Thank god, its not just me then. I have a lot of thought on the issue. What I really can't wrap my head around is if you factor in the median house price in the USA, which is about $200K? People spend a big part of their lives endlessly paying mortgages with relatively high (compared to auto loans) interest rates on that. How are vehicles hitting 25% - 50% of home prices and people are willingly paying these rates? Especially when you consider the massive depreciation and frequency that most replace their vehicles.
It just seems like an endless pit of money for such short term use vs long term home purchasing.
I think a lot of people have their priorities out of whack. Of course there are quite a few that can afford the best of both worlds... but I am sure each and every one of you knows someone like I am talking about. Living in apartments, yet driving these new $50k vehicles. Just.. why?
/rant off
Well, if we are going to rant.....
I think if you look at the general population and generation shifts happening less and less people are really wanting to purchase a house. Actually watched a study the other day about how 40 somethings are leading that charge. Too focused on careers and life to worry about having to upkeep a house when they can rent and just call someone to complain and things get fixed.
I will agree that it seems like car prices have shot up over the last 5-10 years. $50k use to buy you something pretty nice! $100k and you were buying a really nice vehicle! Now if you want similar vehicles you need to tack at least $20K onto the price. I know the way the world works financially but inflation has not been quite that high. I also think manufacturers are shifting product lines higher to get higher prices while inserting smaller vehicles into their line-up that they charge less for while giving significantly less. (Thinking BMW here with the shift in prices of their 5 series (X and Cars) in price/quality/options and inserting the 1 Series into the line-up to help get the lower market)
I also think most people just see car payments as a way of life. I know my parents always have. They hold a car till its paid for and typically go out and purchase a new one to replace it. Sadly we load miles on a vehicle at beyond the average rate. Not quite Umberto rate but pretty close. Between living outside of town, having a second home states away and traveling to visit family/friends/other cities we are currently averaging about 25-30k miles a year. I just took a new job that has me running 75 miles one way at least 4 days a week (picked up a cheap commuter car for this). We don't like to hold on to the vehicle for more than about 50-60k miles as after that you start to have issues and we don't care to be stranded with a vehicle in the shop. This limits changes to about 2.5 years. I will also admit that I have a high passion for cars and typically look at where my money goes and it goes to changing vehicles every 1-2 years just because I either want something different or our lifestyle has changed. I am working on doing better with this but just can't seem to find a vehicle that truly makes me happy and fits the bill for everything we do. I will also say that I rarely purchase new vehicles, hence why I hated cash for clunkers. Finding a lightly used vehicle for $10-15K less than new is difficult to do the past few years.
So, after some background, I agree with you to a degree but while cars depreciate the recession/housing market crash has also ruined a lot of peoples perception of owning a house. A car gives people pleasure while not locking them into something that they might change their mind about in a year. Purchasing a house entails much larger closing costs (taxes for a vehicle purchase) and is difficult to get rid of on short notice if you decide you are not in love with it. A lot of people 40ish and under have either had upside down mortgages or can't even afford to purchase something. Thus they are stuck with renting, while they probably have decent credit and can afford to get the 1.9% rate to purchase that $50K BMW or MB. Renting has become accepted in the world we live in.
What I do agree with you on is that vehicles are a terrible financial item. Horrible! One of the worse things you can do with your money.
The other angle to play on this is the fact that our government encourages debt. You talk interest rates on home mortgages but almost all of that interest can be taken off on your taxes. While it is not a 1:1 ratio it does help people and people see that as aid or benefit to being a home owner.
So I agree with you that the world, peoples priorities and financial standing of 99% of the US is totally screwy. Just the wonderful world we live in!
