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The Car Market COLLAPSE IS HERE
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Right now, the auto industry is flashing
some major warning signs on the US
economy and where things are at right
now. It's basically a real car market
crash that we are facing, which seems to
be right in line with the housing
market. Actually, this it's so
interesting the parallels that the car
market have with the housing market. I
mean, the similarities are quite
stunning. We're seeing automakers being
squeezed by tariffs right now. We have
seen a subprime auto lender collapse and
a lot of car dealerships are warning
that consumers are pulling back. Like
for example, CarMax chief executive Bill
Nash, he told analysts that the consumer
has been distressed for a little while
and I think there's some angst. No,
really. He also said that consumers with
better credit profiles seem to be
sitting on the sidelines, which is kind
of a little hint that people who are
smart with money right now are kind of
just sitting on the sidelines with
everything, not just with buying a car,
but with investing, with buying real
estate, you name it. People who are
smart with their cash are sitting back
and taking a wait andsee approach to see
where this economy goes in the next 12
to 24 months. because a lot of people
probably think that things are going to
continue to get worse and that is a very
safe bet considering the direction
things are going right now. Ford said
this week that it's offering lower
interest rates to buyers with the
weakest acceptable credit histories as
it tries to sell their unsold F-150
pickup trucks. Honda said it was
scrapping an electric Acura SUV after
just one model year and other brands are
offering steep discounts on EVs to
capture buyers before a federal tax
credit expires next week. Triricolor,
which is a subprime auto lender and car
dealer owner, they all of a sudden filed
for bankruptcy liquidation earlier this
month because of government
investigations and because of alleged
fraud. And this company, what they used
to do is they used to offer financing to
customers who didn't have any credit
history or they didn't have a social
security number. And they operated 65
dealerships nationwide. So pretty big
company actually. Sounds like they
catered highly to the illegal
immigration crowd and businesses
suddenly dried up. First Brands, which
is a major auto parts supplier, they
make things like oil filters and
windshield wipers. They're preparing to
file for bankruptcy protection and they
have more than $6 billion dollar with a
B in outstanding debt right now. CarMax
is also having problems. They have about
250 dealerships nationwide and their
profits have been sinking recently,
particularly in their finance department
because of increased delinquencies.
Apparently, a lot of the loans that were
written back in 2022 and 2023 by CarMax
are going delinquent, and they're seeing
some major losses. And this made their
stock price go down by double digits
recently. And funny enough, a lot of
people have been racing out there to buy
electric vehicles before the tax credit
is over at the end of the month here in
September because people are trying to
get that $7,500 tax credit. But you got
to remember that that trend is going to
be temporary because once this tax
credit is over in a few days from now,
no one's going to be rushing out to buy
those electric vehicles anymore. And by
the way, today I am in Belarin Keys
walking down uh Montego Key Street, I
think it is. And you guys can see looks
like a pretty middle-ass neighborhood,
right? Well, guess what? These houses
are like 1.6 $1.7 million. No joke. And
it just looks like an average
neighborhood now, doesn't it? But
there's been so many people out there
buying these EV vehicles in September
that they think that September electric
vehicle sales are going to be up 28%
year-over-year. But it's going to be a
temporary thing October the numbers are
going to be down back to where they were
probably even below normal levels as so
many people are rushing out to buy the
cars now. And let's face it, high
vehicle prices and high interest rates
are already having a major impact on
people that are facing high food prices,
high rent prices, high gas prices, and
are feeling less secure in their job and
worried about being laid off right now.
To make matters worse, new vehicle
prices are up 2.9% since last year at an
average of almost $46,000
for a brand new car. And as you know,
that's basically the base model. You go
to any car dealership these days looking
to buy a nice brand new vehicle, that's
the base model. As you upgrade and as
you get more bells and whistles, you're
going to be looking more like 60 to 70k
range for a lot of different vehicles
though. And the car industry as a whole
from supply chain all the way to the
dealership lots are experiencing
trouble. The German company Bosch, they
are the world's largest auto supplier.
They said that they are going to be
cutting 13,000 jobs this week, which is
3% of its workforce. That is huge, guys.
That's a lot of people losing a job
right now. And apparently in September,
a lot of auto dealers have been pulling
out all the stops in order to get
vehicles sold. But none of that has
really been enough to get the consumer
off the sideline, which is a very
similar trend that we're seeing in the
housing market. Everybody thought once
the Fed started cutting interest rates,
then mortgage rates were going to
plummet and be back down in the fives
and all the buyers are going to be
rushing back. But in fact, what we're
seeing is the opposite. We're seeing an
even larger pullback and we are seeing
mortgage interest rates start to go back
up. And so this traditional economy, the
way things used to work, don't work like
that anymore. A Fed rate cut no longer
means that interest rates on loans are
going to go down. Why? because inflation
is too large of a problem and all of the
Treasury investors know it. But here's
the numbers when it comes to auto sales.
Okay, the seasonally adjusted annual
rate slipped to 14.6 million vehicles,
down from 15.1 million in August. So
that is a big decline in just one month.
New vehicle sales, they are off 2.4%
month overmonth with SUVs and trucks
seeing the sharpest declines. and the
used market, we're seeing the demand
fall even faster with dealers reporting
longer lot times and steeper price cuts
to get these vehicles sold. And this is
all while these dealerships have the
highest incentive levels that they have
had since early 2023 and it still wasn't
enough to get people out there to buy.
My guess is most people don't have the
money and the ones that do are hanging
on to it. That's exactly what we're
seeing happen right now. And that's
especially true if you need a loan to
buy a new or used vehicle because right
now the average auto loan rate is near
9% for new vehicles and above 13% for
used vehicles according to bank rate.
That is huge, guys. And it's no wonder
that CarMax is seeing so many
delinquencies go up from 2022 and 2023
loans because the New York Fed reports
serious auto delinquencies at their
highest level since 2010. People have
signed up for these massive car payments
at big interest rates, sometimes even
refinancing car loan just like they do
with houses in order to try to play some
financial shenanigans, whatever. Then
they end up in this situation where they
can't afford the car. We got to let it
go. Got to go delinquent. Average
monthly payments are still above $750
for brand new vehicles, which is kind of
like an impossible payment for somebody
who is trying to pay the mortgage, the
taxes, and insurance, and all the other
costs of life. The big three automakers
here in the US, GM, Ford, and Stalantis,
they all reported modest declines in
sales recently. only EV sales have been
doing good, which is ironic because for
a while the EV sales are what was not
doing good. But because everybody wants
to get that tax credit before it
expires, these things are actually
selling like hotcakes. Toyota and Honda
are seeing even bigger drops than the
American automakers in sales. Tesla is
saying that their deliveries have slowed
after a summer surge despite aggressive
price cuts. And the luxury segment is
holding up pretty good as higher income
buyers remain more insulated from
financing costs because it's clearly if
money is no object then you really don't
care how much the car costs or what the
payment is going to be because you're
likely just going to pay cash and be
done with it. And the thing is when the
auto industry is slowing down, what we
have to realize is this has major
implications across other parts of the
economy. Similarly to when real estate
sales slow down, real estate agents
don't make money. Lenders don't make
money. The contractors don't make money.
You know, a lot of people that normally
rely on one sector of business moving
like in real estate don't get paid. They
make less money. Same is true for the
car market because when car sales are
slow, then manufacturing jobs take a
huge hit. Automakers employ roughly 1
million Americans and they could be
seeing layoffs pretty soon from all of
this. You also have credit stress
because the rise in delinquent auto
loans spill into banks and credit unions
being heavily exposed to subprime
borrowers and people start missing other
types of payments as well. And having
low auto sales is also a sign of a weak
economy because not only can people not
afford to buy these vehicles, but it
also shows that people who can afford it
are not confident in the future of the
economy. So, we better hold off and wait
and see what happens. And all the
experts are saying, listen, unless the
borrowing costs go down substantially or
wage growth goes up substantially, we're
probably not going to see a meaningful
recovery in the auto market anytime
soon. What does that remind you of? Oh
yeah, real estate. Obviously, I'm not an
expert in the car market, guys, but I
like reporting on these stories when
they come out because of the
similarities. It's almost the same
thing. And what it shows me and what I
like to remind you guys and myself of is
just how broken our system is now. Like
nothing actually works the way it was
designed to anymore because it has been
overheated, right? We have too much
money in the system. They have just
pumped up inflation to too high of a
number and wages cannot increase to keep
up with it. And one of my viewers, I
think Amanda is her name, she asked me
this in the comments the other day,
like, well, if everything is so
expensive, why can't companies just pay
people more to keep up with inflation?
And the answer is because they're not
going to be able to keep their profit
margins. A lot of these companies are
beholden to shareholders. And even if
they could magically increase their
wages to keep up with inflation for
people, well, now all of a sudden that's
going to put increased demand on
everything out there, all of the goods
and services, which means the price is
going to go up even more, essentially
creating more inflation. Now, the
increase in money supply is what really
creates the inflation. But when people
have more money in their pocket to
spend, then demand for everything goes
up. You can see it right now in the
story we just talked about with auto
sales. because people don't have the
money, the auto sales are low. But if
everybody was flushed with cash, we
would be seeing a repeat of 2021 and
2022 where people are going out there
paying above MSRP for brand new cars.
That's not happening anymore because
people don't have the money anymore. So,
I just want to make that point and make
it clear why we are in the situation
we're in. Now, speaking of the EV tax
credits, a lot of dealerships are having
some major anxiety over these EV tax
credits because they are going to be
expiring in a few days from now. And one
problem that a lot of these dealerships
have been running into recently is that
the IRS has been slow in the recent
weeks to approve and pay the federal tax
credits for electric vehicles. According
to a lot of dealerships and industry
analysts about midepptember the delays
started piling up and the dealerships
now are left with a tough choice which
number one they can either carry the
cost and keep offering the credit until
it officially expires or they can pull
back and risk losing the vehicle sale to
another dealership that's still willing
to kind of front the bill so to speak.
That's what these dealerships are doing.
One dealership owner said that we're
continuing to pay the tax credit, but
with a lot of anxiety. He says, "We're
out close to $100,000 right now, meaning
that's how much the IRS owes them in tax
credits, and they're hoping they're
going to be able to get this money
back." And these tax credits are pretty
big. That's why people have been rushing
out to buy these cars, because for a
used EV, you could get a $4,000 tax
credit. And for a brand new one, it
could be as high as $7,500
as an upfront rebate at the point of
sale. And a lot of these dealerships
have been offering that upfront rebate.
And they're the ones who are collecting
the tax credit from the IRS. So they
give you the discount upfront. So say
the car is 30 grand. They sell it to you
for 22,500.
They're the ones who have to chase down
the IRS and get that tax credit, not
you, the consumer. Other dealerships are
not taking the risk and they're saying,
you know what, we're not going to be
giving these tax credits anymore. We're
not getting paid. We're not going to be
the ones stuck with the bill. I kind of
don't blame them. You know, it's a very
risky bet that they're going to get this
money. You would think that they would
since the tax credit doesn't officially
expire until the end of the month, but
you never know. It's also creating a
problem because the dealerships are not
able to provide customers with official
time of sale reports that a lot of
customers need for their own tax filings
at the end of the year. And apparently,
ever since this program began, there's
never been any delays. But now all of a
sudden, there is now that the program's
coming to a close. So, there's a lot of
speculation about why this is. Some say
it could be backlogs at the IRS due to
staffing shortages and the huge increase
in the EV sales volume. That's probably
what it is most likely. But some people
speculate it could be a move by the
Trump administration to slow down EV
adoption. I doubt it. That sounds just
kind of like one of those political
stories. It sounds like they're probably
just backed up. Too much work, not
enough people to do it. And of course,
we got to get weekends and holidays and
all the government holidays off, too.
So, yeah. Now, if you are a consumer and
you're trying to take advantage of these
EV tax credits before they expire, you
don't necessarily need the dealership to
give you that upfront rebate. You can
also claim the tax break on your own tax
return when you go to file your own
taxes and you can get that refund
yourself. You don't have to rely on them
for it. But obviously, a lot of people
want the money upfront right now. And if
you're financing the vehicle, then
obvious obviously you're going to have a
higher monthly payment if you have to
buy the vehicle without the tax credit
up front. So I would imagine for the
vast majority of people who are looking
to take advantage of this, they kind of
need that upfront tax credit in order to
even make this vehicle sale or lease
even possible to begin with. Without it,
they probably wouldn't be able to afford
it is my guess. For example, somebody
who buys a used EV might pay $80 to $100
more per month on a 5-year loan if
they're unable to get the $4,000 tax
credit right up front. So, that might
make the difference between qualifying
to buy the car and not qualifying. And
also, there's a mental game to it as
well. Like, if you're buying a car and
say you had in mind that you want a $400
a month payment, that's my maximum
budget. and you really don't want to go
over and without that credit now you're
paying $500 a month. Well, that might be
enough of a mental block for you to say,
"No, forget it. This is too high." So,
in a lot of ways, these dealerships are
kind of financing the customer's ability
to get a brand new or a used EV right
now. If they're paying this tax credit
up front, they're kind of just throwing
a Hail Mary and hoping that they are
going to get that money back. And we
know that these auto sales are already
having a major impact on the economy.
But really the next thing that is
brewing that I think is going to have an
even bigger impact is the student loan
delinquencies. Okay? Because according
to a new TransUnion survey of federal
student loan borrowers, they found out
that many would consider putting student
loan payments ahead of other bills like
credit cards and personal loans, but
mortgages and auto loan payments were
prioritized above all else, which makes
sense. People need a place to live.
People need their wheels to get to and
from work and pick up the kids from
school and all that. But now they're
starting to prioritize student loans
because your wages can be garnished if
you don't pay them. So now the credit
card companies and the personal loan
lenders are going to be starting to get
stiffed because people have to
prioritize those loans instead. And
let's not forget there are about 6
million student loan borrowers who are
delinquent right now who are already
looking at their wages being garnished.
Okay? And those delinquencies are
expected to continue to increase
throughout the rest of the year and into
next year. So that's a lot of people who
are going to be missing credit card
payments and personal loan payments. And
the proof is in the data because people
who are delinquent on their student
loans right now have seen delinquency
rates on all of their other types of
debt skyrocket between December of last
year and June of 2025, especially on the
credit cards and personal loans. And
obviously auto loan delinquencies and
mortgage delinquencies are up as well.
This may or may not have a correlation
with student loans. I don't know. And
people who are already starting to see
their wages being garnished can see up
to 15% of their disposable wages being
garnished from the federal government.
And they can withhold money from social
security benefits and tax refunds as
well. So these people who thought that
they were just never going to have to
pay and just refused to pay are finally
starting to feel the financial hardship
from those bad decisions. And let's not
forget since September of 2023, so for 2
years now, federal student loans have
been acrewing interest once again
because they were kind of on pause
during the pandemic and balances were
not going up. But for the last 2 years,
the balances have been going up,
especially if you haven't been making
any payments. And I know a lot of people
kind of put it on the back burner
thinking that Biden was going to forgive
their student loan debt and all of that,
but also sitting there and ignoring a
problem that you know that you have,
which is debt and money that you owe,
and just hoping it's going to magically
go away wasn't really the greatest plan
either. You know, people need to take
responsibility for their debts and
things that they sign up for. So, let me
know what you guys think about all this.
Do you think that the auto delinquencies
and the car sales being down and student
loan borrowers going delinquent and not
paying other bills are a warning sign
for the economy? Or do you think it's
just business as usual? You think
everything is just going to recover by
next year, the Fed's going to lower
interest rates, and all will be well?
Let me know what your opinion is about
this stuff. And if you enjoyed this
video, make sure you subscribe to the
channel. And if you don't want to wait
for my next video to come out, check out
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