Real wages have been stagnant for 40 years, even as economic productivity has continued to grow. One way to make people feel like their incomes are not stagnant or shrinking is to cut taxes constantly, a trick that has been exhausted and overused since St. Ronnie arrived in 1980. A second, which we saw at its worst in the late 00s, is to extend really easy credit. For nearly half a century, this is how lawmakers have tamped down the potential danger of a system in which working people run faster just to stay in place while wealth and income skyrockets for the very richest. Say "tax cuts" constantly (even people not actually benefiting from a given tax cut will think they are) and give anyone with a pulse a mortgage, an auto loan or three, and a handful of credit cards. Open a payday lender in every run-down neighborhood or town, et voila.
I like cars and I find the economics of the industry are a decent proxy for overall trends (the crash of auto lending circa 2002-04 presaged the much more damaging collapse of the housing market in 2008-09). A couple trends in recent years are ominous. One is that prices have skewed so high that only old people can afford new cars. Many brands, under intense pressure from the auto press, keep trying to "get younger" and build sportier cars that appeal to less stodgy buyers. The problem (evidenced by the collapse of "Brands aimed at the kids" like Scion, Saturn, and Volkswagen's now-extinct low price marketing) is that no one under 40 can afford new cars beyond entry level compacts. The idea from the 1950s and 1960s that a high school kid would buy a cheap new car with his after-school job is…gone. Good luck finding all but the most spartan new cars under $25,000. Hell, I bought a used Porsche Cayman, since sold, for less than the cost of a mid-level new Camry now. Cars are expensive. "Affordable" cars in magazines hover around $40,000 or more. You know those fun Minis that seem ideally aimed at The Youths? The average price of a Mini Cooper sold new is $35,000.
A second trend is that loans are getting really long in an attempt to compensate for higher prices. Trucks, which have gotten staggeringly expensive yet are targeted at "white working class" types least able to afford expensive vehicles, are soon to be offered at 84 month loans. Seven years. Seven years of interest for something that has three years of warranty and will have depreciated 50% in its first 12 months after purchase. Think about that.
What companies do with trucks will soon be done for any vehicle. It is nearly impossible to find any new truck, no matter how stripped down, under $30,000 and with options most full-sized trucks are in what used to be Mercedes or Jaguar prices – Ford F-150s can easily be optioned to close to $60,000 and maxing out the options can push it close to $80,000. Trucks are big sellers and they are expensive as hell.
Most people earning good money can't even afford a $50,000+ vehicle, and yet truck sales are often highly dependent on people who have little long term economic stability. The only way Bob the Non-Union Builder is going to afford a new $50,000 Ram is if you can lower the monthly payments and hope he sucks at math.
As recently as a decade ago, 60 month auto loans were spoken of in hushed tones. It had long been assumed that the repayment should not extend much beyond the warranty period, nor past the sharpest depreciation points. Now we've tacked two years onto what was already a tenuously long lending period. Good luck paying seven years' interest on a truck that will be worth about 25% of what was borrowed by the time it is paid off.
PS: I'm sorry about the title, but also not even a little sorry.