Wednesday , June 26 2019
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Automotive Embalming

Summary:
ABS can only do so much. After going gangbusters for the past several years, new car sales are skidding all of a sudden – and the industry might just end up in the ditch, again. The reason for the power slide is easy enough to grok –  the rising the cost of money – which is upticking alarmingly, if you’re in the market for a car. Or trying to sell them. About 14 percent of people who took out a loan on a new car last month are paying more than 10 percent interest – and the average interest rate is now well over six percent. Which is higher than it’s been since – interestingly enough – about ten years ago. Which was the last Time of Troubles for the industry, back in ’08. People talk about the bailout, but that’s not really what

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ABS can only do so much.

After going gangbusters for the past several years, new car sales are skidding all of a sudden – and the industry might just end up in the ditch, again.

The reason for the power slide is easy enough to grok –  the rising the cost of money – which is upticking alarmingly, if you’re in the market for a car.

Or trying to sell them.

About 14 percent of people who took out a loan on a new car last month are paying more than 10 percent interest – and the average interest rate is now well over six percent.

Which is higher than it’s been since – interestingly enough – about ten years ago.

Which was the last Time of Troubles for the industry, back in ’08.

People talk about the bailout, but that’s not really what has kept the industry afloat since then.

Low (and no) interest financing has worked like the injectable plastic and make-up embalmers use to make a corpse look like it’s just sleeping. They make it possible for people to buy more car than they can afford – and for government to impose cost-adding mandates that people think they’re not paying for.

It works like withholding. If you don’t see it, you don’t feel it. Or so the theory goes.

If there were line-items on new car window stickers listing the cost of every federal fatwa – plus a profit margin for the car company, which is part of what you’re paying for, too – people would notice and perhaps object. But the costs are folded into the overall price of the car – and the cost of that price is hidden, in turn, by low (and no) interest financing.

Thus, the average price paid for a car is now $36,534 – a number which ought to scare the skin off anyone who is tied to the car business in any way whatsoever.

Because of the other number.

$61,891.

That is the current median household income in the United States. It is the gross – not after tax – median household income. And it is not after-mortgage/rent/utilities/food and Obamacare income, either.

Less federal and state taxes, mortgage/rent/utilities/food and Obamacare, the real median household income – the money available to spend on other things – is closer to $35 or $40k.

Even if half the people in the country were actually taking home $61,891 – and didn’t have to pay their mortgage/rent/utilities/food and Obamacare out of that sum – spending $36,534 on a car amounts to about 60 percent of their annual income.

Much more for those making less-than-median income – which is half of the population, to the left of the median. The other half – to the right of median – makes more, of course.

But not enough more, as regards most of them.

Eric Peters
Eric Peters is a freelance car/bike/political columnist. He escaped the corporate-owned media Big Boys years ago. Without the censorship of the corporate tools

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