What could possibly go wrong?


If you’ve visited a dealership recently you might be surprised to see that while the selection of vehicles sitting on the lot is better than a year ago, prices haven’t dropped as much as you might’ve been hoping. This seems to defy people’s simplistic knowledge of supply and demand dynamics in economics as everyone waits for the bottom to fall out of both the new and used vehicle market. We’ve even seen repossessions on the rise, yet car prices in many instances are still unbelievably high. There’s an interesting potential explanation which might account for at least part of the continued inflation of new vehicle prices, but if true would mean a big fall is building.

Watch the latest Motorious Podcast episode here.

First off, you need to understand how we got to where we are today. Things were fairly normal when 2020 began, then a virus of unspecified origin made people and especially governments turn to desperate measures, just about everything shut down, and automakers scaled way back on production in anticipation of demand plummeting. When people realized they weren’t dying and they were sick of being cooped up they decided to get a new car and drive a lot, which in turn put a pinch on dwindling new car supplies so automakers started trying to figure out how to ramp production back up.

can't afford your car payment? buy a new car!

As if the situation wasn’t bad enough, certain members of the government decided funneling plenty of stimulus checks into the hands of just about everyone would fix the increasing economic woes from shutdowns. With this extra cash in hand people who never had so much money in their life got excited and bought a car they could only afford if all that stimulus money kept pouring in, which they started to believe would never end. Plus, a lot of people took out loans with ridiculous a 9-year term and made other foolish financial decisions. Those kinds of actions helped push car prices even higher, both for new and used models.

Fast forward to now and the stimulus checks are long gone, companies are starting to lay people off, inflation is soaring thanks to all that extra money printed to supposedly stimulate the economy, and consumers are in a bit of a pinch. Maybe they’re having trouble making the monthly payments and realize they should’ve bought something more reasonable, or perhaps they need a bigger vehicle, so they’re trading that BMW in for a Hyundai or something of that nature. But the issue is they’re behind on payments for said Bimmer, and thanks to prices which are starting to fall combined with their extra-high interest and long loan term, they’re way upside down in the vehicle. Normally that would be a non-starter when trying to finance a different car, even if it’s something cheaper, but according to Twitter user CarDealershipGuy it’s apparently not.

can't afford your car payment? buy a new car!

Yes, you read that right, this guy claims you can owe significantly more on your car than it’s worth, be behind on payments, and somehow still get financed for a new vehicle. He says lenders are doing this because they’re losing out on potential deals and so are dealers. Desperate to keep making deals, they’re taking a huge risk on people who’ve demonstrated less than responsible financial habits. How incredibly shortsighted, if true.

If you just screamed an obscenity that’s completely understandable. After all, this is the kind of behavior which could very well trigger a collapse of the car market and ripple throughout the economy. It’s reckless, irresponsible, and yet so very believable after the kinds of tricks I’ve seen lenders pull not only for car loans but also for mortgages. It’s almost like we learned nothing from the previous recession.

You might be thinking these lenders are really dumb lending any money to someone who’s upside down in their current car and has fallen behind on payments. Normally, I agree, but I also know something about the industry most people miss: certain lenders actually really love repossessing cars. When they do, they get to collect not only the amount people are behind on but also other fees. Plus, the people most likely to fall behind on car payments are paying ridiculous interest rates, something like 24% or maybe more, meaning the lender is making incredible money off the loan. Even if the person doesn’t finish paying off the car, the lender can repossess it a few times until finally the borrower just doesn’t want the hunk of junk back, then the lender sells it at auction, a dealer puts it on the lot, and it’s the same process over again.

can't afford your car payment? buy a new car!

Back to what CarDealershipGuy said on Twitter: he claims “a wave of car repossessions will hit in early/mid 2023.” I don’t doubt it as they’ve already been on the rise. As economic woes push people into a corner, they’re going to let their vehicle go.

Normally, this puts considerable pressure on the bottom of the used market as people who had a car repossessed buy a jalopy using cash and the supply of those cheap options starts to dry up. The problem is you’d be hard-pressed to find a running car for under $1,500 these days. Actually, you might have trouble finding something decent for twice that amount. So that’s a big different from before. Plus, if these people who are behind on their current car payments can finance something new or newer, it’s a whole new game.

can't afford your car payment? buy a new car!

If what CarDealershipGuy says is accurate about certain lenders financing people in such a situation, and these consumers have a history of making sketchy financial decisions for whatever reason, the risk they’re going to default on the new car loan is pretty high. For these consumers they could experience two repossessions of two different vehicles in fairly rapid succession.

Combine that with people walking away from new factory-order cars and this situation gets complicated fast. It doesn’t take a genius to figure out the market is going to be a mess, but the big question is how bad is the fallout going to be and when will the crap really hit the fan? It’s already starting but it sounds like we haven’t seen anything yet. Also, this alone could help push the overall economy over the edge, so hold onto your hat, it’s going to be a bumpy ride.

Images via Antoni Shraba, Pixabay, Gustavo Fring, Anotni Shraba, Gustavo Fring

Keyword: Can't Afford Your Car Payment? Buy A New Car!

CAR'S NEWS RELATED

Here's How The Ford Ranger Raptor's Fox Shocks Make It A Great Off-Roader

There are multiple drive modes, and each one tweaks the dampers for different purpose.

View more: Here's How The Ford Ranger Raptor's Fox Shocks Make It A Great Off-Roader

Crawford moves to DAMS, Hadjar and Marti join Campos

Isack Hadjar (FRA) Red Bull Junior Driver. Formula 1 World Championship, Rd 17, Japanese Grand Prix, Thursday 21st September 2023. Suzuka, Japan. Jak Crawford will move to DAMS for the 2024 Formula 2 season while Red Bull juniors Isack Hadjar and Pepe Marti will compete for Campos. Crawford finished ...

View more: Crawford moves to DAMS, Hadjar and Marti join Campos

Ford Robbed Us Of The Old Four-Door Ranger Because It Wanted To Sell Explorers

Photo: Ford By definition, a big truck like a Ford F-150 or Chevy Silverado struggles to be small. Even in its smallest, most trucky configuration — a two-door single cab — a full-size truck is relatively large and comes with a sizable bed for hauling cargo. But a small ...

View more: Ford Robbed Us Of The Old Four-Door Ranger Because It Wanted To Sell Explorers

Ford loses nearly 400 participants from its EV dealer program

After asking its dealers to join it “on an epic journey of sustainable expansion,” Ford revealed over two-thirds of its dealers joined almost a year ago. However, close to 400 dealers have dropped out of the program since then. Ford asked its dealership network to become a part of ...

View more: Ford loses nearly 400 participants from its EV dealer program

Planned Three-Year Cruise Canceled At The Last Minute Because The Company Couldn't Afford To Buy A Ship

Image: GreenOak (Shutterstock) A cruise that was set to sail around the world for three years has been abruptly canceled at the last minute. The reason? The company behind the cruise couldn’t afford to buy a ship in time, as CNN reports. Life at Sea Cruises, a division of ...

View more: Planned Three-Year Cruise Canceled At The Last Minute Because The Company Couldn't Afford To Buy A Ship

Volkswagen Is Developing Affordable EVs, But Only For China

24 May 2023, Saxony, Zwickau: A model of the new-generation ID.3 is assembled at Volkswagen’s plant in Zwickau. Following the start of production in 2019, the vehicle has now received a facelift as part of the model mint. Image: Hendrik Schmidt/picture alliance (Getty Images) After Chinese automaker BYD dethroned ...

View more: Volkswagen Is Developing Affordable EVs, But Only For China

This 2024 Ford Mustang GT Only Survived 16 Miles Before Being Crashed

There's heavy damage on the rear of the car, but the 5.0-liter V8 is listed as still running.

View more: This 2024 Ford Mustang GT Only Survived 16 Miles Before Being Crashed

Let This Lancia Stratos Replica Be Your Affordable Key To Rally Greatness

This auction is a realistic way to have a street-legal rally icon parked in your driveway.

View more: Let This Lancia Stratos Replica Be Your Affordable Key To Rally Greatness

At $27,500, Is This 2008 Ford F450 Super Duty A Super Big Deal?

Can you tow with a Ford Everest Wildtrak?

1962 Ford Falcon | Old Car

Ford patents inflatable bumpers for its large SUVs & pickups

Ford Figo: Weird noise when the ignition is on worries me

Ford Taurus, Dodge Caravan Live Again In 1995 Detroit Auto Show Retro Video

Next-gen Ford Mustang – The competitors at R1.5 million

At $9,000, Would This 1976 Ford Granada Ghia Put You Back In Black?

2.0L Bi-Turbo or 3.0L V6 – The most popular engine for the Ford Ranger Wildtrak in South Africa

Ford Mustang GT3 Looks Fast, Sounds Like Thunder In Track Test Video

Road-Trip Review: 2023 Ford Everest 3.0 V6 4WD Platinum

Here’s How An Affordable Chinese-Made EV Holds Up After 100,000 Miles

OTHER CAR NEWS

; Top List in the World https://www.pinterest.com/newstopcar/pins/
Top Best Sushi Restaurants in SeoulTop Best Caribbean HoneymoonsTop Most Beautiful Islands in PeruTop Best Outdoor Grill BrandsTop Best Global Seafood RestaurantsTop Foods to Boost Your Immune SystemTop Best Foods to Fight HemorrhoidsTop Foods That Pack More Potassium Than a BananaTop Best Healthy Foods to Gain Weight FastTop Best Cosmetic Brands in the U.STop Best Destinations for Food Lovers in EuropeTop Best Foods High in Vitamin ATop Best Foods to Lower Your Blood SugarTop Best Things to Do in LouisianaTop Best Cities to Visit in New YorkTop Best Makeup Addresses In PennsylvaniaTop Reasons to Visit NorwayTop Most Beautiful Islands In The WorldTop Best Law Universities in the WorldTop Richest Sportsmen In The WorldTop Biggest Aquariums In The WorldTop Best Peruvian Restaurants In MiamiTop Best Road Trips From MiamiTop Best Places to Visit in MarylandTop Best Places to Visit in North CarolinaTop Best Electric Cars For KidsTop Best Swedish Brands in The USTop Best Skincare Brands in AmericaTop Best American Lipstick BrandsTop Michelin-starred Restaurants in MiamiTop Best Secluded Getaways From MiamiTop Best Things To Do On A Rainy Day In MiamiTop Most Instagrammable Places In MiamiTop Interesting Facts about FlorenceTop Facts About The First Roman Emperor - AugustusTop Best Japanese FoodsTop Most Beautiful Historical Sites in IsraelTop Best Places To Visit In Holy SeeTop Best Hawaiian IslandsTop Reasons to Visit PortugalTop Best Hotels In L.A. With Free Wi-FiTop Best Scenic Drives in MiamiTop Best Vegan Restaurants in BerlinTop Most Interesting Attractions In WalesTop Health Benefits of a Vegan DietTop Best Thai Restaurant in Las VegasTop Most Beautiful Forests in SwitzerlandTop Best Global Universities in GermanyTop Most Beautiful Lakes in GuyanaTop Best Things To Do in IdahoTop Things to Know Before Traveling to North MacedoniaTop Best German Sunglasses BrandsTop Highest Mountains In FranceTop Biggest Hydroelectric Plants in AmericaTop Best Spa Hotels in NYCTop The World's Scariest BridgeTop Largest Hotels In AmericaTop Most Famous Festivals in JordanTop Best European Restaurants in MunichTop Best Japanese Hiking Boot BrandsTop Best Universities in PolandTop Best Tips for Surfing the Web Safely and AnonymouslyTop Most Valuable Football Clubs in EuropeTop Highest Mountains In ColombiaTop Real-Life Characters of Texas RisingTop Best Beaches in GuatelamaTop Things About DR Congo You Should KnowTop Best Korean Reality & Variety ShowsTop Best RockstarsTop Most Beautiful Waterfalls in GermanyTop Best Fountain Pen Ink BrandsTop Best European Restaurants in ChicagoTop Best Fighter Jets in the WorldTop Best Three-Wheel MotorcyclesTop Most Beautiful Lakes in ManitobaTop Best Dive Sites in VenezuelaTop Best Websites For Art StudentsTop Best Japanese Instant Noodle BrandsTop Best Comedy Manhwa (Webtoons)Top Best Japanese Sunglasses BrandsTop Most Expensive Air Jordan SneakersTop Health Benefits of CucumberTop Famous Universities in SwedenTop Most Popular Films Starring Jo Jung-sukTop Interesting Facts about CougarsTop Best Hospitals for Hip Replacement in the USATop Most Expensive DefendersTop Health Benefits of GooseberriesTop Health Benefits of ParsnipsTop Best Foods and Drinks in LondonTop Health Benefits of Rosehip TeaTop Best Air Fryers for Low-fat CookingTop Most Asked Teacher Interview Questions with AnswersTop Best Shopping Malls in ZurichTop The Most Beautiful Botanical Gardens In L.A.Top Best Mexican Restaurants in Miami for Carb-loading rightTop Best Energy Companies in GermanyTop Best Garage HeatersTop Largest Banks in IrelandTop Leading Provider - Audit and Assurance In The USTop Best Jewelry Brands in IndiaTop Prettiest Streets in the UKTop Best Lakes to Visit in TunisiaTop Highest Mountains in Israel