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A similar thing is happening with auto loans. There's a ton of bad car debt out there, and easy credit has inflated car prices and (I believe) helped disincenti

A similar thing is happening with auto loans. There's a ton of bad car debt out there, and easy credit has inflated car prices and (I believe) helped disincentivize auto makers from building cars that are actually affordable. There's no market for simple and cheap if you can get something nicer on credit and not look poor. There's a reason the Dodge Journey retails for 4k+ off msrp. With the inflated mspr they can get the bank to write a bigger loan. That way you can buy a journey at a "discount" with room to roll your existing bad loan into a new, even worse one.

taurath 8y ago
To be fair though, safety regulations requiring heavier vehicles on top of requirements for better fuel economies have cut the margins a bit, but the prices have not raised much if at all. The 1995 Honda Civic LX was $14,160 in MSRP, which is ~$22k in 2018 dollars. There are plenty of vehicles for less than that. You might be referring to the higher margins that SUVs get, which are getting more and more popular in the US... but TBH I'm not sure where you get the idea that car prices have been inflated.
- smogcutter 8y ago
  This got me to dig into historical prices a little, and turns out I was even more wrong than that. Looks like car prices were pegged to inflation until about 1997, where they level off while overall CPI keeps growing: https://fred.stlouisfed.org/series/CPIAUCNS https://fred.stlouisfed.org/series/CPIAUCNS https://fred.stlouisfed.org/series/CUUR0000SETA01?utm_source=series_page&utm_medium=related_content&utm_term=related_resources&utm_campaign=categories https://fred.stlouisfed.org/series/CUUR0000SETA01?utm_source... That said, loan terms are lengthening and subprime loans are a large and growing part of the market. That has to be buttressing prices. I really can't back this up, but my suspicion is that over the long term, available credit has helped discourage auto makers from simply making cheaper cars. Today you can buy a cheap appliance computer for a price that would've been unimaginable in 1995. And you can buy a cheap appliance car... for about the same price as in 1995. Obviously the two markets don't work the same way, but there's still something odd about that.

taurath 8y ago

To be fair though, safety regulations requiring heavier vehicles on top of requirements for better fuel economies have cut the margins a bit, but the prices have not raised much if at all. The 1995 Honda Civic LX was $14,160 in MSRP, which is ~$22k in 2018 dollars. There are plenty of vehicles for less than that. You might be referring to the higher margins that SUVs get, which are getting more and more popular in the US... but TBH I'm not sure where you get the idea that car prices have been inflated.

smogcutter 8y ago
This got me to dig into historical prices a little, and turns out I was even more wrong than that. Looks like car prices were pegged to inflation until about 1997, where they level off while overall CPI keeps growing: https://fred.stlouisfed.org/series/CPIAUCNS https://fred.stlouisfed.org/series/CPIAUCNS https://fred.stlouisfed.org/series/CUUR0000SETA01?utm_source=series_page&utm_medium=related_content&utm_term=related_resources&utm_campaign=categories https://fred.stlouisfed.org/series/CUUR0000SETA01?utm_source... That said, loan terms are lengthening and subprime loans are a large and growing part of the market. That has to be buttressing prices. I really can't back this up, but my suspicion is that over the long term, available credit has helped discourage auto makers from simply making cheaper cars. Today you can buy a cheap appliance computer for a price that would've been unimaginable in 1995. And you can buy a cheap appliance car... for about the same price as in 1995. Obviously the two markets don't work the same way, but there's still something odd about that.