Enter at https://www.omaze.com/stephan for your chance to win an Unplugged Tesla Model S Plaid S-APEX and support a great cause. Add me on Instagram: GPStephan - Video Inspiration From Automotive Life - HELP GET HIM TO 100K SUBS: https://youtu.be/zhmr8w-A7YQ
GET YOUR FREE STOCK WORTH UP TO $1000 ON PUBLIC & READ MY THOUGHTS ON THE MARKET - USE CODE GRAHAM: http://www.public.com/graham
Trade Bitcoin, Doge, and other crypto with zero fees on FTX. Use my referral code GRAHAM and get up to $100 FOR FREE: https://ftx.us/partners/graham
GET MY WEEKLY EMAIL MARKET RECAP NEWSLETTER: http://grahamstephan.com/newsletter
The YouTube Creator Academy:
Learn EXACTLY how to get your first 1000 subscribers on YouTube, rank videos on the front page of searches, grow your following, and turn that into another income source: https://the-real-estate-agent-academy.teachable.com/p/the-youtube-creator-academy/?product_id=1010756&coupon_code=100OFF - $100 OFF WITH CODE 100OFF
As supply chain constraints, production, and chip manufacturing begin to improve…used car prices are beginning to drop, down 6.4% since the record high in January. This also marks the FOURTH consecutive month that auto prices have fallen…and, the FIRST month that sales declined 17%.
Even though this is certainly GOOD NEWS if you want to buy a car…it’s a NIGHTMARE for banks who have LENT MONEY on those cars, at a value that’s rapidly beginning to fall.
Right now, “investors are willing to bet that consumers will keep paying their loans in the near term” - because, after all, a car is an essential purchase that allows them to go to and from work, or be used as a way to make money…although, that might not necessarily continue.
A survey from Fannie Mae found that: “16% of consumers said they expected to lose their job in the next 12 months.” - and, THAT is generally the time where finances get tight, and people cut back on the items that might be costing them too much money…or, in this case, certain Auto Loans.
The WallStreetJournal even found that “more subprime borrowers have start missing payments” as rising prices force households to choose between paying for essentials and paying their monthly loans. NOW, the government is warning of a surge in CAR REPOS, and that “the problems could get much worse unless we stay ahead of it.”
The reality is - lenders have given potentially unaffordable loans to buyers, without verifying their finances, on cars with overinflated values that can’t be sustained without a chip shortage…and, it’s only a matter of time until - EVENTUALLY - things have to come back down and return to normal….after all, used cars can’t sell for more than NEW, FOREVER.
ON THE BRIGHT SIDE….logistically, don’t expect this to be ANYWHERE NEAR the size of the housing market collapse…because, loan sizes are SIGNIFICANTLY SMALLER, and it’s MUCH easier to repo and auction a car than it is to foreclose on a home.
In addition to that, most auto loans have a fixed interest rate…so, even though a buyer may owe WAY MORE than what the car is worth…as long as they can continue making that monthly payment…the solution is to simply hold on to the car longer than you expected, and keep driving it until - eventually - you break even.
The best strategy, in this case…is to simply recognize that 40% year-over-year price appreciation is by no means normal, or to be expected…and, if you find yourself with a loan that MIGHT not be affordable….NOW would be a good time to either lower your interest rate, or drive something in a more affordable price point to save the extra money.
My ENTIRE Camera and Recording Equipment:
https://www.amazon.com/shop/grahamstephan?listId=2TNWZ7RP1P1EB
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness @gmail.com
*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. This is not investment advice. Public Offer valid for U.S. residents 18+ and subject to account approval. There may be other fees associated with trading. See Public.com/disclosures/
GET YOUR FREE STOCK WORTH UP TO $1000 ON PUBLIC & READ MY THOUGHTS ON THE MARKET - USE CODE GRAHAM: http://www.public.com/graham
Trade Bitcoin, Doge, and other crypto with zero fees on FTX. Use my referral code GRAHAM and get up to $100 FOR FREE: https://ftx.us/partners/graham
GET MY WEEKLY EMAIL MARKET RECAP NEWSLETTER: http://grahamstephan.com/newsletter
The YouTube Creator Academy:
Learn EXACTLY how to get your first 1000 subscribers on YouTube, rank videos on the front page of searches, grow your following, and turn that into another income source: https://the-real-estate-agent-academy.teachable.com/p/the-youtube-creator-academy/?product_id=1010756&coupon_code=100OFF - $100 OFF WITH CODE 100OFF
As supply chain constraints, production, and chip manufacturing begin to improve…used car prices are beginning to drop, down 6.4% since the record high in January. This also marks the FOURTH consecutive month that auto prices have fallen…and, the FIRST month that sales declined 17%.
Even though this is certainly GOOD NEWS if you want to buy a car…it’s a NIGHTMARE for banks who have LENT MONEY on those cars, at a value that’s rapidly beginning to fall.
Right now, “investors are willing to bet that consumers will keep paying their loans in the near term” - because, after all, a car is an essential purchase that allows them to go to and from work, or be used as a way to make money…although, that might not necessarily continue.
A survey from Fannie Mae found that: “16% of consumers said they expected to lose their job in the next 12 months.” - and, THAT is generally the time where finances get tight, and people cut back on the items that might be costing them too much money…or, in this case, certain Auto Loans.
The WallStreetJournal even found that “more subprime borrowers have start missing payments” as rising prices force households to choose between paying for essentials and paying their monthly loans. NOW, the government is warning of a surge in CAR REPOS, and that “the problems could get much worse unless we stay ahead of it.”
The reality is - lenders have given potentially unaffordable loans to buyers, without verifying their finances, on cars with overinflated values that can’t be sustained without a chip shortage…and, it’s only a matter of time until - EVENTUALLY - things have to come back down and return to normal….after all, used cars can’t sell for more than NEW, FOREVER.
ON THE BRIGHT SIDE….logistically, don’t expect this to be ANYWHERE NEAR the size of the housing market collapse…because, loan sizes are SIGNIFICANTLY SMALLER, and it’s MUCH easier to repo and auction a car than it is to foreclose on a home.
In addition to that, most auto loans have a fixed interest rate…so, even though a buyer may owe WAY MORE than what the car is worth…as long as they can continue making that monthly payment…the solution is to simply hold on to the car longer than you expected, and keep driving it until - eventually - you break even.
The best strategy, in this case…is to simply recognize that 40% year-over-year price appreciation is by no means normal, or to be expected…and, if you find yourself with a loan that MIGHT not be affordable….NOW would be a good time to either lower your interest rate, or drive something in a more affordable price point to save the extra money.
My ENTIRE Camera and Recording Equipment:
https://www.amazon.com/shop/grahamstephan?listId=2TNWZ7RP1P1EB
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness @gmail.com
*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. This is not investment advice. Public Offer valid for U.S. residents 18+ and subject to account approval. There may be other fees associated with trading. See Public.com/disclosures/
what's up you guys it's graham here so first of all i gotta say i am shocked that more people aren't talking about this because we're facing a huge problem in the used car market and honestly it's a disaster waiting to happen like we all know that used car prices have gotten really expensive but did you know that those car prices have outperformed the stock market in 2020 2021 and also 2022 in just the last year used car prices have increased 40 percent which is twice the growth of the housing market four times the growth of contemporary art and five times higher than the 40-year record-breaking inflation of eight and a half percent however the days of used cars selling for more than new is beginning to come to an end with the automotive industry on the brink of an auto loan collapse that has the potential to shake out the entire market as defaults begin to increase on predatory loans that never should have been issued to begin with but hey at least on the bright side they arrested an avocado thief in california anyway let's talk about the current state of the auto industry how this quietly became one of the most egregious bubbles that very few people are talking about and how this will likely affect the value for vehicles over these next few years for better or i guess for worse although before we start there was a lot of research that went into making a video like this so it's factually correct and accurate as of the time i'm posting this video so if you appreciate that it would mean a lot to me if you subscribed or hit the like button for the youtube algorithm so that more people could see exactly what's going on so thank you guys so much for doing that and also a big thank you to omaze for sponsoring this video but more on that later alright so for anyone who's ever wondered how on earth we got here why 82 of cars were selling for over msrp and how this was even allowed to get so out of control it's all jerome powell's fault he did it okay not really but just like everything else 2020 has been a hell of a drug see in most normal circumstances when you go and buy a new car that car loses on average 11 as soon as you drive it off the lot within a year it's lost 25 percent of its value and within five years the average car is worth 63 less than it would cost new this makes sense because technology is dated the car experiences wear and tear and it's no longer the latest design but in 2020 auto manufacturing completely stopped in the wake of the shutdown this meant that for a brief period of time no new cars were being built although what made the situation worse wasn't so much the auto manufacturers but instead the tiny little chips that went inside the car and no not those chips these chips semiconductors like this make it possible for the car to control everything from the windows the sensors the ignition navigation and everything else so much so that a modern car requires in excess of several thousand chips and even though that sounds like a lot the auto industry only uses about three percent of the global chip supply the rest gets used by consumer electronics like smartphones which saw a record increase throughout 2020 and 2021 so those products get priority as a result excess demand combined with manufacturing delays a lack of labor and a supply chain crisis led to a shortage of semiconductor chips which of course led to a shortage of new cars being completed in fact the uk suffered its worst manufacturing year since 1956 in terms of output and the us continues to halt production on their most popular vehicles simply because they don't have the components to finish them that means higher prices for everybody else at the same time demand for cars has skyrocketed to the point where buyers are willing to pay a premium just to get anything that they can and all of a sudden a three-year-old car is selling for more than its original sticker price brand new and that's where the problem begins see when buyers purchase a car the vast majority of them are financed in fact 85 new car purchases are bought with debt along with 55 of used car purchases and what makes this so unique is that unlike real estate auto loans are not subject to strict underwriting requirements allowing nearly anyone to get a loan if they really want to drive off with the new purchase it's so bad the jalopnik ran a story in late 2021 detailing just how easy it was to get a loan and how predatory those loans become calling it a true wild wild west and a poorly regulated wasteland or in other words borrowers with great credit scores are being funneled into high interest loans that were more than double the average rate on top of that 25 to 50 of loans were given to customers who might not be able to afford them and to make matters even worse lenders rarely verified income and employment to borrowers to confirm that they had sufficient income to repay the loan of the loans consumer reports looked at these verifications happened just four percent of the time and if that wasn't unbelievable enough as of now five percent of auto loans in the us are behind on payments and nearly half are underwater where the buyer owes more on the car than what the car is actually worth and that says a lot when you consider that auto prices are already significantly higher than they were just two years ago and just like the housing market collapsed from the loan crisis in 2008 it said that the same thing is beginning to happen in the automotive industry and i didn't even believe it until i saw the numbers but before we go into that since we're on the topic of cars how about this instead of buying a car and worrying about its value let's take it a step further because i've partnered with omaze who's giving you a chance to win something perfect for a video like this while getting to support a great cause at the exact same time they're giving you a chance to win this absolutely incredible custom tesla model s plaid upgraded by unplugged performance the plaid is insanely fast with a 0-60 of under 2 seconds a top range of 396 miles and a top speed of 200 miles an hour on top of that the artisans that unplugged put their own luxurious touch on countless customizations including cognac colored vegan bamboo leather interior satin white vinyl wrapped exterior wide body kit and carbon fiber accents i've done reviews of my own tesla in the past and i have to say the technology is incredible the ride is unbelievably quiet and the panoramic glass roof makes it feel like you're driving a convertible minus the sunburn and best of all in the process you'll be able to help support the juju foundation at the exact same time the juju foundation is a non-profit organization dedicated to the support of youth initiatives and lifting the spirits of those in need this includes bicycles and logs to underserved youth around the country a music fund which creates greater accessibility to musical instruments and teachers to underserved youth and a scholarship program for students facing economic hardship so if you want to potentially win this incredibly cool tesla model s plaid while getting to help support the juju foundation at the exact same time go to omaze.com stefan or click the link down below in the description so thank you guys so much and now with that said let's get back to the video all right so when it comes to the current state of the auto industry here's the thing when a buyer obtains a loan whether it be through a bank or a dealership those loans are bundled together and sold on the secondary market for investors who want to get paid back with interest in return lenders get their money back plus a small fee and they could use those proceeds to hand out new loans to start the process over again with the real estate market this spelled disaster because subprime loans were falsely packaged as safe investments and when homeowners couldn't afford those monthly payments they defaulted banks couldn't pay back their investors and everything went to poop since then lenders have strengthened their requirements increased down payments and verified financials but with the car market that's not being done instead investors have had such a big appetite for buying up packaged car loans that they're selling at the fastest pace in years to the point where subprime auto bonds with junk ratings have been selling at yields as low as three and a half percent versus as high as nine percent four years ago this essentially means that investors are highly unlikely to see a positive return on their investment because three and a half percent is nowhere close to compensating on the level of risk associated with lending money on a vehicle that's probably not worth the price that they paid right now the auto loan industry is a 1.4 trillion dollar market on top of that as car prices have risen lenders have offered longer loan terms to allow for more people to finance a car experian noted that the number of car loans of 72 months or longer is the highest it's ever been even more concerning is that some lenders are willing to finance up to 125 percent of the car's value so if you bought a car for 30 000 you would be able to get 37 500 to include sales tax registration title and fees then instantly you're in the negative without even turning on the car now in all fairness negative equity like this is nothing new and unlike a house repossessing and auctioning off a car to recoup some of your investments is a fairly quick process but the magnitude of which this is occurring is beginning to draw some concern and this is what we have to get to as supply chain constraints production and ship manufacturing begin to improve used car prices are beginning to drop down 6.4 percent since the record high in january this also marks the fourth consecutive month that auto prices have fallen and the first month sales declined 17 even though this is certainly good news for anyone who's soon to be in the market for a car it's a nightmare for banks who have lent money on those cars at a value that's rapidly beginning to fall right now it's said that investors are willing to bet that consumers will keep paying their loans in the near term because after all a car could be an essential purchase that allows people to go to and from work or be used as a way to make money but that might not necessarily continue a survey from fannie mae found that 16 percent of consumers said that they expected to lose their job in the next 12 months and that is generally the time when finances get tight and people cut back on the items that are costing them too much money or in this case it's expensive auto loans just recently it was reported that eight and a half percent of subprime borrowers defaulted on their car loans which is the second highest total on record the wall street journal even found that more subprime borrowers have started missing payments as rising prices force households to choose between paying for the essentials or paying off loans now the government is warning about a search in car repos and that the problems could get much worse unless we stay ahead of it the reality is lenders have potentially given buyers unaffordable loans without verifying their financials on values that can't be sustained without a chip shortage and it's only a matter of time until eventually things have to come down and return to normal the reality is for most people just like a house a car could be a necessity but just like any payment it needs to be affordable otherwise you run the risk of making a huge mistake in most cases the rule of thumb here is what's called the 2410 rule 20 down payment on a four-year loan where you spend no more than 10 of your monthly income on transportation but what actually happens is completely the opposite instead the average payment is just 11.7 percent on a 72 month loan with a car that's being kept for 71.4 months so basically people aren't even finished making their payments before they roll that into a brand new loan that starts the process all over again so between an unprecedented search and prices rising interest rates and chip manufacturing beginning to return to normal we should expect auto prices to begin to fall right alongside with your cryptocurrency investments just kidding but seriously kpmg predicts that used car prices could drop 30 as more supplies the market and ally financial predicts a 20 decline the timing is a bit uncertain but it does look like it's starting to unravel over the next 12 to 18 months overall from everything that i have researched my biggest concern is that too many people have locked themselves into auto loans that were more expensive than they could afford and in the event of a job loss or a reduction in income those people wouldn't be able to sell the car for as much money as they owe and if they can't come out of pocket on a twenty five thousand dollar car that they owe thirty five thousand dollars on they'll have no other choice other than to get their car repossessed flooding the market with more inventory and causing prices to decline even further this is especially true right now when more than half of all auto loans are underwater meaning they own an average of 3 700 more than what the car is actually worth and that negative equity is only going to get worse the more auto values decline at a certain point it's just not sustainable and that needs to be acknowledged we also have businesses like carvana who actively lose 3 200 for every car sold and when they have more than 55 000 cars that's a lot of losses that have to go somewhere like their stock which is also down 91 year-to-date now on the bright side logistically don't expect this to be anywhere near the size of the housing collapse because loan sizes are significantly smaller and it's a lot easier to repo and auction a car than it is to foreclose on a home in addition to that most auto loans have a fixed interest rate so even though a buyer may owe way more than the car is worth as long as they can continue making those monthly payments the solution is to hold on to the car longer than expected and keep driving it until eventually you break even best strategy in this case is to simply recognize that 40 price increases year over year is not sustainable or to be expected and if you find yourself with a loan that might not be affordable now would be a good time to either lower your interest rate or drive something less expensive so that that way you could save the difference this is certainly something to be made aware of and if you don't believe me i'll link to my newsletter down below in the description where you can see each and every single one of my sources very few people are talking about this and the more people understand what's going on the more we could prevent the problem from only getting worse in the future just buy a car that you could comfortably afford pay it off as soon as possible drive it for as long as you can and then subscribe if you haven't done that already i had to put that one in somewhere so thank you guys so much for watching also feel free to add me on instagram and don't forget that you can get a free stock with all the way up to a thousand dollars when you sign up for public.com down below in the description when you make a deposit also you can get all the way up to a hundred dollars a free crypto when you sign up for ftx us also down below in the description and also with the codegram you may as well take advantage of those offers it's pretty much like free money enjoy thank you so much for watching and until next time.
Great video Graham
No
Honestly i'm not surprised, new cars are made of plastic…
Bought my 2019 VW Alltrack for 6k under MSRP with 0%apr in May2020. Today im at 50K miles and its worth the same that I paid. Planning to sell it ASAP while the prices are still being held up.
Auto industry will keep rising as the inflation rise .
What was the appreciation of the Ford GT. Please make a video on how some cars are not dumb investments. Thank You.
Waiting for my C5 to come down
bro your videos are nice and informative but your body hand and head movements is kinda cringe .. word of advice tone it down a bit
Cognac colored vegan bamboo leather???? Is that a sentence
I'm willing to predict inflation will continue, gas prices will remain high, recession will happen, unemployment will rise, car loans will trend towards default, and mortgages will trend towards default. Too many people made bad and impulsive purchases. I'm already seeing high level employees being let go in my network.
In investing what is comfortable is rarely profitable !
$Dexa
Keep calm and keep investing! Lol XD
Two years back, new Suzuki Jimny cost around $21,000 here in Europe. Now, used Suzuki Jimny cost double that price. And if you want new, you must wait more than year.
I secured a bag flipping cars from last year and I’m still doing it!
LMfao this is so wrong
I notice a lot of market casters now getting back to making content, and moreover making private pay-only content. Are they trying to make up for loses? xD
I'm being patient…I'm not getting rid of my current car it still runs great even though it's 10 years old. I would just like a toy to play with on the weekends thats not going to drain my pockets.
I check prices everyday they have not dropped
I've been thinking about getting a new car for awhile because up until this point I've driven a junker. The older Graham videos about lifestyle inflation helped a ton in holding onto my cash. I've got a paid off 2016 Lancer and a 2006 Honda accord I got for $500 and put $2k in repairs into. No reason to upgrade anytime soon.
This nigga talking about autobots
I bought my car few months before covid started in November 2019. Thank goodness.
Why would you buy a car with debt, thats just stupid. In other words, why would you spend lend money on something that doenst even bring in positieve cashflow.
America’s free money and easy cheap loans, made the JDM market go crazy it will be good to see it come back to earth!
How does one bet against car loans in the market?
Im selling cars right now, and we are making some serious money. Im 21 and make extremely good income
The fact that MSRP isn't it's actual price should be illegal on its own. This one dealer tried to hike up a car I wanted by an extra 6,000. Almost 25% extra cuz of "short supply". Like no, imma walk. F that.
Bought my 16 Golf R 20k miles for $25k Jan 2020, sold it Sep 2021 with 50k miles for $30k 😂 wild
Very informative. Thanx
Graham I agree with many things you say. On this point your wrong. There are still no new cars to be sold so this is a simple supply and demand issue.
I bought a used car in 2019. I got rear ended it still gone up in value.