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Comment by avgDev | Hacker News Reader

The current car market is unsustainable. 96 month loans are becoming common place. It is just a matter of time until people who purchased their cars during chip shortage are massively underwater on their cars. If they have long loans and the cars start having major problems they won't be able to roll negative equity into their next car loan.

People are extremely irresponsible with money and cars with high, long time loans are a great wealth destroying 'vehicle'.

I think the social media helped fuel the 'I want NOW!' culture. This gave life to scalpers and $10k mark up on cars. I'm interested how all this is going to unfold.

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My last (used) car shopping experience saw me struggling to get over paying more than $10k for a car, because we really wanted a minivan and they're (IMO) damned expensive. That was a few years ago.

I am... concerned about how painful the next one's going to be, in 3-5 more years. I hate spending money on cars.

EVs don't seem to be helping the price any—quite the opposite, as far as I can tell—even if they're good for TCO. Concerned about what that market's looking like for poor people, these days. No more $2k cars that'll semi-reliably get you to work for the next five years, or to the 50-miles-away grocery store or Wal-Mart for your "big shopping" once every couple weeks, for the rural poor.

> No more $2k cars that'll semi-reliably get you to work for the next five years

They are out there, but definitely getting harder to find. They may need work to be reliable/drivable; if you can do the troubleshooting and work yourself you can still come out money ahead.

I haven't paid over $10k for a car in 20 years. Last time I did, it was one that I bought new. I will never do that again. The key is to look for a 15-20 year old car that hasn't spent its life in the rust belt and has had good maintenance.

> No more $2k cars that'll semi-reliably get you … to the 50-miles-away grocery store or Wal-Mart for your "big shopping" once every couple weeks, for the rural poor.

Recently I saw a video on YouTube about an impoverished depopulated Eastern European town where instead of having a fixed local grocery store, there was a truck that visited weekly. On the one hand, it’s sad to think of people being so remote yet dependent, but on the other it actually seems like an innovative solution to the problem.

https://youtu.be/q37qWA2cL5w?t=7m5s

Nearly all car loans for all of time have been underwater. It's a depreciating asset that drops a huge amount of value the moment of acquisition. Eventually the principal drops below the trade in value, but all car loans start out under water.

It's possible to buy used cars. Used cars don't drop huge amounts when you buy them, because they've already started to depreciate. Losing that "single owner" badge on a website or carfax might be worth $200, if that.

If you've purchased used cars and put anything more than a pittance, you've likely never been underwater on the loan. In 2019 I purchased a 2016 car for $25k with 10% down. I've made minimum payments on a 5 year loan and it's never been under water. While by their definition I think it qualifies as "very good," the "good" KBB trade-in value is currently $23k (honestly higher than I thought).

In the case of a used car, you'd lose the difference between the marked up price and the trade in value.

It’s going to end up with defaults, repossessions, and negative credit repercussions for a large subprime cohort.

https://archive.ph/2022.05.19-151713/https://www.wsj.com/art...

You're assuming that inflation comes down.

Our money supply was debased by at least 30%. So far inflation hasn't even made up for half of that.

Even if you assume we go into a recession, it's not going to be long before 2019 dollars are worth $0.70.

$30k was the norm 3 years ago. But it's likely in a couple of years that $40k is the new $30k - because money will have lost that much value.

In that case, people won't really be as far underwater.

This only works if wage growth keeps up with the inflation.

Wages have generally tracked inflation - slightly behind the curve.

They led inflation (maybe were a big contributor to inflation) this time around.

I'm not sure why you're convinced that wages aren't going to keep up with inflation.

At least for cars, most people have to finance them so you would assume there is an interest rate where the monthly payments are too high for enough people to bring prices down. A lot of what has gone on the last couple years were extremely low interest rates coupled with the money supply increase. Can probably handle one or the other but not both.

Mark up IS NOT INFLATION.

Higher MSRP would account for inflation. Car prices actually have not raised that much over the years, as improvements have been made to the manufacturing process to keep costs down.

It’s much worse for buyers of ICE vehicles today. We are approaching the inflection point of the S curve of EV adoption, I know this is probably an unpopular opinion but I really think in 5-10 years people are going to have a seriously hard time selling a used ICE vehicle as most people will be looking to the future and would prefer an EV. For EVs I expect an “appreciation” curve for the same period of time, as lithium supply takes a long time to scale to meet demand. I drove my 2019 model 3 for 3 years and sold for a profit recently.

As long as there isn't massive increase in taxation I don't think ICEs will be hard to sell. There is plenty of people who don't want to deal with charging it for example. Or like the long range.

Almost everyone I know who swore off EVs 3 years ago for those reasons are now driving one or looking into it, opinions are changing rapidly

Assuming that gas doesn't end up around $15/gal by then...

If crude oil were to triple in price I think we might have bigger problems. Also I think hitting those price levels is unlikely in any case. Apart from hyper inflation. The consumption would be lower so price would be too.

> Also I think hitting those price levels is unlikely in any case.

Unless we end up with refinery bottlenecks (like we more or less have now) or political incentives (although the odds of that seem alarmingly low at this point).

> The consumption would be lower so price would be too.

Is this expected to hold as oil usage drops over the next century?

Yeah, manufacturing issues might be real. Just think of proper eco-terrorist group attacking multiple refineries... You newer know with people nowadays...

My point is that there is relationship with price and consumption. If the price rises too much people will either look for alternatives or reduce use. Thus prices might not rise that much.

I disagree, your example is just what everyone is experiencing right now.

Nearly all newish used cars are selling for what people paid for them new. The current market does not represent a reasonable market value.

I can assure you EVs of today will depreciate faster than ICE vehicles, as new improvements are made to the tech. So much more money is being poured into batteries and R&D.

Also EVs are expensive because there is not that much supply on used market. Wait for one or two cycles of leased corporate fleets hitting resale market after this price boom and it likely won't be that great to try to sell even older models.

Plus, some EVs are still getting the $7500 federal credit.

I can buy a luxury Lexus ES Hybrid for $45k, or I can buy a luxury model S for $100k. The only thing the ES is worse in is acceleration but it makes up in build quality.

I don't think we're there yet at all. This is a very "silicon valley mindset".

The truck segment only just got the Ford Lightning and are at the start of the adoption curve. The inflection point probably won't be for another 10 years.

And you're likely to be able to sell an ICE vehicle to someone who wants to maintain it because they have all the necessary mechanical tools for a long time. There's a lot of people out there who might not be actual mechanics but know how to debug an ICE vehicle, and even know a machine shop where they can buy a rebuilt engine.

Even after vehicle manufacturers actually stop building and selling ICE vehicles there's going to be an after-market for them. There's probably some cliff that happens where gas stations start to disappear, but you have to age-out the existing ICE fleet pretty significantly, beyond the ability of people to keep their vehicles running.

I believe that EVs are actually going to face problems. While ICEs are expensive to produce now thanks to chip crisis, it will eventually fade off and prices will cool down, while raw material shortages for EVs (copper, cobalt, lithium, nickel) are predicted for years into future, probably full decade.

Thus in few years people will have choice to either own inexpensive ICE maybe hybrid or much more expensive BEV. Problem for BEV will be even more compounded by their inflexible charging (majority of people can't charge at home, 50% people in EU lives in apartments) and high electricity prices (especially in EU). Thus people will start switching back to ICE, purely from economical and comfort reasons.

That is exactly my point. The choice today seems to be (1) spend ~$50k on a new ICE car and sell it in 4 years for 20-30k (or less) or (2) spend ~$70k on a new EV and sell it in 4 years for 60-70k (or more)

Which will actually make ICE cars more favorable for buyers than second hand BEVs with questionable state of battery?

I do not expect the infrastructure for EVs to be built up enough in 5-10y for this to be the case. In fact, if the people start buying EVs faster than charging stations appear, then the opposite might happen and people will want ICE cars because they can't rely on being to charge them if on longer trips outside home range. The existing ICE infrastructure (gas stations everywhere) is not a thing that can be replaced quickly.

Do you currently drive an EV? The infrastructure is already there. I don’t ever think about range or charging, even on long trips, there’s always charging somewhere within range.

I obviously don't live in the same place you do.

> It is just a matter of time until people who purchased their cars during chip shortage are massively underwater on their cars.

It's a depreciating asset. You lose 10 to 15 percent when you drive a new car off the lot. Unless it's a classic car, it's expected that you will be underwater.

10 to 15 is a bit different than "massively underwater", I think 30-40% is going to be hard to swallow by most folks.

When you pay $33k for a $23K MSRP car something is really wrong.

We haven't really had a significant recession since 2008. The 2020 was too V-shaped to make anyone change their behavior. It has been 14 years worth of people overextending themselves.

I wonder how its going to look when the coming recession (we're clearly not in one yet, just look at the headline title here) really starts to bite and just as one example the "influencers" who are at the margins see their youtube revenue kneecapped by more tightening by Google and then all the shit they've been buying on credit comes back to haunt them.

Even the used market is absolutely bonkers. I was just offered $5k more than I paid for my Accord I bought new 4 years ago. Obviously sounds like a deal I shouldn't pass up, but I'd be lucky to find something to replace it with.

It is a very similar feeling to the housing market crash in 2008. History repeats itself.

I don't know, modern cars have longer and longer lifespans.

Do they? Modern cars are using 0W-20 or lower weight oils solely for MPG/emissions purposes and pushing service intervals on that oil to 1 year for cost of ownership purposes. Then many people are not in the habit of changing their oil due to such long intervals so make that 2 years. Compounding that modern cars tend to burn a small amount of oil due to low friction rings for MPG purposes. I don't think you get long engine life with that recipe. That's not even counting the type of fancy things they are engineering into their engines like turbos, special valves, selective cylinder ignition (reduce V8 to V6 or V4) All that stuff breaks before 100k. It's a modern miracle a turbo last just 100k miles.

In the aughts and nineties the extra emission equipment (mostly gas tank vapor emissions) would break after 100k miles, but it wouldn't stop the engine from running. Now it's even crazier stuff that definitely will.

Oh come on my '12 Odyssey has all that stuff besides the turbo and is happily approaching 200k miles. I see older Odysseys like '04-'08 on the road approximately all of the time. That stuff does not "all break before 100k". It would be interesting to see MTBF info for these new features, complexity _is_ typically the enemy of reliability, but handwaving based on your feeling isn't it.

Prepare for a transmission failure. I have owned two Hondas and both had total transmission failures at that mileage. Neither were as new as '12 though, maybe the clutch packs were improved by then.

Yeah 8/9/10 speed transmissions are another issue. So are CVTs

Sounds like you were just very unlucky then :( I'm on at least my 3rd 200k+ Honda and only one of them ever had anything close to transmission issues (clutch went out). It could be because they were all manual transmissions however.

I don't think your car from 10 years ago has all this stuff, plus it's a Honda.

It's not my feeling. Just off the top of my head: See GM AFM lifter failure. See Kia/Hyundai engine failures. See direct injection carbon buildup on Lexus IS250. I could probably go on and on with some more research.

I didn't even mention the transmission.. Nissan CVT is one of the worst but the Subaru CVT isn't even proven to 200k.

2012 might be just on the cusp.

Most cars from the 00's I'd put as being before this paradigm shift.

Motor oils are also getting better: https://www.mobil.com/xomfl/pvl/content/xom-annual-protectio...

(Good for 1 full year or 20,000 miles, whichever comes first)

Right. One of my points was that things you do once a year are difficult to make a habit. For a long time now synthetic oils have been good for 10 or 15k miles but people still had 3k or 5k intervals drilled into them so maybe once every few months was on their internal clock but once they actually took the time it ended up being twice or even once a year and that was actually fine.. But let's say the interval is now a year and you do it every 18 months? Is that fine? I don't know..

This is no longer true and there seems to be a regression in the length of the lifespan of the car, due to cost of repairs and other factors.

The golden age for reliability was when we had significant manufacturing advancements and improvement in engine building with tighter tolerances but lack of all the tech.

The problem is now with the tech, and average car owner has yet to realize just how expensive that tech is. Windshield replacement used to be $150, this is no longer the case. Now, if you have radar cruise control, it needs calibration. Some cars have acoustic glass, which is more expensive.

The cars have sensors all over, minor crash results in thousands in damage. LED headlights are $2k a piece.

Even Tesla, imagine the car is now 10 years old, worth $10k, is someone going to buy a new battery for $10k? There is going to be better tech out there and faster charging times.

Additionally, look at cost of ownership of something like an S class, those things become cheaper than Accords after few years. The reason is that all that tech is hard to maintain and now some of it trickled down into the main stream cars.

Don't get me started on low-profiles wheels. 3x more expensive tires and poor ride quality, all for just the bling factor. It's getting hard to find new cars that even leave the factory with standard wheels anymore.

Not in the rust belt they don't!

Better engineering and a desire for ever-higher fuel economy means that today's cars are made stronger than ever before (when new) but with less metal. Less metal means the frame is compromised more quickly by corrosion.

All but one of my previous vehicles had engines and interiors that were perfectly fine at 200k miles but the frames and bodywork were so rusted out that the whole car was essentially a loss.

Car manufacturers COULD design a far more rust-resistant car, and it wouldn't even be that hard or much more expensive. But of course when your business is pumping out millions of a thing, you don't have much incentive to engineer it to last longer.

I started spraying wool wax on the undercarriage of my car. 3 years in midwestern winters with salt and 0 rust on the underbody. Not a complete solution but helps, as I tend to keep cars for 10+ years.

Having just moved to the midwest, do you spray it everywhere or only in certain places?

I remove the wheels, put bags over rotors/calipers and spray mostly everything except the exhaust and body panels.

I don't drill holes in doors or anything like and don't spray inside them.

Is it really a desire for "ever-higher fuel economy?"

I would have no problem driving a 10mpg car that had character, didn't look like every other car on the road, or had some sort of unique value to it. But regulations are arbitrarily increasing fuel economy requirements which drives every car to use smaller engines, less powerful engines, and end up looking like a half-used cough drop.

I think if manufacturers didn't have to waste time with that they would be willing to invest more in things people actually care about, rust resistance being one of them.

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