Life has gotten progressively less affordable. From Eric Peters at ericpetersautos.com:
Financial experts will tell you that, as a general rule, you ought not to be spending more than 30 percent of what you earn on a place to live – i.e., your rent or mortgage – because if you spend more, you won’t have much left for anything else. Including whatever comes up that you didn’t expect, but always does.
Imagine spending half that 30 percent – imagine spending all of that 30 percent or even more – on a car payment.
Apparently, a lot of young people did just that over the past couple of years – and now they’re broke and not keeping up on their car payments. According to Jerry, a car insurance buying app, something on the order of $20 billion in car loans is headed toward default and most of this Everest of debt presses down on the shoulders of people in the 18-39 age bracket.
Jerry says four out of ten Gen Z car “owners” – in air fingers quotes to reflect the fact that you’re not an owner when you’re making payments on a thing that can be taken away from you if you stop making those payments – are paying 15 percent of their after-tax income on car payments.
One in five is paying more than 20 percent, or about what they ought to be spending on their rent/mortgage. Which probably accounts for why so many cannot afford their rent or mortgage. Jerry says 52 percent of Gen Z car-“owners” have had to defer a rent/mortgage payment in order to make a car payment.