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"15 Signs A Massive Car Market Crash Is Already Upon Us"
By Epic Economist
"A devastating car market crash is now in motion, and it will trigger brutal consequences for buyers, sellers, and dealers. The U.S. auto market entered 2023 in a massive bubble, with average new car prices hitting an absolute record high while used car prices were almost 42% higher compared to 2019 levels. But now several factors are contributing to a collapse in the value of cars. At the same time, auto loan debt levels are shooting up and even borrowers with good credit scores are becoming unable to afford car payments and having their vehicles repossessed. A famous industry executive said this could lead the country to the next great financial crisis, and considering the pace at which this downturn is unfolding, it looks like his warning is spot on.
In February 2023, the average cost of a new car climbed to $50,000 in the United States, up from just $38,948 in December 2019. That marked the highest price for a new car in history, according to data compiled by Edmunds. At the same time, a growing number of consumers are having to stretch their budgets to afford a new vehicle. The average monthly payment for a new car is up 26% since 2019 to $718 a month, and nearly one in six new car buyers is spending more than $1,000 a month on vehicles, also a record. Other costs associated with owning a car have also shot up, including insurance, gas, and repairs. "With new car prices as high as they are, it's getting more and more difficult for most Americans to stomach these payments," stresses Ivan Drury, Edmunds director of insights.
After the pandemic broke out, automakers expected car demand to collapse, which led them to reduce output, and microchip manufacturers followed suit. With a shortage of new cars hitting the market in 2020, consumers started to use their stimulus checks and took advantage of low-interest rates to purchase used cars instead, driving up prices four times faster than the growth seen in the inventory of new cars. “The perfect storm of supply and demand created a temporary and unsustainable spike in used car prices, says Motley Fool’s analyst Sean Williams. A huge bubble was formed, but a reckoning has just arrived.
The repercussions of the car market collapse can throw the entire country in disarray. We must consider that the U.S. car industry is a significant contributor to the country's economy, accounting for millions of jobs and billions of dollars in revenue. A crash in this market can result in a significant economic downturn, leading to widespread job losses, bankruptcies, and a sharp decline in consumer spending. It can also disrupt the supply chain for many other industries. Given that car manufacturers rely on a vast network of suppliers to produce their vehicles, when the crash finally occurs, it will trigger a domino effect on these suppliers, leading to mass disruption in many sectors. When Musk says this could turn into a financial nightmare, he isn't bluffing. We should all pay very close attention to the next developments of this crisis because it will ultimately impact all of us. That’s why in today’s video, we compiled several facts that prove that the U.S. auto market is in huge trouble."