Debt Trends Among Younger Households for 1989 to 2010

I remembered reading somewhere that Millennials didn't own cars as much as older generations.   Theres been a few stories on that topic such as The young and the carless which says : "Nationally, the average annual number of vehicle-miles traveled by people ages 16 to 34 dropped 23 percent, to 7,900 from 10,300, between 2001 and 2009".    Then the article Young Americans ditch the car says that "The share of new cars purchased by those aged 18-34 dropped 30% in the last five years"

Given that trend away from cars for young people, I wondered to myself if Millennial were trading auto debt for student loan debt.

The 2010 Survey of Consumer Finances  (SCF)  I pulled the version that is adjusted for 2010 dollars so these numbers are all inflation adjusted.   I only looked at families with a head of household that was under 35 years old.   Thats the youngest family group that the SCF splits up. 

First, the % of families that have each type of debt in question  :

I looked at 4 types of debt.   'ed' is educational or student loans.   'auto' is automobile loans.   'other' would be other types of installment debt. I'm not sure what all falls in that 'other' category but I bet things like medical debt or boat loans.    Then 'cc%' is the credit card debt.

You can see there that the % of families with car loans did drop steeply from 2007 to 2010 and it went from 44% to 32%.    At the same time the % of families with student loans went up from 34% to 40%.      There was an almost equal % of families that dropped auto loans but gained student loans.

Now lets look at the amount of debt for families who owe the different kinds debt:

Again we see the trend that auto debt was down some from 2007 to 2010 while student loan increased.   Auto debt dropped $2000 from $14,600 to $12,600 and student loans were up $1,100 from $24800 to $25900.    Even among families with each debt we see student loans going up and auto loans going down.  However we also see credit cards go down and other loans go up. 

Finally I figured the total average debt for all families with head under age 35.   This combines the % of families with the debt and the amount of debt to find the average debt for all families whether each  family does or doesn't have debt.

Again we can see the trend from 2007 to 2010 is an increase in student loans and a decrease in auto loans.  Student debt went up by $2,004 and auto loans dropped by $2,411.    Credit card debt also dropped going down $955 but other loans were up 482.   The total average debt did drop from 2007 to 2010.  

Before we read too much into this I should point out that the debt balances were down among households in general from 2007 to 2010 regardless of the age of household head.   So the fact that auto loans dropped for young families is not unique and more a reflection of the poor economy and tight credit.  Auto buying plunged pretty drastically around 2008 and 2009 as the economy plunged into recession.  

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Best of Blogs for week of June 28th

Every Friday afternoon I share some of the more interesting or notable posts that I have seen in the personal finance blogs and other sources for the past week

MyMoneyBlog has info on the 5% Cash Back Credit Cards: Rotating Categories Update 2013

Maps On the Web has The Corporate States of America
   ... ok so its not related to personal finance and you can find faults with the companies chosen but I think the map looks pretty neat.

 The Big Picture looks back at how well public survey on investing from 2011 results did since then Polling the Public About Investing Is Loads of Fun!

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A Marginally Useless Long Term Automotive Reliability Study

A friend and I were talking about cars.  His car recently died on him.  It needs a new transmission but that would cost more than the car is worth.   The car lasted him around 14 years and he got maybe 130,000 miles out of it.   My previous car had a fairly similar track record with about 12 years and about 130,000 miles before it needed a major repair.   I think getting 130,000 miles out of a car isn't so bad.  Its not great and I hope that todays cars will be good for 150,000 miles, but mid 90's cars lasting 130,000 miles wasn't so bad.

In the same topic JD Power recently released their latest 2013 survey results.    I saw someone say that their results are 'useless' because they only go back 3 years.   OK that kinda makes sense, as a better measure of how reliable a car is would be what % of cars can make it 150,000 or 200,000 miles.    The 3 year JD Power study isn't long enough to tell you that.   I think it is still nice to know which cars have more problems within the first 3 years since thats pretty meaningful.   A very well made car will have low failure rate in the first three years and a poorly built car is more likely to fail within three years.   Still it would be useful to know how often a particular car might last for 200,000 miles without being a total loss.   

I then went hunting for information on the % of cars that last over 10 years.   I found one article on that kind of topic.  I got it from a CBC news article written in 2007 so its a bit old and from Canada.   I figure Canadian data is probably just about the same as American.  I know its a little different since Canadian auto market is a little different than the US but I'm thinking that most of the cars sold in North America are basically the same exact cars with different numbers on the speedometer. 

Now this information is from 2007 and its talking about cars on the road 11-15 years later.  That means we're dealing with the reliability of cars bought 11-15 years before 2007 or back in 1992 to 1996.   Thats now 17-21 years ago.   A lot can change in a market in 17-21 years.   SO unless you're in the market for a mid 1990's car then this information isn't really too practical.   For example, look at how Hyundai is WAY down on the bottom of that list.   Today Hyundai has made great strides in reliability and today they are above average in the 2013 JD Power Initial Quality Survey.    What I think is better is to watch the longer term trends.   You'll notice that Porsche is at the top of the list below and Porsche also happens to be #1 in the latest 2013 JD Power IQS.   Toyota and Cadillac are both  well above average in both lists.  Dodge and Subaru are both below average. 



Anyway here is the list for whatever its worth:

Percent of cars on the road in Canada 11-15 years later by make as of 2007:

Porsche	98.7%
Volvo	87.2%
Lexus	83.7%
BMW	83.6%
Mercedes-Benz	82.6%
Toyota	78.2%
Audi	76.5%
Honda	76.5%
Acura	75.9%
Cadillac	74.6%
Lincoln	72.8%
Saab	72.2%
Saturn	69.2%
Buick	68.8%
Chrysler	68.8%
Mazda	64.8%
VW	63.1%
Nissan	61.0%
Subaru	59.1%
Mercury	54.9%
Dodge	54.6%
Pontiac	53.6%
Ford	53.6%
Plymouth	52.5%
Chevrolet	48.6%
Hyundai	32.8%
Suzuki	30.8%
Lada	5.1%

Source : DesRosiers Automotive/R.L. Polk

p.s. I don't know what a Lada is either but I'm glad I didn't go to Canada and buy one.

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Summer Camp Bubble

I read at Moneybox that Summer Camp Cost Growth Will Bankrupt America.   That is  of course a tongue in cheek comment.   However he points out that from 2005 to 2012 the cost of summer camp went from $397 to $690.   Thats about +75% increase or around 8% annual growth.

They commented :

The serious point here, though, is that the sleepaway camp industry has some broad structural similarities to the higher education industry but isn't subject to the kind of subsidies and regulations we associate with education. Nevertheless, among the structural similarities is a similar cost trajectory. And broadly speaking, I'd say the reason is that middle-class people want to spend lots of money on their kids.

 Now I'm not sure that summer camp and college are really all that comparable.   One is a fun luxury diversion for a week or two and the other is a multi year endeavor that can have significant impact on your lifelong career and earnings.   Its almost like saying that tricycles are similar to Toyota Camrys.

However I do think they both have a few things in common.   They are optional.  More or less educational.   You send your kid away there.    And the cost growth rates are similar.    Is the key reason both are going up at the same rate simply that middle class people want to spend lots of money on their kids?    Maybe I'd rephrase it that : people want the best for their kids often regardless of the costs.

I think one of the key reasons that college costs have gone up so much is that the market will bear it.   If nobody would ever pay $40,000 a year for college tuition then colleges couldn't ever charge that much.   This isn't to say that the costs are going up because there are people willing to pay that much.  But there are some things people will pay more for and somethings that people won't pay more for.  


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