Hello good people of Jalopnik and welcome to Letters to Doug, your weekly column wherein you write Doug letters and also you sign up Doug’s extra email address for spam messages from exotic pet stores.
If you want to send a letter to Doug, you can! Just email me at Letters2Doug@gmail.com, and I will be happy to a) read your letter, and b) probably discard it. Occasionally I will not discard it – I will post it – but that’s unlikely, as I receive approximately 50 legitimate emails per week, plus roughly seven e-mails per week from the Rick Santorum For President email list.
This week’s e-mail comes to us from a reader I’ve named Chet, who writes:
In your last article, you made jokes about a 20+ year old, trying to get 20k$ from the bank to buy the 25 year old Nissan of their dreams.
Why is it nearly impossible to get a loan for a potentially collectible 20k$ car that will be worth the same amount of money or more in 2, 5 or 10 years, while, on the contrary, getting a loan for a 19999$ “fully equipped” Kia Rio, that will lose half of its value in the first year is very easy??
I think it makes absolutely no sense from an investment stand point and the bankers risk a lot more when loaning money for a new Kia than for an old 911, 240Z or GTR...
So... What is your point of view on the subject?
For those of you who don’t want to read an email from someone named Chet, allow me to sum it up for you: Chet is asking why the hell banks are so willing to finance rapidly depreciating new cars, and simultaneously so unwilling to finance an older car or a collector model whose value will remain relatively secure over time.
This is an excellent question, Chet, and it’s something I’ve thought about many times over the past few years. And I mean that: I’ve thought long, and hard, and seriously about this issue, and I’ve eventually reached the following conclusion: banks are idiots.
This is especially true of my own bank, a large national chain, which is open on a weekly basis for approximately 37 minutes each day. Seriously: I am a stay-at-home freelance writer with no set schedule, and I still have trouble making it to the bank during their open hours. This would be a like being a harbor seal and finding it difficult to make time for swimming.
Since I’m apparently doing a whole thing on banking here, I’ve got another complaint: sometimes, when I visit the ATM, it is out of order. How the hell. Does a MACHINE. Go OUT OF ORDER? The self check at the grocery store is never “OUT OF ORDER.” My iPhone is never “OUT OF ORDER.” My watch is never “OUT OF ORDER.” My car is never— eh, scratch that last one.
Anyway, the point I’m really trying to make is that banks aren’t especially sophisticated when it comes to this kind of thing. This is because they have giant, long-winded policies that outline precisely what the bank can and cannot do. For instance, the following is pulled from the Bank of America Giant Book, Long-Winded Policies, chapter seven, verse twelve, row four, seats five and six:
1) BANK OF AMERICA shall not finance any vehicle older than 7 years and with more than 100,000 miles on the odometer, under any circumstances, even if this vehicle is an original Shelby Cobra being sold for the price of eleven grand and a used Xbox 360.
1 a) BANK OF AMERICA will not even finance the used Xbox 360.
1 b) BANK OF AMERICA might finance a used Xbox One, but only if it’s newer than 7 years and has less than 100,000 miles on its odometer.
2) BANK OF AMERICA shall not remain open on Saturdays past the tremendously late hour of 11 a.m., regardless of how many customers are lined up outside desperately hoping to access their money.
The funny thing is, as Chet points out, this policy of not financing older vehicles is actually detrimental to banks.
I’ll give you an example. Let’s say you go into a Mitsubishi dealer and purchase a brand new Mirage, which I suspect costs something like twelve grand. So you take out a loan, and you buy the Mirage, and a year later the damn thing is worth $2,200 because it was made with the same care and attention to detail as Christmas lights.
However, you still owe $11,400, because you — being the kind of person who purchases a Mitsubishi Mirage — took out an 84-month loan, and you missed six of the first 12 payments. This puts the bank at an enormous risk, since the asset they’re financing is now worth far less than what’s owed on it. If you simply abandon the Mirage and stop making payments, your bank will lose quite a bit money on the whole deal.
Meanwhile, if someone had been willing to finance the purchase of my Skyline, I would’ve probably considered doing it. Unlike the risk in the Mirage situation, there is virtually no risk in financing the Skyline: it’s fully depreciated, highly in demand on the used market, and unlikely to lose significant value. But because banks don’t know what a “Nissan Skyline” is, they lose out on any interest I would’ve paid over the life of my loan – and thus, some additional profit they could’ve had.
And so, Chet, to answer your question: there is absolutely no doubt that banks should finance cars like my Skyline, and the examples you used – an old 911 or a 240Z. But given the volume of popular shiny new car loans bank process, I suspect they don’t see any real upside to educating themselves about collector cars in order to finance the occasional buyer.
Or maybe they just don’t want to get emails from potential Skyline buyers that say only: “Will u finance me?”