Technology… ; just because you could…does not mean that you should !
I see cars from the 60s and 70s on the road as daily drivers for people of quite limited means here. But I feel quite certain that in 2070 there won’t be any 2015 cars still on the road as daily drivers for poor people. Regardless how well maintained today’s cars will be disposed of when they are 10 years old and have no bank loan value but need a repair greater than the down payment on a late model car.
But…the average age of cars keeps going up. The average is 11.4 years now.
I doubt if there will be many 2015 cars on the road in 2070, they’d be 55 years old, but I cannot agree that the decisions will have been made based on the criteria you describe. More and more people keep their cars on the road until they are no longer safe and/or reliable. That, rather than economics, will likely drive most purchase decisions.
As an example, if an old car requires a $3000 repair, and in the mind of the owner that will get him/her through another three or four years, more and more people are opting for the repair rather than a new car. New cars used to be 25% of average gross annual income. Now they’re 60%. Standard new car loans used to be two years. Now they’re five years and even six. The economics have changed dramatically. I believe people’s buying behaviors have changed as well.
In short, unless something changes dramatically in our economy, I think most people will keep their future cars far beyond the current 11.4 years. Few can afford to buy a new car anymore based on economic analysis… they’ll need a large repair and will get it because they simply cannot afford a new car. Unless, of course, they no longer consider the car safe.
What will it cost to replace the automaticly folding outside rear view mirrors on Lexus when it is 10 years old? Who will buy a 10 year old Lexus needing $thousands spent on the rear view mirrors and drill holes in the doors to attach chrome mirrors with the 50s look.
And certainly, the current economic situation is pumping the market with cheap money to get profit flowing by obligating the next 7 years of hard work from the middle class. And as I have often said, what would those hard working people buy if not for the Fed’s easy money? If a 20% down payment was required with a 24 month pay off what would middle class American be driving?
As a lover of old cars I don’t think you wi;; be seeing todays cars even at car shows 50 years from now. Where are you going to get bodycontol modules, sensor, and computers for them. People with Jeeps from the period when Chrysler was offering lifetime warranties can’t get their ABS brakes fixed because the suppliers that made parts for them went out of business.
Not to argue but what is the magic rationale for a 24 month pay off? It was from the days gone by where cars were traded in three years or 60,000 miles. These days, cars go 200,000 miles with little repair issues except the normal wear items. Unless of course you are unlucky enough for an electronic failure. My Acura has a four year 50,000 bumper to bumper and a 7/70,000 drive train warranty. Same with the Pontiac that had a 70 for drive train and emissions. So on a piece of equipment that is guaranteed for that length of time, what relevance would a 24 month loan pay off have?
Then throw in a 1-3% interest rate and it becomes more costly to pay off a loan early than not, when you can make 5-10% on the money. It really makes no economic sense except to make a person feel better. And much of the money is from the manufacturers or credit unions that are not affected by the federal discount rate to banks. The manufacturers need it to move iron which provides jobs in manufacturing and support.
I listen to Dave Ramsey too and his insistence that everything be paid off as quickly as possible. You have to remember that his world has been colored by bankruptcy. Of course my response is then what do you do with the money? Hoard it, bury it, put it in the bank for 1%, buy things again? Its just important to make wise economic decisions and sometimes that means it is smarter to carry debt than pay it off. But then we are all slaves to our own life experiences.
A 20% down payment didn’t used to be required for a two year loan. A two year loan used to be the standard. A three year loan was an unusually long loan. I bought my first new car in 1972 on a standard two year fixed-rate loan, with only the minimum down payment required. And, as I recall, the interest rate was lower than current rates… without any government money involved.
I personally think it’s a stretch to be crediting the feds with providing easy money that’s supporting new car purchases. If anything, the oft-estimated $5,000 dollars that regulatory requirements add to the cost of each new car makes cars less affordable. And since current rates are higher than they were years ago, well, I guess that sort of takes the gas out of the argument that they’re supplementing auto loans.
Bing, your economic theory may be sound, but I honestly don’t think the average worker makes his/her new car purchasing decision that way. He/she simply considers his/her confidence in the car’s reliability and safety overall. If he/she feels the car is no longer safe or reliable, he/she goes shopping. If he/she still has confidence in the car, he/she simply gets the repair and goes on with life as normal. The exception is if a person’s needs change. A growing family was responsible for most of my new car purchases.
Rod, I cannot in my wildest dreams imagine anyone replacing their Lexus with a new one because it needs a new mirror.
The mirrors are operated by the Body Control Module. Will that be available in the future? At what price? Who would drive with the mirrors folded against the doors?
And the current situation re interest rates paid on savings and interest rates on car loans and mortgages is the result of government manipulation. And it will sooner or later become evident that it has been a terribly expensive entitlement to America’s investment banks.
And Dave Ramsey’s advice is great for people who are broke and clueless but useless to the poor.
Rod, your hypothetical situation about the mirrors on a Lexus is really stretching your point beyond credibility.
Yup, the feds are manipulating the economy. And no matter what they do, new car sales are still in the basement. They’re making things worse, not better, with their current policies. We could take this discussion all the way to an overview of the actions of Henry Paulson and Tim Geitner, and how they undermined the economy, but I don’t think this is the correct forum.
I know who Dave Ramsey is, but since his economic advice has zero influence on the average man’s decision to buy a new car, IMHO it’s irrelevant to the thread. People don’t do a comprehensive financial analysis to decide whether to buy cars, only in figuring the cheapest way out of the necessary purchase.
That AC vent for the smartphone might do more harm than good. The heat is being generated internally. If you cool it externally you might put too much of a temperature differential on the glass and crack it. Better to just unplug it and put it in the shade until it cools down.
@Mustangman yeah, the Tesla retractable door handles are for aero purposes, though I suspect there’s a bit of Musk showmanship involved as well.
Well the feds are supposed to manipulate the economy to keep it on track to avoid hyper inflation and no growth. They do it through expanding or contracting the money supply, setting treasury rates, and setting the discount rate for providing money to banks. The problem is you can’t also punish businesses and make it impossible to expand and expect a growing economy.
Ramsey would never tell someone to buy a new car unless they paid cash for it. Instead he would tell them to buy a $1000 car until all their debts were paid off. If everyone did this, there would be a huge retraction in the auto industry like we have never seen costing thousands of jobs. Like it or not people need to buy things for a strong economy. Big purchases like houses and cars often need and should be paid off over a period of time. Makes sense for everyone. Henry Ford or Sloan first tried this way back to stimulate sales and make it possible for the ordinary person to buy a car.
It matters not what I like or dislike or what Ramsey recommends. The fact is that people are doing the repairs and keeping their cars as long as possible now. New car prices are too high as a percentage of average gross annual income, loan terms are too long, and… to the industry’s credit… cars last a lot longer.
If I look at my own history…
I bought my first new car, my '72 Vega. because my old beater froze solid one -40F night in North Dakota when my engine heater burned out in the middle of the night.
I bought my second new car four years later when the rear wheel and axle came out of my Vega. I no longer felt safe in it. As soon as we put the axle back in, I drove it straight to the Toyota dealer.
I bought my next new car, and '82 Civic 4-dr, because it was too difficult getting an infant in the back seat of a '76 Corolla 2dr coupe.
My next new car, a Toyota minivan, was bought because the Civic was too small for my still-growing family.
The next, a Mazda MPV was perfect… except for a little design flaw. The lifters kept collapsing. After returning for the second time to have the rattling corrected, I had a long chat with another MPV V8 owner with the same problem. Ergo, my next new car, a Saturn (it was my exes fault, honest!).
My next new car was after I’d dug myself out of a company bankruptcy and a brutal divorce. And my '91 Camry that I’d bought used was too tired to rely on.
I haven’t included my trucks, both bought new. My first I had for almost 11 years until the frame rotted away under me. The second I kept until I gave it to my daughter some 17 years later.
And I’ve not included used vehicles. They’re irrelevant to the subject.
The point is, I never bought a new car because of any comprehensive economic analysis of the projected value of money. And I believe very, very, very few people do.
My observation on the current automobile situation is that beyond being basic reliable transportation, a car has become a status symbol and an extension of oneself and the easy credit that has been available for many years allows people greater opportunity to be extravagant in their self indulgence.
Of course I barely finished high school and my knowledge of economics and accounting are quite basic and self taught. But in 2002 I worried that the easy money being pushed into the housing market would result in a bust and was often corrected by those better educated than me. I was often characterized as the “nattering nabob of negativity” by the experts. Oh well.
“Bing, your economic theory may be sound, but I honestly don’t think the average worker makes his/her new car purchasing decision that way.”
Unfortunately the average car buyer today, new or used, looks mostly at what the monthly payment will be. That’s all. Most expect to get into their “new” car with little or no down payment.
Fortunately most of us here are not average.
A study done not many years ago revealed that a very high percentage (something in excess of 85%) of potential car buyers were interested in nothing more than the monthly payment. Length of the loan, rebates, percentage rate; nothing else mattered except that per month figure and that’s where people get trapped upside down.
Especially so with a new car, tacking on all the bells and whistles, and the dealer paying (ha…) the tag, title, and tax.
I listen to Dave Ramsey now and then and have several problems with his show.
He tells someone to get rid of their cars and buy a thousand dollar beater to use until they get their financial situation ironed out. What is not taken into account is that someone may have zero mechanical knowledge and end up with a 1000 dollar beater that goes to the crusher the week after they buy it when the trans goes out or it launches a rod through the engine block.
I don’t buy some of the stories some of those callers go on about. One couple with an 80k a year income and they allegedly paid off 140k in debt to become debt free in 3 years time?
They allegedly “scrimped a bit”. Personally, I think a lot of those callers are hedging some financial info so they can sound cool on the radio.
One really hilarious one was the ex-student who has a PhD in History and owes 450 grand in student loans. Apparently the admission standards were very low…
“One really hilarious one was the ex-student who has a PhD in History and owes 450 grand in student loans. Apparently the admission standards were very low”.
@ok4450 --I had colleagues with PhD degrees in mathematics when buying a car were only interested in the monthly payments. Common sense is not necessarily correlated with advanced degrees. I really don’t care if my car or anything else I own is in or out of style. With size 14AA feet, I’ll take any pair of shoes that fits–the style means nothing.
Not to be flip but death or marrying money would be two of the few options open to a history PhD in my view with 450K in school loans. Rod, anyone that had any sense back in 02 was saying the same thing as you. I’d just shake my head at the TV ads for 125% mortgages. A few years before that there was a money program on the radio and the investment advisers had a seminar that I went to. One of the things they recommended was to get a second mortgage for all you could and invest the money. Yeah right. Some wise advice. Their company broke up when the hard times hit.
Now back to cars. My wife wants an SUV or cross over or whatever an RDX is. I’m trying to stall.
yeah , you could buy a lot of history books for 450 grand, especially since most of it can be had for free on the internet these days. historians have , and always have , written books. that s what they do, that and teach.
maybe there should just be tests, like a Bar Exam, to get some degrees. I think that the modern college may be kind of obsolete soon.
Yup, the feds are manipulating the economy. And no matter what they do, new car sales are still in the basement. They're making things worse, not better, with their current policies
New car sales have been steadily rising since we peaked low from the Bush Recession. Since the peak low of 09…new car sales have almost doubled. But they are still behind the peak of the mid 80’s.
I also think that a major part of that reason is that new vehicles are lasting longer and people are hanging on to them longer. If vehicles today were built like my 84 GMC S-15 we would have had to buy 15 new vehicles instead of 7…or spend a ton of money keeping on repairs. Either way it’s a great deal of money out of our pockets.