The $1.7 Trillion Car Loan Debt Crisis...What Happened?

It’s no secret that car prices have become ludicrous over the past couple of years, at least in the US. MSRPs have shot up from $30 to 40k to as high as $70 to $80k. And that’s if you’re even able to get the vehicle at MSRPs. It hasn’t been uncommon for dealerships to charge $5, $10, or even $15k markups over MSRP due to “excessive demand”. But how could this be? Aren’t automotives a commoditized industry with razor-thin margins? Well, that’s how it used to be until the pandemic. The pandemic not only brought with it a supply shortage but more importantly, 0% interest rates. Combine this with extra long car loan terms of 72 months or even 96 months, and dealerships could move high-sticker cars for a relatively affordable monthly payment. Since then, interest rates have gone down and demand has cooled off, but prices have remained high. This video explores the various reasons leading the car bubble and what may be in the future given completely unaffordable cars.

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Timestamps:
0:00 - The Car Bubble
0:42 - Prices Out Of Control
5:33 - Why So Expensive
11:30 - The Debt Trap

Resources:

Disclaimer:
This video is not a solicitation or personal financial advice. All investing involves risk. Please do your own research.