Rising old used car prices help push poor Americans over the edge

[Eugene]

Source: Reuters

BUSINESS NEWS OCTOBER 11, 2019 / 6:07 AM / A DAY AGO

Rising old used car prices help push poor Americans over the edge

Nick Carey
7 MIN READ

FREEPORT, Ill. (Reuters) - For America’s working poor, an often essential ingredient for getting and keeping a job – having a car – has rarely been more costly, and millions of people are finding it impossible to keep up with payments despite prolonged economic growth and low unemployment.

More than 7 million Americans are already 90 or more days behind on their car loans, according to the New York Federal Reserve, and serious delinquency rates among borrowers with the lowest credit scores have by far seen the fastest acceleration.

The seeds of the problem are buried deep in the financial crisis, when in the midst of the worst economic downturn since the Great Depression, automakers slashed production. A decade later, that has made a relative rarity of used 10-year-old vehicles that are typically more affordable for low-wage earners.

According to data provided to Reuters by industry consultant and car shopping website Edmunds, the average price of that vintage of vehicle is $8,657, still nearly 75% higher than in 2010 despite some softening in prices over the last year. The average new car, in contrast, has seen a price rise of 25% in that same time period.

“This is pinching people at the worst point possible,” said Ivan Drury, Edmunds’ senior manager of industry analysis. “If you need basic A to B transportation, you have to get an older car that needs more repairs and has more wear-and-tear issues.”

-snip-

Read more: https://www.reuters.com/article/us-autos-usa-used-analysis/rising-old-used-car-prices-help-push-poor-americans-over-the-edge-idUSKBN1WQ1AP

[Farmer-Rick]

1. Much like socialist countries that have no in country car production capabilities

They import old cars because that's all they can afford. You see 10 to 20 yr old cars every where on the roads.

Now what are the advantages of capitalism and out sourcing all our manufacturing again?

[exboyfil]

2. I have a good job, and I feel the pinch

keeping my 2002 Cavalier and 2009 HHR on the road. My daughter and son in law just spent nearly what I paid for my first house in 1988 for a Subaru. They had to have it since they make frequent trips to dog agility trials and home to his parents. Their 2010 Fix Or Repaid Daily died in a deserted location on the highway. Soon after it died a group of young men approached them. Nothing happened, but something could have happened. Most of the time they drive their 2000 Corolla so it is not like they wanted a fancy car.

I plan to rent when I go see my mom over Christmas. My younger daughter drives my Cavalier to work (that is something of a concern since she works in a high crime area). She is holding off buying a car.

We are definitely going down to one car when one of the two above finally dies. My daughter then will have to pony up for her own car. When both die? Well maybe my older pets will be gone by then so I might have a chance in affording one.

[CountAllVotes]

3. The car must last forever

I'm sure not about to but another one.

How many out there can afford $40K+ for a car?

[MichMan]

4. Doesn't that also mean that cars don't depreciate as fast thus making trade ins worth more?

Trying to understand why cars depreciating slower is a bad thing ?

[progree]

8. I think the article is saying that it's tough for poor or near-poor people at the bottom of the car

food chain. Not that it's a bad situation for everyone.

Just like rising rents and house prices are good for landlords and home owners in general, but tough for people trying to buy their first homes, or stuck with having to rent forever.

[MichMan]

5. This recent article states the complete opposite

Used-car price tumble spells trouble for the U.S. auto market

"Falling used-car prices last month were a major contributor to subdued inflation for the U.S. economy. Auto analysts warn this could be a lasting trend with major negative implications for new-vehicle demand.

The 1.6% monthly drop in used-car prices last month was the biggest decline in a year, a Labor Department report showed Thursday. The overall core consumer price index increased just 0.1% from the prior month, a smaller gain than expected.

The decline in used-car prices is explained in part by rising returns of vehicles that have reached the end of consumer leases, according to Charlie Chesbrough, Cox Automotive’s senior economist. Analysts have warned for years that a glut of off-lease vehicles was coming and would pose a risk to carmakers by making used autos look like better bargains than new ones."

[link:http://www.detroitnews.com/story/business/autos/2019/10/10/used-car-price-tumble-spells-trouble-us-auto-market/40294195/|

[Eugene]

6. Not necessarily. End-of-lease cars tend to be newer, not the 10+ year-old vehicles

typically in reach of the poor.

[mitch96]

7. End of lease cars.... That's what I'm doing

My good friend leased a Prius. After three years she does not like leasing and is getting a new car and I will buy it. Her buyout for the lease is about $5000 LESS than the going rate for that year Prius.
I'll take over her lease and then buy it out at the end.. It only has 16,000 miles.
Win win for each of us.. My Honda has a good resale value and it too has low miles so it should go quick... Works for me!
m