Is America Becoming The Land Of The Suckers?
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Thread: Is America Becoming The Land Of The Suckers?

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    Is America Becoming The Land Of The Suckers?

    Is America Becoming The Land Of The Suckers?





    Suckers come in all shapes and sizes.


    They can be a young guy with college loans in his mid-20′s who is charged $800+ for a $100 repair. Or an elderly couple on a fixed income who is encouraged to sign on the dotted line with a malevolent seller.


    Every single American has probably been a sucker at some point in their lives when it comes to cars. Young, old, smart, not so smart, confident, fearful… and in all cases, struggling with the unfamiliar. Our society is not one that de-fangs the predators or educates the victims. It is a debtful and litigious one that encourages money to be thrown into every which direction but personal accountability.


    Or does it? Frugality is supposedly the in thing these days… and cars are now kept longer than ever. As a life long debt hater, I would like to think that there are far fewer suckers than before. Especially when it comes to cars.


    But the numbers tell me otherwise.




    This recession has yielded some unusual results in two industries that reflect the lack of change within the American automotive lifestyle. Take a look at this graph for instance.





    Autozone is the largest auto parts retailer in the United States. Not to be outdone by a long list of other competitors. It has been a bellweather of success along with many of the other publicly traded auto parts retailers during this recession. Since 2008 this market segment has yielded a 125% return vs. the S&P 500 index.


    So should we all just toss in our proverbial ponchos of stock portfolios and start chasing after companies that embrace Americas newfound penchant for frugality? Not quite yet. Any investment we do in life has to require far more than a few blips worth of data.


    The idea of buying a parts retailer may be lucrative to the ‘keepers’ amongst us who believe in investing in our cars for the long haul. But the three most dominant and successful auto parts retailers have only seen annual revenue growth of 4% to 7% over the last five years (Click symbols: AAP, AZO, GPC.)


    Without going too deep into the rabbit hole of data, success in the auto parts business has more to do with managing inventory and costs than the sudden enlightment of the general public.


    As far as it pains me to say it, most Americans are not pursuing the path to wisdom at all. At least as it relates to cars. In fact everything on the wholesale side of the world points to a public that is increasingly dependent on barnacle levels of debt for their roadside freedom.


    Go to page 18 of the 2012 Data Source Book for Used Car News and you will see the nasty reality of a ‘sucker’ infested marketplace. According to Experian Automotive, loans for used cars that are for 60 months or less are becoming far fewer in number. In their place are 5+ year loans. The 61 to 72 month term is now the most common one in the United States with loans beyond 72 months up a startling 41.1% just in the last year (see page 18).


    There are now more auto loans for used cars that are six years and longer, than those that are three years or less.


    The average term has gone up (page 17). The average payment has only declined for the most creditworthy (see page 16). While those who are the most credit challenged are putting nearly 15% less of a down payment since 2008 ($959 down in 2011 vs $1130 down in 2008, see page 23).


    From these numbers, it appears like a lot of folks are going to be bordering on the broke for a very long time. But it gets worse. Far, far worse for the unfortunate among us who happen to live from paycheck to pawn debt.


    For more Americans than ever before, the cycle of ‘debt to equity’ has become a ‘debt to debt’ trap. That will be shown in detail come Wednesday. But for now let me ask you a question. How can we reduce the number of suckers in our society? Jokes are welcome as always. But serious answers would be even better.




    Hammer Time: Is America Becoming The Land Of The Suckers? | The Truth About Cars

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    ADMINISTRATORcolor> TrailDust's Avatar
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    IMO, the sucker factor is getting worse because people have become lazier. With the advent of accessing the informational powerhouse of Google/the internet, there's no excuse for being misinformed in today's world, but because people are so lazy they don't even bother with educating themselves.

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    Part of the rise in debt reflects the amazing rise of used car firms that will finance any customer, but specialize in the desperate and ill-informed. I read a couple of articles on how they work. Essentially they take any customer with a pulse and a down payment. They charge the maximum interest rate availabe - 20% or more in some areas. They are extremely hard sell and effective. They take customers and sell them cars that are on average substantially to grossly overpriced over market rates. In addition, they aggressively sell the customer on cars far more expensive than they had planned. I personally know of an older lady who planned to buy an older Fusion for around 10K, but at the last moment the dealership "discovered" the car had a major mechanical problem. She left the place with a 5 year old Buick for 18K - something she really liked, but didn't need.

    These used car outfits, can afford to finance anyone because something like 1/3 of the customers default on their loans. They quickly repossess and in some cases can end up selling the same car several times in a single year. Even those who do not default end up paying much more for the car then they would of had they had good credit, or bought from an ethical used car dealership. Often, these cars are quite old and high-mileage vehicles.

    Essentially this is a vampire business model that will only survive so long until (or if) the government cracks down on their practices.

    In the past few years the business has grown large enough to impact statistics on auto-related debt, at least as it applies to used cars.

    Frankly, attributing debt to "laziness", is not an example of exerting intellectual effort. Most people who get into serious debt do so because they are desperate to have a vehicle (statistics show that you are 80% more likely to land a job if you have a car), and because they have gotten into debt due to catastrophic medical-related costs.

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    People dont research and look into what they need to do, A lot of people try to work things out their own way and dont shop around, yes a lot of debt has to do with the fact that yes you may not have money because of you car but would you be where you are if you didnt have a car there is a ton of factor but its trust people trust each other too easikly no a days

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    Quote Originally Posted by Parabolic View Post
    Part of the rise in debt reflects the amazing rise of used car firms that will finance any customer, but specialize in the desperate and ill-informed. I read a couple of articles on how they work. Essentially they take any customer with a pulse and a down payment. They charge the maximum interest rate availabe - 20% or more in some areas. They are extremely hard sell and effective. They take customers and sell them cars that are on average substantially to grossly overpriced over market rates. In addition, they aggressively sell the customer on cars far more expensive than they had planned. I personally know of an older lady who planned to buy an older Fusion for around 10K, but at the last moment the dealership "discovered" the car had a major mechanical problem. She left the place with a 5 year old Buick for 18K - something she really liked, but didn't need.

    These used car outfits, can afford to finance anyone because something like 1/3 of the customers default on their loans. They quickly repossess and in some cases can end up selling the same car several times in a single year. Even those who do not default end up paying much more for the car then they would of had they had good credit, or bought from an ethical used car dealership. Often, these cars are quite old and high-mileage vehicles.

    Essentially this is a vampire business model that will only survive so long until (or if) the government cracks down on their practices.

    In the past few years the business has grown large enough to impact statistics on auto-related debt, at least as it applies to used cars.

    Frankly, attributing debt to "laziness", is not an example of exerting intellectual effort. Most people who get into serious debt do so because they are desperate to have a vehicle (statistics show that you are 80% more likely to land a job if you have a car), and because they have gotten into debt due to catastrophic medical-related costs.
    Very informative post. Luckily I nor anyone I know have been taken advantage of by these "dealerships".

    I agree that serious debt can most likely be attributed to a big financial misfortune, which can result from being laid off and being unable to pay the mortgage/lease or from a unexpected medical issue. This can cause a person or family to get into tens to hundreds of thousands of dollars in debt.

    Though I also a bad trend in North American culture with people collecting debt by making bad decisions. I see a lot of people who spend money they don't have and/or racking up credit card bills, when they could instead be putting money into savings.

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    You'd all be stunned at how many hybrid owners complain about how poor their mileage is during the winter months and acknowledge that they didn't research the deficiencies of hybrid systems in cold weather, yet they still insist that the "salesman should have told me." P.T. Barnum was so correct!

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    Hmm, I hadn't heard that about hybrids and cold weather. What's the explanation? Decreased battery performance?

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    Short version is temperatures below 40 degrees Fahrenheit render the battery system inefficient and eventually nullified as the temperatures get near freezing, and the regenerative braking system loses its functionality as well. Hybrid systems typically resort to all gas driving mode and, with such small gas engines, burn a lot more gas and mileage suffers. This isn't one of those urban myths but rather an actual issue. Check it out on Google or on forums like Toyota Nation's various hybrid forums to read more about it.

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    See this is a prime example of being a sucker, not paying attention to actual real world testing and just believing what the sales man tells you, its pretty amazing though how people just believe everything even from word of mouth !

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