Dracula and the Dawning Sun

December 26, 2018 in News by Slad

 

via: Lew Rockwell

By 

Eric Peters Autos

Did you know that the percentage of new cars sales that are actually leases has risen from about 3-5 percent in the early-mid 2000s to more than 30 percent as of this year?

It appears about a third of the population – about five times as many as used to be able to –  is no longer able to afford to buy new cars.

At least, not the cars they want – the $30,000 and up ones, laden with all the latest gadgets they want (plus the ones mandated by Uncle).

There are still new cars priced under $20,000 – and most people can still afford those. But they’re the slow-movers. And they’re disappearing – both because they are slow-movers and also because the government-corporate nexus is pushing electric and hybrid-electric cars, which are on track to become the only kinds of cars we’re allowed to buy.

The average car transacted for more than $30,000 last year. The average electric car will transact for much more.

But the monthly nut on a $30k-plus transaction is too high for about a third of the car buying population to grapple with – even when the payments are stretched out over seven or more years.

And so they rent – just like people who can’t afford to buy a house.

But there is an important difference. A house (or an apartment) is a thing of enduring value while a car is a depreciating appliance, like a washing machine or toaster.

But a house or apartment that X rented for $800 per month this year will cost the same $800 per month when Y signs the new lease next year.

Possibly, it will cost more. It is not unheard of for landlords to raise the rent.

Cars are very different.

They leak value almost from the moment they leave the assembly line – and hemorrhage it the moment they are driven off the dealership’s lot. At the end of its lease, a car is always worth less than it was worth at the beginning.

Usually it is worth about 30-40 percent less.

There is even a term for this – residual value.

As in, what’s left of its former value.

This is why payments can only be stretched so far. The new car’s price goes up, consistently – while its value goes down over time, just as consistently. That’s not good math – if you’re trying to sell new cars.

Or finance them.

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