Americans crushed by auto loans as defaults and repossessions surge | Hacker News Reader

Americans crushed by auto loans as defaults and repossessions surge

carscoops.com

51 pointstoomuchtodo96 comments

It's always surprised me, when talking to Americans online, how many people seem to feel they don't have access to the secondary car market.

Perhaps it's because I grew up around people who were good with their hands, but in my mind buying a used car isn't a scary matter - you visit the private seller, you look at the vehicle, you check for the things one needs to check for, and you know if it has problems or not. And if you can't do this, you've got a cousin or uncle who can.

But speaking to Americans, they make it sound like this kind of traditional working-class knowledge has been lost? A lot of folks seem positively scared of the second-hand market, and say that a $50,000 brand new car is going to save them money on maintenance.

Crazy high standards of living, in a sense!

I'd guess perceived status. That, or, they want a tank: another arms race for Baby (Crushing|Saving) Machines. Modern cars keep growing.

I've bought exactly one new: will drive it until the wheels can't be put back on. Before that, probably a dozen second-hand. I now make silly amounts of money, am American.

All this to say: used cars are best cars. Terrible purchasing experiences await regardless.

edit: "In for a penny, in for a pound", right? :)

Can't you just buy from a second hand car dealer? They usually give you more guarantees than private sales (for a slight premium). That's how most people in the UK buy cars.

You can, but it's usually a larger difference. A car that might be negotiated down to $5k or $6k on the private market, will probably be at $9k-$10k on the dealer lot. Plus they'll tack on document fees, and so on. In the end, you might be looking at paying double what you would otherwise for cars in similar shape and mileage.

Still a much better deal than new, and more accessible to people without technical car knowledge. This is how my wife buys our cars.

That does also basically erase any connection to the last owner - so you can't try to infer if they took care of the car or not. On top of that, afaik many second-hand dealers buy cars at auction and then often only do basic (bandaid-type?) fixes to get the car ready for sale.

Two things in my opinion: Cars are now much more complex than 10-15 years ago. And the secondary market is more expensive. It’d make sense if the discount is big enough but if it is not, you are gambling.

New cars require less maintenance and usually come with 1-3 years of warranty.

Assertion #1

> And the secondary market is more expensive.

Assertion #2

> New cars require less maintenance and usually come with 1-3 years of warranty.

The more people who purchase because of Assertion #2, the less true Assertion #1 is going to be.

So, yeah, as someone who has only twice purchased new (and regretted the financial hit both times), I actually am in favour of convincing more and more people to strain their finances to buy new, knowing that a lower demand in the secondary market means lower prices for me for the same used car.

If more people purchased within their means and bought secondary, I'd be paying a lot more each time I bought a car.

Yes, this is very much the case here in Sweden. When people started thinking about environment and second hand became fashion, all the second hand stores suddenly became as expensive as buying new. I have always been buying second hand so I'm a bit miffed.

You can get used cars with a warranty too, since a lot of manufacturers have certified pre-owned programs.

For example a 2025 Mercedes-Benz C300 is $48,450 but a certified pre-owned 2022 Mercedes-Benz C300 is $32,820, and you get whatever is remaining of the original warranty + 12 months. I'd say that's a pretty decent saving, especially considering that it's still the same model (current generation is 2022 and onwards).

I can think of a couple of factors.

One, there's a big urban/non-urban split in American culture. The former are far less likely to know anything about working on cars, nor are they likely to have a friend or uncle that can help.

That cohort is very over-represented on HN.

Second, there's a lot of shady stuff happening in the used car market, and you really do need to be on top of things to not get scammed. We're talking that's absolutely illegal, but also difficult and expensive to enforce, so if you get stuck on the wrong end of a deal, you're just going to eat those costs.

I don't get this at all. I'm an urban know-nothing about cars. The current car I have I bought online from a private seller. I insisted on taking the car to a 3rd party mechanic for an assessment. Paid for the assessment, then bought the car.

It is spending maybe $400-$500 to save potentially over $10000

I don't know.. people have been buying used cars on Craiglist for as long as I can remember.

This is how I roll. Turn up next to the £100k EVs at the office in my 15 year old turd.

I go on holiday 6 times a year for that money.

The 15 year old turd seems to go wrong less and cost less to fix when it does as well.

For interest's sake, what type of car is this?

Dacia Duster

O yeah I know it. Good cars I think. Light on fuel. I have a Land Cruiser, not bad but guzzles a bit, getting 15mpg (15.5L/100km)

> round people who were good with their hands, but in my mind buying a used car isn't a scary matter - you visit the private seller, you look at the vehicle, you check for the things one needs to check for, and you know if it has problems or not.

This has nothing to do with America. The rest of the world has this problem too. Not everyone is a mechanic outside of America.

Come to eastern Europe, nobody here buys a new car (people can't afford it unfortunately). For that exact reason most people have retained the knowledge of how to buy a used car, and choose one that is not awful, or at least the least bad one.

I am originally from EE and there are reports every month on how cars cause accidents because breaks didn't work, or an entire wheel flies out of its place. Not to mention the gazillion cases of accidents caused by improper headlights.

The only reason the second-hand market works there is because most of the used cars come from Germany, and they have strict laws for checking the cars periodically. Once they roll on the EE roads for a few years, then the cracks start popping up which cause horrible accidents.

Just implying that EE is this amazing place where second-hand cars have no issues and Americans should follow the same model shows that you have no idea what you're talking about.

So the issue isn’t second hand cars but a lack of oversight.

It depends on the country but some eastern European countries require an annual car inspection as part of registration. They check for basic stuff to ensure it's not falling apart. Thoroughness varies, and some inspectors can be bribed.

People in Eastern Europe buy new cars.

Most new cars in Eastern Europe are leases owned by banks. People buy brand new cars for themselves with cash every 15-20 years. The rest is importing totaled cars from Germany, Netherlands, and US of A.

That's how new car purchases work in the US too. Unless you pay cash, which few people do, the car belongs to whichever entity granted the loan to purchase it.

In Eastern Europe I regularly hear that car disintegrated into three pieces or engine fell off after a collision. These do not happen to a car having minor crash in its history, these happen to a car which had been totaled in the past. Eastern Europe is the scrapyard of Western Europe and yet its inhabitants found a way to fell superior about their 15 years old BMWs with engine mounted on three screws.

Some modern cars are specifically designed with frangible engine mounts to eject it downwards in a frontal crash. This is a safety measure to dissipate energy and prevent the engine from being pushed back into the passenger cabin.

I live in Amsterdam, and we can absolutely afford to buy new (especially if we were to choose not to live in Amsterdam), but there are reliable car dealers where you can buy a good second hand car for a decent price. I really don't see the point in buying new.

The average interest rate on used car loans is above 10%, they do buy used, but it's even more of a scam

Buy the car you can afford by paying in cash, or a small enough loan that even 10% will be manageable.

This isn't the American way apparently, do you want to be a True American Patriot or some loser driving a shitbox

I still remember the first thing my bank offered me as a student in the US, a credit card, 25%+ apr, give that to a 18 years old clueless kid and you'll set them up for failure. The entire system is setup to make you think these interests rate are normal and that being in debt is a proper lifestyle

It's weird to refer to charging interest on a loan as a "scam". The default rate on used car loans is higher than on new car loans, and interest rates reflect that.

If anyone is financing used cars for >10%, they're making the mistake of financing through the seller.

It should be a lot lower. E.g. current rates: https://www.penfed.org/auto#cbs

>But speaking to Americans, they make it sound like this kind of traditional working-class knowledge has been lost?

We don't have cars anymore, we have PlayStations with wheels. Even if you are able to properly diagnose the check engine, you may need to disassemble the whole engine just to replace a 20cent sensor inside.

But you wouldn't buy a car with a check engine warning if you don't know how to read the code or fix it.

For the most part you're not really looking for signs of mechanical or electrical faults that will develop, you're looking for signs it has been cared for. Service history, clean interior, tires with decent tread, oil and water levels okay and aren't contaminated, starts up and drives nicely from cold to warm. That's about it.

Someone with very little auto mechanic knowledge can do that. Sure an O2 sensor might give out in the next few thousand miles, but you have to allow for some maintenance cost beyond scheduled services for older cars.

>you check for the things one needs to check for, and you know if it has problems or not. And if you can't do this, you've got a cousin or uncle who can.

You don't even need to do that. You can just find a mechanic to do a PPI on the car, so they'll check for any issues and read the errors codes to see if there's something funky.

> Perhaps it's because I grew up around people who were good with their hands, but in my mind buying a used car isn't a scary matter - you visit the private seller, you look at the vehicle, you check for the things one needs to check for, and you know if it has problems or not. And if you can't do this, you've got a cousin or uncle who can.

You could do that, sure. Or you could get a respected independent assessor. Here in South Africa we have Dekra (and others) who wil do a test of the car more thoroughly than I can (road test till operating temperature is reached, examination of the car on a lift for chassis damage/signs of repairs, oil leaks, etc, examination of car for signs of accident repair, pulling of DTC, etc).

If you go to this place - https://www.webuycars.co.za/buy-a-car/18C404984 - you'll see a car that looks good for its age on the surface with only a few easily fixable things (tail lights, brakes, etc). But the attached report shows that the chassis is twisted and that there are oil leaks. These two problems are terminal faults that I, even with a background as a mechanic, will not spot because I cannot put the car on a lift when I go to view it.

It's not perfect, but at least I don't waste time test driving a car with terminal faults (chassis damage, transmission DTCs or problems, engines without compression, etc).

It means when I look for a car, I can dismiss dozens of cars based just on the attached Dekra report, and spend more time examining the remaining ones for faults that Dekra might have missed.

Additionally, a lot of people who would otherwise be in the used car market for price reasons in the US cannot afford to purchase even a used car outright, and getting financing for cars sold on the private market is, to my knowledge, not really possible.

> Additionally, a lot of people who would otherwise be in the used car market for price reasons in the US cannot afford to purchase even a used car outright, and getting financing for cars sold on the private market is, to my knowledge, not really possible.

To me, that's the biggest reason for used-car prices to be low - the market is restricted to those who have cash. IME, the prices of cars that cannot be financed (older than 5 years) is severely constrained. I've seen a 5 year old model advertised for exactly twice the price as an almost identical 6 year old model, with similar mileage and similar condition[1].

I find that hard to reconcile with the other posters in this thread who observed that used cars are still too expensive. Maybe they are looking at used-cars that can still be financed (under $X years, for example)?

=======================

[1] Condition of both was reported by the same independent assessor - see my posting upthread

Ah, so this is really just another way poverty is punished. I can afford to save up $8000 for a second hand car, but people who can't, have to buy more expensive cars on a (predatory?) car loan.

> Ah, so this is really just another way poverty is punished. I

Yes, but it's not intentional like you seem to imply, it's incidental.

The intention is not to punish those with no money, its to extract the most value in every segment of the market.

Trust me, maximal value extraction is similarly going on for new cars and lightly-used second hand cars too.

I'm not saying it's intentional, but there are a lot of mechanisms like these that make it more expensive to be poor, creating a vicious cycle of poverty.

> I'm not saying it's intentional, but there are a lot of mechanisms like these that make it more expensive to be poor, creating a vicious cycle of poverty.

You are quite correct, but this is one of those rare cases when "learning things" is enough to uplift one from some of the poverty.

I did not start out rich enough to afford a 6 year old car cash, I started out by saving for a year (sacrificing a lot in other spheres of my life at that age, early 20s) to buy a barely running beater that I then maintained cheaply for the next 5 years.

Cost over five years, including repairs and maintenance was about a tenth of a new car price.

Many who cannot afford the cash $8k for a decent 2nd-hand car can afford the cash $2k for a dodgy barely running car.

The problems they face is being clueless about cars, repairing, etc in general.

IOW, the problem they have is not "not enough cash to own a car", it's "not enough knowledge to fix a car". The only person who can remedy that is themselves, not the market.

Looked at through this lens, this is not a punishment on poverty, it's a punishment on lack of knowledge.

You can’t get a loan for a used car in the US?

This is pretty common in Australia. All of the banks offer car loans or “personal loans”

That's not true. There's a whole industry of lenders for used cars. Interest rates are typically slightly higher than new cars but as long as you have a decent credit rating and the car isn't too old you can get financing.

Note that those lenders are separate from "buy here pay here" used car dealers. They offer their own in-house financing at much higher interest rates, targeting consumers with bad credit. Some of these are close to being a scam.

Indeed. Many banks offer used car loans.

https://www.investopedia.com/the-best-used-car-loans-1170306...

I've used PenFed for years: https://www.penfed.org/auto#cbs

Wow, did not realize that private-party purchase vehicle loans were a thing. Wild that the banks are willing to take on that much risk.

It's much easier to get financing than you might think if you've not tired - but the rates aren't great, and you're limited to fairly new vehicles. My bank only finances back to 2018 model years, and only 80% of what they consider to be "market value". In practice this means two things.

The first is that the cars that can be financed tend to be almost as expensive as new - but at a higher interest rate and shorter loan term. That means from a monthly budget perspective, you can end up paying as much for a used car as a new one while needing to keep funds available for repairs and maintenance.

The other is that older vehicles are typically financed without traditional "auto loans". If I wanted to finance a $5k truck, I could do so - but it would be an unsecured "personal loan" at significantly higher interest. You have to have fairly good credit to do that, too.

I'm not sure if the American credit score system is at all familiar to those outside the US, but the minimum score for a personal loan is around 600. While granted, I haven't been good with money most of my life, it took me from ages 30 to 35 to get my credit score to the point I could buy a home in 2018 (605). As soon as we closed on our home, my score went back down to ~570, and it has been a struggle ever since. In the seven years since then I've had exactly two "late" payments reported. Both were issues with autopay failing and my not noticing until I got a letter in the mail - at which point I immediately resolved the issue and brought the account current. My credit score right now is ~615. On paper, I carry a high credit card utilization that keeps it from being higher. In reality I pay all of my cards but one off every month. I could get my score up to ~680 in two months by paying off those cards and not using them - but unless I need the score for something, why would I? I have ~$6k in expenses that I run through those cards every month. I get 3% "cash back" for every purchase I make on them, so I end up earning an addition ~$180 / month for doing so; it'd be silly to not take advantage of that.

The result is that while I can get an auto loan on a used vehicle, it makes no sense for me to do so. Instead, I've not borrowed for a vehicle of my own since 2012. When I totaled my Jeep, I took the insurance payout and bought my '91 GMC.

We have two other vehicles: my wife has a 2019 F-150 Platinum, and my daughter has a 2024 Subaru Crosstrek Wilderness. Both are financed.

For the Ford, my sister wanted to trade it in on a Ram 2500. It wasn't drivable at the time due to a failed timing cover gasket, which the dealership estimated at $5k to repair. Another dealership offered her $12k for it. She owed $23k on a 0% note. With the towing package and other upgrades, it's worth ~$35k on the private market in running order - so I offered to pay off her loan on it ($23k). She agreed, then asked if I could just take over the loan she already had on it to continue to build her credit. That's what we did. I've got another two years to pay on it at ~$700 / month.

For the Subaru... well, we knowingly overspent there because my daughter's previous vehicle was destroyed when someone t-boned her on her way to school last winter. She was very hesitant to get back on the road, and my wife and I weren't exactly comfortable with the idea either. We compensated by buying her the absolute safest vehicle we could find that fit her use case. It came down to Subaru and Volvo; Subaru offered the best price and she preferred the Crosstrek or Outback anyhow. We could have gone as low as ~$25k or as high as ~$45k for a Crosstrek, depending on trim. We went for the Wilderness because it's geared slightly lower and therefore has more low-end acceleration - which is important to us, so she has the power necessary to get out of bad situations on the road if warranted. Total financed there: ~$37k, for six years, with a ~$750 / month payment.

All of this is to say: I make good money in tech. Though I am the sole income earner for the family, we're well over 2x the mean household income in my area. We have three vehicles as a family and ~$1.5k / month in vehicle payments. I don't understand how families making half of what I make are driving three vehicles <5 years old - but they absolutely are.

My entire debt load -- including our mortgage and some lingering student loans -- is less than my annual salary. I'm extremely uncomfortable with that much debt. Meanwhile, the people I see around me are living in homes that cost twice as much as ours, have more and newer vehicles, and make half as much. It makes no sense to me.

This is a really clear picture of things, thanks! I am actually originally from the US, but I've been living in the EU for 5ish years and haven't had a car since I gave the one I had in college back to my parents after I moved to the bay area, where public transit was good enough that I couldn't really justify the ongoing expense for something I was just using for grocery runs. Otherwise, I've just been purchasing motorcycles in cash.

I guess I'd never really seriously considered the availability of loans for used cars (beyond the unsecured personal loans); it makes sense that they would exist, but in the ~30 years I lived in the states, I never once heard mention of them, or talked to anyone who had gotten one. Which is pretty crazy if you think about it. I think that, combined with the complete and total lack of regulation surrounding private sales (ie, no way for banks to de-risk the loan), made me assume they just weren't a thing. So I stand corrected.

But I think your anecdote might offer an even more compelling reason why: to satisfy the conditions to actually get one, you find yourself in territory where, from a short-term month-to-month financial perspective, you might as well just be buying new. And if you're struggling to make ends meet... welp, that's that.

The credit score is another good point; it might also be the case that the people who have a good enough credit score to land a decently-priced financing deal on a used car are almost by definition financially capable of buying new. Where I grew up, there was definitely a stigma against buying used, so that seems like it might also have some explanatory power.

Another thing that makes no sense to me: I couldn't get my bank to finance the purchase of an older vehicle at any rate.

Last year, my air conditioner condenser went out and had to be replaced for a total of of $4.5k. I could have paid that out of pocket, but didn't want to deplete my emergency fund and always check my options. The same bank was happy to give me a "personal loan" for $5k at 9% APR. I asked if I putting up collateral could lower that rate - they offered 6% if I'd use a vehicle title to secure the loan.

So, I can get a loan for $10k on a 2020 vehicle at 9%, or I could get a loan for $5k at 6%... but only if I already had the vehicle's title in my name at the time.

It makes no sense to me at all, but that's how it's structured. It's far easier to get credit when you "want" it than when you "need" it.

If you need the money you're less likely to be able to pay it back, is the logic.

Can't they still attach the AC loan to your house without you putting it up? I know having work on your home can automatically attach.

Yes, I could have gotten a home equity loan. I didn’t want to do that because I want to be able to sell it in the near future depending on how things work out, and didn’t want the additional title encumbrance.

DTC - Diagnostic Trouble Code

I had to look that one up.

Sorry. I assumed too much. Obviously most people won't know what a DTC is.

The value in a DTC is that you can pull the stored code to see, for example, oil pressure warnings that were issued last week.

If the car you are looking at reveals the DTC but appears to be full of oil anyway, it likely was only properly filled recently, so you can assume engine damage to only show itself after you drive off 8n the car.

Think people have a general aversion to buying secondhand. You see it in people building home servers too - preference for buying new even if eBay route would yield tangibly better bang per buck.

> you visit the private seller, you look at the vehicle, you check for the things one needs to check for, and you know if it has problems or not. And if you can't do this, you've got a cousin or uncle who can.

I had good luck with taking a used car for a test drive, and (with the knowledge of the seller) dropping it off at a garage and asking a mechanic to spend half an hour checking it over.

Could it be that, as we moved most of our consumption online the idea of visiting a dealer, garage or direct-seller, has become unnatural and intimidating ? Suddenly you are confronted with the messy, material and mechanical reality rather than the clean product pages, specifications and marketing pictures.

If you’re working a regular job, you need a reliable car in the US. New cars should be, and nowadays are, more reliable than used cars with unknown provenance. Just donated a sedan I bought new 25 years ago that didn’t have a spot of rust and the motor was still great. Desert living…

Just didn’t want to chase down exotic material failure modes at that point and wanted the enhanced safety features available on new cars to protect my old body. I don’t own a lift nor an air compressor. I’d feel like a damn fool if I got hurt working on my own old car. Fixing my broken old body would be much more expensive than having a professional with the proper tools repair my old car. Can pass that dealer-maintained car with a clean conscience to someone who has the tools and expertise.

Nowadays, you can expect 20-30 years from a new vehicle, properly maintained. Especially in the desert. When you spread that buy-it-new premium over 25 years, it’s worth buying new just to know the exact provenance of the vehicle you’ll be driving over the next quarter century.

I mean that’s probably more an excuse, because they want the shiny new car.

Used car prices have skyrocketed in the past 10 years. You used to be able to get a decent, reliable car for under $5k. Now that number is closer to $10-15k, which is just as out of reach for most Americans as $30k. If you're going to go into debt anyway, why not buy the new car?

The used car market got pretty crazy there for a while due to the covid supply disruptions. 3 year old corrolas with 100k mileage were selling as much as brand new ones! Why? Because you had to wait 9-10 months to get a new one. So a few years ago anybody who needed a car, whether new or used, was paying a lot. A few years later with more inflation in prices and none in wages, its not surprising to see some of these loans start to default.

Even before that. "Cash for clunkers" did a number on the used car market.

I don't think I can evaluate a second hand car. I understand very little of cars to measure its state. I can easily be fooled.

It's not the maintenance costs that scare me is not being able to rely on the car working when I need it.

Before I could afford to buy a new car I just didn't own a car.

If most of your interaction with Americans has been centered around the tech industry, then I can totally see you coming to this conclusion. Tech is largely made up of people from urban areas, who didn't grow up around people who worked on vehicles. Many of those people also don't have extended family outside the cities.

That's not everyone, of course, but it's far more common in tech than HVAC for instance.

My dad worked as an agriculture teacher for 30 years. He's now retired, and has a 40x120 shop building on his property that I have access to whenever I need it. As a result, I drive a 35-year-old GMC pickup. Before that, I had a 25-year-old Jeep that I'd driven since ~2012.

Even with the necessary skills, I had a very difficult time performing basic maintenance on my Jeep when I lived in a city. My apartment complex didn't even allow oil changes on the property, and there were no garages around that I could rent space from. I ended up doing a lot of stuff in the parking lot of the auto parts store near me - from oil changes to replacing the entire rear axle at one point. The police were called on me from passers-by multiple times, to the point that they knew me by name. Bear in mind, that's with the permission of the shop.

In short, urban America is fairly hostile to DIY.

As an alternative I've paid a mechanic I trust (not a cousin or uncle) to inspect a car I was looking to buy. Cost like $75 and I had the peace of mind that I wasn't buying a lemon.

Covid constrained the supply of new cars, leading used car prices to skyrocket. It's not easy for the average person to evaluate whether a used car from a private seller is in good condition. A Carfax report is thin on details other than its crash history. Cars in good condition sell very fast, so I can understand why people choose to buy a new car that comes with a warranty, especially if they live in a town where cars are necessary to get around.

I’ve got a group of friends in Huston and it’s pretty crazy to me that to them having a “car payment” is almost as expected as having a cellphone bill. One of them didn’t even recall the sale price of his main vehicule, he just knew he could afford the car payment.

The car market right now makes no sense to me. Interest rates are high, prices are high (inflation + tariffs), unemployment is rising, inventory is low, and yet car sales are booming? What gives? People panic buying before tariffs have a bigger impact?

> and yet car sales are booming? What gives?

Maybe some people need a car to get to work, plus maybe they also want good optics with it, not wanting to be perceived as "broke" by the rest, so they splurge on a new car without any thoughts on financial responsibility just to keep up appearances.

It’s the optics part that breaks the camel’s back. Any decent car goes from A to B. Only expensive cars have the “optics”. The car is a status symbol that carries you around, and the poorest are the most “vulnerable” to need such a status symbol to compensate.

It mirrors perfectly the luxury fashion industry where more branded merchandise is bought by broke people than by rich ones (unbranded luxury goods are a different beast).

I would disagree for a different definition of optics. As someone else who replied to me mentioned, the top selling vehicle in the US is the Toyota RAV4. Based on the many people I personally know who own them, this is a vehicle that says "I'm doing just fine thanks" even when that is very much not the case.

“Optics” just means you care about how the situation looks like to you or others.

Having a RAV4 when a Yaris would have done the job is optics. Sometimes having any car at all is about optics.

It's not just optics. For consumers who care about safety, newer and more expensive cars generally have significantly higher ratings for both passive crash safety and active collision avoidance. You might not care about such things but there is a real and measurable difference.

https://www.iihs.org/ratings

> plus maybe they also want good optics with it, not wanting to be perceived as "broke" by the rest

I mean, really, who is even looking?

It doesn't even matter if someone is actually looking or not, what matters is that owner has the perception that others are looking, so will act on that.

You don't think many people are judgmental on appearances or at least think they are being judged?

That's the main reason why people get a better paying job, buy a fancier car, fancier clothes, nicer haircut, go to the gym, take Ozempic, etc so they can influence how they are perceived.

It's more that in America, cars are for the most part an inelastic commodity. It's very, very hard to hold a job and maintain your life without a car except in the densest of metro areas. Since the population is still growing, sales of cars keep going up and people get trapped in predatory loans or conditions. Used cars are also harder to find and more expensive, which pushes people into these predatory conditions.

I think it's a really poor indicator for the future. America literally cannot function without cars, and if people cannot afford cars they cannot afford to work.

A ten year old Honda Fit is like $12K, pretty fuel efficient, and probably reliable and low-maintenance (I owned one until recently). People aren't buying $50,000 new Ford F-150s because they just need a working car to go to work and the grocery store.

> People aren't buying $50,000 new Ford F-150s because they just need a working car to go to work and the grocery store.

Let me introduce you to half of my block. And I live in a city with fantastic public transit where you don't even need a car. I see those loan notices in mailboxes....

you’re opening your neighbors’ mailboxes and reading their mail?

No, I am not.

It's millennials moving out of cities into the suburbs and deciding they need a car. Guess what the bestselling car in the US? Toyota RAV4.

The Ford F-series and Chevy Silverado both outsold the RAV-4 by significant margins.

Also the RAV-4 isn't a car, it is an SUV.

https://www.visualcapitalist.com/best-selling-cars-us-h1-202...

"Car" typically means "passenger vehicle" in common parlance, at least in the US. A lot of truck sales like you point to are fleet sales for work vehicles, so this person is probably pointing more towards non-fleet sales, where the RAV4 is indeed the top seller.

for some reason the one-two punch putdown style of this relatively pedantic reply has me in stitches

Report: https://consumerfed.org/wp-content/uploads/2025/09/Driven-to...

As I understand one of the primary reasons is also that people do not finish the previous car payments and just roll them forward to the next new car. Dealerships and loan makers of course enable that behaviour.

Indeed, this is a "negative equity rollover." The economic distress compounds.

https://www.cnbc.com/2025/09/14/underwater-car-trade-ins-are...

Seeing the surge of prices a few years ago, and seeing how expensive new cars are, and knowing how loans work in the US (they will always loan you more than you should prudently borrow), this is completely understandable.

Which eventually might be good? The repossessed cars will need buyers and they will offered at lower rates?

Nah, they will be sold into the used car market at whatever price the market will support while charging the highest interest rate possible.

From the report this is based on (pages 6-7), there are simply not enough cars to meet demand due to manufacturers constraining supply to maximize by price. Similar to new construction housing in the US. Tariffs make importing cheaper foreign made vehicles untenable. It’s an economic extraction doom loop.

Auto loans defaulting seems to suggest that the car market does not support the current rates and prices.

You’re correct. The loans are made because they’re profitable even when the borrower defaults and a repo is performed. The car is sold to someone else and the cycle repeats. The goal is to get you off the lot and to get enough payments and interest out of the borrower so it’s a net profit even when the borrower defaults.

"America runs on credit."

> simply not enough cars to meet demand due to manufacturers constraining supply to maximize by price.

Awhile ago, Harley-Davidson did this, not expand supply to keep per new unit numbers high, for years during their high demand phase. It's a legit business strategy if one is confident in one's demand curve's robustness.

My roommate stopped making payments on his car 6 month back, its underwater. The financing company doesn't want to repossess, he now has his car with zero payments. Eventually, the companies have to start repossessing all these ridiculously high priced cars and sell them at lower rates. There will be a flood unless someone wants to keep these non performing assets on their books.

The repossessions will happen over time eventually as repo throughput permits, and borrowers will still be on the hook for the debt unfortunately. There will be no flood. My condolences for your roommate's situation.

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