American car buyers, attracted by new models and cheap financing, are taking out bigger auto loans and stretching out the terms of those loans to a new record length
Recession? What recession? In fact, everything is right back where we left off in 2008.
According to Experian Automotive, the average new car loan in the fourth quarter of 2012 was $26,691 and the term was an average of 65 months!
And that too is a record – one month longer than the previous record set in the third quarter of 2012.
This shows that automobiles are becoming less affordable with every passing quarter.
The average new auto loan also hit a new high – increasing by $272.00 to reach its highest total since the first quarter of 2008.
Why do new cars cost so much?
New vehicle prices have been steadily increasing in recent years as automakers have pushed new technology-like in-car entertainment/communication systems to differentiate their models. At the same time, as more Americans look to stay connected behind the wheel they are showing a greater willingness to pay more for the latest technology.
I suppose this is part of the problem, automakers feel they need to have such features just to entice 20-somethings into the show room. But the cost of technology comes down over time, so these new features alone can’t account for the hike.
What the article doesn’t tell you is that all the fuel mileage and environmental standards are hiking the cost of production greatly as well.
And there’s also the labor overhead. General Motors is on the hook for billions of dollars of benefits every year before a single car is made or sold. When GM was bailed out by the Obama administration in 2009 it avoided bankruptcy and as a result none of the contracts had to be renegotiated. I can only imagine how far in the hole GM is at the start of every fiscal year now.
Those costs have to get passed on to the consumer to some extent as well, and GM is not alone.
More subprime borrowers
As the economy has stabilized, lenders are increasingly giving auto loans for those with subprime or weak credit ratings.:
In the fourth quarter, there was a 30.9 percent increase in the number of new vehicles sold to those with deep subprime credit scores under 550. Loans to those with subprime credit scores between 550 and 619 jumped 11.5 percent.
That total is a whopping 43% of all new car loans in the fourth quarter of 2012 that went to subprime borrowers!
That’s the highest percentage of new car loans going to subprime buyers since late 2007.
The “New Normal” is looking more like business as usual to me.
In a nutshell, proponents of taxing the rich treat people as inanimate objects that will continue to engage in the same behavior at the same levels regardless of tax rates. Anyone who has to pay taxes knows this is ridiculous on its face, but then again many of the tax the rich crowd don’t pay taxes so that probably explains some of it…
Anyway, Sowell does a great job outlining how “Trickle Down Theory” is a political term – not an economic theory – and why “Tax Cuts for the Rich work”. Although “Trickle Down Theory” is a political phrase, it’s not a partisan idea – both Democrats and Republicans alike have tried tax cuts for the rich throughout the 20th century and they worked every time.
Trickle Down Theory and Tax Cuts for the Rich is not only a great and informative pamphlet, but it is also brief and understandable – something that is a rarity in economic guides.
So, you’ve searched, gone to open houses, negotiated with lenders, and you’ve finally the keys to your new home in hand. Only it isn’t yours because, like most, you’ve taken out a mortgage. Now comes the issue of paying off your home mortgage loan. No worries. There are a lot of strategies out there to cut the debt on your house, but we’re going to focus on one: the paydown.
First, terminology: A paydown is when you, the debtor, pays both the principal — the amount you’ve borrowed from a creditor — and the interest at the same time on any given loan. This comes in excess of what you’d normally pay in a given month. That’s it.
A paydown can come in many forms — from budgeting extra money from side jobs to gaining inheritance and, well, winning the lottery. All that matters is that you pay more on principal and interest on your mortgage loan than you normally would.
So why would you like to pay down your mortgage? There are a variety of reasons, but primarily to pay off what is, traditionally, the largest debt you’ll acquire in your lifetime. It isn’t a debt which must be paid immediately, but the sooner you do, the more financially secure you’ll be.
Here are a few considerations to make for paydown on your mortgage:
Pay Bi-weekly
Splitting your mortgage payment into two can be both mentally relieving and money-saving. By splitting your payment into two segments per month, you can fit in an extra payment every year. This, as financial expert Suzan Orman notes, can land you a 13th payment on a mortgage in a year and save you in the long run.
However, a bi-weekly plan isn’t for everyone. Some mortgage services, as bankrate.com points out, charge for bi-weekly payments — the benefits of which you can get for free if you’re financially disciplined enough.
Additionally, you’ll need to consider if you can do something more productive with any excess money you may come across. If your mortgage has a low interest-rate, and you can properly invest so your returns meet that rate or higher in the form of an IRA or 401(k), you might consider another paydown method.
Prepayments
A prepayment is perhaps the easiest, and simplest, method of paying down your mortgage debt. All you do is pay more than required on your contract for each month. The trick, however, is establishing the habit of placing, consistently, an extra $50 or $100 towards your mortgage.
This extra payment, however, shouldn’t come at your cost. Check with your mortgage agreement for any fines for prepayments and consider any investments you can make which will earn a higher return than your mortgage interest rate.
Refinance
Refinancing your mortgage is always an option. Traditional mortgages spanning 30-years can, depending on your income and whether the housing market is in your favor, sometimes be renegotiated into a 15-year payment plan. You’ll be paying more per month, but, as Yahoo! Homes points out, you’ll be saving more in the long-run.
When you shouldn’t make a mortgage paydown
You should always choose to pay off higher-interest debts before you put extra money towards your mortgage. These debts, as the New York Times points out, can come in the form of a credit card, car loan, or some other type of credit you’ve taken on. Additional priorities, NYT notes, are your retirement savings and your emergency savings funds. Finally, you might able to make, and in the eyes of the IRS, save, more money in the long run by stuffing it away into retirement savings. If you’re unsure, talk to your a financial expert you know well.
Paying off your debts is always a satisfying feeling. With mortgages it can be so emotional that some even opt to ceremoniously burn their last payment notice at a party. But that satisfying feeling of paying off a long-standing debt shouldn’t come at your expense. Keeping up to date with the latest payment trends and rate can help you save a bundle, and make that little flame feel all the warmer.
Angie Picardo is a staff writer for NerdWallet. Her mission is to help consumers stay financially savvy, and save some money with the best CD account .
Being budget smart and tech savvy often go hand in hand and for obvious reasons. Technology has made it easy for you to accomplish almost anything—including keeping track of your finances and spending with Excel spreadsheets.
With the popularity of mobile devices, it comes as no surprise that budget cautious users are starting to shift their financial spreadsheet tracking onto smartphones and tablets. If you’re starting to make use of your mobile device to stay on budget yourself, here’s some advice on how to stay smart and stay on top of your financial tracking sheets while on the go.
Budget Spreadsheets
Overall, the best place to start tackling your finances is with a budget spreadsheet. You can find a number of budget spreadsheet templates online for free that are already set up with formulas and headings for any type of financial tracking you need.
To be successful at managing any financial budget, you need to be constantly organized and keep a close eye on your accounts, purchases and debits. With a budget spreadsheet set up and accessed through your smartphone or tablet, you can easily update those spreadsheets on the spot.
Cloud Drives
To access those free budget spreadsheets on the go, a cloud storage service works best. You get a ton of free space, unlimited access to your files and the ability to sync your spreadsheets across devices. Don’t rely on SD cards you have to constantly update. Make things simple and convenient. Free cloud services like Dropbox.com offer over a gigabyte of free data storage to keep track of your budget no matter where you are.
Document Processing Suites
It goes without saying that once you can access your budget spreadsheets, you’ll need a high quality mobile office suite to edit them. A mobile suite like GoogleDocs is ideal. It’s free and already available to you if you have a Gmail account. Moreover, it’s also part of GoogleDrive on mobile devices.
Just upload or open the spreadsheet from Google Drive and you can edit or add data within the cells as needed. This works out perfectly when you need to quickly edit your daily budget when you’re away from the desktop.
PDF Converters
For a full rounded financial toolbox, get a mobile converter to further manipulate your financial data. PDF banking statements and records are, without a doubt, essential to getting a good handle on your personal finances. They eliminate the inaccuracy of estimated numbers.
Rely on tools that come recommended from major accounting and tax sites like AccountingToday.com. These guys will give you a good head start on spotting finance related tools. For example, they awarded an honourable mention to Investintech.com’s Able2Extract PDF Converter, which has a free mobile app version. The free converter app will allow you to convert PDF to Excel and Excel to PDF too.
Financial Calculators
As you know, certain financial analyses are way too complex for a simple addition or subtraction on your device’s default calculator. For more advanced calculations, you should look out for specific financial apps like Financial Calculators by Bishinews. Such calculator apps can quickly determine calculations that range from sales tax and currency to credit card balances and Annual Percentage Rates.
They can help you make smart choices when it comes to major financial decisions. If the numbers don’t fit in to your budget, chances are you don’t want to go through with it.
The desire to be more financially savvy won’t be enough to keep your accounts from going empty. You have to make a conscious effort to build solid tracking and budgeting habits that can be sustained. And what better way to do it than monitoring them wherever you go.
About the Author: Reena Cruz writes for the Investintech.com blog, where she shares tips about PDF converter technology and software in general. As a tech-geek, she enjoys learning about new tech trends and sharing productivity tool tips online.
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