Car affordability in 2022 and beyond

Something about this story leaves me curious ...

Beneath the headline: "On average, today's car customer owes $5,500 on their trade-in, a number that hasn't been seen since before the pandemic."

And in the article: "Data from Edmunds shows that the average amount Americans owe on their auto loans is quickly approaching pre-pandemic levels."

I'm not remembering ... how much were we talking about a car loan bubble then?

 

Americans car debt has been in the news for quite some time

American Car Center folds as more fall behind on car payments | Fortune

Auto Loan Balances Hit $1.52 Trillion in 2022 (investopedia.com)

It's Not Just a Car-Loan Crisis | City Journal (city-journal.org)

"America has suffered stock-market bubbles and housing-market bubbles—but a car bubble? Last month, Tesla/Twitter impresario Elon Musk casually called the recent upheaval in the trillion-dollar-plus auto-loan market “potentially, the biggest financial crisis ever.”"

It is a shame that sometimes responsible people are going to be also affected.

If someone borrows money irresponsibly and doesn't pay it back that debt doesn't just go away - responsible people are left holding the bag and will pay through higher taxes, loan rates etc.

Think about Student Debt forgiveness - these people have received an education - Teachers must be paid - school utilities and operating cost must be paid, school property taxes must be paid etc.. Because the Government forgives the Student Loans means nothing - all these entities must still be paid.

Take a wild guess who will pay and if you pay taxes go take a look in the mirror to see if you guessed right on who will pay the bills.

 

I wonder what the "median" car price is. Averages don't mean much when you have those +$100,000 vehicles the very rich buy. The same with wages.

The median household income was $70,000 the last time I checked. That means half of US American households make less than that. Using the 40/4/10 approach that would be $583 per month total. That's about what I spend total on average transportation, with one, 10-year-old, 4-cylinder, Toyota hybrid sedan. And we make considerably less than a median household income. I have seriously considered going vehicle-less if something were to happen to our current car. But with very little public transportation here, it wouldn't be easy.

 

I get a "404 Page not found" onion on that page.

 

I wonder if I should even have a car.

If a guy makes $48,000 per year, that's $4,000 per month. 10% of that would be $400. I can't seem to find an insurer that will let me pay less than $150 per month. At 15,000 miles per year and now over $4 per gallon (it seems to have gone up $1 in the past month?!) and me averaging 35mpg, that's $142 per month. That leaves me with $108 left for car payment and maintenance and repairs. It looks like my next place to live will be more than 50% of my income, so that doesn't leave a lot of room for paying much more for a car...

I just hope what I have lasts until I either can make more money or prices go down or something like that.

 

I've never borrowed money for a car. I can't really get my head around the idea of taking out a loan for a depreciating asset. I buy out of savings, and I tend to limit myself to a couple of months' income, at most.

 

In other countries, governments weigh the cost of that education against the impact that education has on the economy, and against how the increased wages of graduates will lead to higher tax incomes for the government: essentially the government is making an investment and expects a return on that investment. In Australia and England, students take out loans to pay part of the cost of a university education, but the government pays much of the cost. In Scotland, tertiary education is free at the point of delivery.

 

are those countries 20 trillion dollars in debt?

 

That's a good idea. But if that means no car until one saves up, is that a good idea?

I've owned lots of cars over the years. Only the two last ones did I take out a loan, the rest never cost me more than a couple grand at the very most. But having to work on an old car on a regular basis is also an expense for time and money. It's why I bought my Prius 2 years ago and haven't been able to drive it ever since. If I didn't have the Avalon I'd be forced to work on it every evening and weekend until it's roadworthy.

 

Yeah, if everyone can have the financial resources to pay cash for a car they need, we wouldn't be talking about unaffordable car prices. Of all the cars I have owned, I can remember only one car I paid for in full cash at the time of purchase. It was the first car I bought for $300 cash when I was an undergrad. Back then $300 was a lot of money but I could not take a loan. Every other 20-plus cars were either financed or leased. For many people, that's the only way to drive a car.

I agree with you that borrowing money to purchase a depreciating asset is a bad financial move. But at least for my streak of last 5 new car purchases, taking low-rate loans worked out to my benefit. After flipping the first new car I financed on a 0% APR loan with only a 10% down payment. I have not lost a penny. So far, I have gained ~$10K. My current vehicle 22 Escape PHEV was traded with 21 PP, I could have paid it in cash but decided to keep the loan at 0% APR. In my case, it was better to keep $25K in an investment account than pay cash for the car. With a 0% APR loan, as long as the investment is making a gain, I am making money on borrowed money.

 

If a person could sell off their student loan, get rid of it in bankruptcy, or even just refinance it, it would be comparable to a car loan.

 

You can't start an investment without with an asset. This is one reason why the rich get richer and the poor poorer.

If I had a 21 Prius Prime I might be able to do the same thing as you. But last I checked my $15,000 used 2013 Avalon isn't worth near that much anymore.

 

Same here.

I've got more important things to spend my money on
I don't see cars as a status symbol
I don't like owing money
I don't do huge miles so I can live with some unreliability

A couple months back somebody was trying to explain something like this to me in terms of being a Turo operator...with the associated tax write-offs. I should've paid attention

 

Here we go again- what are you saying and what are you running to debate.

If you borrow money that you can't afford to borrow or pay back this is going to be a problem for you whether it is for a car or a student loan.

When you irresponsibly do this your mistake doesn't just go away into fairy dust - the product, service etc must be paid for by someone else - through higher cost for financial services by everyone or higher taxes.

Governments do not have money - they have resources they accumulate by taxing their citizens through different mechanisms- sure they can print money - that their citizens will pay for through inflation, diminishing savings accounts real values and increasing poverty levels etc.- but it is not a free to citizens that really pay the cost.

In America people can pay for college by joining the service and getting the GI Bill, all Universities offer a student pay as you go program where a student can work their way through college by preforming differing job duties on campus, many business now offer tuition assistance and will actually pay for the students college while they work for them - Starbucks, Walmart, Khols and far too many more to mention. Toyota where I worked will pay 100% of your college expenses for successful completion of classes and a degree program. In industry and the private sector if you want to enter certain professions and agree to initially work for the company the company will pay for your degree when you go to college. There are actually recruitment on High School campuses trying to get people in these programs.

The above items are just beginning to scratch the surface of ways college can be completely free or can be exchanged for sweat equity here in America.

Admittedly this is not popular, having to work for what you get - far more popular to be a victim or a helpless pawn of society and the way things are. In reality the American labor market is crying for laborers right now-Laborers in very good jobs - laborers for skilled trade programs - laborers for Teachers- there is a severe Medical Professional shortage. In many areas of our country large factories with great jobs and benefits are so desperate they are advertising on TV for workers paying bonuses to people who get hired or even apply for a job.

The point being, this is a land of great opportunity and wealth for individuals who will work and apply themselves - It is also a haven for social derelicts who would live off the work of others and borrow money irresponsibly.

Rarely does one start as a company as a CEO but if you work hard at an entry level job and build credibility there is a staircase to a much better life for those who have initiative and are willing to apply themselves to career progression while watching out for opportunities.

Life is a hard thing - it was never meant to be a picnic and unfortunately many people have a very hard time through no fault of their own and are struggling to get to countries like America where they and their children can get a real chance at life.

"Life is what you make of it " is not a popular sentiment these days. Much more in vogue - "woe is me and look at what life is doing to me".

Which is the more enabling and successful mantra to live by?

I paid my way through a private, very good High School by staying after school each day and cleaning the rest rooms and floors. I then paid my way through college by cleaning the campus buildings three days a week until I was drafted into the service and then was able to complete my college by using the GI Bill. I've worked as a painter, janitor, short order cook for Ramada Inn, a kitchen worker at Kentucky Fried Chicken as well as a few other jobs until I completed my education and was able to start off my professional career at the lowest end of that career and work my way up to a very good position.

The above should give the antagonist or socialist enough ammunition to go on for days and days of unbalanced posts.

 

Oh really? The US government spent $800 billion dollars on its military in 2021.

Aside from increasing access to education by diverting some of that military spending, maybe the government fails to recognise (or just ignores) that an educated workforce is a well-paid workforce.

Governments across the world understand that better education = better pay = increased tax revenues which fund public services including education. Investment in education benefits all of society.

This just seems to be a straw man argument against free/cheap access to education. Inflation has many causes, mostly corporate greed these days.

I could just as easily claim that the GI Bill you mentioned is a cynical ploy to drag the poor into military service with the promise of an education. It might be free to the recipient but taxpayers are picking up the tab. You're not mad about that??

You cleaned toilets in High School? People in other countries don't have to do this to get an education (even in Third World countries I've been to) but you seem to have brainwashed yourself into thinking this is somehow normal.