Unencumbered by the thought process!

I was attempting to explain how loans work to my 15 year old son. I told him that you sign a document that is basically a promise to pay the loan terms.

I explained how the interest rate is directly related to risk and the term of the loan is directly related to the asset. For example - you can't get 30 year car loans because the car won't have any value after 10 or 15 years.

We then talked about the bad stuff... what if you can't pay the loan anymore? We talked about car repo's and home foreclosures.

But, now I have a question: Why do people make payments on car loans? Everyone knows that cars decline in value....