This is why now is a terrible time to buy a car | Taza Khabre


  • High car prices and skyrocketing interest rates make buying a car out of reach for the average person in the US. The average price of a new car is $48,000-$50,000 with monthly payments of about $700.
  • Banks have become stricter about lending money, making it difficult for car buyers to get approved for loans. Down payment requirements can reach 30-50%.
  • Dealer markups on popular vehicles have become commonplace, with prices as high as $50,000-$200,000 in some cases. Manufacturers’ incentives to help customers buy cars are currently virtually non-existent.

Buying a new car can be difficult for first-time car buyers. Financing, down payments, interest, credit scores, taxes, and insurance policies can all seem overwhelming to quickly wrap your head around. But it seems that buying the “average” car is no longer possible for the “average” American.

Automotive YouTuber Racer X reveals some interesting takeaways about the current state of the U.S. auto market YouTuber faced some major hurdles when buying the world’s fastest factory car muscle car — 2024 Dodge Challenger SRT Demon 170. Running on E85, the 1,025 hp Demon 170. can run the quarter mile in 8.91 seconds at 151 mph.

Dodge’s Last Call muscle car is so fast that the NHRA had to ban the muscle car from the track unless it had an optional safety kit. The muscle car has a suggested retail price of less than $100,000, and getting close to that price can be nearly impossible. “Cars have become largely out of reach for the average person,” says Racer X, and he highlights the reasons why.

High prices for cars make them unaffordable for average buyers

Prices for a new car

  • The average salary in America is below $60,000
  • The car payment for a car worth $50,000 is $700-800
  • Consumers should spend 30% of their income on an average car and more on powerful cars

Racer X highlights that the prices of powerful cars have become extremely expensive, in some cases by 20-25%. The average price of a new car in the USA reaches even 48,000-50,000 USD. verified by Kelly Blue Book. When financed, this would equate to a monthly car loan repayment plan averaging around $700.

There was a time when people used to spend 10% of their salary to buy a car. Now the high prices of new cars mean that if the vehicle costs $50,000, the average American would have to earn $500,000 to stay within the 10% budget, but that’s not the case. Forbes offers the average salary in America costs only $60,000. Racer X provides an example of a more optimistic average income of $80,000. After taxes, an individual will take home about 65% of that.

With monthly payments on an “average” $50,000 car like the Chrysler Pacifica, that would cost them $700-$800 a month before taxes, insurance, maintenance and fuel costs. So, on average, people have to spend 30% of their income today to afford the average car. But for powerful cars, it is much higher.

Interest rates on loans are simply flat

Via Getty Images

Racer X exclaims, his second reason is that “loan interest rates are just stupid.” He notes that in January 2022, the average interest rate on a loan for a new car for 60 months was only 3.8%. In September 2023, the average percentage increased to a staggering 7.5% in almost a year and a half.

Related: Here’s why you shouldn’t take out a huge loan to buy your dream car

But when working with Dodge to buy the Demon 170, Racer X discovered that those numbers didn’t tell the whole story. To purchase a Charger Widebody Jailbreak, Dodge’s website offers a good interest rate of 8.16% for someone with good credit. However, anyone with an average credit rating should be prepared to pay 10-12% depending on the amount of money you borrow.

In 2023, banks will not lend money so easily

The bank does not want to lend money for a car loan
Via Getty Images

In 2023, banks have become much stricter when issuing money than a couple of years ago. ATTOM’s report shows that auto loan defaults among GenZ and Millennials are on the rise. Rider X says he spent time improving his bottom line, saving money for a down payment and anything he could to help his cause, and checking all points since he had a Demon 170 on order. Despite his best efforts, banks repeatedly turned him down when he went to pre-qualify for a loan. Every bank he tried came back with the same result.

Lending problems

  • Banks are making it difficult for consumers to get loans due to the fact that car loans are increasingly being defaulted
  • YouTube RacerX had multiple loan applications turned down for a 2024 Dodge Challenger SRT Demon 170 despite a large down payment and good credit
  • Some banks even require a down payment of up to 50%

Later, he realized that if you have never applied for a loan for a similar amount before, banks will automatically reject your application. The largest loan he had received up to that time was about $60,000 for his Dodge Charger Hellcat.

Cars are getting more expensive, and banks don’t want to lend. When they approve a loan, some banks ask applicants for down payments of up to 30%, sometimes 40% or even 50%. Racer X tells us that even if you’re making good money, getting financing for a new car in 2023 will be extremely difficult.

Related: Chrysler has waived dealer markups on the 2023 300C

Car dealers are happy to overcharge customers

Dealerships Markups on cars with high demand and low volume of production
Via Getty Images

Dealer markups on low-volume, high-demand vehicles have become all too common in the industry. Racer X says that while some dealerships are OK, “some dealers are no longer shy about cheating customers.”

The YouTuber emphasizes that it is a shame that such a practice exists and is even allowed. Prices for most high-powered cars these days are extremely high, starting at $50,000, $100,000, or even $200,000 over MSRP. For example, a dealer is selling a used Dodge Demon 170 for $96,666 for $233,000 on AutoTrader.

Dealer markups continue to hurt consumers

  • Limited vehicles are already expensive items, and dealer markups make the car even more unaffordable for many consumers
  • For a vehicle like the Demon 170, a featured car could potentially have a monthly payment of over $3,800 with very good credit

According to Kelly Blue Book’s calculator, with a “very good” credit score of 700-739 and a 20% down payment of $46,600, the total financing for the marked-up Demon 170 is $186,400. This results in a monthly loan payment of $3,817 over 60 months with an interest rate of 8.42%. Even with an Excellent credit rating, the interest rate is still an average of 7.74%.

Dealer markups drive many enthusiasts and brand supporters out of the market. While an online calculator might suggest otherwise, Racer X confirms that bank loans will almost never cover the value of a dealer’s markup on a car. This is extra money that you will have to shell out if you want to buy a car.

Manufacturer incentives are for dealers only

No incentives for people to afford cars in 2023
Via Getty Images

In the past, car manufacturers offered incentives to customers to help them purchase a new car. These cash bonuses will help lower the price of the car, allowing customers to easily finance it. However, Racer X shows that these deals and incentives are long gone.

Related: People Pay Dealers $100,000 for 2023 Dodge Challenger SRT Demon 170

He adds; “any incentives to help customers buy cars have virtually disappeared.” Manufacturers now offer no assistance to dealers to help sell cars or for customers to afford new cars today. Racer X says it would be nice to see automakers reintroduce customer incentives. But, unfortunately, everything goes the other way around.

Car prices are getting higher and higher, high loan interest rates, banks unwilling to lend money easily, and dealer markups that OEMs are powerless to control. All this combined makes them extremely difficult not only for lovers of performance cars dream carbut also for average car buyers to afford an average car right now.

Source: RacerX, Kelly Blue Book, Dodge, Autotrader, Forbes

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