144-month Car Loan?!?!

[greg1647545532]

I think these 6/7/8 year car loans for normal cars are absolutely ridiculous, but new cars are better than ever and last longer than ever, so I dunno. I mean the interest sucks but after 8 years of inflation maybe the time/value equation works out.

 

Personally, anything I would need to finance for 8 years that my wife is just going to spill coffee all over and the kids are going to hide half-eaten lollipops in is a bad purchase. I can't stomach paying more than $15k for a car when there are so many good cars for under $15k.

 

That said, as I've moved up the socioeconomic ladder I've financed more and more things that I didn't think I would. Interest rates are low and I'd rather have my money more liquid, and let a bank take on the risk of converting a bunch of cash into a non-liquid asset. I think when you go even higher up the ladder, the rules change. I just did some research on 20 year boat loans for a friend of mine, I had no idea 20 year boat loans were a thing. But if you're buying a boat that costs as much as a house, I guess it's worth a bit of interest payments to have a bank deal with the TCO and just write a check every month.

[Geeto67]

Kerry, you're so full of shit I can smell you through my monitor.

 

Because I don't think it's a good idea to finance a used car for 12 years, makes you the authority of where this loan is appropriate in the used-car marketplace?

 

You really think I don't understand this product, or is it convenient for you to position me as misunderstood to help your passive-aggressive naysaying on this topic?

 

Yes I don't believe you understand the product because you keep making the mistake of equating the market it serves to another different market where a similar loan period is a bad idea. You keep compressing it into the same product as extended loans for luxury daily driven cars which just flatly isn't the same clients, isn't the same collateral, isn't the same residual or resale market, - about the only thing they have in common is a long term and a high price . I don't know why you keep doing this, but you do, and frankly I know you know better. And you aren't the only one here doing it. This isn't a dealer selling used Hyundai's to people with bad credit - these are savy exotic car brokers who deal with a completely different clientele who have different credit needs. It's a bad idea for the people you want to shit on in the same way it is bad idea for unicorns to take out car loans, the people you think are using this credit product just aren't.

 

Yes a 72 or 96 or 144 month on a depreciating asset, like a luxury DD, that is paid off to term is generally not a smart idea. Even on this P car it is probably unwise. However, Others beyond me have stated, and I even linked a video of a professional who writes these loans specifically saying they are bridge loans, or loans for speculators, and are cycled in 2-3 years and that is the value of the product and the market to whom it works for. A 144 month finance written for this GT4 isn't going to come from a regular bank (because they actually do some specialty lending that they don't advertise like older imported JDM cars, not because I am taking a dig), it is going to come from a very specialized lender who probably isn't going to approve credit to the kind of person who this would be a bad idea for. Banks don't write loans to customers they think are going to default. This is basic stuff clay.

[zeitgeist57]

Andy, thanks for a real-life example of how the loan works short-term, in unique circumstances. I don't doubt people with money to spend on trips like that can benefit from this loan product (as I've mentioned a few times), but I fear the downside risks for others who buy-and-hold beyond the window that there is still money to be made on the car in resale.

[Geeto67]

, but I fear the downside risks for others who buy-and-hold beyond the window that there is still money to be made on the car in resale.

 

I fear that you assumed that the people who are taking this risk of a long term hold is greater than 1%.

 

Talk to any exotic car dealer, more exotic cars are turned over in a 2-3 year cycle than not. The majority of people just don't buy new, rare, exotics to hold them forever.

[Zx2guy19]

Eh....more like

 

Clay: “look at this crazy debt instrument I don’t really understand fully, and let’s all shit on fictional people who probably don’t qualify for this product but we think do so we can feel better about ourselves”

 

The rest of Cr: “debt is the devil, this is exactly like 96 month leases on yugos and other pedestrian cars. Also fuck people who have debt”

 

Me: “debt is not the devil, you don’t really understand this product, and this isn’t anything like 96 month financing on a Camry”

 

The rest of CR: “burn him he’s a witch who speaks heresy!!!!!!”

 

By the way, since when is CR for making friends? This place literally exists so a bunch of local guys can shit talk each other.

 

Wrong again, amigo. I'm 28 and have over 700k in debt lol. I am someone who uses debt to make me money, and this is still a stupid ass loan any way your fucking pea brain slices it.

[zeitgeist57]

Yes I don't believe you understand the product because you keep making the mistake of equating the market it serves to another different market where a similar loan period is a bad idea. You keep compressing it into the same product as extended loans for luxury daily driven cars which just flatly isn't the same clients, isn't the same collateral, isn't the same residual or resale market, - about the only thing they have in common is a long term and a high price . I don't know why you keep doing this, but you do, and frankly I know you know better. And you aren't the only one here doing it. This isn't a dealer selling used Hyundai's to people with bad credit - these are savy exotic car brokers who deal with a completely different clientele who have different credit needs. It's a bad idea for the people you want to shit on in the same way it is bad idea for unicorns to take out car loans, the people you think are using this credit product just aren't.

 

Yes a 72 or 96 or 144 month on a depreciating asset, like a luxury DD, that is paid off to term is generally not a smart idea. Even on this P car it is probably unwise. However, Others beyond me have stated, and I even linked a video of a professional who writes these loans specifically saying they are bridge loans, or loans for speculators, and are cycled in 2-3 years and that is the value of the product and the market to whom it works for. A 144 month finance written for this GT4 isn't going to come from a regular bank (because they actually do some specialty lending that they don't advertise like older imported JDM cars, not because I am taking a dig), it is going to come from a very specialized lender who probably isn't going to approve credit to the kind of person who this would be a bad idea for. Banks don't write loans to customers they think are going to default. This is basic stuff clay.

 

Kerry, part of my job is covering BofA's Dealer Floorplan Services group in OH and IN. Part of our partnership involves our 7-state Dealer Sales channel, with guys focused on getting dealer F&I's to use BofA for end-customer loan financing.

 

While my scope of business is focused on more conventional (conservative) loans for qualified individuals through volume-driven dealerships, I do understand where this sort of specialty loan comes from, and where it can be used.

 

Clearly, living through a bubble economy during the recession has made me wary of ever-increasing loan terms for financial firms (banks, specialty lenders) to compete in an over-banked industry. I took a negative stance in line with the Jalopnik writer of that article. I've said all there needs to be said on this topic.

[coltboostin]

no actually you. That was the point of your original "LOL" and "america is so accepting of debt". You don't see the potential for this debt to make you money.

Your original statement presumed that debt can't make you money and if it was this wasn't it. I stand by my comments. don't back pedal now because you don't want to read it.

 

No, you indeed just misread or misinterpreted my post. It seems all of CR realizes this, besides you. Im well aware of the power or correctly leveraged debt. Most small (and large businesses) businesses would not exist today without it.

 

Not only that, but understanding how to correctly leverage debt has literally been my job for the last 10 years. :lolguy:

[Geeto67]

Kerry, part of my job is covering BofA's Dealer Floorplan Services group in OH and IN. Part of our partnership involves our 7-state Dealer Sales channel, with guys focused on getting dealer F&I's to use BofA for end-customer loan financing.

 

While my scope of business is focused on more conventional (conservative) loans for qualified individuals through volume-driven dealerships, I do understand where this sort of specialty loan comes from, and where it can be used.

 

Clearly, living through a bubble economy during the recession has made me wary of ever-increasing loan terms for financial firms (banks, specialty lenders) to compete in an over-banked industry. I took a negative stance in line with the Jalopnik writer of that article. I've said all there needs to be said on this topic.

 

You are right in that there are ever increasing loan terms for more conventional loans on high volume common products, and you are right to be concerned about that. I'm concerned about it too. That's just not this product.

 

Just because a jalopnik writer "discovers" this for the first time doesn't mean it hasn't been around for a while. These long term exotic and collector car loans have been around since at least the 1980s, same as Yacht financing and private airplane financing which are both about 240 months for new vehicles.

[Lauren]

How do I get a 144 month loan on my craigslist specials. I could move up to the 7-10k range for flips

[Geeto67]

No, you indeed just misread or misinterpreted my post. It seems all of CR realizes this, besides you. Im well aware of the power or correctly leveraged debt. Most small (and large businesses) businesses would not exist today without it.

 

Not only that, but understanding how to correctly leverage debt has literally been my job for the last 10 years. :lolguy:

 

Ok, I'll own that, maybe I did misread them. I read them in the context of the larger conversation, and responded based on my understanding in that context.

 

But If what you are saying is indeed correct, then you agree with my position that this is not 100% a bad idea for all people in all situations and that there are people for whom this product makes financial sense. Right?

[coltboostin]

But If what you are saying is indeed correct, then you agree with my position that this is not 100% a bad idea for all people in all situations and that there are people for whom this product makes financial sense. Right?

 

Yes. Not dissimilar to an interest only mortgage on a property you intend to flip. However, it is very difficult to look at a car as NOT a depreciating asset. Sure, you can get lucky with a, for example, 2006 Ford GT, that does appreciate over time. But that is just luck. 98% of these purchases people are making are not focused on profit, but are focused on "purchasing" a product which they otherwise may not be able to afford. That's the issue

[Geeto67]

Yes. Not dissimilar to an interest only mortgage on a property you intend to flip. However, it is very difficult to look at a car as NOT a depreciating asset.

 

I understand that but even as a depreciating asset these assets aren't the same depreciation curve as something like a new 5 series BMW, or a Chevy Tahoe. Both of those vehicles will lose about 45% of their value in the first 5 years of ownership with the predominant amount happening in the first two years. Something like a special edition Lambo, ferrari, or porsche isn't going to come close to that as most lose less than 20% over the same time and most of that depreciation comes in the 3-5 year mark as miles accrue and newer models are introduced to replace the old ones. Even as a depreciating asset, an owner can hold a car for 2 years and see under 10% depreciation.

 

Sure, you can get lucky with a, for example, 2006 Ford GT, that does appreciate over time. But that is just luck. 98% of these purchases people are making are not focused on profit, but are focused on "purchasing" a product which they otherwise may not be able to afford. That's the issue

 

I think this is the fundamental point we disagree on. You presume 98% of the customers for this product are using the product inappropriately, where as I think the number is much much much lower, and the majority of the people who are using this product are using it correctly and it is a bad idea for a small group of outliers. The companies that write these loans know their clientele well and rely a lot on repeat business.

[o0n8]

[RyM3rC]

Some of you have waaaaaay too much time on your hands to debate this to the level it is being taken.

 

Get off your ass and get to work and make some more money and buy whatever the hell you want.

 

So I say as I'm sitting on my own ass taking a mental break by coming on CR for 3 minutes to get a laugh out at some of the posts.

 

If 1/4 of CR worked just as hard as they debated certain topics, could then just go pay cash for the damn car/toy/whatever strikes your fancy item.

 

Damn, I went back to work and somehow didn't make an extra $105k just there.

 

Are you guys hiring?

[Zx2guy19]

Damn, I went back to work and somehow didn't make an extra $105k just there.

 

Are you guys hiring?

 

Lol no shit. I make the same amount whether I'm actually working or debating with dick weeds on here. Can't change what I do from 8-5.

[Franchi]

Damn, I went back to work and somehow didn't make an extra $105k just there.

 

Are you guys hiring?

 

Ha, touché.

 

Perhaps I should clarify what I meant. If people put the same intensity and passion into their respective careers as they do with arguing on internet forums, that eventually pays off far more then trying to sway some random ass dude to your side of the argument.

[AudiOn19s]

Lol no shit. I make the same amount whether I'm actually working or debating with dick weeds on here. Can't change what I do from 8-5.

 

the typical management response to this, because I have this talk regularly, is that it's not what you're making now that will change with hard work, it's what you will make in the future once you show results that can change.

[Franchi]

the typical management response to this, because I have this talk regularly, is that it's not what you're making now that will change with hard work, it's what you will make in the future once you show results that can change.

 

BOOM! Every job has downtime to a degree but what are you doing with that downtime? Using it to get better at your job/field, develop yourself, learn something new, help a coworker out and learn something new in the process, ect, ect.

[Otis Nice]

Again, let met state that at 144 month loan on a car is completely foolish if you plan on actually making payments for all 144 months and simply living beyond your means. While I'm not debt adverse the only debt I have is a single car payment but I'm not here to preach about debt and 'Merica or whatever.

 

Let me run this scenario past you. Next year when I go back to Europe to visit the Nurburgring and Spa again which Scenario should I follow:

 

1 ) Spend $1000 on a rental car for the period I'm there. Spend $2000 on rental car (BMW 135/235) for Nurburgring lapping. Spend $1500 for rental car (Same BMW 135/235) for Spa lapping.

 

OR

 

2) Purchase a new GT4 or GT4 RS from my buddy who is the sales manager at Byers at Sticker price and do so with European Delivery option. Buy the car on one of these foolish 144 month loans. drive around Europe in a GT4 for the time we are there and do both track events without the need to pay for a rental car ($4500 savings). Drop the car back off and wait for 3-4 weeks for it to show up at home, where I'll then sell it for $10-15k OVER sticker.

 

...which one should I do?

 

Before you say it yes, I'll have to eat the taxes but the money still works out in my favor.

 

This single, one of a kind, not typical to literally anyone else is exactly what Clay's post is about and VERY applicable.

 

Kerry, part of my job is covering BofA's Dealer Floorplan Services group in OH and IN. Part of our partnership involves our 7-state Dealer Sales channel, with guys focused on getting dealer F&I's to use BofA for end-customer loan financing.

 

While my scope of business is focused on more conventional (conservative) loans for qualified individuals through volume-driven dealerships, I do understand where this sort of specialty loan comes from, and where it can be used.

 

Clearly, living through a bubble economy during the recession has made me wary of ever-increasing loan terms for financial firms (banks, specialty lenders) to compete in an over-banked industry. I took a negative stance in line with the Jalopnik writer of that article. I've said all there needs to be said on this topic.

 

You're wrong, don't know what you're talking about, and don't understand finances/debt.

 

...I don't know how or why but you are.

 

No, you indeed just misread or misinterpreted my post. It seems all of CR realizes this, besides you. Im well aware of the power or correctly leveraged debt. Most small (and large businesses) businesses would not exist today without it.

 

Not only that, but understanding how to correctly leverage debt has literally been my job for the last 10 years. :lolguy:

 

You're wrong, don't know what you're talking about, and don't understand finances/debt.

 

...I don't know how or why but you are.

 

Ha, touché.

 

Perhaps I should clarify what I meant. If people put the same intensity and passion into their respective careers as they do with arguing on internet forums, that eventually pays off far more then trying to sway some random ass dude to your side of the argument.

 

Then how would everyone know how good of an attorney I am?

[Otis Nice]

I wonder how a 144 month loan Porsche would perform on The 270.

[noobiemcnooberson.]

So can someone explain to me why it's a bad idea to finance the sale tax into a loan? I'm guessing it's you're paying interest on something that you cannot even assign a positive value?

[Geeto67]

As I understand it, you can deduct the sales tax you pay on the car on your federal income tax in the year you purchase the car, regardless as to whether you rolled it into financing or not, but you cannot deduct the interest payments made on that amount. Whether this is “bad” depends on your situation and your point of view. There are some who think you should never finance taxes because of how they feel about taxes in general, while others just see it as part of the whole cost of purchase transaction. Either way, taxes are one of those things that can sometimes creep up the cost and make an already marginal deal worse. Part of this also has to do with the way cars are sold and how often the taxes aren’t discussed until the end.

[zeitgeist57]

https://jalopnik.com/more-than-half-of-all-new-car-loans-in-canada-are-finan-1829964502

[10phone2]

the typical management response to this, because I have this talk regularly, is that it's not what you're making now that will change with hard work, it's what you will make in the future once you show results that can change.

 

I will have to politely disagree with you on this one. I have proven at work that I have long term been able to drive a team to improve revenue to 20-30 million a year in handling calls for harder accounts over years and still face the obstacle dealing with cuts due to incentive changes that are geared to normalize performance with the purpose to reduce pay. A wrinkle to it though, is that regardless of position or title, life is more stable when pursuing excellence regardless of job role/focus.

[zeitgeist57]

https://jalopnik.com/americas-car-loan-debt-is-out-of-control-and-getting-wo-1832635925

 

This topic's been debated enough, but I'm interested in the progression of auto-loan debt numbers and whether the 90+day delinquency percentage (2.5%). I'm curious in the loan growth relative to wage growth...assuming the complaints come from loans being higher. Though, this graph isn't looking good:

 

 

The comments are interesting as well, regarding NHTSA standards (and global ones) making more expensive safety measurements a requirement on most vehicles. If cheaper, third-world/global car platforms were available for sale, would we be having the same financial issues? Drive a Tata Nano around your city for a few years, scrap it when it dies...

 

 

 

EDIT: To be clear, I have used this thread to transition the conversation away from the specialized car market to increasing, "gen-pop" consumer debt levels around car loans.

Edited February 15, 2019 by zeitgeist57
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