
The Seven-Year Auto Loan (2019) - paulpauper
https://www.wsj.com/articles/the-seven-year-auto-loan-americas-middle-class-cant-afford-their-cars-11569941215
======
hprotagonist
_But very seriously, it goes through life; the drum major instinct is real.
(Yes) And you know what else it causes to happen? It often causes us to live
above our means. (Make it plain) It 's nothing but the drum major instinct. Do
you ever see people buy cars that they can't even begin to buy in terms of
their income? (Amen) [laughter] You've seen people riding around in Cadillacs
and Chryslers who don't earn enough to have a good T-Model Ford. (Make it
plain) But it feeds a repressed ego.

You know, economists tell us that your automobile should not cost more than
half of your annual income. So if you make an income of five thousand dollars,
your car shouldn't cost more than about twenty-five hundred. That's just good
economics. And if it's a family of two, and both members of the family make
ten thousand dollars, they would have to make out with one car. That would be
good economics, although it's often inconvenient. But so often, haven't you
seen people making five thousand dollars a year and driving a car that costs
six thousand? And they wonder why their ends never meet. [laughter] That's a
fact._

Martin Luther King Jr., 1968 [https://kinginstitute.stanford.edu/king-
papers/documents/dru...](https://kinginstitute.stanford.edu/king-
papers/documents/drum-major-instinct-sermon-delivered-ebenezer-baptist-church)

~~~
sfrank2147
Somewhat tangential, but the most absurd ad I've ever seen was when Dodge ran
an ad during the Superbowl quoting from this speech.

~~~
zweep
I heard a President’s day ad for a Jeep CHEROKEE that had a song with the US
Presidents in order. I don’t know if they got to Jackson _shudder_

~~~
perl4ever
Whenever people make a comment about references like that, or with sports
teams, it makes me think:

\- If it was common to make references like that in Germany to Jewish
institutions, groups, or tribes, ambiguously "honoring" them, would that be a
bad thing? Would it be gloating over victimizing them, or commemorating their
bravery?

\- Given that (my impression is) they don't, what does the cultural difference
really signify? Are Germans entitled to feel superior for it?

Like, I can imagine a world where there were sports teams called the
"Maccabees" or the "Ghetto Fighters". I think that German cars _do_ make
reference to groups in ways that surely someone _could_ find offensive, like
the VW Touareg. Is this better/worse/as bad as using "Cherokee" as a name?

~~~
zweep
I don’t think you have the context. President Andrew Jackson violated a
Supreme Court ruling to basically commit a genocide and expulsion of the
Cherokee from land that was theirs by treaty.

~~~
perl4ever
Yes, the association of Jackson is obvious. Why do you think that genocide was
not the context of my comment?

~~~
zweep
Well would you use a song about the “Chancellors of Germany” to advertise the
Maccabees’ next game?

~~~
perl4ever
You probably would/could have ads for Mercedes or VW, and their history could
lead to awkwardness, particularly if old photos of their cars were used.

------
kop316
Is it really that the middle class can't afford cars, or is it that a lot of
folks want to buy a car they really can't afford?

My much higher concern is that the reason people take a seven year auto loan,
as it is the default option given to them and see a lower monthly payment. By
doing that, one can think they can afford the $40k or $50k car, not realizing
that the total cost of ownership (i.e. maintenance, gas bill, etc.) also just
rose, and the money they are paying in interest is also much higher now.

~~~
HarryHirsch
THe OECD has the numbers on GDP per hours worked: [https://www.oecd-
ilibrary.org/economics/gdp-per-hour-worked/...](https://www.oecd-
ilibrary.org/economics/gdp-per-hour-worked/indicator/english_1439e590-en)

Worker productivity in the US has risen while wages have remained flat and
expenses for healthcare and education have gone up. People really can't afford
their cars any longer.

Besides, if you have a 90-minute megacommute a nice car is no longer a luxury,
it's a necessity.

~~~
vorpalhex
> if you have a 90-minute megacommute a nice car is no longer a luxury, it's a
> necessity.

I used to commute 90 minutes on the bus and rail on a daily basis. I assure
you, even at 90 minutes, a nice car is _still_ absolutely just a luxury. A
dependable car may be required, but not a fancy one.

~~~
PaulHoule
If you have a long commute you probably want a fuel-efficient car, which is
usually going to be a small (and inexpensive) car.

My impression also is that many of the most dependable cars are inexpensive.
I've been so amazed at the reliability of the Honda Fit (it required no major
repairs until it got totaled around 120k; my main beefs were with the
hatchback which needed to be oiled quite often, and the tire pressure sensors
that seemed to fail around once a year or so) I was amazed enough that I
bought another one (with a three year payment)

~~~
HarryHirsch
When you are driving 90 minutes in the early morning on busy roads, when
everyone around you is just as sleep-deprived as you, you'd like to minimize
distractions, so you can pay attention to the road. You really want a good
suspension and a silent engine. (I agree about the fuel efficiency, but that's
not the whole story.)

~~~
PaulHoule
Small cars vary just as large cars vary.

I like Hondas, I like the Chevy Sonic, I like the Nissan Altima. I think the
Nissan Sentra has dangerously little purchase on the road, and can't stand the
drivability of either the Toyota Corolla (almost crazy optimization of gas car
for high m.p.g.) or the Camry.

I think the roar of the engine and the sounds outside are an important sensory
channel in driving, so "super quiet" doesn't matter for me.

------
scarface74
It is so easy to find a used car that will be good enough for $10-$15K. Even
though I know we probably pay slightly more, we always go to CarMax. Just not
dealing with slimy car dealers makes it worth it. We have never had an issue.

~~~
save_ferris
I did this last year on a 10 year old Camry, bought the car fax, paid for a
pre-purchase inspection, everything checked out.

Six months later, a major electrical issue damaged a significant portion of
the internal computer system, which cost almost as much to fix as the car was
worth.

Almost $8k down the drain in 6 months. You’re always rolling the dice on an
old car, no matter how much research and prep you do.

~~~
neogodless
I don't know the real statistics, but typically buying a 10 year old Camry is
rolling a 100-sided dice and unless you roll a 1 or a 2, you're fine. You just
had a particularly unlucky roll.

For most people, over a lifetime of buying cars (say 60 years) buying the $15k
car (at today's prices) every 5 years vs $30k new car every 5 years will save
them $180k. You can replace a lot of computer systems with the savings
(ignoring even more savings with insurance, etc.)

~~~
baumandm
I also don't know the real statistics, but I don't think it's fair to assume
the used car will last the same as a new car.

If new cars cost $30k and last 10 years, and used cars cost $15k and last 5
years, you break even.

Alternately if you always trade-in your car after 5 years to buy a new car,
you'll end up paying a lot less than $30k each time.

~~~
Spivak
I feel like I'm going mad in this thread.

You buy a reliable used car with ~30k miles for half of the cost of buying new
and then drive it until you hit 150k+ miles.

Where are you buying cars where you're only getting a 50% discount from new
with half of the cars useful life spent?

~~~
neogodless
Indeed! I got a car with ~8k miles for 30% less than new. And it's a budget
hatchback, not a rapidly depreciating German luxury sedan.

------
alphabettsy
Isn’t this just another sign of consumerism and poor financial decision making
for “status”?

Automakers are having trouble selling affordable and reasonably priced new
cars causing them to drop them for pricier SUVs. Consumer behavior is driving
these trends.

I’ve seen plenty of friends buy a new car that costs what they make per year.
The only way to get by is to have 5-7 year financing or they’d be left with
nothing after payments and insurance.

~~~
AJ007
It’s remarkable how similar all of the cars look now. If you didn’t hear the
engine, or didn’t know what you were looking for, even the new Lamborghini
mini SUV looks the same as everything else on the road.

~~~
dsfyu404ed
They all have to minimize aerodynamic drag in the same atmosphere, comply with
the same vehicle class/dimension based (depending on location) fuel economy
regulations and are all judged by the same set of benchmarks. It's no surprise
that they mostly resemble each other now that all the easy gains have been
made.

~~~
tomwilson
Also pedestrian crash laws and safety regulations etc. By the time you plug
all those values into the computer along with the hard points of your
platform/chassis you are obviously gonna end up with the same thing.

------
michaelt
_> He found himself unprepared for the hard sell from the finance manager. The
add-ons brought his payment to $448 a month, nearly $100 more than he had
expected to pay_

Given the reputation of car dealerships, I'm surprised there's not a cooling
off period for transactions like this.

------
excalibur
[http://archive.ph/O1OJS](http://archive.ph/O1OJS)

~~~
jeegsy
Thanks!

------
JamesLeonis
There is a lot of hand-wringing over consumer behavior here in the comments,
but nobody is pointing out the extent that Wall Street is involved much like
they were in the Mortgage Crisis of 2008.

> Yet for the auto industry, there was a silver lining: Interest rates had
> fallen to practically zero. Suddenly, it was much cheaper to finance a car.
> Loans made to buyers were snapped up by Wall Street investors looking for
> returns as income from supersafe Treasurys drifted toward zero.

> The combination of rock-bottom rates and yield-hungry investors helped bring
> the U.S. auto industry back to life. By 2015, auto sales had reached
> records.

> Low rates, in effect, served as a bailout for the entire auto industry. Last
> year, investors bought a record $107 billion of bonds backed by cars,
> according to the Securities Industry and Financial Markets Association, a
> trade group. That is the first issuance record since 2005 and nearly triple
> the amount two decades earlier. The outstanding pile of auto bonds swelled
> to a record $264 billion.

> So far this year, dealerships made an average of $982 per new vehicle on
> finance and insurance versus $381 on the actual sale, according to J.D.
> Power, a data and analytics company. A decade earlier, financing brought in
> $516 per car and the sale made dealers $837.

> Finance managers at dealerships typically use an electronic portal to hash
> out the terms of the loans. On the other end are various financial
> institutions that buy up the loan pretty much as soon as the dealer closes
> the deal.

So the entire incentive structure flipped to reward _financing_ rather than
_purchase_ in the last decade. It's no wonder that dealerships are increasing
the terms of loans. Banks are snatching them up and putting them into
securities practically sight unseen while the debt just keeps piling on.

We can talk about consumer behavior all day, but did behavior _really_ change
over the last several decades (specifically since the 2008 Crash) or are other
factors driving this like Wall Street types starving for yield? Looks like
we're watching the highly anticipated sequel.

~~~
hurricanetc
I would say it's quite apparent that consumer behavior did change. Consumers
could have taken cheap money and continued buying cheap cars... but they did
not.

But you can't blame Wall St for this. This debacle is squarely on the fed.

------
mc32
One thing that I see is carmakers stuffing their trims with all kinds of
unnecessary extras. Sun/moonroof, heated seats, powered seats, humongo speaker
system, etc.

All those extras do two things:

Drive up ave selling price and added complexity (meaning more maintenance).

It’s probably near impossible to get manual windows in any trim level.

They also tell customers “hey you can wait 10,000mi before changing oil”. That
kills engine life, and they know it.

~~~
winternett
I think the most costly difference between cars is found in leather seats.
Leather is often the best choice if you have kids and pets... In European
cars, the leather quality is usually ages above leather in cars from Japan and
China. you pretty much have to pay 60k or above to get a car with non-bonded
(inferior) leather.

Options add value, in luxury cars, a sunroof and alloy wheels are pretty much
essential, not getting one means negative value on resale.

The dealerships often mark up prices on cars just because... It always amazes
me how many people think sticker prices are firm and fixed. I have never
purchased a car in my life without getting at least $7k off the sticker price.

There are many walks of life. A self employed realtor, for example, can write
off a car lease, and may need to regularly carry clients, so an expensive
sedan or big SUV ends up helping them more. People are so used to projecting
their own circumstances on evaluating everyone else when it comes to
economics, benefits of financial decisions are always subjective.

~~~
PaulHoule
What I see is this.

When I bought a car in 2010 I had no problem finding a small car (industry
reeling from 2008.)

In 2018 I went car shopping and found that both Asian and American car dealers
had no small cars in stock (the usual state w/ American car dealers) and all
sorts of excuses why they didn't.

Right after that they will point you a whole bunch of trucks and SUVs all in a
row, all with deep discounts.

Looking at this, I'd conclude that car dealers want to sell big cars, not that
people want to buy them.

(A retired ag economics professor I knew bought the $70k corvette that the
chevy dealer had for show for $35k at the peak of the 2008 crisis.)

~~~
auiya
> not that people want to buy them.

Completely incorrect. The market demand for gigantic cars in the US is
virtually insatiable. And will remain so as long as the price of gasoline
stays around $2-3 per gallon. Once we see ~$6/gallon like what's common in UK
for instance, cars will start to shrink again.

~~~
PaulHoule
In my nearby family I think it is 50-50% if somebody has a compact car vs
something large.

I remember a childless couple that went to a car dealer and got talked into a
Chrysler Pacifica (monster minivan) at the steal price of $22,000.

I rode in it and it was the worst hunk of junk, the only car I've gotten
seasick in. That car contributed to the implosion of their marriage.

American car makers have a huge incentive to sell 'trucks' because of this old
protectionist law:

[https://en.wikipedia.org/wiki/Chicken_tax](https://en.wikipedia.org/wiki/Chicken_tax)

They make a bigger profit on 'trucks', so they can pay you discounts out of
the premium they get.

~~~
auiya
Even with tax incentives and huge profit margins, the cost of a modern truck
is still sometimes three times as much as a family car with the same seating
capacity. It's the small social circle status symbol mentality which
perpetuates it. Same mindset of people who collect hyper-expensive athletic
shoes I feel.

~~~
PaulHoule
Yes and no.

My brother-in-law has a big-ass pickup truck with a plow attached and he takes
a chunk out his big-ass payment by plowing driveways in the winter. He has
worked his way up building roads and really does use his 'truck' like a truck.

------
tharne
A lot of this has to do with obscenely low interest rates. I have a 6-year car
loan simply because the interest rate on it (under 2%) is lower than what I'm
getting on a (by today's standards) high-yield savings account. I could have
bought the car outright, or gotten a shorter-term loan, but why bother when
you're paying effectively no interest rate?

If you have good credit is the US, you can basically borrow money for free to
buy a car.

------
gruez
>He paid $27,000 for the car, less than the sticker price, but took out a
$36,000 loan with an interest rate of 1.9%

Isn't that pretty good? 1.9% is at inflation, so it's almost a free loan.

~~~
kop316
So let's assume the person can pay off the loan (A lot of these loans have
clauses where if you miss a payment or are late for a payment they can charge
a collection fee or repo the car).

From my understanding, what is used is called an "opportunity cost". Meaning,
if I took this loan rather than pay off the car, I now have $36,000 in my
possession that I would not have otherwise. I have to be able to make more
than %1.9 off the money I spent over seven years for that loan to have been
worth it.

So let's say I just store $36,000 in a savings account that had a yield of
less than %1.9 and used that to pay off the loan. I am still losing money on
the deal. If I put it into some sort of investment that made more than %1.9,
then I make more money than if I spent it entirely on the car.

This is at least my understanding of how it works out. I welcome other's
thoughts if I am wrong.

~~~
0xffff2
Even very safe investments will get you an expected rate of return higher than
1.9%. Hell, my bank's current rate on a 5 year CD is (barely) above 1.9%.

In short, the loan is a great deal if the terms of the loan did not affect
they buyer's willingness to pay more for the car.

~~~
kop316
That's what I was thinking too....but this assumes a few things:

a) You have that sort of cash on hand. b) You do NOT miss payments.

If you miss payments, they typically have late/collection fees against you (I
don't know how bad they are) or repossess your car depending on the situation.
I assume both are structured to be advantageous to the dealer (I don't know
specifics).

Also, it is in the dealer's interest to make the loan as long as possible, as
this makes the advertised monthly payment as low as possible.

In addition, making the loan payments as low as possible helps decouple the
true cost of the car from the buyer. This encourages more spending that
otherwise would not happen.

------
winternett
I kinda feel like an idiot... I buy a new car every 4 years. The last one I
bought cost just above $68k... At least it's a relatively fuel efficient SUV.
You can also end up buying a cheaper car that burns the extra payments in gas
and upgrades/repairs though to be fair, though not as much as $60k I know...

I have no wife to reprimand me. :/

~~~
alphabettsy
There’s almost nothing you can buy that would burn the difference in fuel
savings.

If you’re going to continue that madness you could at least save yourself some
depreciation buying 1-2 year old models.

~~~
0xffff2
Honestly, if they're managing to buy new $60k+ cars every 4 years, either
their financial status is such that it's not a real concern, or they need much
more financial help than is available on an internet message board.

------
aazaa
> Just 18% of U.S. households had enough liquid assets to cover the cost of a
> new car, according to a Wall Street Journal analysis of 2016 data from the
> Fed’s triennial Survey of Consumer Finances, a proportion that hasn’t
> changed much in recent years.

The surprising thing about being poor is how expensive it is!

Those taking out the car loans are paying more than the people who pay cash.
It's a kind of quicksand that lulls its victim into a false sense of financial
security.

All the while, debt begets higher expenses, which begets more debt. Suddenly,
out of nowhere it seems - comes calamity.

This describes both the American consumer, and the US government.

~~~
bluGill
Why would you have that many liquid assets? Most of my investment is in my
retirement accounts which can't be touched. My house ties up a lot of my net
worth. I do have some stock investments, but they are long term investments
and I don't consider them liquid (I'm sure this report would, but they
shouldn't as the stock market is too volatile to count on for any short term
purchase)

------
brudgers
Cars are more reliable. Federal law mandates a seven year manufacturer's
warranty on the emissions system. That's why banks are willing to make loans
that long...it matches the minimum expected life of the vehicle.

The longer loan period is just another financial option. Attention to cash
flow and use of leverage are not moral failings. Sure, people can make dumb
choices when taking out a new car loan. People make dumb choices paying cash
for a new car. People make dumb choices buying late model used cars.

------
confidantlake
I am lucky to live in an area where I don't need a car. Sold my car last year.
It was a great decision. Not just monetary but stress and health as well.

------
Dumblydorr
Buyers think in terms of monthly payments; sellers try to lower those monthly
costs by stretching out the term. Buyers need to think of the price of the car
first, and the amount of interest paid second.

But most people are not savvy and don't have pre approved loans, so they get
stuck with shitty financing that the dealers make a killing on.

------
gwbas1c
I wonder how this changes with electric cars?

I bought a Tesla last year, and a Chrysler plugin hybrid. Both were eligible
for $7,500 back from the US government, and another $2,500 back from my state.
In both cases, the dealer offered a 6 year loan with the understanding that I
could put $10,000 back into the principle once I got my refunds.

------
gmac
In the UK, new cars typically get a 3- or 4-year finance deal, with an
additional lump sum payable at the end if you want to keep the car. This
arrangement is clearly designed to encourage you to get a new car every 3 or 4
years.

I bought a car that I expect to keep at least 5 years (and paid a bit extra
for the peace of mind of a 5-year warranty).

To finance this, I specifically sought out a 7-year bank loan. The value of
the car at 5 years should exceed the balance of the loan at 5 years, at which
point I will probably sell the car, pay off the loan (with some left over),
and repeat the process. This works out as a kind of hire-purchase plus minor
incidental savings scheme.

I'm an economist. The car was good value and I got a good loan rate. But
according to the WSJ (and several comments in this thread) this means I can't
afford my car. WTF?

~~~
guidoism
I think by definition if you have to take a loan out to buy your car then you
can't afford it. The only reason I would ever take a loan out on a car would
be if it were at 0% interest and even then it would be such a small amount of
gain as to not be worth the mental effort.

~~~
tomrod
We bought a van a few years back, and the total interest paid came out to $700
total. That was worth the credit build to us. And in our minds that was what
we purchased: low interest for an asset we needed and one we earned many
multiples in interest because we held a large portion of the principal.

------
mberning
So everybody deserves to drive a brand new car right off the lot? I don't
think so. It is exceptionally stupid to take any loan on a rapidly
depreciating asset, let alone a 7 year loan on a car. Give me a break. Dave
Ramsey is flipping his lid right now.

~~~
mmcconnell1618
I like Ramsey's suggestion of a "car ladder" where you purchase a $5,000 car
in cash, make payment to yourself for a year and then sell the $5,000 + the
cash you saved to move up to a $10,000 car. Repeat in a loop until you're at
the vehicle class you desire.

The drop off in vehicle value over one year is very small at low prices. When
you get to more expensive cars, the drop in value is more significant in a
year.

~~~
auiya
This works find assuming the cheap car you bought in the first place doesn't
blow an engine mid-year requiring everything you've saved in order to repair
it. This happens more often than you (or Dave Ramsey) would imagine.

~~~
mberning
There is no data to back that up. I won’t suggest that it can’t happen, but if
it were as common of an occurrence as you suggest there would be no used cars
to drive. They would all be at a junkyard. If you exercise caution and due
diligence you can score a decent used car that will last you more than a few
years.

~~~
auiya
When was the last time you toured a junk yard? They're absolutely littered
with Eagle Visions, Pontiac Grand Ams, Chevy Metros, and Saturn LS's; all
kinda trash from the 80's and 90's - you know, those $5k Dave Ramsey specials
that don't actually make financial sense to fix? I was being slightly
hyperbolic, but Ramsey's way short-sighted when it comes to car
maintenance/running costs of cars that cheap.

------
vaxman
This being Ycombinator, it's worth noting that the easiest way to offend an
investor is to ride up in a luxury or sports automobile. I once lost an
investor who visited on a weekend and saw a Jaguar parked near the entrance of
my building in a nearly-empty lot. Of course, the Jaguar belonged to the
building's owner and had nothing to do with me, but also, of course, the
investor didn't mention it as I was walking him to his car (so I could
explain) --just weeks later through intermediaries.

------
specialp
It is the move to crossover type vehicles and SUVs which are almost all over
$30k. People think they need something "good in the snow" and that can carry a
lot of cargo. Both things that most rarely need. Even in very snowy and cold
areas like Vermont, I see people come up in their CUV with "all season" tires
and slide off the road while there's locals ripping around in a Civic with
winter tires. If they want something good in the snow, winter tires are a lot
cheaper and will outperform a CUV on all seasons.

But yes you can buy reasonably nice cars for ~25k. The truck market is driving
up the prices.

------
quaffapint
I dont know the situation of everyone. I know what we've always done that
works for us. We each have a 45 min commute. We buy the base version of a
reliable car (A mazda 3 for example for $18k) with a 5 year loan. Then we
drive each car for 10 years. This makes sure we never have more than 1 car
loan at a time and the monthly bills are affordable.

~~~
lotsofpulp
If you value money, then the optimal strategy is to always buy a new reputable
car, and drive the ones you own into the ground. As long as you have at least
1 person in the household who doesn’t NEED a car every single day, then if the
old one breaks down and needs to be trashed, you have time to shop for a new
one.

Works out well if you have kids and a set of grandparents living with or near
you, as the in laws are retired and they can serve as a redundancy for
vehicles, babysitting, and if they have a separate home nearby, a spare home
for emergencies.

~~~
imtringued
I get the appeal of buying new but compared to buying a 1-2 year old car with
20k miles you're still leaving money on the table.

------
motbob
There's a lot of talk about fiscal responsibility in this thread, and I might
have a unique perspective on it, living in a small-to-midsized town and being
intimately familiar with a lot of people's finances who live there. I have
wanted to write about this for a while, so this is a good excuse.

I serve low-income people as part of my job, and I make $49,000/year gross.
But my expenses are about half that. I spend $742 on housing and utilities,
including phone and internet (remember: small-to-midsized town!). My food
budget is $400, thought I haven't spent that much yet. I have (or had) a $253
car payment. And so, I consume about half of my post-tax income and can save
the other half. If I were co-habitating, I'd be able to spend even less on
housing. Living alone is a luxury.

So why are all of my clients in miserable living situations? (I frankly don't
know how to make ends meet at less than 175% of the federal poverty line
without going the rice-and-beans route, so let's set those households aside.)
Part of it is due to issues highlighted by this article--why do my clients
need a $22,000 sedan when I bought mine for $14,000? Part of it is due to the
"cycle of poverty"\--once you are poor, you can easily get trapped in poverty
until you learn some life lessons the hard way (read up on "flex loans" in the
state of Tennessee if you want to see some stuff that my clients have to deal
with). Part of it is health care, where costs are unforeseeable, and when they
arrive they are quite high, throwing a wrench in the plans/lives of budgeters
who aren't extremely careful. And part of it is substance abuse--not the
illegal stuff, but the legal stuff: tobacco and alcohol.

In the end, I have gone through a lot of clients' files, and buying a car
that's too expensive or living in a place that's too fancy is rarely the
primary reason for their troubles. Why am I in such a good financial position
where I'd be able to make ends meet even if I made half as much? Well, it's
because I live in a cheap area, don't have any substance addictions, am
extraordinarily financially educated, have enough savings to buy things like
smartphones up front, know how to fight tooth and nail for the cheapest
possible option when it comes to big life expenses, and am fit as a fiddle.
Oh, and though I am fully on my own now, my parents helped me start my
financial life with a good credit score. It's hard for people to check all
those boxes, and some are out of their control.

So eliminating paycheck-to-paycheck living is a multi-faceted problem, with
solutions as varied as better financial education, moving to single-payer so
that unexpected, burdensome health care costs aren't a thing, having robust
anti-substance-abuse programs, outlawing 270% APR loans (yes, that's what flex
loans are...), etc. There's a strange dichotomy: it's important to have the
personal mentality that you are responsible for your own finances, and that
the government can't and won't save you. That's how financially successful
people think, no matter what their income level. But it's also important to
realize that there are ways that the deck is stacked against people.

~~~
dmfdmf
I'd add the old adage that it is expensive to be poor.

What does that mean? The price for consumer goods generally cluster around
low, mid and high prices. This includes cars, phones, computers, shoes,
appliance, tools and virtually anything you buy. The low priced items are
usually the worst value because they are shoddily built and don't last and
have no warranty. The mid-priced items are the best value because they are
well-built and will last a long time and usually are backed by a good company.
The high priced items are well-built and will last but you pay for fancy
extras or the name brand/prestige or service, etc.

So the trap is that if you are poor you end up having to buy at the low end of
the market and you are on a treadmill of replacement. I once had a pair of
good quality hiking boots that lasted +20 years that had finally worn out. I
don't really hike that much and was in a rush to replace and didn't want to
spend time researching all the choices (another thing lacking when you are
poor, your time). So I bought a cheap pair and they lasted a little over a
year. I was shocked at the difference and realized that I should have stuck to
the rule to buy the mid-priced products to get the best value for my dollar.

Unfortunately if you need work boots and don't have the money you are just
going to get the cheap ones and have to replace them in a year or two versus
getting years of use out of the more expensive ones. The same idea applies to
cars, phone, computers, tools, appliances, etc. and is a real problem for
people trapped in this cycle.

------
Mashimo
Glad I don't need a car. One less thing to worry about.

------
neonate
[https://archive.md/O1OJS](https://archive.md/O1OJS)

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mech1234
Buy a car cheap enough that if you total it, you aren't upset.

Drop collision coverage. Only carry liability insurance.

Feel liberated.

~~~
slezyr
> Buy a car cheap enough that if you total it, you aren't upset.

And alive.

~~~
Spivak
You can find dirt cheap cars with 5 star safety ratings. A 2010 Honda Civic
would meat that bar pretty easily.

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icedchai
7 year car loan? I paid off my home mortgage in less time.

