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Car Prices Might Be Unsustainable for Buyers
(www.wsj.com)
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this post was submitted on 22 Aug 2023
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My understanding is that a big part of the reason car prices are up is that everybody wants luxury brands + high-end trims now. So a lot of these delinquencies could be for people who would have had no problem affording a $300/month car lease if they'd opted for a cheaper car.
Consumer preference is part of it, but car manufacturers have also intentionally stopped competing for the low end and small vehicle market. It’s textbook tacit cooperation.
During the pandemic, there was a chip shortage that led makers to prioritize high margin cars like trucks and luxury SUVs. Many makers decided that they liked being a low volume high price seller and just cut their lower priced cars altogether. If everyone does it at the same time, there’s no market mechanism to punish them. Many people can’t buy smaller cars even if they wanted. It doesn’t help that all of our car regulations in the US and Canada encourage this by having much weaker regulations for bigger vehicles. The whole market is a mess.
@fresh The Answer, at least historically, is consumers buying foreign cars. That’s one reason VW’s took off in the 1950’s-‘60’s. Of course, that’s been foreclosed by EPA & NHTSA regs. But EV’s would avoid EPA regulations. IDK what it would take on the safety end.
But, like you said, the foreign makers are also making big cars to comply with our corrupt pro-corporate regulations.
EVs are looking to be both more expensive and more dangerous. I have zero hope that they will be an improvement in any way except emissions.
We need weight and size based taxation to discourage big cars. More than that, we need to move away from car dependence.
You can buy a Kia with back up camera, Android Auto/car play, for 18k. 16k if you are willing to deal with a Mitsubishi drivetrain. People just don't buy them because MOST new car buyers are wealthy anyway. There is some upward pressure on used because of supply chain issues and used inventory but that has already leveled off and has slightly corrected. Add in being used to 1% APR and it the payments ARE more. It will take more time but I really don't think cars are increasing in price as much as media is yelling about it.
More like the only ones that can afford new cars, want the luxury cars. And automakers make more off them, so that's what they make.
Which means the used car market also gets inflated because there's not as many cheap used cars.
And leases are just permanent payments with 3-4k down at signing.
So say it's a 4 year lease, $300 a month is 17k+ and at the end you don't own the car... So you buy the lease out (new leases won't be good deals) or put another 3-4k down and sign a new lease.
Lease buyouts aren't normally a good deal, there was just a very brief window where the used market had a significant increase, a lease signed today will have a much la