This Is How An Autopocalypse Unfolds
“Up next is the dip and the potentially crushing waterfall.”
That’s what Shareholder Intel alerted back in early December about the deteriorating state of the auto industry.
Since then the auto industry has been hit with a steady trickle of bad news.
And, according to new data from auto market research company Edmunds, there’s not going to be any place to hide from this fallout.
Just look at what car buyers were paying last quarter.
The annual percentage rate (APR) on new vehicle financing hit 6.5% in Q4 of 2022.
This is up significantly from the 4.1% in the same period in 2021.
That’s not a huge deal there.
It works out to the average monthly payment on a 60 month auto loan increasing from $830 to $880 per month.
It’s a drag, but not a market killer.
It’s a bit worse in used cars too.
The average APR on used vehicle financing has increased from 7.4% in Q4 of 2021 to 10% for Q4 of 2022.
That jump in rates will take the monthly payment on a $20,000 fully financed used car from $400 to $425.
Again, not a huge increase, but it’s enough to weigh on the prices and sales.
Here’s the giant problem with these rate increases combined with the record rise in auto prices.
The combination has pushed the car buyers to commit to making the highest monthly payment ever.
Last quarter 15.7% of all new vehicles financed had a monthly payment of over $1,000.
That’s up from just 6.7% in the last quarter of 2020.
It’s a huge jump that should be a bit of a ceiling for auto financing payments.
These big payments have helped keep car sales, the auto loan market, and dealerships afloat.
The future economy isn’t likely to be able to support these record high payments.
As a result, expect more pain for the auto industry.
If you’re interested in seeing how to play the auto bust that’s unfolding, check out Boom-Bust-Boom: This Cycle Could Pay Off Big In 2023.
