There are a lot of things that make me incredibly jealous of America. New York’s 2nd Avenue Deli, for example. You also have a plethora of cheap used cars, and you don’t have to pay through the nose in import fees every time you want to buy anything from the Internet.
Having said that there’s one thing I absolutely don’t want… car loans with excessively long terms.
Having gone to private school, I am more than familiar with the concept of “Keeping up with the Joneses”. This is something that is sadly too often taken to “Dazzle, shame and humiliate the Joneses until they’re begging for mercy” by the upwardly mobile. The results speak for themselves: Credit card debt, over reliance on loans, and bankruptcy filings. You don’t need to be a physician to deduce the amount of stress all this financial juggling brings to the equation. But hey, at least you went to Hawaii last year while the Joneses stayed at home. That’ll show them, if they’d care.
Which they very likely don’t.
Now if you’d just put a drop of your blood here
Turning the discussion back to cars, I was reading some distressing numbers about autos loans the other day. Apparently the average ownership time of a new car was around 66.2 months in 2012. Although I’ve read some sources that pin the number at 93 months. One thing is certain though, the length of automotive loans is increasing.
Forty percent of loans are 72 months long, with more and more people deciding to go even further and committing to a payment term of 84 months. Is it economically sound? Well, it depends on a couple of things. First, how long are they actually planning to keep the car? Good. Now subtract half of that and that’s probably the amount of time they’ll actually own it. Cars break down, get stolen, and ordinarily people just get tired of them. Which has absolutely nothing to do with the fact that Jenny from down the street got the new model and won’t stop driving it around, mocking everyone with it. There’s also depreciation, wear and tear, and maintenance costs to consider. Nothing worse than having your car have a catastrophical failure when the warranty has expired and you still have to make payments on it.
And let’s not forget the unknown factor. I think few, if any people, go into a car loan thinking they’ll default on it. But if we’re honest, who can really guess where they are going to be seven years down the line? Maybe they’ll get that promotion they’ve been burning the midnight oil for, or Murphy rears its ugly head and the company decided to outsource everything on year 6 and they’re fresh out of a job. That’s not to say that this can’t happen over a shorter period of time, but at least you can cut your losses easier and pay less interest to boot.
But if I were to guess, I believe that none of these thoughts cross the mind of the happy car shopper. They just see that they can have a nicer car while making the same monthly payment, nevermind that they’ll have to be making the same monthly payment for a couple more years. But their brand new car will certainly show those people in the gym who’s boss. And to the Joneses too. Their car is so much cheaper. Let’s see them try to keep up for once.
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