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(Some Guy)   More and more people aren't paying their car loans. May soon park their cars behind students for federal assistance   (straightarrownews.com) divider line
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    More: Interesting, Subprime mortgage crisis, Subprime lending, Automotive industry, Mortgage, Simone Del Rosario, Personal finance, Fannie Mae, Alan Greenspan  
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839 clicks; posted to Business » on 20 Jan 2023 at 12:28 PM (8 weeks ago)   |   Favorite    |   share:  Share on Twitter share via Email Share on Facebook



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mistahtom
2023-01-20 11:15:45 AM  
Uber and Lyft like this 👍🏽
 
blackminded
2023-01-20 12:32:50 PM  
In before Farkers with 800+ credit scores driving 20+ year old beaters that they paid for in cash and can't understand why you don't do the same you broke piece of garbage.
 
Madman drummers bummers [TotalFark] [OhFark]
2023-01-20 12:39:46 PM  
There's only one solution to this problem. Wait, no, two solutions:

1) Bail out the auto lenders;
2) Tax cuts for the rich.
 
Marcus Aurelius [TotalFark] [OhFark]
2023-01-20 12:41:04 PM  
It's perfectly normal to have a $120,000 loan for a 5 year old Subaru.  Totally sustainable.
 
H31N0US
2023-01-20 12:52:48 PM  
File this under things we saw coming a mile away.
 
tricycleracer
2023-01-20 12:59:32 PM  
Stretching out that 2022 F350 Super Duty loan to 144 months didn't get the payments low enough for you?
 
Another Government Employee
2023-01-20 1:00:13 PM  

blackminded: In before Farkers with 800+ credit scores driving 20+ year old beaters that they paid for in cash and can't understand why you don't do the same you broke piece of garbage.


You called?

The last time I did a loan (2004), it did make sense. I needed a newer minivan and I didn't have the cash for it. Where most people go wrong is buying for the monthly payment without considering the total cost and duration of the loan. You want to go out of your way to minimize the profit for the lender. 

/ The last four cars were done in cash
// Mainly for cash flow issues
/// Nothing on the market right now makes sense, value-wise.
 
Lord Bear
2023-01-20 1:07:22 PM  
I shall not cause harm to any vehicle nor the personal contents thereof, nor through inaction let the personal contents thereof come to harm' It's what I call the Repo Code, kid!
 
stevenvictx
2023-01-20 1:13:54 PM  

blackminded: In before Farkers with 800+ credit scores driving 20+ year old beaters that they paid for in cash and can't understand why you don't do the same you broke piece of garbage.


I would

But I dont own a Toyota
BMW here,
So maybe 10 years if I'm lucky
 
Northern
2023-01-20 1:19:38 PM  

blackminded: In before Farkers with 800+ credit scores driving 20+ year old beaters that they paid for in cash and can't understand why you don't do the same you broke piece of garbage.


I'm getting a kick
 
blackminded
2023-01-20 1:26:37 PM  

Another Government Employee: / The last four cars were done in cash
// Mainly for cash flow issues
/// Nothing on the market right now makes sense, value-wise.


You forgot to mention that you do all your own maintenance. Otherwise you're nailing it.

/I am obviously not nailing it
//I'm not even taping it
///Command Stripping it, maybe
 
AmbassadorBooze
2023-01-20 1:31:59 PM  

blackminded: In before Farkers with 800+ credit scores driving 20+ year old beaters that they paid for in cash and can't understand why you don't do the same you broke piece of garbage.


740 ish? Credit score here.  Just bought a 20 year old beater.  With cash.  Looks like crap.  Runs OK.  Previous beater was driven for 15 years and only quit because a deer jumped into it from an embankment at night.  Should I have gone into debt for a brand new car?

I didn't realize it was my obligation to buy new every couple of years.  Guess I gotta turn in my murican card.
 
blackminded
2023-01-20 1:40:39 PM  

AmbassadorBooze: Just bought a 20 year old beater.  With cash.  Looks like crap.  Runs OK.  Previous beater was driven for 15 years and only quit because a deer jumped into it from an embankment at night.  Should I have gone into debt for a brand new car?


Shouldn't you have paid for it in Bitcoin? Or are you not going to fully commit to the bit?
 
Autoerotic Defenestration
2023-01-20 1:55:35 PM  

blackminded: In before Farkers with 800+ credit scores driving 20+ year old beaters that they paid for in cash and can't understand why you don't do the same you broke piece of garbage.


Fark user imageView Full Size
 
bostonguy [TotalFark]
2023-01-20 2:08:40 PM  

Lord Bear: I shall not cause harm to any vehicle nor the personal contents thereof, nor through inaction let the personal contents thereof come to harm' It's what I call the Repo Code, kid!


The more you drive, the less intelligent you are.
 
tedthebellhopp
2023-01-20 2:13:38 PM  

blackminded: In before Farkers with 800+ credit scores driving 20+ year old beaters that they paid for in cash and can't understand why you don't do the same you broke piece of garbage.


785 credit score here, and my daily driver is only 13 years old. It was my first and last time with a car payment and its been paid off for almost 3 years now. I do have 4 more cars that are all 20+ years old but those are just for fun though...
 
eKonk
2023-01-20 2:15:06 PM  

blackminded: In before Farkers with 800+ credit scores driving 20+ year old beaters that they paid for in cash and can't understand why you don't do the same you broke piece of garbage.


Got the right credit score, but I just bought my truck a year ago with a five year loan even though I could have paid cash.

1.9% interest on the loan or 3.3% interest on the money in my savings account? Tough decision...
 
valkore
2023-01-20 2:26:18 PM  

tricycleracer: Stretching out that 2022 F350 Super Duty loan to 144 months didn't get the payments low enough for you?


It didn't, so I reduced my insurance coverage to the state bare minimum to be allowed to drive it on public roads. And I'm rationing out my beetus meds, hopefully this 30 day supply can last me 60ish.
 
pastramithemosterotic
2023-01-20 2:27:48 PM  
What's a car loan?

/yes, I'll be that person today
 
pastramithemosterotic
2023-01-20 2:29:50 PM  
And my beater got t-boned last year (2 years ago?) so my new beater isn't even a beater. Everything works
 
Nogale
2023-01-20 2:31:53 PM  
Our 15-year-old car died this week. The used car market is still bananas where we live (not in the US) and there's not a lot of reasonable inventory for our budget, which would have been sufficient for something reliable pre-COVID. We absolutely agreed that we weren't taking on debt to buy a car, much less a used car.

This was by far the most expensive thing we've bought in the seven years we've been together and I was frankly pissed off at having to spend so much money on something I know so little about. Still, we didn't pay for our last car at all, so I guess we're still ahead (sort of).

I put the word out on FB and we're buying from a friend. Shook hands on it today.
 
Another Government Employee
2023-01-20 2:37:09 PM  

blackminded: Another Government Employee: / The last four cars were done in cash
// Mainly for cash flow issues
/// Nothing on the market right now makes sense, value-wise.

You forgot to mention that you do all your own maintenance. Otherwise you're nailing it.

/I am obviously not nailing it
//I'm not even taping it
///Command Stripping it, maybe


Not so much anymore. But I do have a reasonable independent mechanic.
 
MelGoesOnTour
2023-01-20 2:50:16 PM  
I didn't think it was THAT uncommon to buy cars with cash...well, unless it's a new car, of course.

-'87 El Camino (cash but it got stolen years after I bought it)
-'88 Celica convertible (cash and still driving it on nice weekends...and, yes, it is nearly pristine)
-'2011 Camry (cash and it's my daily driver)
-2015 Sentra (with this one I made two initial payments and then paid it off in full; the reason for that was I got all the possible deals and discounts from the sales-hole first and after a month or so I just paid the thing off in full without getting hit with interest. I bet the guy was surprised if part of his commission was derived from continual payments)
 
morg
2023-01-20 3:03:25 PM  

blackminded: In before Farkers with 800+ credit scores driving 20+ year old beaters that they paid for in cash and can't understand why you don't do the same you broke piece of garbage.


My front passenger door can't even open. It's been like that for ten years.
 
Lish
2023-01-20 3:03:51 PM  

MelGoesOnTour: -2015 Sentra (with this one I made two initial payments and then paid it off in full)


One good financial move I've made (though counterintuitive) was taking a loan for my first car and then paying it off after less than a year. I had no real credit history at that point and it got me some positive credit without costing much in interest.
 
GriffXX [OhFark]
2023-01-20 3:14:41 PM  
Wasn't there a thread a month or two ago about how, since dealerships are giving out new car loans with a nudge and a wink to default on their existing one, this is exactly what would happen?
 
pacified
2023-01-20 3:15:35 PM  
Only 800? 🤣🤣🤣
 
blackminded
2023-01-20 3:27:44 PM  

GriffXX: Wasn't there a thread a month or two ago about how, since dealerships are giving out new car loans with a nudge and a wink to default on their existing one, this is exactly what would happen?


Yep. I can't find the link but something about selling a car when you know the buyer will default, repo-ing it then reselling it being tremendously profitable for the dealer given the hyper-inflated used car market.
 
SumoJeb [OhFark]
2023-01-20 3:36:46 PM  
My F150, at only 125,000 kms, is starting to have cam phaser issues.
I'm not looking forward to car shopping. I want a station wagon, in Canada. Not many to be found.
Hoping to find a nice used Volvo.
 
bostonguy [TotalFark]
2023-01-20 3:40:31 PM  
You know? I'm starting to think that the economic prosperity of the '50s and '60s in the US was the exception, not the rule.

Maybe the Boomer Generation did have it lucky, and economic difficulties are a factor of life. No one should have ever expected to do as well as them.
 
Snarcoleptic_Hoosier
2023-01-20 3:49:25 PM  

blackminded: GriffXX: Wasn't there a thread a month or two ago about how, since dealerships are giving out new car loans with a nudge and a wink to default on their existing one, this is exactly what would happen?

Yep. I can't find the link but something about selling a car when you know the buyer will default, repo-ing it then reselling it being tremendously profitable for the dealer given the hyper-inflated used car market.


What the lenders are doing is waiving previous loan stipulations. Let's say you trade in a car worth 10K to a dealer with a loan of 13K. That money has to go somewhere, and in better times, it gets rolled into the new vehicle as compounded negative equity. A year ago, that 10K car might have been worth 15K to a dealer because of low inventory and you'd get a profit for trading out. That is now over.

What the banks are doing is letting you trade out, take the 10K payoff from the dealer, and start a new loan with the bank if you super duper promise to not screw over the 1st bank for the $3000 that is still owed. The first bank gets a large (insufficient) payment, still holds the title, and then calls up the customer when a default happens. It's a violation of the first bank's contract terms to have an unsecured loan, so they file a lien against your second car. The second bank doesn't care because you screwing over the first guy is not their problem in the short term. The end result is stupid, corrupt hot potato.

Plus all the SUPER scummy subprime assholes that have actuarial projections on repossessions built into their finance terms. They count on so many people defaulting while the is still valuable, so it can be re-sold to recoup the costs.
 
AmbassadorBooze
2023-01-20 3:54:09 PM  

blackminded: AmbassadorBooze: Just bought a 20 year old beater.  With cash.  Looks like crap.  Runs OK.  Previous beater was driven for 15 years and only quit because a deer jumped into it from an embankment at night.  Should I have gone into debt for a brand new car?

Shouldn't you have paid for it in Bitcoin? Or are you not going to fully commit to the bit?


Am I a bitcoiner?

I have been advocating Biden issue an EO to the NSA or cyber command to create a stuxnet like virus to destroy all mining and wallets.  The only money that should exist is the US dollar.
 
stamped human bacon
2023-01-20 3:55:40 PM  

Lish: MelGoesOnTour: -2015 Sentra (with this one I made two initial payments and then paid it off in full)

One good financial move I've made (though counterintuitive) was taking a loan for my first car and then paying it off after less than a year. I had no real credit history at that point and it got me some positive credit without costing much in interest.


I'd bet the early payoff still included every penny of interest you'd have paid over the life of the loan. I've neither seen nor heard of a car loan that didn't unless something other than the car was used as collateral. You likely saved nothing by doing that.
 
AmbassadorBooze
2023-01-20 3:57:44 PM  

Snarcoleptic_Hoosier: blackminded: GriffXX: Wasn't there a thread a month or two ago about how, since dealerships are giving out new car loans with a nudge and a wink to default on their existing one, this is exactly what would happen?

Yep. I can't find the link but something about selling a car when you know the buyer will default, repo-ing it then reselling it being tremendously profitable for the dealer given the hyper-inflated used car market.

What the lenders are doing is waiving previous loan stipulations. Let's say you trade in a car worth 10K to a dealer with a loan of 13K. That money has to go somewhere, and in better times, it gets rolled into the new vehicle as compounded negative equity. A year ago, that 10K car might have been worth 15K to a dealer because of low inventory and you'd get a profit for trading out. That is now over.

What the banks are doing is letting you trade out, take the 10K payoff from the dealer, and start a new loan with the bank if you super duper promise to not screw over the 1st bank for the $3000 that is still owed. The first bank gets a large (insufficient) payment, still holds the title, and then calls up the customer when a default happens. It's a violation of the first bank's contract terms to have an unsecured loan, so they file a lien against your second car. The second bank doesn't care because you screwing over the first guy is not their problem in the short term. The end result is stupid, corrupt hot potato.

Plus all the SUPER scummy subprime assholes that have actuarial projections on repossessions built into their finance terms. They count on so many people defaulting while the is still valuable, so it can be re-sold to recoup the costs.


Sounds like we will have to do a BAILOUT! For a whole industry.  Too big to fail.
 
dyhchong
2023-01-20 4:03:14 PM  

blackminded: In before Farkers with 800+ credit scores driving 20+ year old beaters that they paid for in cash and can't understand why you don't do the same you broke piece of garbage.


I don't know what my credit score is but my first car (1989 Holden Barina) 15 years ago was $250NZD ($120USD), the car that I sold a year ago (2010 Hyundai i30) cost $2000NZD, and most have been in between that. It was a weird step up to my $13K NZD car (2015 Toyota Aqua) today.

Nothing to do with having money or not, there are cars to meet every budget, you just have to be willing to downgrade your image and live within your means.
 
phedex
2023-01-20 4:06:04 PM  

eKonk: blackminded: In before Farkers with 800+ credit scores driving 20+ year old beaters that they paid for in cash and can't understand why you don't do the same you broke piece of garbage.

Got the right credit score, but I just bought my truck a year ago with a five year loan even though I could have paid cash.

1.9% interest on the loan or 3.3% interest on the money in my savings account? Tough decision...


same, I got lucky in that everything lined up for me to get my first new, nice car in early '21.  Dealer offered .9 interest / 5 years.   i have no qualms about 30 bucks in interest a month.

i definitely skew into the car enthusiast realm and have always enjoyed regularly cycling through cool used cars in the 15k range, but finally realized that as much as i loved the search for these unicorns, it was a real pain in the ass to ensure that the maintenance was up to expectations.  And expensive;  fluid flushes, tires, brakes, it all adds up.

I know i'm fortunate to be able to afford to get a new car though and i don't take this for granted.  its way harder now than 5 years ago to find cars under 20k that are decent, and even 15k is out of reach for many, many people.
 
AmbassadorBooze
2023-01-20 4:06:28 PM  

dyhchong: blackminded: In before Farkers with 800+ credit scores driving 20+ year old beaters that they paid for in cash and can't understand why you don't do the same you broke piece of garbage.

I don't know what my credit score is but my first car (1989 Holden Barina) 15 years ago was $250NZD ($120USD), the car that I sold a year ago (2010 Hyundai i30) cost $2000NZD, and most have been in between that. It was a weird step up to my $13K NZD car (2015 Toyota Aqua) today.

Nothing to do with having money or not, there are cars to meet every budget, you just have to be willing to downgrade your image and live within your means.


Apparently this is the wrong view.

To keep the world engine turning, you need to buy a NEW car with a price greater than your yearly income.  And another new one every 2 years.  4 years if you are poor.  But all cars must be brand new and expensive.  The world engine requires it.  You MUST consume!
 
gbv23
2023-01-20 4:23:18 PM  
May Soon Park is my Korean wife's name
 
dusty15893
2023-01-20 4:54:18 PM  

Snarcoleptic_Hoosier: blackminded: GriffXX: Wasn't there a thread a month or two ago about how, since dealerships are giving out new car loans with a nudge and a wink to default on their existing one, this is exactly what would happen?

Yep. I can't find the link but something about selling a car when you know the buyer will default, repo-ing it then reselling it being tremendously profitable for the dealer given the hyper-inflated used car market.

What the lenders are doing is waiving previous loan stipulations. Let's say you trade in a car worth 10K to a dealer with a loan of 13K. That money has to go somewhere, and in better times, it gets rolled into the new vehicle as compounded negative equity. A year ago, that 10K car might have been worth 15K to a dealer because of low inventory and you'd get a profit for trading out. That is now over.

What the banks are doing is letting you trade out, take the 10K payoff from the dealer, and start a new loan with the bank if you super duper promise to not screw over the 1st bank for the $3000 that is still owed. The first bank gets a large (insufficient) payment, still holds the title, and then calls up the customer when a default happens. It's a violation of the first bank's contract terms to have an unsecured loan, so they file a lien against your second car. The second bank doesn't care because you screwing over the first guy is not their problem in the short term. The end result is stupid, corrupt hot potato.

Plus all the SUPER scummy subprime assholes that have actuarial projections on repossessions built into their finance terms. They count on so many people defaulting while the is still valuable, so it can be re-sold to recoup the costs.



Whatever banks and car dealerships that are undertaking business that way deserve what they get. What you describe is by no-means common practice. Car dealerships won't take your trade in without being able to pay off whatever debt (upside down or not) is owed on the vehicle. The car dealership doesn't can't take ownership of the collateral without doing so. I've been working in retail banking for 18 years (including an extensive amount of consumer lending) I've never seen a dealership (or lender) that would allow the arrangement you described.  Not saying it doesn't exist, I just may not be familiar with whatever shiathole State allows that kind of thing to occur.
 
BitwiseShift
2023-01-20 5:08:34 PM  
All those ill maintained cars will be coming on the used car market soon.
 
GriffXX [OhFark]
2023-01-20 5:10:57 PM  

dusty15893: Snarcoleptic_Hoosier: blackminded: GriffXX: Wasn't there a thread a month or two ago about how, since dealerships are giving out new car loans with a nudge and a wink to default on their existing one, this is exactly what would happen?

Yep. I can't find the link but something about selling a car when you know the buyer will default, repo-ing it then reselling it being tremendously profitable for the dealer given the hyper-inflated used car market.

What the lenders are doing is waiving previous loan stipulations. Let's say you trade in a car worth 10K to a dealer with a loan of 13K. That money has to go somewhere, and in better times, it gets rolled into the new vehicle as compounded negative equity. A year ago, that 10K car might have been worth 15K to a dealer because of low inventory and you'd get a profit for trading out. That is now over.

What the banks are doing is letting you trade out, take the 10K payoff from the dealer, and start a new loan with the bank if you super duper promise to not screw over the 1st bank for the $3000 that is still owed. The first bank gets a large (insufficient) payment, still holds the title, and then calls up the customer when a default happens. It's a violation of the first bank's contract terms to have an unsecured loan, so they file a lien against your second car. The second bank doesn't care because you screwing over the first guy is not their problem in the short term. The end result is stupid, corrupt hot potato.

Plus all the SUPER scummy subprime assholes that have actuarial projections on repossessions built into their finance terms. They count on so many people defaulting while the is still valuable, so it can be re-sold to recoup the costs.


Whatever banks and car dealerships that are undertaking business that way deserve what they get. What you describe is by no-means common practice. Car dealerships won't take your trade in without being able to pay off whatever debt (upside down or not) is owed on the vehicle. Th ...


Found the thread. It references lenders and not in a particular state. Nine of them.
 
Lish
2023-01-20 5:14:38 PM  

stamped human bacon: Lish: MelGoesOnTour: -2015 Sentra (with this one I made two initial payments and then paid it off in full)

One good financial move I've made (though counterintuitive) was taking a loan for my first car and then paying it off after less than a year. I had no real credit history at that point and it got me some positive credit without costing much in interest.

I'd bet the early payoff still included every penny of interest you'd have paid over the life of the loan. I've neither seen nor heard of a car loan that didn't unless something other than the car was used as collateral. You likely saved nothing by doing that.


Nope. There was an early-payoff penalty but it was much less than the interest I would have paid over the remainder of the loan.
 
firsttiger
2023-01-20 5:20:34 PM  
I live in a neighborhood where large families seem to have one vehicle per person plus a family car. There are folks down the street with 6 vehicles. Big expensive ones. If they lost one or so it wouldn't surprise me. We're the oddballs for having one vehicle and parking in the garage.

When you buy a car as a status symbol, you likely aren't being sensible.
 
Lord Bear
2023-01-20 5:23:16 PM  

Lish: stamped human bacon: Lish: MelGoesOnTour: -2015 Sentra (with this one I made two initial payments and then paid it off in full)

One good financial move I've made (though counterintuitive) was taking a loan for my first car and then paying it off after less than a year. I had no real credit history at that point and it got me some positive credit without costing much in interest.

I'd bet the early payoff still included every penny of interest you'd have paid over the life of the loan. I've neither seen nor heard of a car loan that didn't unless something other than the car was used as collateral. You likely saved nothing by doing that.

Nope. There was an early-payoff penalty but it was much less than the interest I would have paid over the remainder of the loan.


The last car loan I had didn't even have an early payment penalty.  I made sure of that when I signed.  Many car places will give you a few hundred bucks off if you use their preferred loan company(because of higher rates and kickbacks).

Anyways, I always try to pay off my cars a few years early.  Saves a lot in the long term.  I'm in the market for a new car now and am in a position to pay cash if I want to.  I'm weighing the benefit of not having to pay interest vs. the opportunity cost of having less to invest with.
 
Lish
2023-01-20 5:28:35 PM  

Lord Bear: Lish: stamped human bacon: Lish: MelGoesOnTour: -2015 Sentra (with this one I made two initial payments and then paid it off in full)

One good financial move I've made (though counterintuitive) was taking a loan for my first car and then paying it off after less than a year. I had no real credit history at that point and it got me some positive credit without costing much in interest.

I'd bet the early payoff still included every penny of interest you'd have paid over the life of the loan. I've neither seen nor heard of a car loan that didn't unless something other than the car was used as collateral. You likely saved nothing by doing that.

Nope. There was an early-payoff penalty but it was much less than the interest I would have paid over the remainder of the loan.

The last car loan I had didn't even have an early payment penalty.  I made sure of that when I signed.  Many car places will give you a few hundred bucks off if you use their preferred loan company(because of higher rates and kickbacks).

Anyways, I always try to pay off my cars a few years early.  Saves a lot in the long term.  I'm in the market for a new car now and am in a position to pay cash if I want to.  I'm weighing the benefit of not having to pay interest vs. the opportunity cost of having less to invest with.


Yeah, it's worth at least figuring out what rate you can get and/or how much you can save by going through the dealer's financing.
 
raygundan
2023-01-20 5:38:07 PM  

morg: blackminded: In before Farkers with 800+ credit scores driving 20+ year old beaters that they paid for in cash and can't understand why you don't do the same you broke piece of garbage.

My front passenger door can't even open. It's been like that for ten years.


The introvert/quarantine package is rare, but has been the most valuable options package for resale in recent years.
 
zgrizz
2023-01-20 5:57:53 PM  
If you can afford $777 a month for a car, you can afford $1500 a month for a house ($225,000 with a 20% down). Kids need to stop biatching and start prioritizing.
 
natazha [BareFark]
2023-01-20 6:40:37 PM  
Less that 2% are more than 90 days behind, this sounds rather normal.

No brag, just fact:

Got my 18-yo van back from the Mercedes dealer. It was stalling.  Almost $450 in work on it in the last two years.
 
MSFT
2023-01-20 6:48:50 PM  

GriffXX: Wasn't there a thread a month or two ago about how, since dealerships are giving out new car loans with a nudge and a wink to default on their existing one, this is exactly what would happen?


That's a bingo, and now we're seeing the results.
Also, my credit score is around 15,000 and my daily driver is a donkey with a limp.
 
dusty15893
2023-01-20 7:10:15 PM  

GriffXX: dusty15893: Snarcoleptic_Hoosier: blackminded: GriffXX: Wasn't there a thread a month or two ago about how, since dealerships are giving out new car loans with a nudge and a wink to default on their existing one, this is exactly what would happen?

Yep. I can't find the link but something about selling a car when you know the buyer will default, repo-ing it then reselling it being tremendously profitable for the dealer given the hyper-inflated used car market.

What the lenders are doing is waiving previous loan stipulations. Let's say you trade in a car worth 10K to a dealer with a loan of 13K. That money has to go somewhere, and in better times, it gets rolled into the new vehicle as compounded negative equity. A year ago, that 10K car might have been worth 15K to a dealer because of low inventory and you'd get a profit for trading out. That is now over.

What the banks are doing is letting you trade out, take the 10K payoff from the dealer, and start a new loan with the bank if you super duper promise to not screw over the 1st bank for the $3000 that is still owed. The first bank gets a large (insufficient) payment, still holds the title, and then calls up the customer when a default happens. It's a violation of the first bank's contract terms to have an unsecured loan, so they file a lien against your second car. The second bank doesn't care because you screwing over the first guy is not their problem in the short term. The end result is stupid, corrupt hot potato.

Plus all the SUPER scummy subprime assholes that have actuarial projections on repossessions built into their finance terms. They count on so many people defaulting while the is still valuable, so it can be re-sold to recoup the costs.


Whatever banks and car dealerships that are undertaking business that way deserve what they get. What you describe is by no-means common practice. Car dealerships won't take your trade in without being able to pay off whatever debt (upside down or not) is owed on the ...


Thanks for the reference. Don't get me wrong, there are a lot of scummy lenders and shady dealerships but this is way more of an outlier type example. What's more concerning is the more vanilla, not as headline grabbing, practice of loose underwriting criteria. Approving loans at 130%+ loan to value or approving borrowers with a debt to income ratios near or above 50% (sometimes with incomes that have been artificially inflated by the lenders) is way more common and will represent a much larger danger in the long run.
 
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