This is such horrid advice. She will have to declare bankruptcy to discharge the auto loan and 18k debt may not be sufficient to guarantee she can. Worse, that 18k will now have fees added to it for the repossession and late payments. The chance of getting the car back through auction are near nil for many reasons, from that auctions do not necessarily take place in the same locale to it can be months before the car gets to that point as the paper work has to work through the system, a system sufficiently hampered by the CV19

Now we don't know the full extent of the original poster's loan issues but the best bet is to try to arrange payment changes with the lien holder. Never ever advise anyone to walk away, that is the worst thing you can ever do.

The worst advice hardly, you’re exaggerating. Your credit will take a hit for 7 years, which is definitely a long time but the worst of it is you will pay more up front in deposits and pay high interest rates from loans. I’ve walked away from more than $18k during the last crisis and here I am today with a great credit score and am looking at buying a house potentially soon (or at least was pre COVID). The worst thing you can do is to continue paying on something you know you’ll lose anyway, causing even more financial problems for yourself.

The used car market has been inflated for years. 100k+ mile vehicles selling for over half their new price makes no sense to me.

It makes sense if the car tends to last 350k+ miles and has only been gently used. There are at least a few models that have pretty consistently been getting up to that or higher before major repair is needed since 2010 or so. I will say I think quality hybrids (again, gently used) are worth more than a lot of their counterparts on this point.

Gently used at 100k seems like a strong ask. I commute two hours a day and get around ~20k miles a year. The car would be five years old at the point of 100k. Quicker than that and the person that owned it drove the crap out of it. Plastic and trim is squeaking, stains, scratches, etc. I dont personally care about any of that but I expect it to be reflected heavily in the price.

Then you look at the asking prices for larger SUVs with 200k+ miles and its even crazier.

My first car was 10 years old when I got it, model year 1986. I did maintenance myself with the help of my father - oil, brakes, rotors, that kind of thing. It was 5 more years before it needed real work (bad alternator, bad fuel pump) and another 3ish years before major failure. A couple grand kept it on the road. After I sold it I still saw it around town for a number of years.

My point is, cars last far, far longer than we generally assume if you take reasonable care of them!

Those SUVs were expensive new as well. If you head over to the new car lot, it's not hard to spend $60k on an SUV, even a domestic one with a Chevy|Ford|Jeep badge.

These are the kinds of vehicles that everyone wants to drive (along with trucks) and 72/84 month loans have been common for a while now (even for lightly used cars). So that sets price floor for trade-ins, since people can only roll over so much negative equity. Then you have to factor in that car sales in 2009-2012 were 50-60% of what they were in 2019.

So, demand is high, and supply is low. It makes sense that used SUVs are expensive. Once you start looking at less desirable models, like coupes and sedans, then prices drop considerably.

Don’t forget leases! Many of the luxury SUVs are leased and traded every 2-3 years, putting further pressure on prices.

It's possible if you're like my friend whose job was to drive all around Europe hauling specialised parts for construction equipment, sometimes doing 2k km in a single day.

I think he did 60k km (37.5k miles) during the first year, but you couldn't tell that from the shape the car was in, since he cared for both the exterior and interior.

The only thing that showed any visible signs of aging were the windshield wipers - he had so much on his plate that he couldn't squeeze out a few minutes to refresh them.

tbf 37.5k miles really isn’t a lot. in my area in the US it’s common for people to push 25k - 30k a year just on their commute

And that's my point - you can do 100k miles in less than four years.

Is the car "heavily used" after that? I would say that aside from the driver's seat there's probably no clear indication of that.

Depends where you live and how much you drive. While the situation is much much better than it used to be, cars in places like the Northeast still tend to start getting serious rust damage after 10 years or so.

That is definitely true. The salt-rust issue should play a huge role in resale value. I grew up in an area with this situation, and I knew a lot of people who would only buy used cars sourced from southern states because of it.

It's because of the long term 72-84 month loans. People are trading in used cars for close to the loan payoff amounts - which is still pretty high.

GM had 0% interest for 84 month loans on their trucks for awhile there.

something is very wrong with the lending market when it makes sense to give people free money.

You're not giving them free money, you're getting them to pay you a lot more in total over many years by selling them a much more expensive vehicle up front. Instead of, say, $20k over 3 years, they can get $40k+ over 7 years for selling a product that doesn't remotely cost them twice as much to build. It's more profit for them.

These 0% 7 year loans are not coming from banks. They're coming from the car companies. They're a sales tool.

If you take the 0% financing, you miss out on the $4,500 "customer cash" discount. They're just moving numbers around.

The dealerships are making their money with various add-on packages now, to try to bump up the sale price. It isn't even in your favour to offer cash in most cases.

Talk to the federal reserve.

That should only change the asking price, not the actual sales price. Its not like the dealers are going to eat the loss. They just roll what they might lose into the new loan.

I dont have access to the actual sale prices at auction to know what the true worth of these cars is though. I would guess half of the retail asking price?

people can't afford cars, simple as that. otherwise loan terms wouldn't be 84 months.

Car manufactures favor margins over moving metal. They've learned that long loan terms don't reduce sales, as most people define affordable to be, they can afford the monthly payment.

And since manufactures own the lending arm, and the sales arm, they enjoy higher margins, plus more in interest payments. Not everyone is going to qualify for that 0% interest. Plus, it keeps dealers happy because they can squeeze in bullshit fees to pad the sale price.

I recently entered the used car market in the US and I was really shocked at how expensive cars are here compared with Europe.

Americans have bought the idea that everything in the US is so cheap, hook line and sinker, and don't question it. As an American living abroad I hear it all the time. Then I actually put up prices and pretty much everything is cheaper but labor where I am. Everything you need - cars, transport, healthcare, education, good quality fresh food - are usually pretty expensive these days in the US. More niche stuff like hobby equipment yes can be cheaper in the US due to market size.

I'm guessing this had largely to do with the recession?

People weren't buying new cars and so the supply for used cars dropped (I remember dealers calling me begging me to sell my Ford Edge) but the demand increased exponentially because it made more sense to buy a used car, then to get a new one.

This is turn increased the price to many models and in some cases, a lot. Hybrids and electrics shot through the roof because people were trying to save money on gas. More reliable models from Honda, Toyota and Subaru also went way up in value.

Don't forget that the government paid $3B to destroy 665k perfectly good cars in order to drum up demand for new cars.

Low end car flipper here, it really depends on what slice of the used car market you're talking about. Think about what kind of people buy what vehicles, the kind of money they have and where the supply of those vehicles comes from and it all makes sense IMO.

Used cars are an immensely diverse range of "products". You've got $500 Aveos that Jimbo or Manuel will have no regrets hauling an I-beam on the roof of, you've got $25k 25yo 4Runners that 25yo software engineers with six figures of salary and minimal expensive responsibilities will talk themselves into paying asking price for because it's what they grew up getting dragged around in.

The market for anything new enough to get a loan on is always inflated, obviously, that's what easy financing does.

For the last 4yr or so the bottom the the market, non-japanese compacts and subcompacts with 15k+, 90s junk that needs work, Altimas in perfect condition but with a time bomb CVT and 80k on them, etc, unfashionable midsize SUVs from the '00s was just fine. You could pick up running, driving, has one or two known mechanical issues that need to be addressed 10-25yo vehicles for $1500 all day long, non-running for even less.

The market for low mile, low flair, A to B commuting and family hauling vehicles in good cosmetic condition that people who think "good schools" means "no poors" and worry about what their neighbors think of their lawn buy for their kids to go to college in or slightly less well off kids have to buy for themselves after college were what was inflated, like 5k+ for a Japanese crossover from '01 with 250k on it inflated. These vehicles have become less and less common because the white collar upper middle class crowd that keeps things nice but changes cars decently regularly has been leasing more and more.

If you were wiling to clean the ever living crap out of a kid-stained interior or get some cosmetic body damage fixed (or just ignore it and live with the ugliness), or (get your pearls ready folks), <gasp>, drive a domestic that isn't a pickup, you could get cars of the same, age miles and mechanical condition for $1500-$3000 instead of $4k on up. These vehicles are plentiful because the middle class has been buying them CPO off lease and using the piss out of them hauling around their families, commuting a ton of miles, etc, etc and then ditching them for another one when they feel they are too old/beat. This is the niche I specialize in and I think these vehicles are a great value.

Basically the stuff that white collar professionals feel is the bare minimum of what they or their kids can drive without looking below their class has been ludicrously overpriced because (surprise, surprise) those people have a decent chunk of change to throw around and supply has been dwindling.

> and I'm going to record a lien on it with the county so nobody can take it if things get worse and she has to declare bankruptcy

This is brilliant. I have never considered using such a tool in my travels, but have added it to my tool belt. Thank you.

> The rich get richer because they know how to take advantage of situations like this.

Preach!

Can someone explain how this works?

OP's niece takes on the liability as the owner (ie she hits someone and causes harm her insurance doesn't cover), but OP retains legal claim against the property, preventing someone else from obtaining it through a legal judgement or similar proceedings.

Right, if it gets taken away it gets given to me as the senior lien holder. For best legal protection, I should loan her money with some nominal interest rate.

A distant family member did this on the house of one of their kids, and it saved them from losing it in a foreclosure. The other lender was so angry with them for refusing to release their lien; but they couldn't legally force them to do it.

How does this work with an asset the size of a house? Does having as little as say $5,000 in the house when the the other lender has $200,000 in give you this power to stop foreclosure?

Maybe not stop it, but make it a really big pain. They'll need you to sign off on court filings, etc. If you're obstinate, you can certainly encourage them to "deal with this house later".

Don't house loans require an upfront disclosure of leins against the property?

Yes. There might be a state where someone holding a lien on a house can prevent a first mortgage holder from foreclosing, but I'd certainly recommend someone talking to an attorney before trying this.

This would only work in an "easy money" period, during which loan originators are eager to ignore lending standards on second mortgages. Such periods will come around again, though.

So you're paying cash for the car? If there's no loan, who exactly is going to take it away?

Any creditor you can’t pay who goes through the trouble of getting a judgement against you. This could be a credit card company, a healthcare provider, anyone you owe money to but can’t afford to pay.

It doesn't. Bankruptcy courts and courts in general are pretty wise to the idea of "debts" and dubious last minute transfers to family members, close relatives, and so on. This guy is definitely not the first person to think of the idea.

Correct. You can't magically draft a senior lien. Unless it's a house in an HOA in a super lien state. Or you're the government and taxes are owed. So there are some instances where a senior lien can be recorded later, but an outstanding auto-loan - not that I'm aware of.

Skirting what's owed, playing games with manufactured leverage, getting repossessed - these are all the factors that cause people with lower credit scores to pay a lot more for their loans.

You can't do it (unless it's a mechanic's lein) if there's already a lein on the title.

This might be a dumb question, but wouldn't whoever sold the car/provided financing have the lien on the title? Wouldn't sale/financing be contingent on no other liens on the car/property?

Yes, this is why OP would provide the financing himself or pay cash.