Ponce
31st January 2015, 08:45 AM
One of the reasons why the US is in the shit hole.......UNIONS.
("You cannot pay a man $75 per hour (with full benefits & retirement) to build a car that is intended to be sold to a man earning $10 per hour (without benefits or retirement)" --Barnacle Bob)
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"Buy things that increase in value, lease things that do not!" --J. Paul Getty
A 60 month (Rule of 78) auto loan if paid as agreed will not, on average, realize equity until the 42nd month.... and the equity is far removed from the origiginal price paid... Motor vehicles are a depreciating consumed item, this class of asset will never regenerate the capital expended on it during its life unless it is employed strictly as a commercial unit in the transportation of passengers, the transportation of cargo or the transportation of passengers & cargo for fares & fees....
The "Used Car" price guides are merely standardized depreciation tables .....
It is ABSURD to sub-prime finance a consumer good for 84 months.... the collateral, in most cases will be torn asunder long before the loan matures. If the borrower must extend to 84 months to provide affordability, then the borrower in most cases does not possess the excess cash flow to service & maintain the vehicle from the start.... The average vehicle annual milleage is 12k - 15k.... 7 yrs X 15k miles per annum is 105,000 miles at the time of scheduled payoff.
Does a sub-prime borrower possess the surplus cash flow to regularly change oil, tires and perform regular maintenance? Probably not! How about replacing hoses, radiator, or transmission? Prolly not!
How will this sub-prime lending affect the domestic used car fleet in the future when the used cars entering the used vehicle market have not been properly maintained and cared for? And consider the expansion of the "trade cycle," when considering 84 month loans.... The minus equity that is ceated by extending the terms means the borrower cannot trade out for another unit until around 58 - 62+ months w/o having several thousands of $ as additional down pmt...
The Automobile manufacturers & Automobile finance industries are at their end when 84 month sub-prime loans are required... reorganization of these industries is just around the corner or they will not survive.... its a matter of the function of basic mathematics, to wit:
"You cannot pay a man $75 per hour (with full benefits & retirement) to build a car that is intended to be sold to a man earning $10 per hour (without benefits or retirement)" --Barnacle Bob
The above illustrated quote is as simple as it gets.... extending loans to 60+ months, much less 84 months is pretending that the mathematical problem does not exist.... No matter how far out the loans are extended and pretended, the math indicates that there is a serious imbalance between the producers, lenders and the consumers.... And thus, it is axiomatic that the entire industry is required to reorganize or face extinction....
("You cannot pay a man $75 per hour (with full benefits & retirement) to build a car that is intended to be sold to a man earning $10 per hour (without benefits or retirement)" --Barnacle Bob)
================================================== =
"Buy things that increase in value, lease things that do not!" --J. Paul Getty
A 60 month (Rule of 78) auto loan if paid as agreed will not, on average, realize equity until the 42nd month.... and the equity is far removed from the origiginal price paid... Motor vehicles are a depreciating consumed item, this class of asset will never regenerate the capital expended on it during its life unless it is employed strictly as a commercial unit in the transportation of passengers, the transportation of cargo or the transportation of passengers & cargo for fares & fees....
The "Used Car" price guides are merely standardized depreciation tables .....
It is ABSURD to sub-prime finance a consumer good for 84 months.... the collateral, in most cases will be torn asunder long before the loan matures. If the borrower must extend to 84 months to provide affordability, then the borrower in most cases does not possess the excess cash flow to service & maintain the vehicle from the start.... The average vehicle annual milleage is 12k - 15k.... 7 yrs X 15k miles per annum is 105,000 miles at the time of scheduled payoff.
Does a sub-prime borrower possess the surplus cash flow to regularly change oil, tires and perform regular maintenance? Probably not! How about replacing hoses, radiator, or transmission? Prolly not!
How will this sub-prime lending affect the domestic used car fleet in the future when the used cars entering the used vehicle market have not been properly maintained and cared for? And consider the expansion of the "trade cycle," when considering 84 month loans.... The minus equity that is ceated by extending the terms means the borrower cannot trade out for another unit until around 58 - 62+ months w/o having several thousands of $ as additional down pmt...
The Automobile manufacturers & Automobile finance industries are at their end when 84 month sub-prime loans are required... reorganization of these industries is just around the corner or they will not survive.... its a matter of the function of basic mathematics, to wit:
"You cannot pay a man $75 per hour (with full benefits & retirement) to build a car that is intended to be sold to a man earning $10 per hour (without benefits or retirement)" --Barnacle Bob
The above illustrated quote is as simple as it gets.... extending loans to 60+ months, much less 84 months is pretending that the mathematical problem does not exist.... No matter how far out the loans are extended and pretended, the math indicates that there is a serious imbalance between the producers, lenders and the consumers.... And thus, it is axiomatic that the entire industry is required to reorganize or face extinction....