I purchased a new car this spring after driving my previous car for over ten years. My credit score was over 800, I had the cash put aside to pay for it but (naturally) they offered financing. This became somewhat complicated, since I drove a couple of hundred miles to get this car. They were going to increase the price $1k if I paid cash, so I said fine - do the financing. Even with my high credit score and record, the manufacturer offered me over 8% interest over seven years financing. Since I wasn't going to make a return trip to the dealer, I accepted it, though I was shocked that the payments were about $380/mo. for seven years!
When I looked at the contract, I would have paid $31k over the term for an auto priced at just over $19k. I did add extended warranties and maintenance plans (partially to offset parts price increases over the next 6-8 years due to tariffs and inflation and partially because I'm a senior citizen and can't do much maintenance of my own any longer). So the total price before the contract was just over $22k.
Mind you, I purchased the least expensive new car on the market (and the last 5-speed manual trans being produced) - but there is no way I was going to risk going underwater over seven years of payments. I made sure the contract had a clause with "no pre-payment penalty) in it, so as soon as the account was created (which took a couple of weeks) I paid it off, costing me around $80 interest.
Most people can't afford to do that, and unless someone lives outside a large city, a car is almost a necessity, especially for people with children. But with the interest rates going through the roof (the average is 10%) and the average new car price nearing $50k, can you imagine what the monthly payments are extended over seven years (which is, I'm guessing, near the average new car loan period)? Then tack on the full insurance coverage required by the lenders. What is happening is that more people are going underwater on their vehicle loans and trade cars in after a few years, adding the leftover loan balance onto the next loan and raising their payments even higher. Car repossessions are skyrocketing and I don't think anyone is paying much attention.
So when you add that onto the ever-increasing cost of basic essentials (almost out-of-control electric utility costs - every month I marvel that I used less power that month than I did a year ago, but am paying over $30 more. .. ), groceries, health care, etc. it isn't any surprise that many people are being financially squeezed on multiple sides.
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