no. they won't. not under the present system. unlike student loans, auto loans can be discharged during bankruptcy (it is difficult to do with student loans) and you can easily sell the asset to pay off all or part of the balance (can't sell your transcript or degree, just yourself to an employer).
this post was submitted on 01 Oct 2023
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Right? This is the stupidest fucking article. Like you can even have the car repossessed and the loan terminated.
Auto loans may legit be one of the safest type of loans available to students.
Where it gets spicy is:
Buying (financing) a new car, and then having it repossessed at half the purchased value (still 50%) debt to pay
If people have cars repossessed en mass, the second hand car market will be affected, prices for used cars go down (because the supply goes up). This makes repossessions not cover the whole loan, see above point
Finally, as more and more Americans no longer have access to cars, they also lose access to... A lot of society (work, education, healthcare). If this affects a large enough percent of the population, there will be macro effects.
Hopefully everyone stops paying their car loans and it deflates used car prices because they are insanely too expensive.
Banks suddenly getting burned when a bunch of bad loans stop getting paid at around the same time? What could possibly go wrong?
Getting some 2008 vibes. Thats what we need.
Meanwhile housing market is nuts. Nobody wants to sell because they’ll just have to buy and loose their sweet 2.75 refi. So now homes are still at jacked up prices because supply is low, but average 30yr mortgages are still at 7.8. So buyers, especially first time buyers, get stuck with an overinflated principle and a higher interest, getting the worst of both ends, and hoping either values hold or rates fall and they can refi in a few years.
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If it's getting repossessed at 50 percent value, that means it's getting repossessed in the first year, and probably shouldn't have been financed in the first place. BUT, let's say they did, gap insurance is a thing that exists, for cheap, to cover that exact situation. Regardless, that debt can be cleared via bankruptcy, and is peanuts compared to most student loan debt. Smaller plans, multiple outs and protections available from the get go.
On top of that, student loan debt already prevents people from buying cars due to high debt to income, and already low post-grad income tied up paying loans, which are often as high as a new car payment, not to mention insurance and registration. On top of that, it makes them higher risk, raises their interest rates, and makes financing even more challenging.
There is no sane argument between the two.
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But don't cars depreciate a lot? I get that this article is clickbaity. But I think with the elevated cost of cars the autoloan debt is still something to take seriously. Even the response of "its not a big deal, you can always go bankrupt" is pretty wild.
You don't even have to go bankrupt you can just give the car to the bank that has your loan. You'll be fine. Just without a car lol
Not if you owe more than the car is worth, you're on the hook for the difference.
If someone can't pay a $400 payment, they certainly don't have the money to pay the car off. Something something blood from a stone.
Not if they take the car for not paying lol that's where the not paying part comes in. You just get bad credit. Not the end of the world like people make it out to be
They'd legally still on the hook for the difference, and if it's a large enough amount for the creditor to care about they'll come after you for it using the variety of means available. In the US that can include taking the money from the debtor's bank account or having their employer take it out of their paycheck before paying the debtor.
There are some ways around that. You can self-employ and ignore the garnishment request, but that works best if you have a constantly changing client list, like a roofing contractor or wedding-dress-maker or whatever. You have to be careful about keeping cash in your business because they can show up with the sheriff and take any cash, or in extreme cases they can seize non-exempt property (like, they wouldn't generally be able to seize the lawnmower you use for your lawnmowing business).
Also, just not having any money is a pretty good defense. There are limits to wage garnishment for example.
But yeah, in a lot of cases it's not even close to being worth the effort to chase someone down to collect, so you get a ding on your credit report for a few years, and then almost nobody cares.
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Federal student loans are not just difficult to discharge, they're practically impossible to discharge. There are so little valid cases for it, you could count them on one hand. And that does not even take into account the fact that the sitting President and their cabinet can just say, "No, **** you." Even after you qualify and a court agrees with you.
Edit: Just gonna point out that the only guaranteed way to discharge student loans without the federal government possibly overturning the ruling is to simply die. Its an excellent system perfectly designed to ensure that both the public sector and private sector can continue reaping the benefits of social mobility while preying on the most vulnerable segments of the population.
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For the first time? Go back a generation and student loans didn’t exist.
Not to mention auto loans can be discharged in bankruptcy. Try doing that with student loans and you'll quickly find out it isn't possible.
Damn, it’s almost as if making a country almost entirely car dependent is a terrible fucking idea.
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At least you can declare bankruptcy on an auto loan...
I grew up believing all loans is money banks lend you from their own money they have on hand. But that is a lie. That money is created by the fed reserve when the paperwork is signed. And all the bank has to do is follow rules their lobbyists write.
Why do we even need private banks? I bet people could handle their own fianaces a lot better if we had direct access to fed money creation and we didn't let bank lobbyists write the rules.
asdfasf
Rich people are rich because they use other peoples money. Banks do the same.
60% of known species are parasites. However, the animal most well known (human) has 110 species of parasites hinting very very strongly that the 60% is a huge undercount.
The CEO of the corporation I work at took a one month vacation this year and everything was fine. One of our service techs took last week off and every order was late.
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At least auto loan debt isn't enshrined into law as "life debt" like student loans are.
Auto loans are terrible and I always pay them off as soon as I can, but they will never really be that big a threat because you CAN sell your car and buy a substantially cheaper one, in most cases. Sometimes you can sell your car and just use public transit or bike/walk.
Boy do I wish I could sell my college degree
I wish they would repo my degree...
When I was a kid auto loans would be for 2 years or 4 years maybe, now. They'll give you a 10-year loan on a car.
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What, thats crazy. I bought my car certified pre-owned, fully paid it off, and have been driving it for 8 years with hopefully another 8 more to go. I know car prices have been going out of control though, whats going on?
Harder and harder to do that. My goal was to buy a used car then finally a new electric car.
My 2012 pre-owned car was paid in cash for $7k about five years ago. And my goal was to save $25k cash, and trade this one in for a newish car.
My 2012 exact car can now be bought for $9k. And newer cars are now in the $40k range. AND they have shitty subscriptions for features.
It's wild when I was looking to do something similar and instead ended up buying a newish electric vehicle because it was about the same price as what I'd otherwise have gotten.
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Near the start of the pandemic, all the car rental agencies sold off a bunch of their cars because the cars weren't making money. And with the pandemic in swing, car companies were making less cars, because of health restrictions as well as supply chain issues. As the pandemic slowed down, car manufacturers weren't able to keep up with demand for new cars, and prices on used cars soared. Now manufacturers have decided they like the money flowing in like that and they've hiked their prices and are making fewer of the entry-level cars many people bought.
I wish automakers were able to/would actually import some of their cheaper electric vehicles from east asian markets.
The Honda N-Van e would suit the needs of the vast majority of people. 124mi of range and only ~$8,000.
Can I say I love that derpy little thing and I hope they sell it here?
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This is probably by design. The “system” keeps cities designed and built in a way that they are impossible to traverse without cars, which forces people to buy cars. Youngsters are earning shit wages but can’t get to work without a vehicle so they get into debt. It’s all fucked. I live in the Netherlands and can do everything I need to do with just my cargo bike. It rocks.
Certainly car loans can be predatory, and it is worth improving oversight, limiting what loan providers are allowed to offer. While I’ve seen plenty of people in trouble with car loans, it was always predictable/likely and my first thought had been how could a loan provider have approved that. I’m sorry if people are desperate for transportation and short of options but it’s not helpful to offer rates like credit cards, nor roll over previous loans, nor offer loans at high percentages of people’s incomes
There's a reason my car is old enough to drink 👍
Mine’s almost old enough to vote!
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