This disturbs me.

"LJ909" (lj909) 06/18/2016 at 21:56 • Filed to: None

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In my line of work, I deal with loans. So with the nature of my work, I get to see hundreds of peoples credit, credit scores, monthly income etc a day. Today however, I noticed something disturbing: a lot of people are living above their means. Like way above (to the point that for example, one man makes close to 20 grand a month. But has so much credit card and auto payments its like hes making 3500 a month.) Not only that, but many people have outrageous monthly payments and terms on their auto loans.

Now I’m not saying that a bubble is about to burst, but what I see tells me that either people are just dumb enough to sign on the dotted line and let the excitement of a new car outweigh rationality, dealers/lenders are pushing high ass payments on people or both. So to make sure that it was just a handful of people, this past week, I looked at close to (yes) 4,000 people and their credit and their car loans.Now keep in mind that most if not all of the people I looked at have credit scores of 645 and above, with the average being about 720. Here’s what I found:

Lengthy loan terms averaging about 72 with the extreme being 78 months.

People are paying ridiculous car payments. Over $350 bucks a month for less than 20k and over $500 for 25k and up.

The most crazy example I pulled from this?

A customer that got a car that was 37k. They are paying 1034 a month for 60 months. Excellent credit

A customer with 27k car paying 600 a month for 75 months. 715 credit score

Another customer paying 700 a month on a 29k car for 67 months. Again, credit score over 700.

Now from what I know with being in sales myself in the past and with what I do now, the loan terms that seem to be the industry norm now are usually to keep payments low. I guess that’s not the case anymore. But does anyone else see this or know this as being a problem? Or find this disturbing at all?

d15b > LJ909 06/18/2016 at 21:59

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Not enough down payment.

wafflesnfalafel > LJ909 06/18/2016 at 22:01

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‘merica

Steve in Manhattan > LJ909 06/18/2016 at 22:02

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I read somewhere that the new RMBS sort of ‘investments’ are subpar car loans packaged into tranches, made into securities, and sold to gullible investors. And people are far more willing to walk away from a car than a house. We have learned nothing.

Frenchlicker > d15b 06/18/2016 at 22:04

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Even with shitty credit and low down payment these all seem high to me. I blame people just signing and not searching for the best interest rate.

R Saldana [|Oo|======|oO|] - BTC/ETH/LTC Prophet > d15b 06/18/2016 at 22:11

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Yep couldn’t say it better. Although, I traded a car for $2500 plus paid $5000 down on a $17k car and have an over 300 dollar. (albeit with a low interest rate)

Did I do this wrong in your opinion?

Urambo Tauro > LJ909 06/18/2016 at 22:11

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Yeah, there’s an epidemic of YOLO spending going on. It’s ridiculous.

For Sweden > LJ909 06/18/2016 at 22:12

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That text is clearly a font and not hand-written

Dr. Zoidberg - RIP Oppo > LJ909 06/18/2016 at 22:15

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I know plenty of people who could be doing much better if they even had one ounce of financial savvy. So many seem to focus on what they CAN afford, not what they SHOULD afford. This is especially a problem with cars because I or anyone would be approved for an outrageously expensive car somewhere from someone.

Matt Nichelson > LJ909 06/18/2016 at 22:16

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From the 3 examples you gave, it sounds like interest rates are to blame. The first one you mentioned is eventually going to pay $62k for a $37k car if kept the full length of the loan. That can only mean the interest rate is through the roof. To put it simple, they got fucked. There’s absolutely no reason any of those three should be paying what they are each month.

Dr. Zoidberg - RIP Oppo > Steve in Manhattan 06/18/2016 at 22:18

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America’s thought process:

“Nothing bad will ever happen!”
Later: “Nothing bad will happen twice!”
And then: “Trust me, I know what I’m doing — this is my third time.”

JasonStern911 > LJ909 06/18/2016 at 22:24

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Governments have effectively lowered interest rates to, in some cases, even a negative rate in an attempt to get cash flowing through the economy. It’s not just consumers that are debt ridden - corporations are taking on debt to buy back shares to increase earnings *per share* in a stagnant environment. Congrats on identifying it and being smart with how you manage your money.

LJ909 > Urambo Tauro 06/18/2016 at 22:26

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Yea it is. At first when I got into the business I thought “oh these people might still be hurting from the recession. It’s sad.”But it's not the case. It's just thousands of people going for show spending money they don't have and mismanaging their money. There's no reason for a husband and wife to have a total of 12 credit cards between them.

LJ909 > For Sweden 06/18/2016 at 22:26

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And what does that have to do with what I wrote?

LJ909 > Dr. Zoidberg - RIP Oppo 06/18/2016 at 22:27

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Yep. It's really easy. especially if these places have their own finance companies.

For Sweden > LJ909 06/18/2016 at 22:27

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nothing

d15b > R Saldana [|Oo|======|oO|] - BTC/ETH/LTC Prophet 06/18/2016 at 22:28

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How long is the term? It sounds like less than 5 for sure.

d15b > Frenchlicker 06/18/2016 at 22:29

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that too

Textured Soy Protein > LJ909 06/18/2016 at 22:39

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Sounds like these people are accepting loans with ridiculous interest rates because dealer finance departments are offering up higher rates and these folks don’t think to ask for lower ones. $30k loan at 3% for 72 months is $455/month.

Urambo Tauro > Dr. Zoidberg - RIP Oppo 06/18/2016 at 22:41

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“Afford” is a funny word. People don’t want to be in debt (for good reason), yet they spend as if having exactly zero dollars was their goal.

RiceRocketeer Extraordinaire > For Sweden 06/18/2016 at 22:47

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I’ve seen that kind of thing with the online document signing they use for car and home loans

Dr. Zoidberg - RIP Oppo > Urambo Tauro 06/18/2016 at 22:48

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Yes, people never think about injuries, deaths, or something as simple (and common) as being laid off. No income is a guarantee. When you buy a home or a car, you’re declaring that yes, I can afford these no matter the circumstances over X years, when really the internal dialogue is “I can afford this NOW, and tomorrow will be a brighter day!”

RiceRocketeer Extraordinaire > Dr. Zoidberg - RIP Oppo 06/18/2016 at 22:53

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got an email offer from my credit union for a pre approved car loan up to 80,000. uh ... thanks, I guess.

Urambo Tauro > Dr. Zoidberg - RIP Oppo 06/18/2016 at 23:01

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Exactly. Spending all the rest of the money you own puts you in a really vulnerable position. Finances are not a good thing to be overly optimistic about.

shop-teacher > Steve in Manhattan 06/18/2016 at 23:02

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Actually these days people have proven to let their mortgage payments slide before their car payments. Most people need the car to get to work, and it’s a LOT harder to foreclose on a house than it is to repo a car.

That said, we’re surrounded by idiots. We have learned nothing.

smobgirl > LJ909 06/18/2016 at 23:03

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I feel like lower-income millennials see a car loan as a next step in moving up in the world, away from the $500 beaters we all grew up with. But then we don’t have family advice on car loans and unfortunately think dealers (especially branded dealers) are more trustworthy than they really are. I thought buying a car on my own was way more terrifying than even buying my house.

shop-teacher > Dr. Zoidberg - RIP Oppo 06/18/2016 at 23:07

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I actually think it may be an even bigger problem with housing. When my wife and I bought our house in 2010, our mortgage broker wanted to hug us when she saw what we could be approved for, and what price range we were actually shopping in. Why? Because it was so uncommon for her to meet people so responsible. Mind you, this was 2-3 years after the bubble popped, while we were still up to our ass in “we’re fucked.” I imagine it’s way worse now.

E92M3 > LJ909 06/18/2016 at 23:16

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It appears to me everyone I know is making $100k+ a year (by looking at their lifestyle). One of them is an elementary school teacher, so I doubt she does. The others could be making that much I suppose.

What I don’t get though is why they don’t shop rates when buying cars. I would at least check a credit union. I know people paying 7, 8, 9% APR on a new car. I wouldn’t pay that in a used car. Most manufacturers offer 3% or less on new cars if you bother to check their website. They also fall for the tire and wheel protection plans, and prepaid maintenance.

LongbowMkII > LJ909 06/18/2016 at 23:36

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Damn son. I always got in enough trouble with just the one.

LongbowMkII > LJ909 06/18/2016 at 23:38

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Was that the value of the loan or the car? These people could've finances the negative equity from their last car (still stupid, but explains paying 62k for a 37k car)

R Saldana [|Oo|======|oO|] - BTC/ETH/LTC Prophet > d15b 06/18/2016 at 23:42

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I honestly don’t remember, it may have been five or three. We added $3500 of warranty to the 10k we financed.

d15b > R Saldana [|Oo|======|oO|] - BTC/ETH/LTC Prophet 06/19/2016 at 00:12

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Yeah, you want to know those kinds of details of your financial health. But it sounds like a 3 year plan, which is good!

LJ909 > JasonStern911 06/19/2016 at 02:48

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Thanks. Working in this field has really shown me how to be smart with my money.

LJ909 > Textured Soy Protein 06/19/2016 at 02:50

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Exactly.

LJ909 > E92M3 06/19/2016 at 02:52

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Because people don't think and are all for show that's why. They rather flaunt their expensive car and expensive payment than flaunt a good deal they got on a reasonable car.

LJ909 > LongbowMkII 06/19/2016 at 03:00

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The car.

R Saldana [|Oo|======|oO|] - BTC/ETH/LTC Prophet > d15b 06/19/2016 at 11:23

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I think it was a 5 year loan, we’ve had the car a year now and by my basic calculation using the payoff amount divided by the monthly statement it returns just under 3 years of remaining payments. I need to find a good financial planner so I can start investing properly.

d15b > R Saldana [|Oo|======|oO|] - BTC/ETH/LTC Prophet 06/19/2016 at 13:02

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Just get your house in order before “investing”. Maxing out your 401k is step 1 after getting rid of all credit card debt and other debt, aside from mortgage.