Cars Without Financing

"Wobbles the Mind" (wobblesthemind) 06/01/2016 at 11:19 • Filed to: Question

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If there was an announcement that a freeze on new car loans would take place for the month of August every year, what would be the reaction?

July sales spike? Huge incentives on new cars for August? Maybe special “August Edition” trims? Would having a temporary tag on your car at the end of August be a prestigious symbol? What are your thoughts?

Aaron M - MasoFiST > Wobbles the Mind 06/01/2016 at 11:26

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Just for August? Used car dealerships would shut down for August and send everyone home to save on overhead...or there’d be a run on cash-sale cars at auction. New car franchises would either send their used-car staff home or temporarily switch them to new. Trade-in values would temporarily plummet because of the lot issues...you’d probably get better deals for your shitty trade-in that could make a cash sale. Only the largest franchises with the most lot space would actually accept trade-ins.

BigBlock440 > Aaron M - MasoFiST 06/01/2016 at 11:36

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Why would used car dealerships shut down? I’d think a higher percentage of used cars are bought with cash than new cars are.

Aaron M - MasoFiST > BigBlock440 06/01/2016 at 11:37

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Depends on the dealer. Also depends on how much money they make in F&I. And even if more used cars are bought with cash (which is almost certainly true), it doesn’t mean enough used cars are bought with cash to keep the lights on.

qbeezy > Wobbles the Mind 06/01/2016 at 12:32

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Another economics crash lol

BigBlock440 > Aaron M - MasoFiST 06/01/2016 at 12:36

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The used car market is 3 times bigger than the new car market by total sales, if there’s not enough cash sales from the used car lot, I doubt there’d be enough for them to need them over at the new car lot. I think it’d likely be the reverse, the new car guys would be needed over at the used lot.

BrianGriffin thinks “reliable” is just a state of mind > Wobbles the Mind 06/01/2016 at 12:46

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Are there any statistics on how often cars are “impulse buys” or something similar? I know that every time I’ve bought a car, I was just casually looking until the Great One came along.

I’d think almost all sales would go to -0- (except for private party) as many folks want financing to be there just-in-case, even if they had planned on paying cash. I would expect July sales to be higher in anticipation nor September to really catch the difference.

Aaron M - MasoFiST > BigBlock440 06/01/2016 at 12:49

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According to Manheim, 60% of cars sold at auction were six years old or less. Similarly, according to Edmunds the average trade-in age is hovering right around 6.5 years. This would indicate that the majority of used cars are not cash purchases.

Similarly, Manheim reports that a $5,000 vehicle purchased in 2015 will have an average of 120,000 miles on it. Between that lower end and an average auction price of around $10,500, the typical used car is a finance purchase.

Sources:

http://www.manheim.com/content_pdfs/p…

http://static.ed.edmunds-media.com/unversioned/im…

kanadanmajava1 > Wobbles the Mind 06/01/2016 at 13:08

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I don’t understand buying new (or nearly new) cars with financing. If you cannot afford to buy something why do you still need to buy it? New cars lose their value so quickly that it’s a really bad investment especially if you couldn’t afford to buy it without financing in the first place.

But for that loan freezing question I would think that new models wouldn’t be introduced near August anymore.

DynamicWeight > kanadanmajava1 06/01/2016 at 14:00

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Why do I need to buy a car? To get to places. Why do I like buying new cars? Because the used car market sucks. Why would I finance? Because the thousand dollars I end up paying in interest is worth having my cars years earlier than I would if I saved up and waited. Paying for something outright, and making payments on something are completely separate from new car depreciation. The depreciation is the same whether you are making payments or paying in full. For the average person, cars are not an investment.

kanadanmajava1 > DynamicWeight 06/01/2016 at 18:08

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How can the used car market be so bad? I have seen a lot of quite nice ~10 year old things for sale in the US. I have heard that many owners “forget” to get their rides maintained but there has to be a lot of exceptions.

DynamicWeight > kanadanmajava1 06/02/2016 at 11:45

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Used car prices are too high. Especially on desirable vehicles. I like older vehicles, but I see them more as a hobby. I really like having something fairly new that is ultra reliable and safe. No ten year old car is like that. At least not one that isn’t nearly the same price as something new anyway.

I’m really hoping I’m wrong because I am going to be replacing my new car with something else and I really want to see if I can find a deal on a 2-3 year old used car. But for the most part they seem to be priced just a few thousand less than new cars, and for that, I’d rather just get the new one and know no one has fucked with it. Although again, this makes me partially happy because my current “new” car has only lost 1.5k in value for the two years I’ve owned it (WHICH IS CRAZY).

Also, if everyone bought used, there would be no used cars.

kanadanmajava1 > DynamicWeight 06/02/2016 at 13:18

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I guess the value drop isn’t so severe there during the first years. Here the new car value decreases by 10% when you exit the store.

In Finland we import a lot of used cars from abroad. Mostly from Germany as Audis are what Finnish people want to have. The ratio between used imported cars and new cars is around 1/5.