[nbadg]

Additionally, a lot of people who would otherwise be in the used car market for price reasons in the US cannot afford to purchase even a used car outright, and getting financing for cars sold on the private market is, to my knowledge, not really possible.

[lelanthran]

> Additionally, a lot of people who would otherwise be in the used car market for price reasons in the US cannot afford to purchase even a used car outright, and getting financing for cars sold on the private market is, to my knowledge, not really possible.

To me, that's the biggest reason for used-car prices to be low - the market is restricted to those who have cash. IME, the prices of cars that cannot be financed (older than 5 years) is severely constrained. I've seen a 5 year old model advertised for exactly twice the price as an almost identical 6 year old model, with similar mileage and similar condition[1].

I find that hard to reconcile with the other posters in this thread who observed that used cars are still too expensive. Maybe they are looking at used-cars that can still be financed (under $X years, for example)?

=======================

[1] Condition of both was reported by the same independent assessor - see my posting upthread

[mcv]

Ah, so this is really just another way poverty is punished. I can afford to save up $8000 for a second hand car, but people who can't, have to buy more expensive cars on a (predatory?) car loan.

[lelanthran]

> Ah, so this is really just another way poverty is punished. I

Yes, but it's not intentional like you seem to imply, it's incidental.

The intention is not to punish those with no money, its to extract the most value in every segment of the market.

Trust me, maximal value extraction is similarly going on for new cars and lightly-used second hand cars too.

[mcv]

I'm not saying it's intentional, but there are a lot of mechanisms like these that make it more expensive to be poor, creating a vicious cycle of poverty.

[lelanthran]

> I'm not saying it's intentional, but there are a lot of mechanisms like these that make it more expensive to be poor, creating a vicious cycle of poverty.

You are quite correct, but this is one of those rare cases when "learning things" is enough to uplift one from some of the poverty.

I did not start out rich enough to afford a 6 year old car cash, I started out by saving for a year (sacrificing a lot in other spheres of my life at that age, early 20s) to buy a barely running beater that I then maintained cheaply for the next 5 years.

Cost over five years, including repairs and maintenance was about a tenth of a new car price.

Many who cannot afford the cash $8k for a decent 2nd-hand car can afford the cash $2k for a dodgy barely running car.

The problems they face is being clueless about cars, repairing, etc in general.

IOW, the problem they have is not "not enough cash to own a car", it's "not enough knowledge to fix a car". The only person who can remedy that is themselves, not the market.

Looked at through this lens, this is not a punishment on poverty, it's a punishment on lack of knowledge.

[nradov]

That's not true. There's a whole industry of lenders for used cars. Interest rates are typically slightly higher than new cars but as long as you have a decent credit rating and the car isn't too old you can get financing.

Note that those lenders are separate from "buy here pay here" used car dealers. They offer their own in-house financing at much higher interest rates, targeting consumers with bad credit. Some of these are close to being a scam.

[ethbr1]

Indeed. Many banks offer used car loans.

https://www.investopedia.com/the-best-used-car-loans-1170306...

I've used PenFed for years: https://www.penfed.org/auto#cbs

[nbadg]

Wow, did not realize that private-party purchase vehicle loans were a thing. Wild that the banks are willing to take on that much risk.

[fleeting900]

You can’t get a loan for a used car in the US?

This is pretty common in Australia. All of the banks offer car loans or “personal loans”

[Ancapistani]

Another thing that makes no sense to me: I couldn't get my bank to finance the purchase of an older vehicle at any rate.

Last year, my air conditioner condenser went out and had to be replaced for a total of of $4.5k. I could have paid that out of pocket, but didn't want to deplete my emergency fund and always check my options. The same bank was happy to give me a "personal loan" for $5k at 9% APR. I asked if I putting up collateral could lower that rate - they offered 6% if I'd use a vehicle title to secure the loan.

So, I can get a loan for $10k on a 2020 vehicle at 9%, or I could get a loan for $5k at 6%... but only if I already had the vehicle's title in my name at the time.

It makes no sense to me at all, but that's how it's structured. It's far easier to get credit when you "want" it than when you "need" it.

[_DeadFred_]

Can't they still attach the AC loan to your house without you putting it up? I know having work on your home can automatically attach.

[Ancapistani]

Yes, I could have gotten a home equity loan. I didn’t want to do that because I want to be able to sell it in the near future depending on how things work out, and didn’t want the additional title encumbrance.

[qcnguy]

If you need the money you're less likely to be able to pay it back, is the logic.

[Ancapistani]

It's much easier to get financing than you might think if you've not tired - but the rates aren't great, and you're limited to fairly new vehicles. My bank only finances back to 2018 model years, and only 80% of what they consider to be "market value". In practice this means two things.

The first is that the cars that can be financed tend to be almost as expensive as new - but at a higher interest rate and shorter loan term. That means from a monthly budget perspective, you can end up paying as much for a used car as a new one while needing to keep funds available for repairs and maintenance.

The other is that older vehicles are typically financed without traditional "auto loans". If I wanted to finance a $5k truck, I could do so - but it would be an unsecured "personal loan" at significantly higher interest. You have to have fairly good credit to do that, too.

I'm not sure if the American credit score system is at all familiar to those outside the US, but the minimum score for a personal loan is around 600. While granted, I haven't been good with money most of my life, it took me from ages 30 to 35 to get my credit score to the point I could buy a home in 2018 (605). As soon as we closed on our home, my score went back down to ~570, and it has been a struggle ever since. In the seven years since then I've had exactly two "late" payments reported. Both were issues with autopay failing and my not noticing until I got a letter in the mail - at which point I immediately resolved the issue and brought the account current. My credit score right now is ~615. On paper, I carry a high credit card utilization that keeps it from being higher. In reality I pay all of my cards but one off every month. I could get my score up to ~680 in two months by paying off those cards and not using them - but unless I need the score for something, why would I? I have ~$6k in expenses that I run through those cards every month. I get 3% "cash back" for every purchase I make on them, so I end up earning an addition ~$180 / month for doing so; it'd be silly to not take advantage of that.

The result is that while I can get an auto loan on a used vehicle, it makes no sense for me to do so. Instead, I've not borrowed for a vehicle of my own since 2012. When I totaled my Jeep, I took the insurance payout and bought my '91 GMC.

We have two other vehicles: my wife has a 2019 F-150 Platinum, and my daughter has a 2024 Subaru Crosstrek Wilderness. Both are financed.

For the Ford, my sister wanted to trade it in on a Ram 2500. It wasn't drivable at the time due to a failed timing cover gasket, which the dealership estimated at $5k to repair. Another dealership offered her $12k for it. She owed $23k on a 0% note. With the towing package and other upgrades, it's worth ~$35k on the private market in running order - so I offered to pay off her loan on it ($23k). She agreed, then asked if I could just take over the loan she already had on it to continue to build her credit. That's what we did. I've got another two years to pay on it at ~$700 / month.

For the Subaru... well, we knowingly overspent there because my daughter's previous vehicle was destroyed when someone t-boned her on her way to school last winter. She was very hesitant to get back on the road, and my wife and I weren't exactly comfortable with the idea either. We compensated by buying her the absolute safest vehicle we could find that fit her use case. It came down to Subaru and Volvo; Subaru offered the best price and she preferred the Crosstrek or Outback anyhow. We could have gone as low as ~$25k or as high as ~$45k for a Crosstrek, depending on trim. We went for the Wilderness because it's geared slightly lower and therefore has more low-end acceleration - which is important to us, so she has the power necessary to get out of bad situations on the road if warranted. Total financed there: ~$37k, for six years, with a ~$750 / month payment.

All of this is to say: I make good money in tech. Though I am the sole income earner for the family, we're well over 2x the mean household income in my area. We have three vehicles as a family and ~$1.5k / month in vehicle payments. I don't understand how families making half of what I make are driving three vehicles <5 years old - but they absolutely are.

My entire debt load -- including our mortgage and some lingering student loans -- is less than my annual salary. I'm extremely uncomfortable with that much debt. Meanwhile, the people I see around me are living in homes that cost twice as much as ours, have more and newer vehicles, and make half as much. It makes no sense to me.

[nbadg]

This is a really clear picture of things, thanks! I am actually originally from the US, but I've been living in the EU for 5ish years and haven't had a car since I gave the one I had in college back to my parents after I moved to the bay area, where public transit was good enough that I couldn't really justify the ongoing expense for something I was just using for grocery runs. Otherwise, I've just been purchasing motorcycles in cash.

I guess I'd never really seriously considered the availability of loans for used cars (beyond the unsecured personal loans); it makes sense that they would exist, but in the ~30 years I lived in the states, I never once heard mention of them, or talked to anyone who had gotten one. Which is pretty crazy if you think about it. I think that, combined with the complete and total lack of regulation surrounding private sales (ie, no way for banks to de-risk the loan), made me assume they just weren't a thing. So I stand corrected.

But I think your anecdote might offer an even more compelling reason why: to satisfy the conditions to actually get one, you find yourself in territory where, from a short-term month-to-month financial perspective, you might as well just be buying new. And if you're struggling to make ends meet... welp, that's that.

The credit score is another good point; it might also be the case that the people who have a good enough credit score to land a decently-priced financing deal on a used car are almost by definition financially capable of buying new. Where I grew up, there was definitely a stigma against buying used, so that seems like it might also have some explanatory power.