Hey everybody welcome back to whiteboard Finance my name is Marco and I'm here to Help you master your money and avoid 90 Month auto loans or a thousand dollar a Month auto loans so today's video is Going to be about how American car debt Is exploding higher uh we're going to be Talking about skyrocketing Auto rates Repos and potentially even remote shut Off Tech Um we'll see we'll see if we're gonna Get into that one but for the most part This video is going to be like all my Other videos that are in the PowerPoint Presentation tons of value if you don't Like these kinds of videos well I don't Really care because I do and I think It's a great way to convey a ton of Information a very concise amount of Time so trouble is brewing okay so right Now consumers have about 1.4 trillion Dollars worth of Auto debt this amounts To be nine to ten percent of total Consumer Debt so you can see here from The New York Federal Reserve Bank this Chart right here is talking about how Consumers have added almost one trillion Dollars in aggregate credit card and car Loan debt over the past decade so this Is from 2003 up until I want to say 2023 Or late 2022 but you can see here the Black line is basically Automotive loans So in about 2011 or so this just started Exploding even past credit card debt so
You can see the number of people that Are 60 days behind on car loans is about 25 year-over-year growing and then People that are owing more on what their Cars are worth this is called being Underwater which I'll show you right Here so uh I want to quote this article Very quickly this says that the build up In negative equity being underwater Which I just talked about or the amount That debt exceeds a vehicle's value is Rattling consumers and raising alarms Within the industry though it's not Unusual for drivers to carry negative Equity some dealers say more people are Arriving at their Lots up to ten Thousand dollars under water so you can See here that new car payments are at Eye popping levels leave a comment down Below if you guys are seeing this How many people do you know personally That have four figure car payments now This is thousand dollars and up because It's reaching 16 of new car payments so If you look at the share of new car Payments over a thousand dollars if you Look at 2010 all the way to 2022 quarter One this is below five percent and then From then on is just uh hockey sticked We're at 16 right now if you look at the Average new car monthly payment uh from Quarter one 2010 up to quarter one Twenty twenty two uh it's increasing From about four hundred sixty dollars
Four hundred seventy dollars uh to Almost 700 800 right here actually past 700 excuse me so if you look at subprime Borrowers um this goes without saying But they are the highest risk of default And repossessions and if you look at This chart right here which I took from The car dealership guy uh and also shout Out to my research analyst who helped me Put this together look at this right Here I used to sell cars you guys I've never Seen a 90 month term uh the longest I Would see is probably like 60 maybe 72 You know right around there 90 months is Insane you guys who's who's taking these On this is almost becoming like a mini Mortgage if you will Um so sorry for the big block of text Right here uh but basically Uh we're looking at high levels of Automotive debt and negative equity what This is doing is it's making harder for Borrowers to keep up with payments about 29 of all auto loans originated in 2020 To 2022 are subprime or near Prime and Then also uh we can see a rise in repos And a decline in consumer spending which Could have Ripple effects into the other Parts of the economy if you remember my Video from the summer I actually called A repo guy and he said his repos are Going off the charts that video has About 800 000 views if you haven't seen
That already and it's also going to be Harder for riskier consumers to take out Auto loans that they'll have to pay Higher rates on because of the risk okay So what what is the reason for this why Are cars costing so much what are the Roadblock roadblocks to affordability What are we seeing here so this is all Bank of America Global Research if you Look at this big chart right here I know Some of these smaller ones are harder to See I apologize for that I probably Should have made these individual slides But just to be concise uh this first one Is the total cost cost of raw materials Per average vehicle so if you look at The total raw material dollar cost per Average vehicle it's actually decreased In recent months which we can see right Here but it's still relatively expensive Okay if you look at this the y-axis is Four thousand dollars I mean we're still We're just we're just below that right Here but you can still see that it's Still relatively expensive uh compared To 1990 uh and up now if you look at Exhibit 43 up here you can see inventory Levels bottoming in September of 21 Which is right around here and they've Increased since then by about 735 units But still they're at almost at historic Lows so it's just a supply and demand Equation at this point the reason a lot Of these cars aren't affordable is
Because dealers know they can throw in Additional dealer markup look at the Kia Telluride for example I was looking at New cars I was looking at SUVs because I Have another kid on the way if you're Still watching this uh shout out to my Future daughter another girl of course Thank you thank you Lord uh as long as They're happy and healthy I don't care I Was hoping for a boy but whatever Um so anyway uh look at Kia uh tell your Rides I was looking at SUVs and I'm like Okay I'll stop in check out the Korean Stuff the Kias are actually really nice The telluride's nice my point is is There's additional dealer markup on These Kias so if you look at the Kias There's like four or five six grand on Top of the sticker price Um just because they don't make enough There's that demand outpace is the Supply which is going to raise you know Basic economics is going to raise the Price so take a look at exhibit seven so These lead times and production Materials uh this is obviously supply Chain Um being backed up because of covid but This y-axis here is days the x-axis is The date so if you look at anywhere from January 15 to January of uh 21 right Here where my little laser pointer is These lead times were basically anywhere From 60 to 70 days on average after
January of 21 these lead times are close To 90 to 100 days even though it is Dropping down a little bit we're Definitely still way over the norm So with all that being said let's give a Shout out today's sponsor who is policy Genius if you have a family you know how Much your loved ones depend on you in a Worst case scenario you wouldn't want Them to worry about money a good life Insurance plan can give you peace of Mind that if something happens to you Your family will have a safety net to Cover mortgage payments College costs or Other expenses so they can get back on Their feet and focus on what matters Most my wife and I personally use policy Genius to find the right term insurance For ourselves and our family after our Daughter was born policy genius was Built to modernize the life insurance Industry their technology makes it easy To compare life insurance quotes from Top companies like AIG and Prudential in Just a few clicks to find your lowest Price with policy genius you can find Life insurance policies that start at Just 25 dollars per month for one Million dollars of coverage some options Offer coverage in as little as a week And avoid unnecessary medical exams Their license agents are not Incentivized to recommend one insurer Over another so you can trust their
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Are up 37 percent because this people Had to take on more debt and longer loan Terms which we just talked about the 90 Month loans so take a look at this chart Right here from Fitch this is a rise in Auto delinquencies so the percentage of Borrowers at least 60 days late on their Car payments is rising okay so if this Goes all the way back to 1994 which Absolutely actually exploded here uh in The mid to late 90s and then you can see Here during the great financial crisis In the mid-2000s 2006 2007 2008 uh it Spiked back up and then we've had an Increase a huge decline which was good To see I guess and then right here it's Exploding back closer to six percent so With the supportive policies the Pandemic in the past there are pockets Of borrower who are beginning to show Some distress on their debt this is a Quote from the Federal Reserve and then Also in January the percentages of Delinquent subprime borrowers Rose to 5.67 percent the highest since 2006 Which we can see right here So moving along along the current state Of the auto market you can see exhibit 46 from Bank of America Global Research The U.S auto loan rate uh just 60 months Versus effective fed funds rate I talk About this all the time on this channel Interest rates control everything you Guys so if you look at uh the dark blue
Or the purple this is the U.S auto loan Rate 60 months the y-axis is bank rate New 60-month auto rates you can see zero Percent all the way to 10 percent and Then the light blue line is the Effective fed funds rate this is Basically just what commercial Banks get Their money loaned to them at by the Central bank by the Federal Reserve and Then they make their spread they make The Arbitrage on that so if you look at Peak Auto Sales in 2000 the average 60-month auto rate was nine percent okay Now if you look at the FED funds rate It's almost like a one-to-one Relationship so as the FED raises rates Which they've been doing since basically You know a year now or at least eight Months you can see the what the U.S auto Loan rate is also done it's gone up in The same trajectory if you will so auto Loan rates have spiked as the Federal Reserve raises rates to fight inflation Uh GM General Motors has temporarily Halted production of pickups as Inventory bloats and then Ford files a Patent on Tech that could shut off your Car if you miss your car payments this Is 100 true this Source right now I can Open it but it'll kind of derail the Whole presentation that's from kbb.com Okay and then also if you take a look at This slide right here Um and we're going to get into like my
Thoughts and you know what to do at this Point it's not just the video with a Bunch of slides in it Um so even though inflation may have Peaked it's still above the fed's two Percent inflation Target so we've seen Consecutive months of CPI increasing Which means that I think higher federal Funds rates are here to stay that means Higher T bills higher savings accounts Higher returns for people that are Savers sitting in cash but uh the cost Of borrowing will continue to increase As well as we saw in that previous slide As the FED fights stubbornly High Inflation so banks are also tightening Its lending standards at a rapid rate Which we can see right here it was Pretty lacks from basically Um well forever until the great Financial crisis uh and then we're Starting to see you know them getting Strict again right here so how can you Position yourself what are you going to Do as always this is not a Fear-mongering channel this is to help Uh highlight things that are going on in The world and then teaching you how you Can position yourself so wait to buy so If you're in the market for a car know That interest rates and prices are very Volatile right now that is 100 true if You can you know wait for prices to roll Over uh be strategic so explore multiple
Financing options before signing uh Don't simply go for low monthly payments Because it could be a trap hey your Payment's lower but you're paying on This for 90 months look at how much Interest you're paying over those 90 Months right you know how Americans are Americans love their I can fit it into My monthly budget I'm going to finance This toothpick I'm gonna Finance this Salt shaker uh just because I can fit it Into my monthly budget that's how you Stay on the hamster wheel and that's how You stay broke and then also be aware of The repossession process according to The FTC lenders can repo cars as soon as A borrower misses a payment usually Though it takes two to three consecutive Missed payments once the vehicle is Seized the repo could stay on your Credit report for seven years and that Would obviously hurt your credit score Keeping you in that um High interest Rate subprime category gory spiral if You will so how do you guys feel about This leave a comment down below I'm Seeing people with four-figure car Payments uh these used to be mortgages Guys okay 90 month car loans this is Insane these are these are literally Small mortgages at this point for a Depreciating asset this is how you stay Poor uh it's by financing depreciating Assets not only is it a double whammy
Your car is going down in value and at The same time you're paying interest on Borrowing that money for a depreciating Asset so there's some cars that make Sense you can obviously get into classic Cars and things like that those go up Those do go up in value historically but If you're looking at Daily drivers you Know 90 months you know thousand dollar A month car payments you know who knows What the interest rates are on these Things six seven eight nine percent if You're subprime this is crazy you guys This is insane so keep in mind Everything is simply a rate of return so If your car payment is high and you're Watching this video and you do have the Cash to pay it off think about if you Could put x amount of dollar dollars Into some sort of investment let's call It stocks you're going to average you Know let's just pretend seven percent Right and your car payment or your car Loan is nine to ten percent pay off the Car loan you're making a guaranteed Tax-free rate of return of whatever the Percentage of your loan is makes sense Um so as always I hope you guys got Value out of this video I just want to Shine a light and raise awareness on This Um don't don't drive yourselves Literally to the poor house because you Want you know all the bells and whistles
Of a new car I personally always pay Cash for cars if you can Finance it if You're getting something crazy like zero Percent from Honda or whoever Um you know that could be a feasible Option because you can invest the Difference and make money or in this Interest rate you can put I have a video Coming out Um should be coming out before this Video comes out there's places where you Can make guaranteed 5.1 5.2 percent on Your money so if you can finance a car At zero percent you'd be an idiot not to Put that money into something making you Five percent in this interest rate Environment okay or make that spread Um one last shout out to whiteboard Finance University I got four professors In line uh real estate Professor he owns About 400 units Um in Dayton Ohio uh I have a uh Personal finance budgeting Professor I Have a stock market Professor I also Have an ETF Professor all these people Are content creators and they're awesome Uh right now I'm just working on putting Everything together and having content Inside the school before you join as Opposed to just waiting on the live Streams with me and also the weekly Content that will be coming out from all The professors themselves so it's going To be freaking awesome I hope you guys
Sign up for it check out the waiting List down below thank you so much and Have a prosperous Day 90 month car loans are you dumb Like I hate to go like I hate to become Like Dave Ramsey where he's like That that's dumb with a capital d u m b Dumb like but 90 months got like I Thought 60 was you know okay 72 you know You're kind of an idiot 90 90. [Music]
