Did you know that the percentage of new cars sales that are actually leases has risen from about 3-5 percent in the early-mid 2000s to more than 30 percent as of this year?
It appears about a third of the population – about five times as many as used to be able to – is no longer able to afford to buy new cars.
At least, not the cars they want – the $30,000 and up ones, laden with all the latest gadgets they want (plus the ones mandated by Uncle).
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There are still new cars priced under $20,000 – and most people can still afford those. But they’re the slow-movers. And they’re disappearing – both because they are slow-movers and also because the government-corporate nexus is pushing electric and hybrid-electric cars, which are on track to become the only kinds of cars we’re allowed to buy.
The average car transacted for more than $30,000 last year. The average electric car will transact for much more.
But the monthly nut on a $30k-plus transaction is too high for about a third of the car buying population to grapple with – even when the payments are stretched out over seven or more years.
And so they rent – just like people who can’t afford to buy a house.
But there is an important difference. A house (or an apartment) is a thing of enduring value while a car is a depreciating appliance, like a washing machine or toaster.
But a house or apartment that X rented for $800 per month this year will cost the same $800 per month when Y signs the new lease next year.
Possibly, it will cost more. It is not unheard of for landlords to raise the rent.
Cars are very different.
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They leak value almost from the moment they leave the assembly line – and hemorrhage it the moment they are driven off the dealership’s lot. At the end of its lease, a car is always worth less than it was worth at the beginning.
Usually it is worth about 30-40 percent less.
There is even a term for this – residual value.
As in, what’s left of its former value.
This is why payments can only be stretched so far. The new car’s price goes up, consistently – while its value goes down over time, just as consistently. That’s not good math – if you’re trying to sell new cars.
Or finance them.
