# "The Big Short" on car loans **URL:** \ **Category:** Factual Questions\ **Created:** [January 1, 2025, 8:16pm UTC](https://boards.straightdope.com/t/the-big-short-on-car-loans/1012457 "2025-01-01T20:16:00Z")\ **Posts on this page:** 10\ **Page:** 3
**Author:** ![hajario](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hajario/32/171_2.png) [@hajario](https://boards.straightdope.com/u/hajario)\ **Post date:** [January 2, 2025, 4:53pm UTC](https://boards.straightdope.com/t/the-big-short-on-car-loans/1012457/41 "2025-01-02T16:53:18Z")
> [@jnglmassiv](#): > > Maybe that Civic sale was the popping bubble OP was talking about. Imagine being the chump that bought that overpriced thing! It was last March. Nowhere close to the popping bubble thing. The “lose 50% as soon as you drive off the lot” or whatever folklore is generally ignorance. Of course it’s closer to the truth with the Tesla that I bought to replace the Honda. ---
**Author:** ![jnglmassiv](https://avatars.discourse-cdn.com/v4/letter/j/f07891/32.png) [@jnglmassiv](https://boards.straightdope.com/u/jnglmassiv)\ **Post date:** [January 2, 2025, 5:40pm UTC](https://boards.straightdope.com/t/the-big-short-on-car-loans/1012457/42 "2025-01-02T17:40:10Z")
I don’t think there was a bubble, either, I was just trying to see it like OP. Hondas hold their value better than most and goofs with my overly broad generalization but there won’t be a collapse in price. Another aspect is that the ceiling isn’t very high, either. A bidding war for a Civic tops out. And I did go out of my way to avoid the ‘50% drop on signing’ folklore, as you say. ---
**Author:** ![TriPolar](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tripolar/32/3008_2.png) [@TriPolar](https://boards.straightdope.com/u/TriPolar)\ **Post date:** [January 2, 2025, 6:16pm UTC](https://boards.straightdope.com/t/the-big-short-on-car-loans/1012457/43 "2025-01-02T18:16:06Z")
> [@DrDeth](#): > > Not if they made a down payment or trade in, or both. > > And cars are now expected to last 5-10 years, not the three years of old days- the idea that your car depreciated in value by a third once you drive it off the lot is passe. Check used car prices if you dont believe me. It was never a third unless you’re a car salesperson’s dream customer. It was traditionally considered 15-20%, and that still applies. No matter what you put down on a car, or even buy it outright, you can’t recover what you paid by selling the car. All of your fees, taxes, and any interest you pay on financing any portion of it will never be recovered either. There are rare exceptions, and inflation is a factor that can benefit you a little by keeping your car’s value high, but it’s still unlikely for you to come out ahead on the entire deal. ---
**Author:** ![md-2000](https://avatars.discourse-cdn.com/v4/letter/m/9d8465/32.png) [@md-2000](https://boards.straightdope.com/u/md-2000)\ **Post date:** [January 2, 2025, 7:33pm UTC](https://boards.straightdope.com/t/the-big-short-on-car-loans/1012457/44 "2025-01-02T19:33:15Z")
> [@F.U.Shakespeare](#): > > > [@Munch](#): > > > > Other than extremely low-end budget models, at what point since the 1930s have cars been expected to last just 3 years? > > Three years may be a little low, but [planned obsolescence](https://en.wikipedia.org/wikiplanned_obsolescence#History) was definitely a thing. The ‘high’ point may have been with some American car makers in the 1970s. Chrysler pretty much admitted it, with their “The pride is back” campaign in the early 1980s. I assume the 3-year number comes from the traditional 3-year lease timeframe. The “Keeping up with the Jonese” types would lease a car, typically for 3 years. After 3 years, the resale value matches the amount you would have paid off, give or take, return the car, lease a new model. Manufacturers used to have 3 year warranties (now much longer) and some offered free service (which makes sense for a car they will probably take back soon). There were some not bad deals for 3-year-old cars that had returned from lease. ---
**Author:** ![muldoonthief](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/muldoonthief/32/3188_2.png) [@muldoonthief](https://boards.straightdope.com/u/muldoonthief)\ **Post date:** [January 2, 2025, 7:37pm UTC](https://boards.straightdope.com/t/the-big-short-on-car-loans/1012457/45 "2025-01-02T19:37:25Z")
During Covid, leased cars were worth way more than their payoff amount. In 2021 or 22, my wife’s Honda CRV was at the end of it’s 3 year lease. Instead of returning it, we went to a Honda dealer and asked them if they wanted to buy it. They offered $3k, and it was pretty easy to talk them up to $4k. ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [January 2, 2025, 9:01pm UTC](https://boards.straightdope.com/t/the-big-short-on-car-loans/1012457/46 "2025-01-02T21:01:19Z")
> [@Munch](#): > > Other than extremely low-end budget models, at what point since the 1930s have cars been expected to last just 3 years? Well, that is how they calculated depreciation, and many people bought a new car every three years. > [@F.U.Shakespeare](#): > > Three years may be a little low, but [planned obsolescence](https://en.wikipedia.org/wikiplanned_obsolescence#History) was definitely a thing. The ‘high’ point may have been with some American car makers in the 1970s. Chrysler pretty much admitted it, with their “The pride is back” campaign in the early 1980s. Right. > [@jnglmassiv](#): > > My first car, a 1968 Plymouth, only had a 5 digit odometer. They were not expected to last hundreds of thousands of miles. Yeah, I remember as a kid an article in my local paper about a guy whose car had hit 200000 miles!!! it had a 6 digit one, but 5 didgit was very common. > [@hajario](#): > > The “lose 50% as soon as you drive off the lot” or whatever folklore is generally ignorance Yep or a lie they dealer tells you when you bring it in as a trade in. > [@TriPolar](#): > > It was never a third unless you’re a car salesperson’s dream customer. It was traditionally considered 15-20%, and that still applies. IRL, yes. But again, there was urban legends and the lies dealers told. > [@TriPolar](#): > > No matter what you put down on a car, or even buy it outright, you can’t recover what you paid by selling the car. Well, yeah, except in rare instances. But my point is- generally cars today are NOT “underwater” the minute you drive them off the lot- in reality that is. ---
**Author:** ![Saint\_Cad](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/saint_cad/32/18907_2.png) [@Saint\_Cad](https://boards.straightdope.com/u/Saint_Cad)\ **Post date:** [January 2, 2025, 9:05pm UTC](https://boards.straightdope.com/t/the-big-short-on-car-loans/1012457/47 "2025-01-02T21:05:40Z")
> [@jnglmassiv](#): > > My first car, a 1968 Plymouth, only had a 5 digit odometer. They were not expected to last hundreds of thousands of miles. Hence the celebration when the odometer rolled over. ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [January 2, 2025, 9:22pm UTC](https://boards.straightdope.com/t/the-big-short-on-car-loans/1012457/48 "2025-01-02T21:22:04Z")
> [@Saint\_Cad](#): > > Hence the celebration when the odometer rolled over. Yep, and also "IF it ever got there. ---
**Author:** ![Sage\_Rat](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/sage_rat/32/399_2.png) [@Sage\_Rat](https://boards.straightdope.com/u/Sage_Rat)\ **Post date:** [January 2, 2025, 9:38pm UTC](https://boards.straightdope.com/t/the-big-short-on-car-loans/1012457/49 "2025-01-02T21:38:33Z")
Usually, you would expect a crash to follow delinquent payments. Currently, the delinquency rates are fairly normal, across the board: > **[FRB: Charge-Off and Delinquency Rates on Loans and Leases at Commercial Banks](https://www.federalreserve.gov/releases/chargeoff/delallsa.htm)** > > The Federal Reserve Board of Governors in Washington DC. ---
**Author:** ![LSLGuy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lslguy/32/5813_2.png) [@LSLGuy](https://boards.straightdope.com/u/LSLGuy)\ **Post date:** [January 2, 2025, 10:12pm UTC](https://boards.straightdope.com/t/the-big-short-on-car-loans/1012457/50 "2025-01-02T22:12:00Z")
As is often the case in finance, your prediction (whatever it is) will prove right … eventually. The problem is being positioned awkwardly so as to benefit for your predicted crash then waiting 2 or 3 economic cycles before being proven right. IOW: > The market can remain irrational longer than you can remain solvent. [Previous page](https://boards.straightdope.com/t/the-big-short-on-car-loans/1012457.md?page=2)