trucks or more challenging credit situations. That’s a big percentage of what is likely $5000-$5500 take-home, especially when you consider that it doesn’t include gas, insurance, maintenance, or the indirect cost of parking.

        • 0 avatar

          “Lightly used trucks are 80%-90% of the price, not half the price.”

          This has not always been the case which I will briefly demonstrate from my files. I cannot tell the trim codes from looking at the printouts but in MY03 there are two 4×4 XCs for the Chevy K1500:

          LT Extended Cab 4WD MSRP: $35,885, INVOICE: $30,686

          LS Extended Cab 4WD MSRP: $30,565, INVOICE: $26,031

          Manheim’s Butler Auto Auction 3/30/2005

          MY03 Chevy C1500 SLV4X4 XC 29 20950
          MY03 Chevy C1500 SLV4X4 XC 34 18850
          MY03 Chevy C1500 SLV4X4 XC 47 18000
          MY03 Chevy C1500 SLV4X4 XC 33 21600
          MY03 Chevy C1500 SLV4X4 XC 23 20200

          Five trucks right around the 20K mark, if we cost average the invoices of both trims to 28K, we’re looking at near 30% depreciation in the first three MYs to CY 2005. Trucks by and large on the wholesale end do not do this now.

          “I blame a culture that has told every man in a large portion of America that if he doesn’t have a newish full-size truck, preferably lifted with bigger tires, then his manhood is in question.”

          I have to remember my Carlin:

          “Think of how stupid the average person is, and realize half of them are stupider than that”

          “$50k income earners aren’t buying these trucks, but plenty of $80k income earners are, and it’s just stupefying.”

          I cannot speak for PNW, but there are plenty around that 50K mark who somehow get into a newer pickup. From what I have seen it seems to be a blue collar or hick thing, though I have encountered a few outside of this who sport the loaded half tons as a function of showing off (higher income than 50K of course). My lot is now full but a Ranger (the real Ranger) would have been a welcome addition, seems something like that may be coming again. I have no need or want for an aircraft carrier size pickup which is what they almost all are now.

          I agree with your overall point and not to pick nits but that hypothetical S63 would evaporate money while the hicks in the pickups would retain a sizable portion of the purchase price. They would ironically be more financially intelligent in their poor spending choice in that scenario.

    • 0 avatar

      I agree that the increase is lower than I would have expected all things considered.

  • avatar

    Who do subprime buyers think they are? That Maverick should’ve been theirs. I’ve drove around worse (OK almost) and with an 850 (almost) FICO at the time. I’m a virtual millionaire now (almost) and still I’ve only paid cash for new cars (trucks).

  • avatar

    I’m trying to figure out where the trillions of federal relief went. Most of the unemployed ended up ahead with the extra benefits. That coupled with 3 stimulus payments should’ve let people at least keep their cars out of repo status.

    • 0 avatar
      SCE to AUX

      Agreed, but sadly, some people are running so close that a few grand in relief money only kept the roof over their head, or food on the table.

      Much of the population is only a few hundred dollars away from a financial cliff.

    • 0 avatar

      It’s hard to lump everyone who got stimulus relief together. I’m sure there are plenty of people who used the funds responsibly.

    • 0 avatar
      Land Ark

      I’m curious what happened since I was led to believe half of the US was one paycheck away from financial ruin.
      I’m not getting the sense that 1/2 of the US is in bankruptcy protection. And I can’t believe the checks would get them through. Especially since the first one didn’t come out until well after 2 weeks had passed.

      • 0 avatar

        I suspect the eviction moratoriums are having a significant effect that we will start to see once they expire.

        You can survive a long time on stimmies and unemployment if you aren’t paying rent.

        • 0 avatar

          Yep I agree and rent is shooting up as well in most places. Near me it looks like a 20-25% increase in advertised rent prices in my town. Not sure how families afford $1800 a month for half a two family house that used to rent for $1100 4 years ago. Most people I know who are still out of work were two income families and the spouse kept their job which means they have cash flow just not what it used to be. I imagine there most be people that’s not the case for.
          I know one family that was 5 months behind on rent last time I talked to them. They were both unemployed for 3-4 months then 1 was unemployed until last month. They used stimulus for car payments utilities etc they are now looking at wiping out a good chink of a 401K to pay off the rent.

          • 0 avatar

            @ Mopar: rents are up big in my are also. I currently rent out a 3 bed single family for $1600, but I’ve checked recent listings and found similar houses going for $1850-1950 now. It’s crazy when a mortgage would be half that.

          • 0 avatar

            A house just across the street from mine (small 3 bedroom single family about 1300 sqft)rented 2 years ago for $1500/month (already higher then a mortgage would be by a ways), almost the same house around the corner just got listed at $2100, It’s honestly tempting to buy another house and rent mine out instead of selling.

    • 0 avatar

      We are talking about sub-prime borrowers, who by definition are much more likely on average to make paying their debts a top priority. It also means they are more likely to be the type of person that money burns a hole in their pocket.

  • avatar

    “uneven economic recovery”

    And how! At this point my head is going to end up on a pike.

    • 0 avatar

      Recovery since 2008, but it never recovers. The economy clearly hasn’t hit rock bottom yet and thus won’t admit it has a problem.

    • 0 avatar

      There is a lot to be said for avoiding ostentatious displays of wealth. The pandemic has been a financial boon for me. Not that I am wealthy, but certainly better off than most. I will keep my head down and try to avoid being lined up against the wall when they eventually come to right the social contract.

  • avatar

    “We are now on course for poorer people to have even less money moving forward, especially in the world’s most developed countries.”

    This is news? This has been happening every year since 1995.

  • avatar
    DC Bruce

    Where is “Hammer Time” when we need it? Seriously, I don’t know what to make of stuff like this. To state the obvious, the less money you have, the more careful a shopper you have to be — whether it’s cars, clothes or houses. Rich guys can afford the staggering depreciation on disposable German luxury cars. Others cannot. If trucks and SUVs are “a thing,” then buy a car. It will do fine.

    Likewise, it seems that s lot of people do not understand credit . . . and so they get into trouble when adversity strikes. Instead of teaching the “1619 Project” in high school, maybe kids should be taught how credit works . . . not that it simply should be avoided (which is simplistic and wrong) but how to use it without getting into trouble.

    Of course, governments’ unprecedented response to the COVID-19 virus (shut down virtually all economic activity that can’t be done in isolation) is truly a “Black Swan” event. But, individually, all of us can be subject to Black Swan events — debilitating illness, loss of job, etc.

    But it seems to me cruel that people have to learn “the hard way” about financial risk . . . and I’m not just talking about the so-called “deplorables.” I’m talking about the person who takes on $50K in education loans to get a Master’s Degree in English. (I recall reading an article about such a person.)

    To be sure, globalization and the export of low-skill jobs from the U.S. (and other older industrial countries) has taken its toll. But it seems to me that the higher education establishment should be called to account for marketing its services vaguely as “an investment in your future” while charging obscene fees for the privilege. I recall helping to advise one of my children who was contemplating a career in International Relations (e.g. US Foreign Service). As we were looking at various programs, I recall in particular, Harvard’s Kennedy School, which would cost well over $100K . . . this for a person who’s not going into investment banking or Big Law, but modestly-paid public service. Seriously, folks . . , you ask this with a straight face?

    People — at all levels of educational attainment — falling for this do so because, at some point in their late adolescent lives they didn’t learn about debt, its risks and how to use it.

    Finally, it’s sad but telling that politicians like Sen. Warren are clamoring for student loan “relief” but no one seems to be asking about helping out the restaurant worker who lost his job and whose employer went out of business, but who needs his financed car to get another job somewhere.

    • 0 avatar

      What they teach in American schools? Do they teach finances and to use Excel? Political Economy? How about World History, US History, US Political system – why and how it works? English? Literature? Math? Chemistry? Classical Physics, like Newton’s laws (I know he was a white guy but still)? General Relativity? Quantum Physics? Astronomy? Biology?

  • avatar

    This can only be because of government enforced business closures due to Covid. Otherwise, the US is awash in stimulus money and the economy is starting to roar in places that have fully reopened. My state just increased it’s min wage to $11 an hour and dropped it’s mask mandate. EVERY place that relies on hourly wage employees is hiring right now…every fast food restaurant, every retailer has signs out begging for people. For someone willing and capable of holding a very basic job, there’s no reason to be defaulting on a car loan right now in many places.

    • 0 avatar

      Restaurants are still at under pre covid levels of employment. Yes they are hiring but not everyone. As is typical there are big shifts of people with the wrong job title looking for work. Entertainment and travel are still picking up but are still at a fraction of normal employment. A lot of employers also still aren’t paying what it takes to actually get people. A friend who used to work in restaurants said the offers she was getting to come back were so low she decided it made more sense to spend stimulus money on going back to school. A lot of other employers seemed to have used COVID as an excuse to lay people off and not bring them back as well.

    • 0 avatar

      “there’s no reason to be defaulting on a car loan right now in many places.”

      $11/hr @ 120 hrs per month = $1760. We’ll be nice and assume its a teenager in Texas still living with the ‘rents saving to move out, so per month its less $278 in [now pointless] Federal taxes so $1,482 per month. suggests a range of 10%-35% [!!] of income or a payment of $148 – $518, I personally suggest no more than $300. So can our teen accomplish this every month? Yes, assuming steady work and a reasonable purchase around $17,500 for 60 months.

      Now let’s age the teen to 30, then add rent, utilities, Obamacare, car insurance, food and assume this 30yo isn’t being handed welfare. Even three bills is starting to look tough and this assumes our 30 yo can even qualify for the Toyonda. If they cannot, then what has been happening is these people are being corralled into $3K garbage for $8-10K @ eleventy thousand percent which probably has $100/mo minimum in deferred maintenance.

      “The Fed will destroy the world”
      -Dr. Marc Faber, 2014.

      • 0 avatar

        Bad credit sucks if you need a car. Friend has a 2011 caravan that costs him 400 a month (or 100 a week as he says it) from a BHPH. Now this particular friend is decent at making money but really bad on the spending side so this is the third BHPH car, first was repod and the 2nd was swapped for the third by the dealer when the tranny started acting up (thereby netting the BHPH two more years of payments)/
        In general I think the idea that huge swatch of the population are horrible with money is overblown but that doesn’t mean some aren’t really bad with it.

        • 0 avatar

          “In general I think the idea that huge swatch of the population are horrible with money is overblown but that doesn’t mean some aren’t really bad with it.”

          I disagree, though I cannot give a percentage I’d say its much higher than you may think.

          • 0 avatar

            My reasoning is mostly personal experience so not really based on real data. I can tell you a family of 4 living near the median income is not easy in many parts of the country. Most of the people that I know well enough to know their finances try pretty hard to make it work, most financial ruin tends to be caused by being left with a plate of bad choices and not picking the best one.
            Do I pay my mortgage or pay off the medical debt that going to court. Do I make the car payment or make the last payment to the daycare. Do I keep my job or stay home with my ailing grandfather. Do I stay debt free or put the dogs vet bill on the credit card.
            Lots of these choices are emotional and hard to make, so people are not always equipped to handle even if logically they know what they should do. Also there is some amount of living people need to do to maintain some sense of mental stability. Saying not to have kids until your financially stable is one of those things, do you want to be young or old with kids?
            Now I do know a number of people who treat money as disposable and they think they can always make more, so they buy things they can’t afford, or go on vacations on a credit card to keep up with a family member etc. The amazing thing with these people is most of them seem to go thru horrible ups and downs but usually land on their feet.

          • 0 avatar

            Very well put. To most of those hypothetical people I would say the US started its backward slide probably in the 1960s but it accelerated in 1995 when your president voted in favor of the Uruguay Round Agreements Act (aka GATT) in 1994. While the nation’s workforce may have survived NAFTA, this and GATT dealt a steep blow which paved the way to McJob being the default path of many Americans.



            Just look at the 30Y mortgage chart and it epitomizes the true economic situation since 1980 quite well.

            Interestingly, from a 1995 article on the subject:

            “”We’ve always had an `America first’ crowd,” noted political pollster and analyst Stuart Rothenberg. “It’s a hair bigger now. Perot, Buchanan and (consumer advocate Ralph) Nader have the ability to reach the grassroots.””


            Seems the “America first” term was being used in 1995 or earlier… yet so many then and now said “no, America last” with their vote, but I digress as a lot of this is far above our heads and in the past.

            To your hypotheticals I would offer this advice:

            -Elderly and children are expensive, the world they have created since the 1960s de facto requires two incomes however this in practice leads to poor care being given to elderly/children and parents health/stress levels being beyond what is nominal. If a simple cost benefit analysis showed the second income isn’t far beyond this day care cost (min 2/3rds IMO) the work becomes pointless, so stop and live a better life.

            -Since apparently our hypotheticals have a home, its time to garden in the yard.

            -Pets are less expensive than children but outside of fish, generally not cheap. Maybe you can’t afford one? Hmmmm…

            -Cable and/or fancy cell phone plan? You can’t afford it. Hell in the coming years you may not be able to afford Netflix either. Garage sale DVDs are probably your friend, at the right price at least. Better yet… there is this thing called reading…

            -Pay the mortgage over other [odious] debts, because other debts can be stretched out and otherwise handled. Banksters have no qualms about making you homeless, especially now. Those privileged with Section 8 vouchers or otherwise through illegal orders are not impacted by this as much.

            -Teach your children at least one other language (other than Spanish if they are studying that). There are many resources for this now outside of private tutors.

            -Public schools are not designed to educate properly, read up on the late John Taylor Gatto and his research on this.


            -When your children are adolescents, begin preparing them either for trade school or college level education abroad (this is where the second language comes in). “Big education” is beyond a joke.

            -Processed food is toxic, stop eating it. Yes I hate cooking too, but this is what you must do.

            -Learn how to perform basic home and auto repairs.

            -Dump the iGarbage. I argue all of this “smart” junk is for dumb people and is extremely toxic to the mind. I do not know how parents today are grappling with this, from the little I gather they seem to have failed altogether in this arena as a group.


            None of this is particular difficult but one must take responsibility for one’s actions and budget.

            “Now I do know a number of people who treat money as disposable and they think they can always make more”

            Funny you mention this I recently encountered a corporate salary ceiling, at least in my region. I’m sure if I picked up whatever hot skills there are I could sell myself into something better, but by an large there is a ceiling in the individual contributor role.

          • 0 avatar

            Salary ceiling is a real thing and you see it cause arguments on financial forums with lots of west coast tech guys saying they don’t exist. I have hit them before, not fun when every interview ends with an offer remarkably similar to your current salary. I have managed to move past it a bit due to unforeseen job changes but still it’s a big issue.
            One of the people I’m thinking of took on way to much debt when they were working 10-15 hours of overtime a week, which stopped almost a year ago. But he managed to get another job making 15% more and with guaranteed overtime and a union contract with negotiated raises. which is where the landing on your feet part comes in.
            I was taught all about finance when I was a kid (one of my parents has a masters in economics) still didn’t save me from making some poor choices. But the thing is even with cutting out the poor choices things didn’t really get better until the income went up too. There is only so much that can be cut when you have a family.

      • 0 avatar

        Anyone who is working for minimum wage should not be buying a new car.
        If they do, the effect on their economic stability and lifestyle is their own problem, of their own making. They should also consider the cost of comprehensive insurance for 60 months.

  • avatar


    Are you hacking my computer?

    You make numerous excellent points. I will add this: we live in a world where people are unwilling to take personal responsibility. Many want more, better, now.

    And not just the subprime lenders…. at the other end, we have Bill Gates, Jeff Bezos, Elon Musk, et al.

    The “robber barons” of 1890-1940 were more civic-minded, and their wealth came from THINGS that really improved people’s lives, making life easier and safer, like cars (Ford), oil (Rockefeller), steel (Carnegie), food (Heinz)

    The current crop makes money making life more “convenient.” Bezos pays subsistence wages, and no income taxes. We know this, and still, Americans buy his stuff–helping put Sears and K-Mart out of business. Gates controls PCs and has probably caused as much stress to users of MS Office as good has come from it.

    In short, most Americans support “doing the right thing.” They just want some one else to do it.

    While some decline in America’s position in the world was inevitable (in the 1950s and early 1960s, Germany and Japan were still in ruins–they, and the rest of the world would progress then, that was inevitable–just like China would starting in the 1990s), many decisions of our elite (we have the veneer of a Republic, but the reality of cartel capitalism) have exacerbated the challenges of the the lower 70%-85%. Now as the chickens come to home to roost, the “elite” must of necessity, find other real or imagined culprits or enemies. They are master of obfuscation!

    Back to cars–we live in a world awash with technology, yet I cannot think of a single NEW vehicle that excites me enough to want to actually buy it and keep it. That’s a metaphor.

    As for sub-prime lending…. the Fed will bail out the lenders, and those who profit hugely from manipulating the emotions, or needs, of the sub-prime borrowers, those lending CEOs and senior execs and venture (vulture?) capitalists will be made whole and more…after all, they have bought an paid for both US parties.

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