The $30,000 question
Interestingly, the recession has not really slowed down the upward creeping average new car price, or at least it is rebounding quickly - up about 4% over last year already.
One would think that right now, people would be more interested in cheap and reliable, than luxury and speed.
Which reminds me of my favorite used car buyers guide:
fast cheap reliable
pick any two
Anyway, the other interesting part of this is that the Detroit three have much higher average car prices than the Japanese. I think this is due to two things: 1) trucks 2) Americans make really crappy small cheap cars. Always have.
The other thing that gets me here - the average new car is being sold for $30,000. That is a lot of money.
Seriously - it is a lot of money. Median household income is $52,029...
Which means that the vast majority of these cars are being heavily financed. Not really surprising, I know, but it amazes me how many people simply look at their incredibly high monthly car payment as a fact of life. When their car gets older, they trade it in for a new model, and often the goal is to keep the monthly payments the same - so that it feels like you are not paying any more...
Its a crazy way of doing things. Basically, when you do that, you are paying $32,000 or so over time for your $30,000 car, you then let it depreciate to the point where the depreciation greatly slows down (around 75,000 - 100,000 miles) and then "trade it in" (sell it) to the dealer you bought it from for about 2/3rds of its, now greatly depreciated, worth.
Amazing. The dealer makes money on the sale, makes money on the loan, makes money on buying the car back from you, and then makes money starting the process all over again. All that just for being the middleman.
Another interesting stat: 7% of these buyers (who get financing) are subprime. What the hell are you doing buying a new car?
Honestly, if your credit is that bad, there is only one car for you:
One would think that right now, people would be more interested in cheap and reliable, than luxury and speed.
Which reminds me of my favorite used car buyers guide:
fast cheap reliable
pick any two
Anyway, the other interesting part of this is that the Detroit three have much higher average car prices than the Japanese. I think this is due to two things: 1) trucks 2) Americans make really crappy small cheap cars. Always have.
The other thing that gets me here - the average new car is being sold for $30,000. That is a lot of money.
Seriously - it is a lot of money. Median household income is $52,029...
Which means that the vast majority of these cars are being heavily financed. Not really surprising, I know, but it amazes me how many people simply look at their incredibly high monthly car payment as a fact of life. When their car gets older, they trade it in for a new model, and often the goal is to keep the monthly payments the same - so that it feels like you are not paying any more...
Its a crazy way of doing things. Basically, when you do that, you are paying $32,000 or so over time for your $30,000 car, you then let it depreciate to the point where the depreciation greatly slows down (around 75,000 - 100,000 miles) and then "trade it in" (sell it) to the dealer you bought it from for about 2/3rds of its, now greatly depreciated, worth.
Amazing. The dealer makes money on the sale, makes money on the loan, makes money on buying the car back from you, and then makes money starting the process all over again. All that just for being the middleman.
Another interesting stat: 7% of these buyers (who get financing) are subprime. What the hell are you doing buying a new car?
Honestly, if your credit is that bad, there is only one car for you:
Comments
Post a Comment