Our neighbor, Nancy Gail, has one and loves it. My wife drives one and says she will never give it up. She likes this more than the Porsche she once owned. Indeed, both women believe they drive the best car in the world.
What kind of car inspires such loyalty?
It’s not a Mercedes.
It’s not a Lexus.
It’s not an Acura.
It’s not a Cadillac.
It’s not any of the brand names most people dream about and covet… although it could be any one of them.
They call their cars “No Payments.”
“I love my No Payment.”, Ms.Gail says, referring to her 1996 Ford Explorer.
“I love my No Payment.”, my wife responds, referring to her 1992 Jeep Cherokee.
Ask them about features and they will say the same thing: the most important feature on their car is that it has No Payments.
Needless to say, this is not a car for everyone. Most people buy their cars with credit. They borrow much of the purchase price and hope that the car is worth something when the loan is paid off. The average amount financed on new cars is now just under $19,000. The comparable figure is about $12,400 for used cars.
And it all adds up. According to the Board of Governors of the Federal Reserve System, outstanding automobile credit stood at $433.4 billion at the end of September. That’s up from the $413.4 billion outstanding last December. These figures don’t include the financing in automobile leases or the automobiles purchased via home equity lines of credit.
In fact, for all the offers of instant financing, super-deal leases, etc., the broad figures indicate that millions of automobiles are “No Payments.” We just don’t know how many… and its virtually impossible to find it out.
So lets do some thought exercises and examine the number of cars in use, their age, and the amount of automobile credit outstanding. According to the Statistical Abstract of the United States there were 123.2 million automobiles in use in 1995. Some 46.2 million were under five years old. In the same year, automobile credit outstanding was $364.2 billion.
Result: If you assume that only cars under 5 years old were financed, the average financing on those 46.2 million cars would be only $7,880. During the same period the average spending on a new car ranged from $16,083 in 1991 to $18,825 in 1995. Basically, the youngest part of the “fleet” is financed for less than half its new value. The remainder of the fleet could be owned outright.
That’s a lot of fleet, about 77 million cars.
Examining the Automobile “Fleet”
| Category | Number of Autos |
| All cars | 123.2 million |
| —- under 5 years old | 46.2 |
| —- 6-8 years old | 26.9 |
| —- 9-11 years old | 23.3 |
| —- 12 years old and over | 26.8 |
Source: Statistical Abstract of the United States
Needless to say, this isn’t how autos are actually financed. While some new cars are purchased for cash, there are a multitude of used car lots that offer to “tote the note” for people with no money. Indeed, industry figures show that while banks and the major auto finance companies (operated by GM, Ford, and Chrysler) provided 81.2 percent of all auto financing in 1980, they provide only 56.4 percent today, indicating that financing is moving down to poorer credit risks. Basically, the credit smart are building equity in their cars while credit victims are financing more.
Are there any messages here?
Yes:
- Contrary to public mythology and abundant advertising, a car payment is not inevitable;
- Most cars are “No Payments”;
- Most people have figured out that car loans are expensive; and
- If you’ve been wondering why your neighbor lives better than you do on the same income the most probable reason is that your neighbor drives a “No Payment.”
Maybe it’s time to get on the bandwagon.
Photo: Pixabay
(c) Scott Burns, 2022