With an average transaction price of nearly $50,000, it is no secret that New cars are basically only for rich people these days. You can not Buy a single new car for less than $20,000. If wages had kept pace with the rising cost of a new car, this wouldn’t be such a big problem, but that’s the situation. And despite that, people continue to buy cars even when they can’t afford them. In fact, it’s gotten so bad that Motor1 reports Auto loans have overtaken student loans and are now the second largest debt of Americans, after mortgages.
Of course, this isn’t helped by the fact that the pandemic has stifled new car supply and driven up used car prices. While things aren’t nearly as bad as they were at the height of the pandemic, it has more or less shut down the auto market in the U.S., and we’re still recovering. Unfortunately, for everyone currently stuck in this country, a car is basically a necessity, so it’s understandable that they’re stretching their budgets to afford something safe and reliable.
On the other hand, some people exceed their budget just because they think they deserve something shiny and new and will do the math later. So is auto debt, and at nine percent of all debt, it has surpassed student loans and will weigh on mortgages as well. As you can imagine, this is not good news for the economy. Delinquencies are approaching the high levels seen in 2009, and it is so so so unlikely that it will get any better any time soon.
Part of the problem is that many people overpaid for new cars during the pandemic. As the market recovers, they default on their loans, and even if they wanted to sell, they could only do so at a loss. This also puts pressure on banks because even if they repossess a car, they likely won’t be able to sell it for the amount owed, making loans more expensive for everyone.
At this point, it feels like we’re just waiting for the bubble to burst. This can’t be sustainable and the consequences will affect us all, but you never know. Maybe the people who have to pay $1,400 for their car will find a way to turn things around.
This content has been machine translated from the original material. Due to the nuances of automated translation, minor differences may exist. For the original version Click here
