The price of new and used cars has gone out of sight!
You can see people complaining everywhere about used and new car dealers who are pushing up the prices of used and new cars and trucks…
In a recent report the average for some car payments, is all the way up to $1,000.00 per month…
It is not an average price for the majority of buyers but more people are ending up with high dollar auto loans.
What this could mean in the near future?
Defaults and repossessions that is what it likely means in the near future.
As the prices for used cars and trucks goes up more people could find themselves in a position where they cannot do anything but abandon the vehicle.
Of course it only makes sense that people who are accepting higher than average pricing on loans and vehicles may not have the ability to deal with the problem if and when a stressor hits them.
For example if a buyer ends up losing a long term job and then cannot find a job that pays as much as they were making it is likely that they will end up with a decision to make.
Keep the house or let the car or truck go back.
This could well start to happen later this year and the real problem is not really that the consumer will lose money but that market will not be able to absorb the higher pricing.
Even after a buyer defaults and returns the auto to be resold the next problem is that the market will not be able to sell the used car or truck at anywhere near the price of when it was new.
Of course we all know this is true but why is this a problem now?
For one thing a vehicle loses about 25 to 40 percent of its value in the first year.
We also know this but when you are looking at a 40 percent drop in value of a vehicle that should have sold for $58,000 but actually was sold for $79,000 then you have a huge value issue.
If the customer owes $75,000.00 on a vehicle that is not worth the price tag then or now then you have a bubble and that bubble can burst and when it does then you have a problem that the market cannot solve.
One thing seems clear we are in for a rough ride and it is likely that repossession lots will be filling up with automobiles that no one wants because the price is just too high.