Here’s the latest reader rant; my comments follow!
John writes: As one who spent his entire career in the carbiz (after the military) and owned several new-car dealerships, I’d like to add the following: We’re now precisely where the UK (the Uck) was fifty years ago. Back then fully half of all new cars in the UK were leased. Now half the new cars in the US are leased. Actually, the cars haven’t increased in price – the value of our currency has decreased, and by about 90 percent vs. the dollars of fifty years ago.
This can’t go on – and when something can’t go on it finally stops. Sometimes gradually and gently but more often with much pain and suffering. Just recall all the made hysteria during the two gas “shortages” of about twenty years ago, with crazed motorists driving around hysterically constantly looking for an open gas station at which to top off. There was no fuel shortage. All that happened was that the average fuel quantity in fuel tanks went from about four gallons to nearly twenty. This stopped abruptly when gas stations made the minimum fuel fill was established at about ten gallons.
My reply: Agreed, John. I feel like a man howling into the wind sometimes. I, too, have been in the biz a long time now – formally, for the past 25 years. Informally, all my conscious life.
The signs are neon backlit and flashing obvious at this point – but few notice. Car loans are now on average twice the duration they were – and (per the article) leasing has exploded to almost a third of all transactions. This is a clear barometer of an unsustainable gap between what people are buying and what they can afford to buy.
I rail often about compliance costs – which are enormous. But equally driving this bus off the cliff is the finance crack of easy credit on depreciating appliances. The general American attitude used to be – buy what you can afford. It is now – get a loan for whatever you want.
I’ve read that more than half the population could not come up with $1,000 cash for an emergency without having to borrow it. Yet most of these people drive a late-model vehicle. They probably also have an expensive smartphone and other gadgets.
There is nothing wrong, per se, with gadgets. The problem is one of assuming massive, unsustainable debt to “keep up” with the “latest thing.”
I just finished writing a reply to a reader who asked about the new Jeep Gladiator – which is a Wrangler with a small bed. The thing will sticker for almost $40k – to start. This is jibber-jabbing, drooling madness.
It’s a Wrangler. Onto which they bolted a bed. Made of steel panels. The basic package ought to be available for under $20k. But Jeep loads the thing up with gadgets and amenities – because most people insist on them and can get financing.
One can almost see the Jenga Tower beginning to lean, eh?
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