I was duped into thinking President Donald Trump was considering advocating for 15-year car loans, but when put into context it’s hard to blame me.
A fake image of a White House statement circulated social media last week saying that Trump had tasked Transportation Secretary Sean Duffy and Commerce Secretary Howard Lutnick with making “vehicle ownership for all a reality by introducing 15 year car loans!”
“Delivering for America!” the official looking image added.
At least two reputable sources, Newsweek and Yahoo! News, took the time to fact check the claim (they determined it was a forgery), which means I was one of many people to fall for it.
Big if true, as they say. Of course it wasn’t, but it’s hard to tell these days. After all, the fake 15-year auto loan news came right on the heels of real announcements that Trump was considering 50-year mortgages and a $2,000 tariff refund (which he called a dividend). All of these ideas are ridiculous.
Since it was not real, there’s no need to spend much time on why 15-year car loans would be a stupid idea. But just know that a 15-year loan on a depreciating asset that most people sell within half that time is a bad idea.
A 50-year mortgage requires a little bit more effort to understand the terribleness of the idea, but not much more.
First, the best argument in favor of increasing the standard 30-year mortgage by 20 years is that, all other things being equal, it would make monthly payments smaller and give people more money in their pockets today.
On its face it would bring down monthly housing costs and give consumers much needed relief. But there is a much easier way to achieve the same goal: rent a cheaper place. In fact, renting would allow consumers to keep the sizable down payment (down payments vary, but they’re almost always larger than a security deposit on a lease) and maintenance costs that are the responsibility of the owner.
But, you say, if you’re renting, you’re not building equity. True, but you’re not really building equity on a 50-year loan – not for a long time, at least.
On a $360,000 loan, which Zillow lists as the average home value nationally (but would not get you much in California), with a 6.25% rate (again, national average), you’d have to wait until around year 40 before payments to principal exceed payments to interest, compared to half that time on a 30-year mortgage.
With the same terms, you’d also have to wait around 25 years before you’ve even built $60,000 in equity. On a 30 year mortgage, it’s only 10 years. That’s a long time to wait, considering the average age of a first time homebuyer is 40.
Borrowers would spend significantly more in interest over the life of the longer term loan, and the longer term loan will likely carry a higher interest rate.
Sure, this calculation does not include appreciation, but it also does not include the possibility of home values stagnating or declining. But the main point is that this is not a great equity play, especially when the money spent on a down payment, closing costs, maintenance and savings from rent could be used for significantly better investments.
Trump has apparently recognized after the rough election earlier this month that voters are concerned with affordability and they don’t think he’s getting the job done. But increasing housing supply is a better solution to bring down costs and build wealth than saddling consumers with bad loans.
The tariff refund is another silly idea, if for no other reason than it’s basically giving American consumers a fraction of the money back they’ve blown on tariffs. Why not just scrap the tariffs and let consumers keep their money?
Though the Trump Administration routinely argues otherwise, American import tariffs are taxes paid by American consumers (though maybe not exclusively). Tariffs are driving up the cost of many popular products in America, often multiple times throughout the supply chain.
There’s really no reason to have tariffs, as all they do is drive up costs of consumer goods, alienate trade partners, drive shortages and incur retaliatory tariffs from other countries. The Trump Administration would argue that tariffs are a tool necessary to offset trade imbalances, which is not necessarily even a real problem, but even if it was a real problem Trump’s strategy isn’t working since the most recent data showed a significant increase in the U.S. trade deficit.
The Trump Administration has recently proposed the idea of easing some tariffs to fight inflation, which is a good idea, but it is also an admission that tariffs raised the costs of goods in the first place.
But perhaps the worst part of the tariff refund idea is the inflationary aspects of such a program. In fact, generous COVID-era programs were significant drivers in our current inflation crisis.
So much of this is sham economics, and hopefully a reminder as to why free market economics is the best solution. A tariff refund would just be another form of redistribution of wealth, something Trump purports to be against, and is a loser for the country, while a 50-year mortgage is one of the worst possible solutions for the housing crisis.
Again, in context, a 15-year car loan just didn’t seem like a hoax.
Matt Fleming is an opinion columnist with the Southern California News Group. Find him on X at @FlemingWords or email him at flemingwords@gmail.com.