[Kerrigan]

These people are going to have a hard time making payments or getting loans for their Escalades and rims, or their Ford F-series King Ranch and Tracker boats.

I, for one, am not too upset.





Yes, I imagine a good many people are going to have to realize that they are living beyond their means, and that far more humble modes of transportation are more suitable for their social status and pay grade.

[Ghoser777]

Uhmm... what?

[stumblinmike]

say what?

[Kerrigan]

Poor people don't deserve nice cars or boats. Now they won't have access to buying them anymore.

Hopefully the credit crunch will teach people that if you want a $40k Escalade or a $50k bassboat, you have to have a high paying job. There are countless people who ignore this maxim and take out risky loans. They are in large part the cause of our culture of carefree borrowing, and the economic crisis.

[stumblinmike]

Oh, I see.

[OAW]

I find it funny how as times get quite "interesting" the true colors of many conservatives comes to light.

So here's an example of "trailer trash" and "minorities" getting caught up in the credit crisis.

As credit dries up, car dealers close

Over 27 years, Feld Chevrolet in Bridgeton built itself into a recognizable auto dealer and adopted the nickname "the Red Hot Dealer."

Recently, though, its sales weren't so hot as its moniker.

When GMAC LLC stopped financing the dealership's inventory in July, the decision left Feld Chevrolet scrambling to find a new lender. When it couldn't find one, the dealership closed its doors last month.

Higher gasoline prices, a weaker economy and tighter money-lending standards for car buyers have squeezed new-car dealers like Feld Chevrolet. Customers are buying fewer vehicles, and the ones they buy are smaller and less expensive.

Although most dealers nationally and locally are enduring the tough times, some — in extreme cases — are shuttering their doors, laying off workers and leaving customers in limbo. Nationally, about 490 new-car dealerships have closed so far this year, according to the National Automobile Dealers Association. There were 20,770 new-car locations at the start of this year.

OAW

[Chuckit]

Originally Posted by stumblinmike 

Oh, I see.

Well, he's right. If you're poor, you really shouldn't be buying expensive stuff. I know people who blow hundreds of dollars on entertainment and then wind up feeling stressed anyway because they somehow don't have enough money to pay bills the next week. A lot of people have tried to buy luxuries they can't afford with bad loans, and that's why we're where we are now.

[OAW]

If the OP thinks that it will only be "trailer trash" and "minorities" who are affected by the credit crunch, then s/he is an idiot. Plain and simple.

General Motors can no longer access it's line of credit to finance its operations.

Caterpillar is in a similar situation.

Car dealerships are closing nationwide because the dealers can't get financing to buy inventory and customers ... even those with good credit ... either can't get a loan at all or one with a reasonable rate.

Major banks are afraid to lend money to each other.

To minimize the scope of the situation to "Escalades and rims" is beyond idiotic.

OAW

[stumblinmike]

As an American, you can buy anything you want. I like that. I pay cash for most purchases, and carry a zero balance on my monthly credit card (1) statement. Any fool who offers credit to someone who isn't worthy of it, deserves to lose every cent. Pretty simple, really.

[synthfiend]

I thought cash was supposed to be banned every time he makes up a new account?

[Radioflyer]

The problem is not with what people buy but rather with the extent with which they financed their purchases. Maxed out credit cards, lines of credit, low interest mortgages all making buying way to easy and do nothing make the buyer responsible and careful consumers. Owning a house and owning a new vehicle are a big part of what makes our society attractive to everyone ... uncontrolled easy credit is the killer.

[Doofy]

The rims on that Escalade are bleedin' awful. Anyone even contemplating buying them should be shot.

[Dakar V]

To be fair, they're mainly used to hypnotize people it passes into thinking they're cool.

[smacintush]

Well put me down as having no sympathy. I see too many people who are their own worst enemy to have any sympathy for them. Yeah, there may be a certain number that really were unfairly "persuaded", but most of these people "should" have known better.

People like my friend…let's call him John. John makes approx. $50,000 in a managerial capacity. John is also a practicing realtor, and though he has had a tough time of late in the years previous he has made $40,000+. John's wife also has a job at a law firm and though I am unsure exactly how much she makes, it is similar to his salary.

John lives paycheck to paycheck.

John is a moron.

I know a lot of Johns.

[olePigeon]

I'm pretty sure it's The Riddler's getaway vehicle.

[Eug]

Originally Posted by smacintush 

I know a lot of John's.

Quoted just because it's amusing out of context

[olePigeon]

Originally Posted by smacintush 

John is a moron.

I know a lot of John's.

John's what?

[olePigeon]

Originally Posted by Eug 

Quoted, just because it's amusing out of context.

You beat me to it.

[Chuckit]

Originally Posted by Eug 

Quoted, just because it's amusing out of context.

Good to know my brain isn't the only one that jumped in that direction.

[olePigeon]

What about all the rich people who ran corporations into the ground and still took multi-million dollar severance packages at the expense of the trailer trash and minorities? Now the American tax payers have to bail them out, giving them more money. Absolutely zero accountability. That's part of the reason why I absolutely hate the bail out.

[smacintush]

Originally Posted by Eug 

Quoted just because it's amusing out of context

Originally Posted by olePigeon 

John's what?

And I try so hard to get my apostrophe's right.

Ha!

[dcmacdaddy]

Originally Posted by Chuckit 

Well, he's right. If you're poor, you really shouldn't be buying expensive stuff.

I would extend this to say, you shouldn't live beyond your means. Expensive is a relative concept. If you are poor than a used Ford car might be expensive. But if you are middle class a new Ford car might be an affordable purchase but a new Mercedes might not be. It is really about not over-extending one's finances on lots of debt and just living within one's means.

When mortgage companies were creating $400,000 no-doc mortgages for people with $50,000 incomes the people being offered these mortgages should have said no as they would have been living way, way beyond their means. The general rule-of-thumb for a mortgage had always been calculated in one of two ways* and these time-tested reliable measures were thrown out the window in the housing boom, with both mortgage providers and potential home-owners ignoring decades of sound financial policy regarding issuance of mortgages.


*The maximum affordable mortgage was no more than 40x the monthly take-home income or (to look at it another way) the maximum monthly mortgage payment should be no more than 35% of the monthly take-home income (with another 35% going to bills and expenses and the remaining 30% as savings or disposable income).

[olePigeon]

Originally Posted by dcmacdaddy 

*The maximum affordable mortgage was no more than 40x the monthly take-home income or (to look at it another way) the maximum monthly mortgage payment should be no more than 35% of the monthly take-home income (with another 35% going to bills and expenses and the remaining 30% as savings or disposable income).

In New York and the San Francisco Bay Area, many people are using 50% or more of their monthly income just for rent. When a single bedroom apartment costs $1500+/month, getting a loan that demands at least as much seems almost expected of a person.

Probably why the Bay Area is being hit particularly hard. Luckily I have 800+ credit and no debt, so I'm looking to buy my first home in about a year after all these house prices have deflated. Median home prices dropped from $780,000 for a 3 bedroom single family down to just below $500,000, and still going down. It's looking more and more like I'll actually get to have a real house in the Bay Area, something I never, ever imagined would happen.

[Eug]

Yeah, those rules of thumb for pay vs. mortgage are just that. Rules of thumb. In some areas of some of the larger metropolitan cities (like New York) if you tried to follow that religiously, you'd be living on skid row, even with a decent job.

Also, it depends on one's individual circumstances. Do you have a significant down payment? Do you have a significant reserve fund? Is your job stable and relatively secure. Do you have good skills that are marketable should you lose your job? If yes to these, I think it's more than reasonable to spend more than one third of your pay on the mortgage on a monthly basis.

One thing that's useful to do though is to get a mortgage which allows you fairly flexible overpayment options. ie. Amortize for a longer period than you actually need, but pay 115% of your mortgage payment every month, with extra savings kept for lump sum payments on a yearly basis. If you run in some trouble you can always just stop the lump sum payments and decrease your monthly mortgage payments back to 100%.

The problem with this is that it takes discipline, something a lot of people don't have. But the point is, with discipline and a favourable financial situation, one can break those rules of thumb while still being financially conservative.

Another problem IMO is this US's fascination with tax deductibility of mortgage interest. This only encourages slower mortgage repayments, and also encourages price inflation.

But no, you don't need an escalade with psychedelic chromed rims and oversized tires just because.