Climbing car sales, more repos: What’s driving our ‘wacky’ auto economy

For the past two decades, Tom Kingston, an auto hauler, has seen the ebb and flow of the U.S. car-sales market firsthand. During the COVID-19 pandemic, cars flew off dealer lots, sometimes selling above sticker price, thanks to stimulus checks and low supplies. Now that the pandemic has receded, dealers are struggling to move vehicles, enticing buyers with longer loan terms and incentives. Tom notices a change as well—dealers now have more cars than they can handle, a stark contrast from a few years ago.

Today’s car market is a peculiar one. New and used car sales are climbing, but at the same time, loan delinquencies and repossessions have spiked. Experts like Zach Shefska from CarEdge say the consumer is being stretched thin, dealing with higher interest rates, inflation, and economic uncertainty. Even as Americans continue to buy cars, the Federal Reserve has slowed the economy with high interest rates, creating a divide—those with investments prosper, while others struggle with rising costs.

The terms of car loans have also gotten wild. The average new-car loan now has an interest rate of 9%, with loans stretching out for seven to eight years. People are often left paying off their vehicles just as they need major repairs, a scenario that seems almost impossible to escape. While prices for new cars have slightly dropped since the pandemic, many buyers are finding themselves “upside down” on their loans, stuck with a car worth less than what they owe.

Electric vehicles (EVs) bring their own twist to the market. EVs still cost more than traditional cars, but with government subsidies, new EVs are now cheaper than they were just a few years ago. However, manufacturers like Ford and Volkswagen, which heavily invested in EV production, are struggling to sell their overpriced inventory. Despite Kingston’s skepticism about EVs, even he’s starting to reconsider, with some brands offering incredibly low lease rates on electric models………[read more]

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As more consumers stretch their finances with lengthy car loans and higher interest rates, how do you think this shift impacts the broader economy, and what role do automakers and lenders play in shaping the future of the car-buying experience?

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