Jun 10

Rising new car pricing could hurt the auto industry rebound

I doubt I have to tell you that new car prices are completely out of hand. The average new purchase price of a car is now over $28,000 which is up 13% from 2008. A well optioned Ford Focus is going to cost you nearly 30k. Are you going to pay 30k for a Focus? Well not if you are very smart. The cheapest cars are now over 10k, and what was once affordable fun say a new Vette will cost you north of 50k these days.

Shelby Ford Focus

The most alarming news about all this is that consumers are still buying, and buying with increasingly longer loans. 30% of all car loans are now 72 months or longer and even with low interest rates is a really bad idea. The problem here is that in just a few years almost everyone with that 72 month loan will be upside down. This is a personal financial disaster waiting to happen. On a larger scale as wages continue to stagnate this is a disaster for the auto makers because at some point something will give and people will quit buying. So why has the price of new cars gone up 13% in five years? Well it’s simple, see those 72 month loans, most of them served by the financial arms of the auto companies. They simply want your money and they want you to pay interest on it for 72 months!

My solution, by used.

statistics source: Wards Auto