It all comes down to affordability

Jan. 1, 2020
Desperate consumers are taking out car loans for up to 96 months!

Based on what's going on in the automotive sector, the Democrats would be smart to brush off their "The economy, stupid" slogan for next year's presidential election.

If you have any doubt about this, please consider that regular working folks are being priced right out of new car ownership. Being a product of regular working folks, that doesn't sit well with me.

I remember when my dad, who was a pipe fitter in a factory back in the '50s, '60s and '70s, could buy a new car every two or three years. And so could my uncles, one who worked at Ford and another who was an aluminum-siding vagabond. These were hard working guys who were part of the blue collar middle class.

That era appears to have slipped away. The Chicago Tribune recently reported that new vehicle sales are on the slide even though licensed drivers are on the rise. This year, as well as last year, new car sales were off by three percent. Worse, the downward trend started in 1990.

Some would lead us to believe that stupid consumers are to blame. No doubt consumers are stretching out their car loans beyond all reason. Sixty percent of the loans this year are for 61 months or longer, and 20 percent are for longer than six years. And then there's an elite group stretching their loans to 96 months!

Surely, there's a sizeable number of consumers who want it all and will take on more debt than they can afford. Yeah, stupid is the word for that. But I'm not talking about them. I'm talking about those who take desperate measures because they are truly desperate. These are folks who can't buy a break. They get burned in an upside-down system that is quick to penalize them for not having stellar credit. Rather than being charged more reasonable interest rates because they lack funds, they get charged at maximum levels. It's unconscionable that car dealers and lending institutions tie them up in perpetual loans. They rarely earn enough equity to buy another vehicle without digging a deeper hole.

It's no surprise, then, that consumers — the desperate ones in particular — are keeping their cars longer. CNW Marketing Research reports that the average buyer now keeps a car 59 months as opposed to 50 months in 2001.

So why should we care? If fewer cars are sold and consumers are keeping their cars longer, that means people will be keeping cars that will need maintenance and repair...and isn't that good for the aftermarket? Sadly, it is in some twisted way.

But before you go off rooting for more of the same think it through. The growing number of consumers who find themselves driving older cars out of necessity are much more likely just to do just enough maintenance on them to keep them running. There's no glamour in survival.

I bring this topic to your attention because I don't think we drill down enough to analyze issues that will affect this industry for the next several decades. As important as I think the Right to Repair legislation is, it pales in comparison to larger economic issues that can permanently alter buyer behavior.

My dad, if he were living, wouldn't be happy.