Low-income households are falling behind on car bills | Hacker News Reader

Low-income households are falling behind on car bills

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I currently make ~$12k a year as a student. Bought my first car, a 2013 Scion FR-S almost a year ago for $4k. Had about 150k miles on it. I do oil changes myself, twice a year, for $50 a pop. It's a reliable car, and I haven't needed to do any big repairs. I'm planning to take it to 250k, or further.

Bottom line: find a reliable used car. Don't take out a loan you can't afford. E.g. Toyota Camry/Corolla, Honda Civic. For about the price of a typical down payment, you get a functional vehicle that will cost you <$500 in maintenance a year.

If the transmission failed on that $4k car it could cost you $3k to repair it.

I also used to buy cheap cars and do my own maintenance. I got lucky. I was also a college student who didn't have to be somewhere at a certain time to pick up my kids, and if I was late too many times and got fired from my minimum wage job I wouldn't lose my housing. But many people are not in that situation.

For a lot of people, car problems can cause significant disruption to their lives -- especially for single parents or people in some other kind of single-car household.

Also while I was in college, I saw a manager at my minimum-wage job get fired for missing too many shifts. She had an older car and had to defer maintenance because she couldn't afford it -- but of course that only made the car less reliable in the long term. It broke down so many times in a 3-month period that she frequently missed her shifts and got fired.

Situations like that are why a lot of people buy new, really low end cars like Mitsubishi Mirages or Kia Rios. Car enthusiasts look at that and say, you could get a used 3-series for that kind of money! But some people will get fired if they miss too many shifts, they have kids who need transportation, they don't have the cash to pay for a sudden maintenance issue, and a reliable new car with a warranty is best for them even if it's a low-end penalty box.

Jack Baruth wrote a good article about this a while ago: https://www.thetruthaboutcars.com/2015/02/no-fixed-abode-got...

>If the transmission failed on that $4k car it could cost you $3k to repair it.

Well it's an Aisin, so it won't. Part of getting away with buying cheap cars is knowing which one to buy.

There is no 100% reliable brand, and when you buy used cars you also run the risk that a previous owner drove the car abusively. Especially with a car that appeals to the boy racer/tuner crowd like the FR-S.

I remember hearing an expression growing up that went something like, "Buying a used car is buying someone else's problems."

I am not saying most sellers are intentionally selling lemons. A person may sell a vehicle for a variety of reasons, but you never know which ones are selling lemons, and it's a gamble at the end of the day.

It is often like that. You have to be picky.

My current car is over 20 years old. It rarely has issues, and has never cost more than about $1500 to fix all of them at once. It wouldn't be worth a lot on the used market. Practically any repair of $500 or more starts to get into "but how much is it worth" territory.

My comparison is not "how much is it worth", but "how much would I have to pay to get a similar vehicle with a completely known history of good maintenance, and how much would I have to spend for a new one?"

I spend about $1000-1500 a year on it for maintenance - oil changes, tires, brakes, things that break on a 20-year-old truck - and there's just no way that any new car can compete with that. If I could buy its twin for $5k, I probably would. Not because it's an amazing vehicle, because it's not. But having a completely spare car is GREAT. Primary car needs service? Keep it for a week, I don't care. One won't start in the morning? Take the spare, figure out the rest later.

This take is fanboy talk. When you’re talking decade+ old cars treatment by prior owners dominates the equation except in the rare cases of an engineering flub (Tacoma frames, Cadillac V8s etc).

Brands and models that are preferred by the people well enough off to buy more car than they need and not skimp on maintenance tend to be most plentiful in nice condition on the used market.

Or you get a car that needs a cylinder head replacement four months later. Or you accidentally bought a flood car.

"Buy used" is good advice, but at the low end of the market it's a risky maneuver. If you have the mechanical aptitude to evaluate the car, and you have space to perform your own maintenance, and other stars align for you, have at it. For others, it's worth buying a car with some warranty, especially if your livelihood is tied to having a functional car.

I don't think the survivorship bias involved in these recommendations makes for a good one-size-fits-all advice blurb.

Nearly all of the cars I've purchased have been inexpensive used cars, and only one of them has ever given me any real trouble. That's the one I bought from a used car dealer.

The rest I've purchased from individuals. So my approach is to never buy a used car from a dealership. And, of course, always have a mechanic look it over before you buy, even (or especially) for the cheap ones.

Not to mention there is not quite the abundance of used cars that there used to be, as during COVID the market went absolutely insane.

I know this is meant in the spirit of good advice

but I hope people from the US consider the fact that your city/town planners destroyed your liveable areas to make America car dependent

And honestly it wasn't that long ago, it bankrupts your cities and costs everyone

We are well aware of it and extremely unpleased with that. They force everyone to drive a minimum of 2-4 miles to get to the closest store and chances are it's a stupid mcDonalds or some other nonsense like that. i really don't know what they were thinking. it's almost as if the car industry paid off the city planners. I know early in US history the car industry bought up trains and put them out business which is despicable.

You'll see this huge mass of houses crammed together like some kind of concentration camp. and it'll be endless miles of uniform houses like pods in the matrix. no libraries, no parks, no trees, no community compost, (none of these things have to be expensive) nothing. but lots and lots of pavement. some of those side streets are I'm not kidding you like 5 almost 6 lanes wide, meanwhile people's front yard is less than 10 feet long.

It's a complete unmitigated disaster.

I'm pretty sure large developed country/ low population per unit of area did that. Pick any city and drive an hour in any cardinal direction and you'll find woods and racoons.

We know, but what can we do?

Vote and go to local city hall meetings

I would, but I can't find parking, no way to walk there, and my city lacks robust and/or safe public transit.

(I'm being facetious for those unaware).

It's almost like there are systemic issues that keep certain subsets of the population from participating effectively. Weird huh

Good on you!

I drove the same car from age 18-29. It was 26 years-old when I sold it. Never once took it to a mechanic.

Most routine services at a mechanic are just basic oil change, checking fluids, checking tyre pressure, checking brakes. The mechanics my wife takes her car to are so lazy, they didn't bother to check her drum brakes (despite ticking it off. drum brakes are more annoying to check than disc brakes). They were nearly metal-on-metal and I just changed them myself.

You can absolutely service your car yourself. And because it's so much cheaper, you can buy the best brakes (most important), the best tyres (just as important), the best parts.

There's plenty of guides online that will tell you what to check. Keep a log book, and you can start replacing things on schedule (eg changing the belt every 50,000km) before they break.

You can still take it to a mechanic for non-trivial stuff. But once you start doing minor things, you end up doing it all :)

This is massively hard to do these days, dealers watch for private sales and snap them up for health markup

I would love for a ban on as-is sales in the USA. How can you justify a salesperson trying to sell you this amazing Camry that they just cleared all the codes off.

Was it a salvage title car? A year ago a clean title FRS with 100k miles would still easily pull $10k at auction, so you got a heck of a deal if it didn't come with major defects.

Subprime auto loan crisis would be neat.

Small chunk of labour unable to commute, unable to earn.

Less earning snowballs into less demand snowballs into recession.

Whatever triple leverage cronenberg security monster wall street has secretly shoved up everyone's ass wrapped in 4 layers of derivatives goes bust causing the fed props up asset prices (obviously) while low income areas turn into the god damn purge.

But hey, used cars will be cheap again

$10K loan forgiveness for everybody?

Unconstitutional.

Is the emergency declaration still in place? Can it be left in place forever, like the war on terror? It's looking like the SCOTUS may be leaning towards deciding that the loan forgiveness is in fact constitutional. For better or worse.

It's unconstitutional, everyone knows it's unconstitutional, but this way in 2024 they can blame the Supreme Court for striking it down. The executive branch can't spend money without the approval of Congress, and HEROES Act does not apply.

Given what I've read of the proceedings, the states are claiming injury on behalf of loan servicers. The supreme court doesn't play that way. Injured parties must claim injury on their own behalf. Justice demands its pound of flesh. That the states went to the supreme court without standing may in fact doom their case. But if that does happen, it's purely procedural and will not establish a precedent. The conservative justices are vocally against the idea of eroding the separation of powers, so they'll be especially motivated to keep the ruling narrow.

Since when has that limited campaign promises?

On what basis?

The contents of the article show that subprime loans are increasingly delinquent.

While there is definitely a correlation between having a low income and taking out subprime loans, it's not 1:1. Having a bad credit score is what pushes people into subprime rates.

Lots of people with higher incomes and bad credit end up with subprime loans, and many people with low incomes qualify for "normal" loans.

What this article basically says is "people with bad credit scores are increasingly delinquent on their high-interest car loans compared to the same time last year."

There is enough correlation between income and credit scores to speak in generalizations. Of course there are exceptions, but generally speaking, there is a greater percentage chance lower income people have lower credit scores. It makes sense. Many people with limited financial resources are put into situations where they need to take riskier loans more frequently than those with greater financial resources. One link of many: https://www.creditsesame.com/blog/credit-score/the-relations...

The trend has been that people are using bailouts, stimulation, and low interest loan consolidation to pay down high interest credit accounts since the pandemic started. I worked in underwriting for a few years, into the pandemic. The FICO scores have been steadily climbing ever since the beginning of the pandemic, and even years before, despite the fact that consumer behavir was not changed. It's only my hypothesis of whats going on. Thankfully I don't work with credit anymore. I think this jives with your statement, but doesn't mean the article is meaningless overall.

I suspect that quite a few people used the stimulus, the rent forbearance, and the student loan repayment pause to spend money on things they couldn't otherwise have afforded. Unfortunately in some cases they used debt to do it.

But now that money is running out, and gas/food/rent got more expensive, and I bet some people who bought new cars they couldn't really afford are not making their payments on time.

However I also would bet that a decent portion of the people in that situation are not on a low income, but are just people who overspent on their car. I've seen people with six-figure salaries get too deep into car payments before. It's a really common problem.

You're not giving them enough credit. Pun not intended. They paid down high interest accounts with the spare cash hence the evidence I saw, fico score increase across the board. If they had just been taking on more debt with the same income, fico scores would decrease. It's essentially a ml model for predicting the risk of default.

Said another way, people who tend not to pay their bills on time, not paying bills on time.

I think we will be seeing a lot more of this across all sectors too. On the local news last night, I saw the city of Portland is owed some $28M in back water bills by residents from the last 2 years as they suspended cutting people's water off for non-payment during the pandemic. Now they're owed a lot and no one's paying, so they're shutting a lot of people's water off and talking about raising rates on everyone else to make up for the loss.

https://www.msn.com/en-us/news/us/post-pandemic-portlanders-...

I live in the UK. I own a house with a long term partner. We live outside a city. Neither one of us drives. I feel like we've saved an incredible amount of money over the years. I think you can get by and do very well without a car in the modern world especially now that WFH is common.

> I think you can get by and do very well without a car in the modern world

It very very heavily depends on the part of the modern world that you live in. A lot of ostensibly well-off, relatively dense areas in North America are completely unlivable without a car. Public transit isn't reliable enough, distances between your house and various amenities (parks, shops, transit) are too far, and roads are too narrow for walking (no sidewalk or shoulder and travel speeds of 60+ km/h in many places).

To add to your point, it also depends on whether you have kids or other dependents, too. Very often there isn't any real choice in owning a car.

Yes, it's possible to go without, but it's so difficult, or requires such a different lifestyle that it's just not practical. The choices have already been made, and there is no going back. I was raised by a single mom, and there is no way she could have provided for us as well as she did without a car. And she went through some real difficulties to have a working car.

[edit: I should have added that this is in the US. It may be different in different places]

As an American, I envy you. I've spent much of my adult life trying to life car-free but it's really, really hard in the USA. The infrastructure is simply nonexistent or needlessly dangerous, and the few places you can live car-free have become ludicrously expensive.

Eh, with decent income, you can definitely uber/ebike in developed places.

Generally though, one thing of public transport that gets overlooked is that a) you schedule becomes tied to public transport, and b) you have to deal with people. Because of noise and labor regulations, public transport for short trips does not run at night. Also you can get delays due to passengers causing holdups, and so on. I honestly personally much prefer driving over public transport.

Having to tie a schedule to public transit would indicate to me that the transit is not properly set up. It should be traveling frequently enough that this is not an issue. One of my biggest reasons for enjoying flexible working hours is that I can go out during the day when transit is most frequent and I don't have to think about the timing since it is much much more frequent then. And another major plus is not having to deal with traffic. I get delayed far more by people in cars than I ever have with transit.

This is a big problem with a lot of systems, especially the north American ones, but it isn't an inherent flaw in public transit. The more it is used and the more it makes itself available and frequent the better it works overall.

If you can make it work, that's great. No car payments, no insurance payments, no maintenance expense, no fuel expense.

I need a car, but I don't buy them new. I buy used cars that may have some cosmetic flaws but are fundamentally sound. I pay cash so I don't have a car payment or interest expense. Insurance is lower, and if it gets dinged or scratched in a parking lot I don't care.

In the US, this is common, particularly among those who would need subprime car loans:

1 A job where WFH is not an option (either because it's physically impossible (e.g. service industry), or because even if it is physically possible they are at the whims of their boss)

2 A long commute

3 Poor mass transit; even if there is "okay" mass transit both where they live and where they work (already unlikely) there is unlikely to be mass transit connecting the two.

4 Multiple jobs, at least one of which doesn't fit any available mass transit designed around 9-5 commuters.

I live in the UK.

I own a car that cost me 700 pounds. My annual insurance and tax are 500 pounds. The car basically requires 0 maintenance. It will break in approx. 5 years and I'll buy another one.

I can go to the countryside, visit friends and family that do not live near train stations, go to large supermarkets and buy in bulk, and generally just go everywhere more quickly.

I like this. It's nice. I'd pay 500k over a lifetime for it. It allows me to do many things I couldn't otherwise. Thankfully it only costs me something like 50-100k.

You live in a very particular bubble, friend.

Hard to be sure without the data but it looks to me an awful lot like there’s a spike in delinquencies every December, and the graph is through… December 2022. That final spike is also in line with 2017-19.

Low income everyone is falling behind in everything. Call it over dramatic, but it's essentially true.

Buy a tesla

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