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Earlier quoted context omitted.
Remind me if I’m wrong but didn’t something dramatic occur financially in the 20s?
If you mean the Great Depression, the invention of mass market car finance predates it by a decade.
I’ve seen some crazy stories on YouTube about people trading in cars they’re already underwater on just to finance an even more expensive one. I can’t understand why banks keep lending money for deals like that.
Because it’s profitable even after losses, from some combination of origination fees and yield. (at least until the credit cycle turns)
And yet automakers think that the smaller more affordable cars that do well overseas somehow have no audience in the US. For instance, the Geome Xingyuan is $10k, Hongguang Mini EV is $5k. Instead we have the average cost of a new car at $50k.
If they sold well in the US, they would bring in more of them. But they don't.
I use the Loud Muffler Index for judging the economy. Traffic gets louder when working people are under financial stress. It's easily measurable.
Disagree. Do you mean that vehicles gets louder because people skip maintenance? Or more stress produces more honking? An opposite effect: more financial stress means less spending on aftermarket exhaust mods means quieter traffic. Also, financial stress means less driving means less noise. Overall, I doubt you're going to find much signal in the noise!
Earlier quoted context omitted.
Loans appeared almost immediately alongside the invention of the private motor car (~1920 Ford/GM had to start offering financing on private vehicles to make them affordable), with 60-75 percent purchased this way in the 20s. Today its 85 percent - there wasn't really ever a period private car ownership didn't involve finance, at least in North America.
Remind me if I’m wrong but didn’t something dramatic occur financially in the 20s?
"The practice of Americans buying consumer goods on the installment plan dates back to the Civil War," e.g. for sewing machines [1].
America's first affordable car, the Model T, was released in 1908. In October 1919, less than one year after the Armistice of November 1918 and just four months after the Treaty of Versailles, GM had "created a financing arm called the General Motors Acceptance Corporation (GMAC)."
You said "cars became 'unaffordable' sometime when loans became common." That is wrong. Cars became cheap because of industrial production. Production aimed at the American consumer, in part, due to the post-Civil War prevalence of installment-based purchasing of factory-made goods.
[1] http://americanradioworks.publicradio.org/features/americand...
And yet automakers think that the smaller more affordable cars that do well overseas somehow have no audience in the US. For instance, the Geome Xingyuan is $10k, Hongguang Mini EV is $5k. Instead we have the average cost of a new car at $50k.
If they sold well in the US, they would bring in more of them. But they don't.
The auto industry would rather use its limited assembly line capacity for the highest margin products, which are large luxury internal combustion vehicles.
We have long been in the era of lean manufacturing, where assets like factories are hyper-optimized for returns to capital, not for making products to serve all needs or desires. Why lower your gross margins by investing in more factory capacity to make affordable cars? You'd rather put your capital into the Mag-7 to get a higher rate of return.
It also makes sense because with growing inequality in the US, the well-off (or the financially irresponsible) are the only people who buy new cars anyways, so the manufacturers make cars for them.
This is also a big part of the reason they make EVs (which are disproportionately higher end or luxury): because they know that EV buyers are likely to be more well off. The environmental benefits are secondary, and the auto industry has never cared much about lowering TCO or energy costs (those things benefit the EV driver, not the car manufacturer).
I’ve seen some crazy stories on YouTube about people trading in cars they’re already underwater on just to finance an even more expensive one. I can’t understand why banks keep lending money for deals like that.