Used cars are about to get a whole lot cheaper. Could that be bad news . . . ?

Photo above - blink and you'll miss it. Car repos are up 23% this year.

Who DOESN’T want lower car prices? Especially the people buried under $1,000 a month loan or lease payments. For 2022 (the last official data) 15% of car buyers were paying $1,000 a month. Full size SUVs and pickup trucks are in this zone. The average of all car payments in the USA is $700. With the fed funds rate increases, how much does a car loan cost? 6% if you have a giant down payment and a FICO score over 800. If that’s not your situation, you could easily pay 10%, 15%, or more.

These are the guys (and women, possibly) who are now defaulting on their auto loans. A combination of absurdly high sticker prices fed induced interest rates, and huge insurance premiums. You’d think that modern cars with all that safety tech would be cheaper to insure. You’d be wrong. Insurance costs are related to initial purchase price (Battery EVs have up to 1,000 pounds of expensive lithium on board) And if your car is made from aluminum, carbon fiber, or fiberglass, it has to go to a special body shop following an accident. Ordinary cars made from steel and plastic escape this fate.

Hertz announced earlier this year that they were liquidating ALL their Tesla rental cars. Because drivers crash them due to lack of familiarity with the controls, and the repair costs are in the stratosphere.

Back to auto repos. Okay – they’re skyrocketing. People just can’t afford the payments. Or the rising insurance costs. Repos are up 23% compared to last year. (see link at bottom). Wait . . . isn’t the US economy benefitting from the miracle of full employment? Why can’t people pay for their whips?

After being repo’d, a bunch of these vehicles will end up at places like Car Max. Did you notice how Car Max recently stopped spamming everyone’s email begging “we want to buy your car”? They have plenty of used cars now and are trying to figure what they’re eventually going to be worth. Used cars depreciate - they don’t increase in value. That pandemic era (2020) spike in used car prices was a once in a lifetime event. Due to supply chain disruptions for new cars. Nobody today is selling their used Tesla for more than they paid for it, like in 2020.

If it was just cars getting towed and leaving Gen X/Y/Z drivers stuck with Uber (or driving a beater), I wouldn’t shed any tears. But cars are always an early warning for what happens with housing. The same high price and interest and insurance problems are now undermining the housing market. Evictions volume is starting to build. Which means houses could come down in price, like they did in 2008-2009, after the last housing bubble suddenly went bust.

But please don’t tell anyone. The advice in today’s column is top secret. One political party is still chanting “Bidenomics – you’ve never had it so good”. The other party wants to impose huge tariffs, which will increase prices and reignite inflation, throwing more people out of work. Most our politicians are in denial. They have law degrees, not credentials in economics or business. They don’t believe things are about to get worse . . . a lot worse.

I’m just sayin’ . . .

~Repos Spike in 2024 As Fewer Americans Can Pay Their Car Loans (yahoo.com)~