If people could not or did not finance new cars, new car “sales”
would probably drop by 75 percent — and two-thirds of the
currently-in-business car companies would probably be out of
business.
What does this tell us?
First, the current “market” is an artificially created and
very abnormal one — like Frankenstein’s monster and just as
destructive. It is not a coincidence that the explosion in brands
— and the geometric increase in the number of individual models
sold by each brand — coincides precisely with the rise in easy
credit made possible by no-cost (or next-to-no-cost) money (i.e.,
interest) and loans stretched out over 5-6 years.
It was not all that long ago that the typical new car loan
was just three or four years.
But perhaps the most insidious aspect of the flim-flam is
the way it hides the cost of government mandates and regulations
from the eyes (and thoughts) of the typical American — making them
seem “affordable.”
Or at least, we don’t notice how unaffordable they’ve made
new cars.
It’s really quite brilliant, in a Dr. Evil kind of way —
like withholding. Many workers never actually have to send the
government a check, because the money’s already been taken before
they ever even get to touch it. Similarly, long-range financing and
low interest on that long-range financing makes the bloated MSRP
sticker price of the typical new car seem more manageable because
the payments are broken down into monthly chunks. It is no accident
that car salesmen are trained to get the buyer to focus on the
monthly payment — not the actual sticker price of the car itself.
They will ask, “How much can you afford to pay per month?” —
knowing that, say, $400 goes down a lot easier than
$40,000.
Since most Americans are innumerate as well as impulsive
and thoroughly conditioned Consumerists, it’s no hard sell to get
them to sign up.
And that is what makes possible the
shoving-under-the-proverbial-rug of things like the federal
“passive restraint” mandate that gave us the now-common 4-6 (or
more) air bags that every new car has and which add — according to
most estimates — about $2,000 to the bottom like cost of each and
every one of those new cars. Ditto the Feds’ “clean diesel”
mandates that have jacked up the sticker prices of vehicles with
otherwise-efficient diesel engines by 20 percent. There is a
literal laundry list of such mandates, ranging from the minor to
the major — but each costs something and those costs are all
folded into the price of the car.
Now, if it weren’t for extended-range payment plans, the
cost of all this rigmarole would be much more obvious — and
offensive — to consumers. More to the point, it would be obviously
unaffordable.
Instead of that $400 per month payment on the $40,000 car
— spread out over 5-6 years to ease the financial burden in the
perception of the well-marinated Consumerist — said Consumerist
would be staring at $600 or maybe $800 a month for the same
vehicle, scrunched down into a three or four-year payment
plan.
And that, in turn, would make it much harder for the
government to continue blithely imposing its mandates — costs —
onto the backs of consumers, because consumers would simply stop
buying cars and the wheels of industry would cease to
turn.
And we can’t have that.
Thus, the pyramid scam goes on. The regulatory burdens
increase and with them, the cost of the end product. “Finance”
greases the skids by making it all seem affordable when it’s really
not — and the Dumbos keep signing up for payment-in-perpetuity and
wonder why they’re perpetually broke.
The tragedy is we’re still in control and could throw the
proverbial switch overnight and then “change” — the real thing —
would come. If even 20 percent of people who currently finance new
car purchases on the 5-6 year plan chose instead to buy a
lower-cost used car outright, with cash money, it’d impose some
much-needed financial discipline not just on the car industry —
which supinely accepts and often loudly amens every new federal
“safety” (and “emissions”) mandate proposed by non-engineer,
know-nothing bloviating politicians - but it would also put a crimp
on this disastrous living-beyond-our-means
train-wreck-in-the-making that is modern America.
