Could This Cause the Car Industry to Collapse?

foreign show and today we're going to talk about what's going on in the car industry so 2022 was a great year for cars you could say that Americans went a little crazy once they had the chance to spend money again after the pandemic so people were buying cars before they even landed on the lot which means demand went up so then prices went up yep so the average price paid for a vehicle in December of 2022 soared to a near record high of 46 382 and most people ended up financing those cars at rates that they couldn't afford and this was also a time in history where used cars actually were making money like you could actually sell your used car for more than what you paid for it which never happens because usually it's a depreciating asset and again history was made it was a wild time okay so let's break all this down the cost of a car how much it takes to borrow the money for it all the things so the cost that you pay each year to borrow money for your car is called the APR which is the annual percentage rates this is your car loan's interest rates plus all the associated fees so right now the aprs on car loans are the highest that they've been in decades so we're talking about eight percent interest on new cars and 12.88 for used cars so guys don't miss this what you pay in APR isn't even going towards the cost of your car it's just interests and fees so what's happening is that a lot of people don't have the money left to make payments on the actual car so they're not and what's fascinating is car payment delinquency is at the highest it's been since 2009.

So the Repo Man well his business is booming and we'll talk about that a little bit later the first how do you avoid paying for APR IL you don't get a loan yep that's it you pay cash for your car and people think that's crazy and insane and I get it because a car is a need for most of us but listen there are plenty of affordable cars out there okay even like a couple thousand bucks can get you a car not a beautiful car not a great car not a car you want to drive forever but at least you own it and you're not paying payments and interest on it so financing a car you guys it's not going to help you build wealth in fact it does the opposite because you're paying money and interest payments instead of investing that car loan and that interest to be making money for you so instead of you making interest on your money you're paying interest so it is easier and wiser to save 500 bucks a month which is the average car payment for 10 months go and buy a used car no strings attached and you're done but what do you do if you've already taken out a loan and you can't pay it back so the repo guy that we were talking about earlier yeah he's no joke because in 2022 approximately 22 million cars were repossessed so you want to do everything you can to avoid a repossession which is basically where the bank comes in and takes your car back and as soon as you know that you might be in trouble making payments talk to your lender there's no guarantees but your bank may actually work with you to prevent you from defaulting on your loan because it's not that they're kind they just want their money so they may try to help you and again your bank they may lower pause your monthly payment for a short bit while you get your finances in order so again talk to your lender if you can't make the payments but don't do a voluntary repossession this is when you know that you can't make the payments and you simply give up the car and let the bank come and take it and that's it so I get that it kind of sounds like a good idea but it's not so if you can't catch up on your payments sell your car you may have to get a small loan for the difference if you're upside down on it but it is worth it and again given the prices of used cars these days you may actually get some good money for it you never know so here's another thing we have created a culture where your car is your identity which is so wild so like when people see your car it's like it says something about you and we have made that a thing in our world today but I'm telling you if going into debt is the only way you can afford a car a nice new car then you don't need it you don't need it so don't think that's going to be part of your identity because it doesn't need to be that for anybody in the book the psychology of money author Morgan hausel writes that when we're driving a nice car we think that people are thinking we're cool but the truth is most people are just looking at the car they're not looking at the driver they're looking at the car so make wise financial decisions you guys when it comes to what you drive it is so so important it is not worth the stress and the the pain of paying out a car payment every single month when you know you could be investing that instead so remember with budgeting and knowing what you have you can get rid of your car payment save up and pay cash for your next car and here at Ramsay Solutions we created a car guide to help you when it comes to navigating owning a car the smart way so I will leave a link in the description below for you and if you know someone that's in the market for a new car make sure to send them this video and remember you guys to take control of your money and create a life you love [Music]

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