[TXSTYLE]

And in other Dumbass People News...
There's this Fool and their $$$$ soon to be parted.

Customer tells dealer their willing to accept a $2500 car payment on a new GLE (midsize SUV)
https://jalopnik.com/customer-tells-...-ca-1851713624

Americans owe trillions in car payments and the last few years have shown that people are willing to accept life ruining payments to be able to drive what they want. A recent video of a customer at a Mercedes dealership showed in real time just how wildly financially irresponsible folks who get into these car buying situations can be.
BenzsandBowTies is a YouTube channel run by Doug Horner who’s part of the sales staff at a Mercedes-Benz dealership. The channel gives a behind the scenes look at the sales process at the dealer. A recent video posted to the channel is almost unbelievable in its absurdity. Horner and a member of his sales team by the name of Angela have a customer who’s looking to get into a new Mercedes GLE. There’s just one large problem: he’s upside down to the tune of $29,000 on his current vehicle. He also mentions he doesn’t want an EV.
Angela mentions that he currently drives a 2024 Genesis GV80. The kicker is that they purchased — not leased — the luxury SUV just four months ago. What could bring someone to want to get out of a car they purchased just a few months prior? Angela mentions the customer says he finds the GV80 “uncomfortable,” which is definitely not true. As someone who has been in the car sales business before, I guarantee you that that’s the kind of excuse someone makes when they’re trying to justify the decision they’re making; he just wants the GLE because he wants it.

[NickyC]

"More than half of used car loans now carry loan-to-value ratios (LTVs ) above 120% — that means borrowers owe 20% more than their vehicle is worth…".

I just shake my head at car prices now along with their corresponding interest rates. I would never consider financing a vehicle at anything over 2.5%, but we now have people going 84 months at 7% plus. It's just mind blowing. The financial illiteracy one must possess to sign the line on a "deal" like that is incredible.

[zx10guy]

These are the same people that will be screaming about needing a bailout later.

[jkoral]

I've watched this guy before, there was another buyer with a 2023 Escalade that was 46K underwater and he said that's not even the worse they have seen:

[dgoldenz]

This just in - people are stupid and don’t know basic math. How much do you think people who bought $100k over sticker G wagons and $1M SF90’s are underwater? lol. I saw a video last week with a guy who owed over $700k on an SF90 and the dealer was offering him around 480k for it. He did not have the money to make up the difference.

[pbonsalb]

Originally Posted by NickyC

"More than half of used car loans now carry loan-to-value ratios (LTVs ) above 120% — that means borrowers owe 20% more than their vehicle is worth…".

I just shake my head at car prices now along with their corresponding interest rates. I would never consider financing a vehicle at anything over 2.5%, but we now have people going 84 months at 7% plus. It's just mind blowing. The financial illiteracy one must possess to sign the line on a "deal" like that is incredible.

I could care less about the people buying BMW, Mercedes, Ferrari, etc. and getting themselves in financial trouble. But there are people who need a new or used car and have no ability to pay cash and are not able to DIY the repairs on a cheap older car. They may have no choice but to finance for 5, 6 or 7 years. They should look for the best subsidized interest rate, but financial literacy or literacy and education in general are not this country’s best attributes, unfortunately, and sleazy car dealers and loan officers have few compunctions about suggesting payment plans they know or suspect will be unrealistic. I hold those “helping” or “guiding” the customer to just as high or higher an ethics and knowledge standard as the customer themselves.

[Alfisti]

These numbers are something else. More broadly speaking, as values have dropped people are just going to have to grind out ownership so new car sales are going to flag.

[unluky]

"Yeah, yeah, yeah...................but what's my monthly payment? I'm not stupid........."

[zx10guy]

Originally Posted by pbonsalb

I could care less about the people buying BMW, Mercedes, Ferrari, etc. and getting themselves in financial trouble. But there are people who need a new or used car and have no ability to pay cash and are not able to DIY the repairs on a cheap older car. They may have no choice but to finance for 5, 6 or 7 years. They should look for the best subsidized interest rate, but financial literacy or literacy and education in general are not this country’s best attributes, unfortunately, and sleazy car dealers and loan officers have few compunctions about suggesting payment plans they know or suspect will be unrealistic. I hold those “helping” or “guiding” the customer to just as high or higher an ethics and knowledge standard as the customer themselves.

So explain why the more affordable new car models are drying up? Manufacturers are chasing where the dollars are. People have spoken with their wallets and are purchasing nicer vehicles than they can afford instead of buying a car that fits their needs. I bought my daily beater in 2019 new for $20k and even back then people were saying you can't buy a new car in that price point. Well, I did. Just takes readjustment about what a need versus a want is. And this car is still running fine at over 150k miles with nothing but basic maintenance.

[Hit_Apex]

Sure feels like these extreme cases are strategic - continue to parlay neg eq to absurd levels then file BK and start over. All to keep up appearances. Wild stuff.

[BlkGS]

Originally Posted by Hit_Apex

Sure feels like these extreme cases are strategic - continue to parlay neg eq to absurd levels then file BK and start over. All to keep up appearances. Wild stuff.

That's an intelligent take on it. The problem is, we're dealing with very unintelligent people. Or more often, people who are trying to "keep up".

I worked with a guy who was like $15k.underwater on a Jeep Commander. He was a smart guy, engineering degree and all that. In college he traded through like 3 brand new sports cars, losing money every time. When he graduated he married his college gf and wanted to flex and buy her a nice new big SUV. So he rolled all his negative equity that he had been rolling over onto the Jeep. Then after a few years he started having issues with it (they had put a ton of miles on it and it was very much not new when he bought it), and he would have rolled the negative equity over again if the banks had let him. By that point he owed like $17k on a car worth maybe $5k, and he went to buy a car that was selling at MSRP and no banks would finance him because of the negative equity.

He ended up catching a break, bought a new house and sold his old one, and the proceeds of his old house he used to pay off the jeep and then went and traded it on a new jeep gladiator.

Point is, people want to keep up with other people making terrible financial choices, so they make the same stupid mistakes. The amount of people who pay their car loans with other forms of debt is INSANE. Another guy I knew did this, he bought a car he couldn't really afford and was paying his car loan with a credit card. He kept getting cards that had 0% interest on balance transfers and just moved his debt around, never really making a dent in it. I haven't talked to him since interest rates went up, but I suspect that dried up most of those balance transfer offers and put him in a world of hurt. The sad part about it is he thought he was a genius for this. Thought he was getting one over on the system, and tried to convince other people to do it too.

[Mason Hatcher]

Originally Posted by pbonsalb

I could care less

How much less?

Sorry, sometimes I can't help myself.

[zx10guy]

Originally Posted by BlkGS

That's an intelligent take on it. The problem is, we're dealing with very unintelligent people. Or more often, people who are trying to "keep up".

I worked with a guy who was like $15k.underwater on a Jeep Commander. He was a smart guy, engineering degree and all that. In college he traded through like 3 brand new sports cars, losing money every time. When he graduated he married his college gf and wanted to flex and buy her a nice new big SUV. So he rolled all his negative equity that he had been rolling over onto the Jeep. Then after a few years he started having issues with it (they had put a ton of miles on it and it was very much not new when he bought it), and he would have rolled the negative equity over again if the banks had let him. By that point he owed like $17k on a car worth maybe $5k, and he went to buy a car that was selling at MSRP and no banks would finance him because of the negative equity.

He ended up catching a break, bought a new house and sold his old one, and the proceeds of his old house he used to pay off the jeep and then went and traded it on a new jeep gladiator.

Point is, people want to keep up with other people making terrible financial choices, so they make the same stupid mistakes. The amount of people who pay their car loans with other forms of debt is INSANE. Another guy I knew did this, he bought a car he couldn't really afford and was paying his car loan with a credit card. He kept getting cards that had 0% interest on balance transfers and just moved his debt around, never really making a dent in it. I haven't talked to him since interest rates went up, but I suspect that dried up most of those balance transfer offers and put him in a world of hurt. The sad part about it is he thought he was a genius for this. Thought he was getting one over on the system, and tried to convince other people to do it too.

Just because someone has a degree and some white collar job doesn't automatically make them smart. I know people that don't have a degree and are way smarter than those with a degree in the same field.

Also, I have great credit and get 0% balance transfer offers all the time. Everyone one of them came with a catch if you bother to read the details. I wouldn't even call it fine print because many times it's stated in the promo. All of the 0% balance transfers I was offered had a 3% balance transfer fee. So it's not free money and your friend is probably still adding to his debt thinking he's outsmarting the system with his 0% shell game.

[///MPhatic]

When I was in the car business, circa 1996 to 1999, I remember spending a few minutes before every pitch educating people on things like this by using the standard nomenclature.

For example. Every vehicle has 3 values; retail value, loan value, and wholesale value.

I would go on to explain why these values are set, and how they work to protect the buyer, but how purchasing the wrong vehicle and trading too soon could still get you in deep water. Some listened and bought my Honda, some didn't and bought a Domestic.

I only remember one instance where a customer returned to me specifically after making the Domestic mistake, purchasing a '98 (I think) Mercury Cougar XR7, then wanting to trade it for an Accord 7 short months later. I hated to give him the bad news, but I almost smiled when I did (I was young and stupid). He was over $15K upside down...in 1998. It seems he had already transferred part of his loan from the previous vehicle (being upside down) onto the Cougar, making matters much worse.

He was, as we said in the industry, buried in the car.

Sometime after that I saw lenders pushing to 100% of retail, then 120% of retail, then the crash, and now it's headed back up again. SSDD I guess.

I'd like to think I'm smart, owning all 4 of my expensive cars outright and never paying anyone interest, but the truth is that I'm stupid too, as that same expense properly diversified in the market would have been a significant investment at this point.

Oh well.

[Alfisti]

Originally Posted by ///MPhatic

I'd like to think I'm smart, owning all 4 of my expensive cars outright and never paying anyone interest, but the truth is that I'm stupid too, as that same expense properly diversified in the market would have been a significant investment at this point.

Oh well.

To spend on what? I have a sports car worth 80 grand sitting in storage right now (because winter), yeah I could invest that money and make a return so one day I can .... buy a sports car

[ASAP]

so many things to unpack here...

1) the gotta have it mentality runs the world right now... sadly this has also driven inflation and pricing on things massively because there is a mass amount of irresponsible spenders... and yes social media is directly responsible for this on a large scale

2) far too easy availability of credit... no matter what or how poor your credit or salary is... you can always get qualified... less than 20% downpayment loans on depreciating assets like this and the fact that its allowed is cancer

3) negative equity - it is beyond me that this is allowed... the US must be the only country wild enough to allow this... back in the day, you would be walked out of a dealership and told to come back when you actually have money

[///MPhatic]

Originally Posted by Alfisti

To spend on what? I have a sports car worth 80 grand sitting in storage right now (because winter), yeah I could invest that money and make a return so one day I can .... buy a sports car

Yeah, of course, nicer house, more financial freedom, nicer sports car. Investments are for ease of life and levels. But we have to live in the now as well, as tomorrow is no guarantee, so it's a balance for sure.

[Littlecoupe]

I didn't read the article, only the post, but it can be worth mentioning that some people may have the disposable income to waste on a vehicle if that's their prerogative. It's not a smart use of money, but in some circumstances it doesn't do you any good when you're dead and if there is nobody to will it off to. We don't have kids, and only my sister has 1, so there isn't much incentive to build a nest egg, may as well spend.

I've had car payments myself since basically 2005 (a small gap in there, though). With new cars since 2009, I have never traded until there was equity in the car. The cost has been constant payments from ~400 to ~1000 per month for the last 15 years. It's not as though I am bad with money, but I consciously chose to allocate a large proportion of my income to something I enjoy, which is vehicles.

As of today, I'm now tired of making car payments and have found much less satisfaction in new cars, so I hope to finish this lease, pay out the car, and keep used cars moving forward without payments.

Sure, I could have had more money in the bank and a bigger retirement fund to date, but if all goes to plan, I don't think I'll be hurting financially in the long run. I paid to play, but at least I did it willingly knowing what I am forgoing in the process.

[zx10guy]

Originally Posted by ///MPhatic

When I was in the car business, circa 1996 to 1999, I remember spending a few minutes before every pitch educating people on things like this by using the standard nomenclature.

For example. Every vehicle has 3 values; retail value, loan value, and wholesale value.

I would go on to explain why these values are set, and how they work to protect the buyer, but how purchasing the wrong vehicle and trading too soon could still get you in deep water. Some listened and bought my Honda, some didn't and bought a Domestic.

I only remember one instance where a customer returned to me specifically after making the Domestic mistake, purchasing a '98 (I think) Mercury Cougar XR7, then wanting to trade it for an Accord 7 short months later. I hated to give him the bad news, but I almost smiled when I did (I was young and stupid). He was over $15K upside down...in 1998. It seems he had already transferred part of his loan from the previous vehicle (being upside down) onto the Cougar, making matters much worse.

He was, as we said in the industry, buried in the car.

Sometime after that I saw lenders pushing to 100% of retail, then 120% of retail, then the crash, and now it's headed back up again. SSDD I guess.

I'd like to think I'm smart, owning all 4 of my expensive cars outright and never paying anyone interest, but the truth is that I'm stupid too, as that same expense properly diversified in the market would have been a significant investment at this point.

Oh well.

Don't see how buying a domestic is a mistake. The mistake is the buyer not doing their due diligence in ensuring the car they buy is the right one for them. Even if the car didn't meet up to their expectations, the prudent thing is to stick it out until it makes financial sense to get out of the car. I've owned 3 domestic cars and haven't been burned on any of them. Difference is I made sure these cars were the ones I wanted and I drove them all into the ground before moving on. Well, two of the three I drove into the ground. The remainder I sold off to a car buying service after owning it for about 14 years. Any car can be a financial nightmare if people are foolish enough to get out of a new car with the initial new car depreciation hit only after a few months of ownership.

[jkoral]

Originally Posted by ///MPhatic

Sometime after that I saw lenders pushing to 100% of retail, then 120% of retail, then the crash, and now it's headed back up again. SSDD I guess.

Did it ever go down? I've only heard of some banks loaning 90% on expensive (over 100K cars). But I've been buying cars through my credit union for 30 years and they've always financed 110% to 120% of the purchase price.

The difference today is higher interest rates and even my credit union lists the rate for an 84 month auto loan.

[BlkGS]

Originally Posted by zx10guy

Just because someone has a degree and some white collar job doesn't automatically make them smart. I know people that don't have a degree and are way smarter than those with a degree in the same field.

Also, I have great credit and get 0% balance transfer offers all the time. Everyone one of them came with a catch if you bother to read the details. I wouldn't even call it fine print because many times it's stated in the promo. All of the 0% balance transfers I was offered had a 3% balance transfer fee. So it's not free money and your friend is probably still adding to his debt thinking he's outsmarting the system with his 0% shell game.

Totally agreed on both points. I guess the bigger point I was making is being smart and being financially smart aren't the same thing. Then again, some people would say buying a luxury car to drive a couple miles a day is silly. Or that spending a bunch of money on a commuter that's gonna get a ton of depreciation is silly. It's all about where you draw your line of "this is a bad idea".

[///MPhatic]

Originally Posted by zx10guy

Don't see how buying a domestic is a mistake.

In 1998 buying a Domestic car and not planning to keep it at least 4 years in excellent condition was absolutely a mistake.

Originally Posted by jkoral

Did it ever go down?

Yeah, there was a bit of a crash and lenders weren't even going 70% for a while. It's been many years since I was in the car business, but these things cycle.