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In another thread, I could not help but notice someone bought a new truck with a monthly payment of over $1250 per month. It is a shorter term loan, which drives the price up. Still I cannot imagine taking on such a large, single auto payment in my household... and I buy new cars more frequently than anyone money conscious should.
Is this becoming more common to see people paying a grand a month on new car loans?
Common? No. The average is in the $400/mo range - but that is usually for people that plan on carrying the loan for a a full 48-72 month term.
Others don't look it as a perpetual payment, just something they'll pay in large lumps until it's paid off. In which case the actual payment doesn't matter so much.
It isn't uncommon anymore for new trucks to climb over 50K. A Ford F150 Platinum with 4WD has a base price of 55K. With no down payment, this would have your monthly payment be just under 1000 a month and this is a 60 month term.
As much as I feel this payment is just nuts, if they can afford it and the monthly payment is no big deal, then more power to them.
In another thread, I could not help but notice someone bought a new truck with a monthly payment of over $1250 per month. It is a shorter term loan, which drives the price up. Still I cannot imagine taking on such a large, single auto payment in my household... and I buy new cars more frequently than anyone money conscious should.
Is this becoming more common to see people paying a grand a month on new car loans?
It's not common.
But here's the thing: The more often you trade in your vehicle, the shorter your loan needs to be in order to keep up with the depreciation. If you have a long loan to reduce the payment and trade the vehicle in too soon, you will be upside down, meaning you owe more than it is worth. If you simply roll the amount into the next vehicle, you will be even more upside down on it, and eventually you will end up with very high payments anyway.
I read a story of one poor soul not too long ago that somehow managed to owe $66k on a $25k car!
If you do this, you basically have tens of thousands of dollars in de facto unsecured debt, and you are living beyond your means. It's not sustainable. Eventually you have to pay the piper, or so the saying goes.
A better idea is to get a lease that matches the amount of time you will use the vehicle. This way the residual value is known in advance and you will not have negative equity at the end.
But here's the thing: The more often you trade in your vehicle, the shorter your loan needs to be in order to keep up with the depreciation. If you have a long loan to reduce the payment and trade the vehicle in too soon, you will be upside down, meaning you owe more than it is worth. If you simply roll the amount into the next vehicle, you will be even more upside down on it, and eventually you will end up with very high payments anyway.
I read a story of one poor soul not too long ago that somehow managed to owe $66k on a $25k car!
If you do this, you basically have tens of thousands of dollars in de facto unsecured debt, and you are living beyond your means. It's not sustainable. Eventually you have to pay the piper, or so the saying goes.
A better idea is to get a lease that matches the amount of time you will use the vehicle. This way the residual value is known in advance and you will not have negative equity at the end.
Curious what would happen if he defaulted on his car loan and they came and repossessed his car. Would he still be liable for the remaining balance or would it just be written off.
I did not think it is common. In this case, there was no trade. They must feel able to afford it. I guess it just was shocking to see!
Quote:
Originally Posted by IShootNikon
Curious what would happen if he defaulted on his car loan and they came and repossessed his car. Would he still be liable for the remaining balance or would it just be written off.
It may depend on the particular state this happens in, if auto loans differ. I know with home loans, states differ in whether or not you would owe the balance after a default and sale of the asset for less than what is owed in principle.
Think we are right in the average range.. Paying $490/m on my Corvette and $430/m on my wifes Volt. Both are in the low 3% interest rate range and the Corvette was taken out for 72 months, the Volt 60 months. The Corvette has never been worth less then what I owe and I have about $5k in equity in it now with still a little over 3 years to go on the loan.
Curious what would happen if he defaulted on his car loan and they came and repossessed his car. Would he still be liable for the remaining balance or would it just be written off.
It would probably be charged off and sent to a collection agency that would buy it for pennies on the dollar.
Standard car loans were for 3 years. I can see it go up to 4 but 5 or 6 years is crazy. Even 4 years seems like an eternity. I am personally not comfortable with anything over $450/mo, lease or buy, which puts me mostly in the lease category for the kind of cars I am interested in. I actually feel more stressed out with a loan because I count down every day to pay it off. With a lease, you know it never ends, just like my phone bills.
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It is a shorter term loan, which drives the price up. Still I cannot imagine taking on such a large, single auto payment in my household... and I buy new cars more frequently than anyone money conscious should.
