Early 1900s — Cash or Bust
When cars first became popular, you either paid cash or you didn’t drive. Automakers quickly realized most people couldn’t afford full cash payments, so installment plans appeared.
1919 — GMAC changes everything
General Motors created GMAC (General Motors Acceptance Corporation) in 1919. For the first time, people could finance cars through loans tied to the manufacturer. This exploded car sales and cemented financing as the “normal” way to buy.
Post–WWII — Banks step in
As demand grew, banks jumped into auto lending. They made it easy to get loans, but they structured them so they’d profit from interest over long periods. The standard car loan went from 12 months in the 1950s to 72–84 months today.
1980s–2000s — Leasing & subprime boom
Leasing became popular in the 1980s as another way to stretch payments. In the 2000s, subprime auto lending grew rapidly — banks realized they could charge higher interest rates to people with lower credit, securitize the loans, and sell them off (just like the mortgage market).
Today — A $1.65 trillion machine
• Americans owe $1.655 trillion in auto loans.
• Average loan: $41,720 for new cars.
• Average monthly payment: $745.
• Terms have stretched up to 7 years, trapping borrowers in negative equity cycles.
• Over 1 in 4 trade-ins are underwater, meaning people owe money even after they give the car back.
How banks win:
• They make billions on interest, fees, and loan securitizations.
• The longer your loan, the more they profit.
• Negative equity means when you trade in, the old loan gets rolled into the new one — keeping you in debt while the bank collects more interest.
How people lose:
• Cars depreciate faster than loans are paid off.
• Many borrowers end up paying 150%+ of the actual car value over the loan’s life.
• Subprime borrowers get hit hardest — high rates, higher default risk, and fewer options.
The result: Car financing wasn’t designed to give people freedom — it was designed to sell more cars and lock people into debt streams that enrich banks and manufacturers.
That’s the cycle AristoCarWare is trying to break with subscriptions: flexibility instead of 7-year contracts, transparency instead of hidden fees, and no negative equity.
lazide · 2h ago
It’s the same thing that has happened in other ‘too expensive to pay for directly’ areas of life - health insurance, higher education, housing.
Near as I can tell, the US has gone through several phases of the economy post WW2 - the first, enjoying the benefits of everyone else’s economy being mangled which lasted up until the late 60’s/early 70’s. Then the phase of ‘okay we’ll share, but with the Dollar’, when most economies in the West had started rebuild/re-industrialize, but were still not ‘fully’ recovered - and there was a Cold War to fight.
When that ran out of steam (coincidentally around when the iron curtain fell), that then switched to leverage, leverage, leverage around the 90’s - that also really ramped up on exploiting the vast quantities of undeveloped labor in the rest of the world, using free trade agreements and the like. We financialized everything to the max.
Now the US seems to be going into a depressed phase, where the credit cards are starting to get maxed out, and there isn’t any obvious leverage anymore to ‘get rich quick’. We have massive bills due for Boomer retirements too.
On top of that, almost all the major structural advantages the US has had have mostly faded. Other economies are well developed now (compared to the huge differences before), outsourcing isn’t as cheap anymore.
Previously leveraged assets have been juiced for leverage already so much (where previously there was very little!), value there has mostly faded, and now interest payments are high enough relative to income they are a major economic drag. In many cases, payments on interest (or things like health insurance copays!) are now exceeding the original costs of just paying directly for the thing. The difference now goes to Capital.
Sounds like it’s time for a bankruptcy/inflate our way out of it cycle? Or a major world war again?
1919 — GMAC changes everything General Motors created GMAC (General Motors Acceptance Corporation) in 1919. For the first time, people could finance cars through loans tied to the manufacturer. This exploded car sales and cemented financing as the “normal” way to buy.
Post–WWII — Banks step in As demand grew, banks jumped into auto lending. They made it easy to get loans, but they structured them so they’d profit from interest over long periods. The standard car loan went from 12 months in the 1950s to 72–84 months today.
1980s–2000s — Leasing & subprime boom Leasing became popular in the 1980s as another way to stretch payments. In the 2000s, subprime auto lending grew rapidly — banks realized they could charge higher interest rates to people with lower credit, securitize the loans, and sell them off (just like the mortgage market).
Today — A $1.65 trillion machine • Americans owe $1.655 trillion in auto loans. • Average loan: $41,720 for new cars. • Average monthly payment: $745. • Terms have stretched up to 7 years, trapping borrowers in negative equity cycles. • Over 1 in 4 trade-ins are underwater, meaning people owe money even after they give the car back.
How banks win: • They make billions on interest, fees, and loan securitizations. • The longer your loan, the more they profit. • Negative equity means when you trade in, the old loan gets rolled into the new one — keeping you in debt while the bank collects more interest.
How people lose: • Cars depreciate faster than loans are paid off. • Many borrowers end up paying 150%+ of the actual car value over the loan’s life. • Subprime borrowers get hit hardest — high rates, higher default risk, and fewer options.
The result: Car financing wasn’t designed to give people freedom — it was designed to sell more cars and lock people into debt streams that enrich banks and manufacturers.
That’s the cycle AristoCarWare is trying to break with subscriptions: flexibility instead of 7-year contracts, transparency instead of hidden fees, and no negative equity.
Near as I can tell, the US has gone through several phases of the economy post WW2 - the first, enjoying the benefits of everyone else’s economy being mangled which lasted up until the late 60’s/early 70’s. Then the phase of ‘okay we’ll share, but with the Dollar’, when most economies in the West had started rebuild/re-industrialize, but were still not ‘fully’ recovered - and there was a Cold War to fight.
When that ran out of steam (coincidentally around when the iron curtain fell), that then switched to leverage, leverage, leverage around the 90’s - that also really ramped up on exploiting the vast quantities of undeveloped labor in the rest of the world, using free trade agreements and the like. We financialized everything to the max.
Now the US seems to be going into a depressed phase, where the credit cards are starting to get maxed out, and there isn’t any obvious leverage anymore to ‘get rich quick’. We have massive bills due for Boomer retirements too.
On top of that, almost all the major structural advantages the US has had have mostly faded. Other economies are well developed now (compared to the huge differences before), outsourcing isn’t as cheap anymore.
Previously leveraged assets have been juiced for leverage already so much (where previously there was very little!), value there has mostly faded, and now interest payments are high enough relative to income they are a major economic drag. In many cases, payments on interest (or things like health insurance copays!) are now exceeding the original costs of just paying directly for the thing. The difference now goes to Capital.
Sounds like it’s time for a bankruptcy/inflate our way out of it cycle? Or a major world war again?