Negative Equity - wsj on long car loans

This article was interesting. I can see why a lot of people have negative equity from their purchases. Dealers make more from financing than sales.


I just cancelled my WSJ subscription due to the 84 month note on my Bolt, Any chance you could paste the article…?


The article is available on WSJs Facebook home page which doesn’t have the paywall.

But the guy in the article photo - “Mr. Jones, now 22 years old, walked out with a gray Accord sedan with heated leather seats. He also took home an 84-month car loan that cost him and his then-girlfriend more than $500 a month.”. Turns out he rolled in a bunch of other debt. Bought a super sensible car, although maybe should have gotten the LX trim,. It then rolled in huge amounts of negative equity. No wonder his deal is terrible.

From article, cars are expensive but seems like there are two big other issues. 1. People rolling over negative equity. Many people keep digging deeper holes when they really just need to pay off loan one 2. People like expensive trucks and SUVs. Sedans are much better value for money - and use less gas. When did 50K trucks become anything other than straight luxury purchase.

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You have neg equity even on a 36 mo loan…it’s a car.


I also agree. What business does the 22 year old Mr Jones have driving a brand new car? At this age it is either college or house down payment that should be the priority.
At 22 I drove a 10 year old SAAB…


Not if you finance less than the car is worth once you drive it off the lot. I’ve never had negative equity in any car I’ve financed.

Did you actually check? Your car value drops as soon as you drive off the lot…so getting a msrp discount may not be enough. If i had to guess, i would say maybe 1% of buyers have equity after the first year if the loan was a 0 down.

Ehh, it depends on your priorities and situation. I bought my first new car when I was 22. There was no way I would be able to afford a house any time soon, and I didn’t need to. Sure, it would have saved me money in the long term to stash that money away until I did buy a house or to pay ahead on my student loans. But, you have to enjoy life, too. After working hard to get good grades, get into a good college, graduate, and land a decent job, I wanted some payoff.

Eh, cars have changes and become more complex. As we have shown here, math on used cars doesn’t always work out, especially with delta between new car and used car APRs.

I bought a 2008 Civic LX at 22 and drove it for 10 years. Worked out well. What I’d didn’t do was buy a 2008 Accord EX-L (guy either bought EX-L or Touring) or roll any negative in. I also had a payment of about $150 a month.

Someone that age cannot be rolling negative into long payment plan and needs to be buy used or else be buying a Versa/Fit/Sentra etc…the Civic is much to nice now. My 2008 Civic bears little resemblance to the current generation of excellent in effect mid sized cars.

I didn’t buy my first new car until I was 33, and paid cash. Ten years later I still have it. People get buried trying to keep up with the Jones. That said, I’m thinking about leasing a BMW at the right price. You have to enjoy life too.


A never-ending string of car payments is among the most perfect tactics ever designed to help people reach their 40s and 50s with little or no savings, so they can complain about how the US economic system is rigged against them.


All these articles are basically the same….a teenager with little to no knowledge of financial products, interest rates etc. takes out ill-advised financing, often at silly rates and gets stuck in a cycle of constant negative equity until a recession wipes them out completely….

Is it the fault of dealers/finance companies? Or the result of limited education about personal finance?


Yes…there is nothing more gratifying than doing all things right…buy a car and keep it forever, buy a house, have no CC debt, etc…then go BK due to medical bills. The system is just fine…thoughts and prayers.


If you didn’t want to go bankrupt you should have taken better care of your appendix :wink:.

But yeah, personal bankruptcy is a useless statistic for financial responsibility when a large plurality to majority are driven by medical costs.

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I’m talking about the 99.85% of the people who don’t file BK due to medical bills every year.

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I think what he meant was if you put a sizeable enough down payment, you finance less than the car’s worth, thereby no negative equity when you drive off the lot. As to how many people put that big of a down payment - that’s another story…

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Yes, a newborn would have problems filling up the paperwork…but they are people so they count.

Well yes, that’s one way to not have neg equity on paper…but is it really in practice? It’s like the salesman asking you what monthly you want on your lease so he can bump the down.

Good catch. Only 76% of the US population is over 18.

That leaves 251,000,000 US adults, 500,000 of whom file BK due to medical bills (more accurately, due IN PART to medical bills).

This means that 99.80% of US adults do not file BK due to medical bills in a given year, rather than my wildly-exaggerated 99.85% stated above.

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one way to not have negative equity on paper

That’s the ONLY way to not have negative equity. It is absolutely in practice if you’re smart enough to figure out how much you lose once you roll out of the showroom with the new and shiny.

Now go even higher in age since, let’s be honest, if you are under 30 you don’t have much to lose anyway…maybe even take out from the pool past BKs…and maybe we can get over 1%. At 1% you would say it’s pretty insignificant, right?