Trucks are good for daily use.
Over extending finances to buy a truck they can’t afford is a bad idea.
I’ve met some wealthy people that always put their finances first and not made impulse purchases.
Very good, common sense observation. Some semi caffeinated ramblings, apologies in advance for the long post.
I think that persistent low interest rates have fueled society’s trend towards excessive consumption and have contributed to the distortion of our values. I am not saying this was the intended effect, just a result. I remembered a feeling of revulsion when stores started opening Thanksgiving night and having big sales so people could sometimes literally kill one another to score a good deal on a TV. Now we have become accustomed to thinking that sub 5 percent rates are a birthright.
I like to look at Bring a Trailer auctions for a few minutes once a week or so. Pretty common for people to photograph the original paperwork on the car. You will often see that for cars sold in the 1990s, the rates were often on the 9 percent range. Makes sense when you think about depreciating collateral that often has only a relatively small amount of equity. Probably also had the effect of keeping excessive consumption in check given the cost of the money. Maybe this is why, or is at least a contributing factor, as to why a base model Hyundai now has more equipment that a BMW or Mercedes sedan from the 1990s.
Another data point: my wife likes to watch reruns of Golden Girls on Hulu while we are making dinner - it is on in the background. I wasn’t following the script closely, but in an episode from 1985 (I checked the date of the episode) the main character makes reference to her mortgage rate of 7 percent and how great that rate is. Makes sense at the time - my parents bought a house in the late 70s or early 80s and the rate was double digit low teens. I bet those rates helped keep the bidding wars, six car garages, and other aspects of excessive consumption in check.
Back to cars: I know that this is about Rams. I was at the Cadillac / Chevy dealer last weekend - stopped in to look at a classic car show they had, I was with my son. Walking out, I saw a new Suburban LS, four wheel drive model. A hair under $69k list. This is the base model. Inventory at this dealer is building quickly - I drive by several times a week in my travels. He has about two dozen electric Cadillacs available as well. My sense is that the price on many large purchases that often involve financing have gone up not only because of underlying inflation in the economy, but because of the large supply of cheap money available. I know to some extent they are the same thing or related but it is like college tuition. Everyone always marvels at the cost of college. It goes up as much as it does in large measure because there is an expectation that there is a large supply of government loans and other aid available, so the price you see is not representative of the actual price - the pool of cheap money distorts the pricing. Same with high end vehicles that are not luxury brands. The automakers have become spoiled to some degree, thinking they can fold in thousands of dollars of cost and high end features and customers won’t blanch at the cost because it costs an extra $6 a month on the zero percent 84 month term they signed up for - I exaggerate but you get the point. Decisions about car designs are made years in advance, so these vehicles that were probably to some degree spec’d with certain assumptions about the cost being cheap to finance.
Now I read in the WSJ that the Fed has a great case to start cutting rates because the latest jobs number had softened. I don’t understand this argument. The economy appears to be growing well, and job growth appears steady. Other than inflation, which is still too high but definitely slowing, things are ok by historical standards. (There are other serious problems certainly, I don’t want to sound like everything is hunky dory under Uncle Joe.). But put the election season stuff aside and the Fed is at 5 or so. That is a very moderate rate by historical standards, and if the economy is ok, and inflation is coming down but still too high, why is there this clamor to cut, cut, cut? I think the reason is simply that the financial markets, reflecting most of the behavior in the economy, are addicted to cheap money to fuel endless and nonsensical consumption - everything from buying a $75k pick up truck every three years to a new $1k plus iPhone every two years. It is crazy from a financial responsibility standpoint, and my belief is that it is also corrosive to the individuals involved.
Where I wind up is that I don’t mind if the automakers and other businesses gorging themselves on cheap money learn, or relearn, a lesson or two about value. I also think consumers have to wisen up, not just in the financial sense but also in returning to more of the common sense and values that I believe were more prevalent in the prior generations — too much conspicuous consumption.
Finally, get off my lawn! ;-)
Have a good Sunday everyone.
