April 10, 2024:

How much is too much to pay for a car?

A few weeks ago, a TikTok user named Blaisey Arnold posted a video about her Chevy Tahoe.

“After three years with my Tahoe, I’m finally getting rid of it,” Arnold said. It was her dream car, and she’d taken out a loan for the $84,000 — yes, you read that right, $84,000 — vehicle. Since then, she’d been paying $1,400 a month for the last three years, totaling about $50,000. But because of her high interest rate, only $10,000 of that money went toward paying off the balance of the car. “Honestly, that blows my mind,” she said.

It blew her viewers’ minds, too.

“The math isn’t mathing,” one commenter wrote. “Seriously, what is your interest rate???????” asked another. The video currently has about 2.5 million views. The situation was so untenable that Arnold joked in a follow-up video that she was considering leaving the Tahoe in a “bad part of town,” hiring the mob, or (more seriously) defaulting and letting it get repossessed.

There’s a lot we can’t know about her situation, without looking at her finances and the terms of her loans. But she’s not the only one shelling out huge amounts of cash for a fancy car: Other women have also been sharing the details of their major monthly car payments on TikTok.

Still, the online reactions seem to unite around a central theme: Arnold messed up big time by taking out a loans at a terrible rate. Defaulting and letting her car get repossessed, as she seems to be considering, will wreak havoc on her credit.

You could argue that Arnold’s decisions were irresponsible (and I really don’t recommend paying what amounts to a mortgage on a car) but it’s worth looking beyond this one wacky example at the larger structural forces that make car ownership such a necessary burden – and, at times, such an unnecessary scam.

Car ownership has gotten very expensive — but opting out can be difficult

In a society built almost entirely around the supremacy of cars as a means of transportation, most working-age adults seem to consider owning one necessary.

According to the 2021 Census, nearly 92 percent of American households had at least one vehicle, and the benefits of owning a car in a landscape built for them are so great that research suggests people will go out of their way to get one even if they can’t really afford it.

In the last few years, the costs around car ownership have soared, placing tremendous burdens on working class families and the poor.

The pandemic disrupted supply chains, manufacturers turned their attention toward expensive luxury vehicles, and interest rates soared. New cars are now unaffordable for more than 80 percent of Americans. Used car prices are up 34 percent from early 2020, too. On top of that, auto insurance rates have reached mind-boggling heights.

Owning a car is also much more than just a practical necessity: For a lot of people, it’s an outward symbol of prosperity, freedom, and even political ideology.

Car buyers are really vulnerable to exploitation — especially if they’re low-income

Cars are really expensive in America right now. But some car payments are astronomically — indeed, exploitatively — high.

To give one example: In their 2023 book, Cars and Jails: Freedom Dreams, Debt and Carcerality, authors Julie Livingston and Andrew Ross spoke with men recently released from prison who found that their credit histories prevented them from getting reasonable loans at affordable interest rates.

Tayfun Coskun/Anadolu Agency via Getty Images

“A lot of people we were interviewing were driving pretty fancy cars. We were stroking our chins, going: ‘How did you afford that?’ It turned out that some of them were walking into dealerships and being told they couldn’t get financing for the Hondas they wanted, but could for a top-of-the-line Mercedes,” Ross told Vox last year.

“Why would a lender and dealer do that? Because they know they’re going to be able to repossess the car quickly.”

It’s not just formerly incarcerated people who are vulnerable.

A 2021 Consumer Reports investigation found that the lack of a federal interest rate limit, combined with a complicated patchwork of state laws, leaves consumers vulnerable to being preyed upon by shady lenders.

The investigation begins with an anecdote about a man who received disability payments from the Social Security Administration; he received a loan for a Jaguar with an astonishing annual percentage rate of 75 percent. “I don’t know APRs, I don’t know nothing about that,” the man told Consumer Reports. “I’m just trying to go in there and get the car.”

In another piece, the publication found that lenders and dealers often lent money to people with poor credit, sometimes at higher rates, with the aim of collecting the high interest and repossessing the vehicles when people defaulted on their loans.

There is some hope that things will get better. A few states have started to address the problem of hidden fees and predatory loans. At the end of 2023, the Federal Trade Commission announced a new rule aimed at cracking down on a slew of deceptive auto lending and sales practices. (It takes effect at the end of July 2024.)

Meanwhile, auto debt reached a record-high $1.61 trillion last year, and that debt is, of course, most onerous for the people who can least afford to pay.

Understanding how auto loans work — as Blaisey Arnold’s critics point out — is necessary, but it’s insufficient. Going after the lenders who prey on people who need cars to survive, and who often don’t realize they’re getting a bad deal, is paramount.

This story appeared originally in Today, Explained, Vox’s flagship daily newsletter. Sign up here for future editions.

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