Spoiled? Car Debt and What it is Costing Our Parents
There has been some devastating news coming from the mortgage industry of people over borrowing for their homes or getting into loans that they did not fully understand. But this crisis is not limited to the housing market: it is quickly becoming a problem with the way that we buy our cars.
In a recent article in the LA Times(subscription required) and summarized in Kicking Tires, it was pointed out in an ominous way that the amount of people who couldn’t pay their car payments for 60 days was up by 20%. Additionally the average car loans are now much longer than in the 1980s and 90s- 45% of all car loans are for 6 years or longer. It is becoming common that these longer loans are in reality for more than one car because buyers are driving cars for 4 years or less and then trading in that car, debt and all, for newer and more expensive cars. The debt owed on the old loan is rolled into the new loan and the cycle begins to spiral from there with some consumers these days paying for 3 loans or more in a single car loans and owing, in some cases $30,000, in debt on a single car worth far less.
These statistics may begin to uncover an inevitable time bomb for the spoiled babies of the Baby Boomers but a similarly frightening reality is beginning to reveal how this affects the parents that raised these consumers who expect so much for themselves!
Another study done in the UK by MoneyExpert.com shows that almost 25% of parents have had to help their adult children with their car debt when they have become delinquent in their payments. The expensive reality of raising a child has now extended beyond childhood, into adulthood and threatens parents who are now in their 50’s to compromise their hard earned savings and their ability to maintain their retirement and health care needs. The real irony is that adult children today are beginning to literally spend their own inheritance at the cost of compromising their very alive parents.
So what is the solution to protecting our Gen X dollars, and more importantly, our parent’s money? We should take a ticket from their book: our parents drove their cars for much longer after they were paid off and took on much shorter loans. Today it is common to get financed on a car for 6-8 years but our parents usually had 3-4 year loans, reducing the amount that they were paying in heavy interest. Also, cars are expensive these days so foregoing a need to have a brand-spanking new car and instead choosing a car that costs less, is 2 years old at least so has lost the majority of it’s depreciation and has a loan that is realistic for long term goals.
Buying smart not only protects your hard earned money but the savings of your parents.
A great series this week at CreditWithdrawal.com about saving money as we age for retirement.
Stumble It!
In a recent article in the LA Times(subscription required) and summarized in Kicking Tires, it was pointed out in an ominous way that the amount of people who couldn’t pay their car payments for 60 days was up by 20%. Additionally the average car loans are now much longer than in the 1980s and 90s- 45% of all car loans are for 6 years or longer. It is becoming common that these longer loans are in reality for more than one car because buyers are driving cars for 4 years or less and then trading in that car, debt and all, for newer and more expensive cars. The debt owed on the old loan is rolled into the new loan and the cycle begins to spiral from there with some consumers these days paying for 3 loans or more in a single car loans and owing, in some cases $30,000, in debt on a single car worth far less.
These statistics may begin to uncover an inevitable time bomb for the spoiled babies of the Baby Boomers but a similarly frightening reality is beginning to reveal how this affects the parents that raised these consumers who expect so much for themselves!
Another study done in the UK by MoneyExpert.com shows that almost 25% of parents have had to help their adult children with their car debt when they have become delinquent in their payments. The expensive reality of raising a child has now extended beyond childhood, into adulthood and threatens parents who are now in their 50’s to compromise their hard earned savings and their ability to maintain their retirement and health care needs. The real irony is that adult children today are beginning to literally spend their own inheritance at the cost of compromising their very alive parents.
So what is the solution to protecting our Gen X dollars, and more importantly, our parent’s money? We should take a ticket from their book: our parents drove their cars for much longer after they were paid off and took on much shorter loans. Today it is common to get financed on a car for 6-8 years but our parents usually had 3-4 year loans, reducing the amount that they were paying in heavy interest. Also, cars are expensive these days so foregoing a need to have a brand-spanking new car and instead choosing a car that costs less, is 2 years old at least so has lost the majority of it’s depreciation and has a loan that is realistic for long term goals.
Buying smart not only protects your hard earned money but the savings of your parents.
A great series this week at CreditWithdrawal.com about saving money as we age for retirement.
Labels: Buying, Cars, Debt, Financing
Stumble It!
posted by Miss Mota Mouth@ 8:48 AM 1 Comments
