The number of companies reporting non-GAAP numbers
has proliferated. In 1996, only 59% of filers used non-GAAP
figures according to firm Audit Analytics. By 2017, that had grown to 97%.
A gander at the wide range of valuations that non-GAAP creativity implies shows
just how dangerous creative accounting can be for investors, too. Zion Research
Group recently calculated Ebitda figures four different, but often used, ways
for companies in the S&P 500 by sector. The communications sector produced
the widest range between the lowest and highest figures—a difference of $25
billion for the sector as a whole between the most and least flattering
techniques.
Walk into an auto dealership these days and you might
walk out with a seven-year car loan.
That means monthly payments that last well past when
the brake pads give out and potentially beyond when the car gets traded in
for a new one. About a third of auto loans for new vehicles taken in the first
half of 2019 had terms of longer than six years, according to credit-reporting
firm Experian PLC. A decade ago, that number was less than 10%.
For many Americans, the availability of loans with
longer terms has created an illusion of affordability. It has helped fuel car
purchases that would have been out of reach with three-, five- or even six-year
loans.
Just 18% of U.S. households had enough liquid assets
to cover the cost of a new car, according to a Wall Street Journal analysis of
2016 data from the Fed’s triennial Survey of Consumer Finances, a proportion
that hasn’t changed much in recent years.
Even a conservative car loan often won’t do it. The
median-income U.S. household with a four-year loan, 20% down and a payment
under 10% of gross income—a standard budget—could afford a car worth $18,390,
excluding taxes, according to an analysis by personal-finance website
Bankrate.com.
But the size of the average auto loan has grown by
about a third over the past decade to $32,119 for a new car, according to
Experian. To keep payments manageable, the car industry has taken to adding
more months to the end of the loan.
The average loan stretches for roughly 69 months, a
record. Some last much longer. In the first half of the year, 1.5% of auto
loans for new vehicles had terms of 85 months or longer, according to Experian.
Five years ago, these eight- and nine-year loans were practically nonexistent.
As a result, a growing share of car buyers won’t pay
off the debt before they trade in their cars for new ones, either because the
car is in need of repairs or because they want a newer model. A third of
new-car buyers who trade in their cars roll debt from old vehicles into their
new loans, according to car-shopping site Edmunds. That is up from about a
quarter before the financial crisis.
Americans have been borrowing to buy their cars for
decades, but auto debt has swelled since the financial crisis. U.S. consumers
held a record $1.3 trillion of debt tied to their cars at the end of June,
according to the Federal Reserve, up from about $740 billion a decade earlier.
So far this year, dealerships made an average of $982
per new vehicle on finance and insurance versus $381 on the actual sale,
according to J.D. Power, a data and analytics company. A decade earlier,
financing brought in $516 per car and the sale made dealers $837.
