Everyone can look around and see the writing on the wall for the nation financially. It’s not hard to see the U.S. is heading into or already at the start of a recession. We are not faring well financially, as a nation. Between Biden’s poor leadership and the poor financial planning of many Americans, it’s easy to see why we have so many problems.
Given the decisions already being made, many Americans are also trying to set money aside in case of an emergency. The more expensive oil becomes, the pricier gas and home energy fuels like propane, natural gas, and heating oil get. It’s simple economics. As a result, people are keeping the thermostats lower when they can, or driving less. Many are also keeping their AC temps higher as their energy bills have also gotten more expensive.
Two areas that are last to be impacted simply by the virtue of being the hardest to change are their housing costs and the costs they spend on their cars. While the massive jump in the cost of buying a home or having a new one built is no secret anywhere, the huge change in pricing on cars across the U.S. is taking many by surprise. With slower supply chains due to overseas constrictions, the supply of new cars has been choked off. This means used cars have been in greater demand, and then those prices skyrocketed.
Given the average age of cars on American roads is 12, we are finally starting to get to the truly reliable design of cars. People are finding themselves selling vehicles with 250k miles with ease. Something nearly unheard of even 22 years ago. Given the current vehicle market, buying new or even used is just throwing away money.
Buying new was always a great way to lose money before the supply chain issues, but now if something goes wrong, you’ll have a hard time finding parts, and once that supply chain is straightened out, the loss on the overpriced vehicle will be significantly higher than it would be if pricing and inventory were at a normal level.
With such a premium being paid for these cars, it’s easy to get stuck and unable to keep up with the payment. Having a repo on your credit report can be absolutely devastating. Much like the other difficult-to-change portion of the budget, a default on your mortgage can be devastating as well.
Being certain that this is a must-purchase at the time is the key. The human ability to place the vanity of a new car over the need for one is huge. Having an outsider to help make intelligent decisions can be hugely helpful. A financial advisor or an accountant can make a great impact on how you spend your money, and if that new car is a smart idea or not.
For someone who commutes 2 miles a day, doesn’t do much on the weekends, and already has a 3-year-old car, there is little to no actual need for a new car. Meanwhile, someone who drives 2700 miles a month visiting stores or making sales, and currently drives a 10-year-old car, may have a much better excuse to replace their vehicle. Especially if they are looking at going from a gas guzzler to a more economic vehicle. The savings on fuel alone could make up the costs of buying that new car. Granted both situations are incredibly extreme.
While we wait for things to stabilize, everyone has been doing their small parts. Keeping that up, supply chains will have an opportunity to replenish factories and dealerships. This means the price gets a chance to stabilize, and prices go back down. It’s a win for everyone.