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March 8th, 2012
American student loan debt totals nearly one trillion dollars. These loans break down to about $23,300 owed by each borrower. Changing Gears has been reporting on the effects of that debt and what it takes to pay it off.
We want to know how student debt affects big purchasing decisions. Are you ready to buy a house? And if so, can you get a mortgage?
Earlier today, we brought you the story of Buy Here-Pay Here dealerships in the Midwest. These are places where the dealer finances car loans himself (BHPH is sometimes called in-house financing.).
Basically, he is the bank and he takes on all the risk. That’s especially true because BHPH dealers cater to people with bad credit – deep subprime customers who typically have credit scores less than 550.
It’s not hard to find people who are out of luck, out of work, and grateful for the opportunity to finance a car at all. But that opportunity comes at a steep price, which is either folded in or added on in the form of interest rates up to 25%.
So here are six tips to consider if you’re thinking about Buy Here-Pay Here:
1. Can you wait? This is Philip Reed’s big question. He gives consumer advice on the car site Edmunds.com. Say you’re going to spend $300 a month on BHPH car payments. Can you put off your purchase by a few months and save that money? Reed says if you grow your down payment, you may be able to find a friendlier loan, or even buy a used car outright.
2. How much is the down payment? A bigger down payment reduces the balance on which you pay interest, and that’s good. But how much is too much? If you put $3,000 down on an older car, you may be handing the dealer enough to cover its actual value. The rest is profit. Again, that money might be better spent on a friendlier loan or a private purchase.
3. Where’s the nearest computer? This relates to another good question: Where’s the nearest door? Go home; think it over; don’t rush. Try to go online and comparison shop. Philip Reed recommends looking up a vehicle’s history on CARFAX.com. You can appraise a vehicle and calculate maintenance costs on Edmunds.com. See what other deals are available in your area.
4. Take a test drive. Preferably to a mechanic. This is one of Matt Ghazal’s tips, over at Express Auto. Do you have the option to get an independent inspection before signing? Take it. Take it now. A lot can happen in the 100,000 miles that many used vehicles rack up. Get advice from a third party.
5. Do you feel like the dealer is doing you a favor? This one is from Phil Reed. I like it because it speaks to the emotional aspects of A) needing mobility and B) needing money. Reed says when people feel vulnerable they are less likely to negotiate. And you should negotiate.
6. Does the dealer report to the credit bureau? These days, it’s easy to wreck your credit, but you want to be able to build it too. Make sure a successful track record of payments can, theoretically, count in your favor.
That’s six tips from here. What would you add?
Polk, the Southfield, Mich., firm that tracks automobile data, says the average age of cars and trucks has reached a new high. The average car on the road is now 11.1 years old, while the average truck is 10.4 years old.
Overall, the average vehicle is now 10.8 years old, compared with 10.6 years in 2011. Polk bases its data on vehicle registrations, rather than sales numbers.
It’s a number that everyone in Detroit and the auto industry elsewhere watches closely, since it helps gauge how many future vehicles might be built.
What’s behind the longevity?
- Automotive quality. A decade ago, the average age of a car was 8.6 years, while the average truck was about six years old. Vehicles are simply lasting longer than they did for our parents or grandparents.
- Another factor is the economy, which was reflected by the slump in auto sales and only a gradual recovery the past few years. People are maintaining and keeping their cars and trucks longer, because they have to.
- A final factor is the length of auto loans. The average car loan is now 63.3 months, or a little over five years. People who pay off their loans often like to keep their vehicles a few years longer.
Polk also has some interesting data on the automotive fleet. There are now 240.5 million vehicles on the road, which is 500,000 more than at this time last year.
The Census Bureau says there are roughly 112 million American households, so that’s just a little over 2.1 vehicles per household.
How old is your car or truck? How much longer do you plan to keep it?
Like other visitors to Cuba, I was charmed by the vision of vintage Buicks, Chevrolets and Cadillacs gliding down the streets of Havana when I visited in the 1990s. Now, it looks like those cars may soon be joined by more-recent models, potentially rejuvenating a market where Detroit has not participated for decades.
The reinvention of the Cuban car market will be closely watched by companies all over the world, especially those in our region.
Under reforms proposed by president Raul Castro, the market for vehicle sales may be liberated from the strict controls placed on it by the Cuban government. Very few private citizens own cars, and the only cars that can be openly sold and traded are those produced before the 1959 revolution, according to this report from NPR.
These autos sell for anywhere from $3,000 to $40,000, depending on the condition of the car. Many are held together by the skill of Cuba’s mechanics, who have managed to keep these classics running long after they disappeared from American roads.
Otherwise, the government allows those with a demonstrated need for a car — such as taxi drivers, merchants, farmers, and of course Cuban officials — as well as artists and athletes to purchase one. As I learned when I was there, Cuba’s government basically selects the car company allowed to sell there, and that’s the choice that people have.
For years, the available cars included Russian Ladas, and occasionally a company like Nissan might be the featured model. For a while in 2010, Mercedes-Benz participated in a luxury import program. And, diplomats and foreign companies that operate in Cuba can opt to bring in their own vehicles, undoubtedly after obtaining government permission. For instance, the officials of one Canadian company drove an Isuzu Trooper.
How big is the potential Cuban car market? When I was there on assignment for USA TODAY, one estimate was that Cuba, which has a population of about 11 million, probably could see demand of about 200,000 or more cars per year, assuming that the nation’s economy was in decent shape and its citizens were able to earn disposable income. Currently, the State Department estimates that the average Cuban earns only $18 a month.
The sales potential might seem tiny, considering that the American car market was about 10.4 million in 2010. But the opportunity to sell cars in a country where they’ve been locked out for a half-century has to appeal to some at the Detroit car makers. After all, they’ve had free advertisements cruising the Cuban streets all this while.
Would you like to see Detroit automakers sell their wares in Cuba? Have you been? What do you think of the classic cars there?