Going into hock for a depreciating asset is rarely a good idea. From Eric Peters at ericpetersautos.com:
People used to actually buy new cars – as in paid for them, when they acquired them. Money and title changed hands. The car was theirs. Now people finance cars, which – interestingly enough – is probably the main reason why very few people can afford to buy a new car.
Or a used one, for that matter.
Financing is a way to spend more than you can afford and that’s why every new car comes standard with features that used to be optional, back when people had to consider whether they could afford to buy things like air conditioning, power windows and automatic transmissions. Let alone climate control and heated seats. All very nice to have, if you don’t have to go into debt for years to have them.
Now you haven’t got a choice – because most people are willing to go into debt for years in order to have those things. It’s also why the government gets way with imposing all the things it “mandates” – that buyers have to pay for but which most of them could never come up with the money to pay for.
So they finance them – and that makes it all seem “affordable.”
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It’a arguably one of the best tricks since the devil convinced most people he doesn’t exist.
The result is an unprecedented crisis of affordability. The average price paid for a new car has gone up about $15k over the course of about three years to nearly $50,000. The wheels that have been set in motion will not stop turning until the wheels come off this ride. The manufacturers – that is, the car companies – have oriented their business model around financing ever-more-expensive cars rather than offering affordable cars, their prices (and roster of equipment) kept in check by the ability of their customers to pay for them. The government is no longer restrained by the costs it imposes – including the ruinous costs of “electrification” – because serial debt-financing makes it seem “affordable.”
