I just don't understand and I tend to fault the banking industry more heavily for this phenomenon than I do these covetous consumers.

My bank, ORNL Federal Credit Union, writes mortgages with no money down, too, and also grants home equity lines of credit for up to 100% of home values. Their website advertises their foreclosures these days, of course.

All I know is that it's hard to pass on to my kids the lessons of conservatism and frugality that my own parents taught me, what with practices like these having become the new normal.

I just took another look at ORNL's website to see for how long they'll finance a car but it's not indicated. I know someone who recently financed a new car there for seven years, but I was wondering if they could have run the loan for even longer?

Anyway, ORNL will finance 100% of a new car purchase, too, and sells *optional* "gap insurance" so that if the car is totaled or stolen and not recovered and the debtor's car insurance payout is then inadequate to repay what's owed to the bank, he won't be left twisting in the wind.

But why is this "gap insurance" optional???

Bubble?

(link...)

People have less and less money to spend, so the credit component of the economy gets larger and larger. It's, like, the definition of capitalism ...

If Marx is too dense, try Istvan Meszaros' "Beyond Capital." He lays it all out, and explains why Bill Lyons' 'economic development' is a dead end.

And again, banks aren't looking after buyers' interests when they offer these zero down/seven year repay terms then make "gap insurance" optional, either.

I certainly recognize that buyers share culpability for this kind of recklessness, but we've all seen the polls indicative of how little most Americans know about personal finance. The banks, on the other hand, we should expect to know better.

I just don't see any evidence of "consumer protection" in these recent terms that would serve to protect new car buyers from themselves.

About 30% of new car loans are made through manufacturer's financing companies.

My dad always bought cars with cash. If he didn't have the cash, he didn't buy the car.

Credit is an industry. Just look at Chapman Highway ... and the 'plantation' banks that line Kingston Pike.

Well, let me clarify that I certainly don't begrudge anybody who can afford those $517 a month car payments (before insurance) and I want to be one of 'em!

All I've meant to point out above is that if this is the average new car payment, we ought to be able to examine that amount relative to the average household income (and the average household size, I guess) to determine whether that amount seems prudent for that household. So I'm talking relativity, you understand.

If I may briefly return to this tangentially-related subject of mortgages, though, the rule I was taught was to keep housing cost, rent or mortgage either one, no more than 25% of "take home" income (to include one's taxes and insurance on any mortgage). In my previous life as a single person and over the years I was married, I always did (which has something to do with why I live in a 1456 square foot house, ha ha).

I just asked Mr. Google what that guideline imposed by the banks is today, though, and look what he answered:

Income used for housing: What others say

The traditional model: 35 percent/45 percent of pretax income.

In an article on how the mortgage crash of the late 2000s changed the rules for first-time home buyers, the New York Times reported:

"If you’re determined to be truly conservative, don’t spend more than about 35 percent of your pretax income on mortgage, property tax, and home insurance payments. Bank of America, which adheres to the guidelines that Fannie Mae and Freddie Mac set, will let your total debt (including student and other loans) hit 45 percent of your pretax income, but no more."

Let’s remember that even in the post-crisis lending world, mortgage lenders want to approve creditworthy borrowers for the largest mortgage possible. I wouldn’t call 35 percent of your pretax income on mortgage, property tax, and home insurance payments “conservative.” I’d call it average.

The conservative mode: 25 percent of after-tax income!

On the flip side, debt-hating Dave Ramsey wants your housing payment (including property taxes and insurance) to be no more than 25 percent of your take-home income.

(Ramsey says) "Your mortgage payment should not be more than 25 percent of your take-home pay and you should get a 15-year or less, fixed-rate mortgage … Now, you can probably qualify for a much larger loan than what 25 percent of your take-home pay would give you. But it’s really not wise to spend more on a house because then you will be what I call “house poor.” Too much of your income would be going out in payments, and it will put a strain on the rest of your budget so you wouldn’t be saving and paying cash for furniture, cars, and education."

Notice that Ramsey says 25 percent of your take-home income while lenders are saying 35 percent of your pretax income. That’s a huge difference! Ramsey also recommends 15-year mortgages in a world where most buyers take 30-year mortgages. This is what I’d call conservative.

Sure looks to me like the "conventional wisdom" has changed--and that it's not very wise.

From Bloomberg:

The rise in leases has contributed to a surge of vehicles being returned to dealers at the end of their term, which are then sold in the used-car market. The supply glut has started to depress used-vehicle prices. When those values fall by more than automakers and lenders bargained for, the companies rack up losses. Ford Motor Co.’s credit unit cut $300 million from its annual profit forecast,

The good news is I got a great deal on a lease return with 30K miles, a blingy little car for about half it's original list. Thank you, Ford.

**************

The bad news is people using loans to buy used cars of questionable reliability. When the cars die before being paid off, borrowers are having wages garnished for a car they can't even drive.

The bad news is people using loans to buy used cars of questionable reliability. When the cars die before being paid off, borrowers are having wages garnished for a car they can't even drive.

But in an instance like that, too, responsible banks (serving less-than-responsible or at least less-than-knowledgeable borrowers) really should be helping borrowers avoid such a scenario.

Banks can cap the age of cars they'll finance and cap the number of months they'll run the loans, too.

Working in tandem, those two controls should reduce or preclude the borrower's chance of disaster.

Ouch. This site cites as assertion by Debt.org that, as of 2015, 30% of new car loans were written for 72 to 84 month terms.

(Confirmed, then, that some institutions are now running car loans that long. Thought so.)

Most of the comments here are about how to get around the fact that people do not make enough money to buy a new car and about how to get around that problem by buying used ones or whatever.
We are so mired in this system that we do not see it.

I started out buying new cars, more accurately 2 new cars and a new truck (or two).

The first one, a civic, simply didn't exist before. 2017 price - 12,000

The second one in 1980 was a new model wagon with a hatch wide enough to haul plywood, 17,000 in today's dollars.

I helped my X buy a truck in 1980 for about but the same one I bought new in 1984 wasn't much more expensive, having lived through inflation I thought it was a deal, about 15,000 today*.

*Actually it was a deal, it should have cost $7200 adjusted for inflation, as opposed to the $6400 I paid.

But I digress, My point is new cars are a bit more expensive now than back in the day. But they have more amenities, like AC and cruise control, not to mention airbags & such.

So I remembered this thread while I was reading this interesting article that attempts to link the 2016 success of Trump and Bernie Sanders to car prices and affordability.