I sat and pondered over this AM....where the hell did car-prices go 'crazy'? I remember in 2012....a general trend....that you could still go and find new cars for $30k and do a 48-month purchase deal that made sense.
So I asked Grok for the story (AI). Grok said:
"Car prices in the United States began to escalate significantly in early 2021, driven primarily by the COVID-19 pandemic's impact on global supply chains. Factory shutdowns and a severe semiconductor chip shortage reduced new vehicle production, while pent-up consumer demand surged as economies reopened. This imbalance caused average new car transaction prices to climb from around $37,000 in late 2020 to over $47,000 by late 2021, a roughly 27% increase. Used car prices followed suit, jumping nearly 60% from June 2020 to January 2022, peaking at over $31,000 in April 2022."
Yep....this goes to Covid, and the 2020/2021 era.
I should add....Covid-era-inflation also started to play a role....so you could add another $5k to $7k to this problem.
Last year....the average base-model of a US car...ran to around $48k (new). For a used-car? For a 3-to-4 year old car....up around $27k.
Once you added the extras? Well...you start talking about $10k to $20k.
Trying to blame Trump or Biden? That's a goofy position to take.
Moving the four-year loan onto six or eight years? You just compounded the chip and inflation mess...adding another layer of banking cost.
Fixing this? You'd have to solve the chip-mess (lessening the cost), and start asking for base-model vehicles....then start looking for a path back to the 4-year loan business.
My humble 'bet'? A quarter of all present car companies will cease to exist in two years. And we will reach a point where most people are driving a 7-to-15 year old car.
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I drove down one of the Car dealer rows here in SE Va. All of the lots were packed with new and used cars and trucks. During the COVID it was sparse pickings.
I follow a used-car deal VLOG (he only sells vehicles priced at the $4k to $5k level). About four months ago...he started talking new car lots (over-flowing)...some with trucks/cars sitting there now for longer than 12 months. He regularly points out....the re-possession rate is increasing, but these are cars priced in $30k to $50k....which he can't touch for his lot-strategy. Lot of lower-income people simple can't touch half the used cars out there (their credit is shot)....so all they can touch is the $5k or less cars with 'cash'.
Credit issue is creating new problems. I saw some 'note' yesterday....social-media engineer who was pulling $240k a year on salary....was given termination notice last week. His monthly mortgage was $6k, and car payment was in the $2,500 range. He has enough savings to survive three months...would then have to go to the IRA. There's to be a 2008-like crisis for early-to-mid-2026, and a moderate crash to carry through the of 2026. Credit organizations (banks, Visa, and so) will be the ones suffering this time around.
Don't forget the "Cash For Clunkers" program (started back in the Obama era, I believe). That got a LOT of used cars off the streets that would have been available for the lower end used car drivers and the new teen drivers who just need something to get them to and from their first job. They weren't ALL clunkers, but it took a substantial number of available cars off the used car market. As a consequence, used car prices jumped rather dramatically.
Germany did this C-f-C gimmick, and the used-part 'yards' were furious about the outcome. Tons of parts that were smashed-up. Back in the 1990s....I used the German 'yards' on 3 or 4 occasions...probably saved a fair sum of money.
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