Tom Purcell: Driving an ‘underwater car’ no fun |
Tom Purcell, Columnist

Tom Purcell: Driving an ‘underwater car’ no fun

Tom Purcell

What’s the best car on the road? One that’s paid off.

That’s what my father loves to say. Regrettably, too many Americans aren’t heeding his advice. What’s worse is that they’re taking on “underwater” loans that far exceed their cars’ value.

The Wall Street Journal recently featured a 40-year-old electrician who bought a $27,000 Jeep with a $45,000 loan.

How is that possible?

A string of bad luck was part of it. He “replaced one because it had 100,000 miles and another when he went through a divorce, and he changed cars again when his family was expanding.”

Since auto dealerships earn more from financing cars than from selling them, they’re happy to extend “underwater” loans that can take many years to repay — though in those cases, “car owner” probably isn’t the right term for the buyer.

Buyers often trade their cars in before those lengthy loans are paid off, driving into a perpetual state of indebtedness. In 2019, a third of car buyers have taken on “underwater” loans, The Wall Street Journal says.

It also says rising car prices are another cause of growing debt. I know a few fellows who’ve borrowed $60,000 or more to buy new trucks, which get pricier by the day.

A 5%, seven-year loan on a $60,000 truck costs $850 a month. You can still buy a house for that amount in Pittsburgh!

“Easy lending standards are perpetuating the cycle, with lenders routinely making car loans with low or no down payments that can last seven years or longer,” reports The Wall Street Journal.

“Easy lending standards”? When has our country encountered that eerie term before?

“Consumers, salespeople and lenders are treating cars a lot like houses during the last financial crisis: by piling on debt to such a degree that it often exceeds the car’s value,” the paper reports.

Automakers have realized they can charge more for their vehicles if they give buyers, who aren’t very good at math, monthly payments they can swing — even though those vehicles depreciate massively and are “underwater” throughout the loan’s lifespan.

“A record 7 million Americans are now 90 days or more behind on their auto loan payments,” The Washington Post reported in February.

Some observers are starting to use the “bubble” term regarding auto loans, as such debt has grown 75% since 2009, to about $1.26 trillion or about 5.5% of GDP, according to a U.S. PIRG report.

Look, I’m a car guy. I’ve owned 27 vehicles. When I was younger, I did my fair share of boneheaded deals, taking on more debt than I should have to drive nice cars. I figure everyone has a right to be foolhardy this way once or twice in a lifetime.

But I’ve learned that paid-off vehicles are for more enjoyable to drive than those the bank still owns — that massive debt on rapidly depreciating automobiles takes the joy out of driving. And that all that auto debt combined with college-loan and credit card debt is doing no favors to our economy.

Thankfully, I finally came to my senses.

I now own a 2008 Toyota 4Runner in mint condition; a super-clean 1992 Chevy S-10 that sits in my father’s garage, waiting to haul furniture or mulch; and a recently acquired 2011 Chrysler 200 convertible, which I’m enjoying the heck out of.

Why are they three of the best vehicles on the road? They’re all paid off!

Freelance writer Tom Purcell of Library is author of “Misadventures of a 1970s Childhood.” Visit him on the web at

TribLIVE commenting policy

You are solely responsible for your comments and by using you agree to our Terms of Service.

We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.

While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.

We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers

We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.

We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.

We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.

We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.