mad anthony

Rants, politics, and thoughts on politics, technology, life,
and stuff from a generally politically conservative Baltimoron.

Saturday, June 02, 2007

How do I do it? I'm in debt up to my eyeballs...

I have a bad habit of comparing myself to other people, which always makes me come up short and feel like a failure. It seems like everyone has a nicer house than me, a better job that pays more, better sucess in their romantic lives, and a way nicer car.

Well, now I know why it seems like everyone on the beltway is driving a nicer car than I am. Car loans have gotten so long that they are slowing down new car sales because people haven't paid off their old car loans quickly enough to buy a new one.

Some interesting stats:

Three out of five new-vehicle loans made this year, or 60 percent, are for 61 months or longer, and nearly 20 percent are for longer than six years, according to a Consumer Bankers Association study.

-CNW says the average loan in 2006 was 64.8 months, up from 52.4 in 1998. This year it has climbed to nearly 71 months

-On average, it takes 48 months before a buyer has equity in a 60-month loan and 59 months on a 72-month loan, Spinella said.

That last stat means that lots of people buying new cars are upside-down. They owe more on their old car than it's trade in value. That means that they are rolling over more debt when they buy a new car, perpetuating the cycle.

Obviously, I knew that this happened, but I didn't realize how common it was. With people rolling over their debt, it's only going to mean that loans will be longer in the future.

So next time I'm staring longingly at an Escalade on deuce-deuces, I need to remind myself that the person driving will probably never own a vehicle free and clear.

For the record, I bought my Ranger with a 5-year loan through my credit union. I had my trade paid off, which was worth about a third of the cost of the Ranger. I've got some money set aside, and I'm debating if I should put it towards paying off the truck early or putting it towards my mortgage (interest rate is about the same, mortgage has the advantage of letting me stop paying PMI sooner, but truck payoff is easier to attain and interest on it isn't tax-deductible like my mortgage).

And the plan is to keep it until the wheels fall off. If anything, if I ever get to the point where it's paid off and I have extra cash, I'd rather buy a second vehicle - something small and sporty - and keep the truck for hauling/snow/ect.


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