The Next Wave
Dec 30th, 2007 at 8:38 am by Susie
Every time I have to shell out another $300 for another car repair, I consider the alternative:
When Jennifer and Bobby Post traded in their 2001 Chevy Suburban last year for a shiny new Ford F-350 turbo diesel with an extended cab, it seemed like a great deal. Even though they still owed $9,500 on their SUV after the trade-in value, they didn’t have to put a penny down.
The dealership, near the Posts’ home in Victorville, made it easy; it just added the old debt to the price of the new truck and gave the couple a seven-year, $44,276 loan.
The Posts were a little worried about taking on such a long obligation, but they couldn’t pass up a monthly payment under $700. Now they’re having regrets.
“I didn’t realize how much debt was in it,” said Jennifer Post, who has since moved with her family to Iowa. Now, she’d like to get rid of the truck but can’t, because there’s so much debt that she’d literally have to pay someone to take it off her hands.
“We have no options,” she said.
Americans haven’t just been taking out risky mortgages for homes in the last few years; they’ve also been signing larger automobile loans for significantly longer terms than they used to.
As a result, people are slipping into a perpetual cycle of automobile debt that experts think could lead to a new credit crunch extending from dealerships to driveways and all the way to Wall Street.
It’s stories like this that make me glad I live in Manhattan…
I bought my Camry used, and it’s still running fine 11 years later.
My wife’s Beetle is about 8 years old and doing well.
Part of the secret is that we have lived in cities, and not totally
relied on these vehicles by also using busses, trains, light rail,
walking, and biking.
Well the disease seems to be rampant consumerism. We thrive on how large our cars, homes, debt load are. Am in my early 60’s and we went through one VW bug and several vans in our first 25 years of marriage. Currently we have a 84 Mazda truck with 263K miles on it and about $2K in repairs (excluding routine items) since we got it. My spouse drives a 94 Honda Civic with 185K mile on it - only a new radiator so far. We must replay some of the 70’s values of having a smaller footprint on the earth.
Happy new year to all.
Erik
I support designing our cities so that we don’t need cars every day. Living in a city near public transportation and encouraging better public transportation that will allow everyone to get to work as well as to cultural/sports events would free up a lot of money for things other than car payments, car repairs, and maintaining and building more lanes on the highway.
But I suspect that we will continue to resist that change. We may admire the old world’s old cities while we build more suburbs where there is nothing to walk to even if you are brave enough to try to walk to the local strip mall. It’s the American way — we’ll wait until the cost to maintain our auto-based infrastructure becomes too expensive to continue before we think about designing for pedestrians instead of automotive Full Metal Burkhas.
It never occurred to her that a loan that size might be a bad idea? Are car loans as complicated as the subprime mortgages? (I don’t know; I’ve never owned a car.)
Innumeracy is a significant part of the problem, I think; most Americans are terrible at math, myself included. This leaves them at the mercy of fast-talking salespeople. Fortunately for me, I am deeply suspicious of any business dealings and walk away whenever someone tries to pressure me.