- 7/11/2025
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LifestyleTranscript
00:00What's up guys, it's Graham here, and you better buckle up, because the entire car market is f-
00:05For the first time ever in history, the average price of a new car is about to surpass $50,000.
00:11Auto loan payments are exceeding $745 a month, and with interest rates near their all-time highs.
00:17Americans are now officially beginning to fall behind in their payments.
00:20This is why it's so important that we break down exactly why cars have become America's
00:24number one wealth killer, why used car prices are spiking again, and then what the data says
00:30is most likely going to happen over the next year, because there are three points that you need to
00:35be made aware of, if you want to save a ton of money. Although before we start, if you appreciate
00:39videos like this, or even find them helpful, it would mean the world to me if you gave the like
00:43button a little gas, or subscribe if you haven't done that already. I know it's annoying when I
00:48ask for it, but I promise it's going to be a smooth ride. And as a thank you for doing that,
00:53I promise to stop making bad car puns. So thanks so much, and also a big thank you to Helium Mobile
00:58for sponsoring this video, but more on that later. All right, so first of all, we got to talk about
01:02the boogeyman for anybody who owns a vehicle, and that would be depreciation. Like here's the thing,
01:07for the longest time, when you think about car prices, you'd imagine a chart like this. In a
01:12normal market, a new car is expected to lose anywhere from 9 to 18% the moment you drive it off the lot,
01:18and then from there, prices continue to fall by an additional 10 to 20% a year until after five
01:24years of ownership, you're left with about 40% of the price that you paid. However, these last few
01:29years have completely messed that up. Because of a shortage of auto manufacturing, a limited supply
01:34of parts, record low interest rates, and a surge of demand, used car prices began to defy the laws
01:40of gravity by going up in price. For instance, in 2021, used car prices were 40% higher than the year
01:46prior, meaning back then, you could literally go and buy a car, drive it around for free,
01:51and then sell it a few years later for a massive profit. Not to mention, throughout 2022, it wasn't
01:56unusual for buyers to pay over sticker price just to get the car from the dealership. And at the height
02:02of the shortage, the average vehicle was priced 9.9% above MSRP, all thanks to high demand and limited
02:09supply. Yet, despite nearly every other pandemic shortage eventually coming back down to reality,
02:14car prices never really fell that much. As of now, new cars are still $12,000 more expensive than
02:22they were a few years ago. The typical family would have to spend 70 to 80% of their entire year's pay
02:27just to buy a vehicle at today's prices, which is double from what it used to be in 1990. And all of
02:33this simply means that car prices are outpacing incomes, more buyers than ever have payments that
02:38exceed $1,000 a month. And we have a new category that's absolutely out of control, and that would
02:44be skyrocketing debt. See, when buyers purchase a car, the vast majority of them are financed.
02:49In fact, 85% of new car purchases are bought with debt, along with 55% of used car purchases.
02:55And what makes this so unique is that unlike real estate, auto loans are not subject to strict
03:00underwriting requirements, allowing pretty much anyone to get financed for a new vehicle if they
03:05really want to drive off in a new car. You know, I mentioned this before, but the situation got so
03:10bad that in late 2021, Jalopnik ran a story about just how easy it was to get approved for a loan,
03:16and just how predatory lenders have become, calling it a true wild, wild west and a poorly
03:21regulated wasteland. In this case, their investigation found that borrowers in every credit score category
03:27were given loans with APRs that range from 0% to more than 25%. Or in other words, buyers with great
03:33credit scores were being funneled into high interest rate loans, with interest rates that
03:38were more than double the average since they were just desperate to get into a new car.
03:42On top of that, 25% to 50% of loans were given to customers who might not have been able to afford
03:47them. And to make matters worse, lenders rarely verified income and employment to borrowers to
03:52confirm they had the sufficient income to repay the loan. Of the loans consumer reports looked at,
03:57these verifications happened just 4% of the time. This has now resulted in 5% of all auto loans in the
04:03United States being more than 90 days behind on their payments. Subprime loans have hit a record
04:08high delinquency rate, and 39% of all buyers are underwater on their purchase, meaning they owe
04:14more on the car than what the car is actually worth. How is this allowed to happen? Well, I'll let you in
04:19on a little secret. Contrary to popular belief, an Iowa law review found that over the last 10 years,
04:26car dealerships have begun making more profits from the financing of cars rather than from the cars
04:31themselves, meaning they have a direct financial interest in you taking out as big of a loan as
04:37you possibly can, because that's actually how they make their money, not from selling cars.
04:42Like to give you an idea just how big this problem has become, U.S. auto loan balances have increased
04:47to $1.64 trillion, which is now the second highest debt category after mortgages. In fact, people have
04:54taken out so much money just to buy a car that auto debt has increased 70% in the last decade. So to
05:01compensate for that, people are forced to take out longer loans just to stretch out their payment to
05:06a manageable level. Or in other words, instead of taking out a $30,000 loan for four years pre-pandemic,
05:12which equates to $690 a month, they're now taking out a $50,000 loan for eight years. So this way,
05:18their monthly payment stays relatively the same, even though behind the scenes, this results in more
05:23debt, more interest, and less equity. However, we now have another aspect that could completely flip the
05:30car market from where we are today. And this is something you've got to pay close attention to.
05:34Although before we go into that, speaking of prices, it's not just your imagination. Everything
05:38is getting more expensive, from rent to groceries to utilities. That's why it's more important than
05:44ever to cut unnecessary expenditures, with one of the easiest options being your phone bill. In fact,
05:49it was recently found that the average American is still spending more than $100 a month, which is
05:55absolutely insane. And that's where our sponsor Helium Mobile is there to help. They're offering
06:00extremely affordable, or in some cases, free phone plans that actually work, plus a brand new option
06:06for families called the Sprouts Plan. For just $5 a month, your kid gets their very own phone line,
06:11with three gigabytes of data, unlimited texts and calls, and you could manage their entire plan as a
06:16parent or guardian, set limits, track usage, and stay in full control. Separate from that, if you're
06:22someone who barely uses any data, or just wants a second line, Helium Mobile also offers the Zero
06:27Plan, which gives you a free phone line with no contract, no credit card, and no hidden fees.
06:32All you need to do is share your anonymized location data to help build the network, which they don't
06:36sell and only use to improve coverage throughout the country. They also have an unlimited option for
06:41calls, texts, and data for just $30 a month, again, with no contracts required, and you could cancel at
06:47any time. Plus, as a thank you for participating or referring friends, you'll earn Cloud Points,
06:51which after 90 days could be redeemed for gift cards to your favorite spots. Helium Mobile's
06:56able to do all of this because they combine nationwide 5G coverage with a community-built
07:00network powered by everyday users. It's kind of like the Airbnb of cell service, which allows
07:05them to keep costs low, coverage high, and gives people an affordable way to stay connected.
07:09So if you want to try it out, even as just a free option for extra coverage, use the link
07:14in the description and make sure to use the code GRAHAM to get $10 in Cloud Points for gift cards.
07:19You could also refer your friends, and if they sign up, you each get $10 worth of Cloud Points.
07:24So it's a win-win. Again, the link is down below in the description to get started today.
07:27Thank you so much, and now let's get back to the video.
07:30All right, now in terms of the car market, there are two main points that you need to be made aware of,
07:34especially if you're going to be buying or selling in the next year, with the first being
07:39rising inventory. See, here's the thing. Car inventory is often measured in what's called
07:43days supply, which calculates how many days it would take to sell off current inventory at the
07:48current sales rate. At the worst of the shortage, most brands were under 30 days, with some of the
07:53more popular models literally selling the moment they hit the lot. But today, we're back to about
07:5870 days' worth of supply, which reflects a perfectly balanced and normal market. But not all brands are
08:04created equal. For example, Dodge currently sits at 111 days' worth of supply, Ford has 99, and Lincoln
08:11has 127 days, reflecting a lot of unsold inventory and plenty of discounts. On the other hand, Toyota,
08:18Honda, and Subaru are still in high demand, with certain models under 40 days' worth of supply.
08:24So the prices throughout these automakers are staying pretty firm. This has resulted in some
08:28very clear winners and losers throughout the auto industry. And if you're wondering where prices are
08:33rising or falling the most, you're going to want to hear this. Surprisingly, the largest increase was
08:38seen throughout the BMW 4 Series, up nearly 20% year-over-year in the used car market. Why? Well,
08:45it's theorized that this is the result of limited supply combined with high demand for luxury cars
08:49in that price point. This is also the same thing being found with the Infiniti QX60, which is up 16.5%
08:55from a year ago, and the Porsche 718, which is up 15.7%. On the other hand, the largest decrease was from
09:03none other than Tesla, with prices falling double digits over the last year and depreciating 70 times
09:08faster than a Chevy. Now, a lot of this is likely due to the fact that Elon Musk has become pretty
09:13polarizing lately, electric vehicle tech is changing so quickly that some buyers are just waiting for
09:18the latest innovations, and a lot of people who wanted an EV have already bought one. But if you're
09:23in the market for a used EV right now, I got to admit, it's pretty tempting to pick up a good deal
09:29for a fraction of the price new. And if you bought a Tesla between 2021 and 3 for full price,
09:36oh, well, you probably lost about 50% to 70% in value in the last 24 months, unfortunately.
09:42Although keep in mind, this is only one component of the overall market, and even though inventory
09:47is increasing, there is another curveball coming pretty soon, and that would be tariffs.
09:52That's right, in an unusual turn of events, automakers are preparing for a 25% tariff on imported
09:58vehicles and parts, meaning once again, prices could go higher. For instance, analysts estimate
10:03that tariffs will add around $3,000 to the cost of US-built cars and a whopping $6,000 to vehicles
10:09made in Mexico or Canada. Not to mention, Porsche is holding on to extra inventory, not sure how
10:14much to mark up prices to compensate for the extra cost.
10:17Now, if you're wondering why on earth prices of US-built cars like Ford would see a price increase,
10:23keep in mind, most vehicle manufacturers cannot feasibly source all of their parts from the United
10:27States. And it's common practice to import various materials from around the world. This is why no matter
10:33what car you buy, there will be an impact to its price if tariffs remain in effect. On top of that,
10:38there's also talk that automakers might actually just stop making lower-priced cars altogether if
10:43they just aren't profitable anymore. And if certain parts get too expensive or hard to find, we could see
10:48even more production delays. So even though the car market was finally starting to cool off and head back to
10:54normal, because of tariffs, we could see prices starting to go back up again, with one estimate
10:59suggesting that each car might cost $2,000 more than it did previously. But in terms of where prices
11:05are realistically headed over the next year and what you could do to save yourself as much money as
11:10possible, here's what you came for. Overall, it seems like most experts believe that used car prices
11:15will continue to see a gradual downtrend over the next year, especially if defaults increase and
11:21inventories stay high. Some forecasts even suggest that new car prices could fall a few percent as
11:27competition heats up. But there's also a chance that prolonged tariffs erase this decrease entirely
11:32and actually cause new cars to get more expensive, leading to more demand for used cars. For example,
11:38we're already starting to see this throughout older vehicles. And as CarEdge pointed out,
11:43retail customers that want to purchase a car sub $20,000 are forced to look at older used vehicles
11:48because the new ones have increased in value beyond their budget. That's why if you're in the market
11:52for a car, I highly recommend you take your time, you're not afraid to negotiate, and most importantly,
11:58if you're getting a loan, shop the loan around to find the best possible deal. That way, you're not
12:03going to be reliant on the dealership who's going to charge you whatever they could get away with.
12:08Typically, I've found that credit unions offer the best deal, and there are plenty of ways that you
12:12could save a ton of money just by doing this yourself ahead of time. Separate from that, in terms of what
12:17you could afford, the general rule of thumb is what's called the 24-10 rule, which suggests you
12:22make a 20% down payment on a four-year loan where you spend no more than 10% of your monthly income
12:28on transportation. If you could follow that, you're going to be in a great position financially,
12:32even though, in reality, the opposite of that happens. Unfortunately, the average down payment is
12:37just 11.7% on a 72-month loan with a car that's kept for just 71.4 months. So basically, people haven't
12:46even finished making their payments before they roll it into a new loan to start the process over
12:51again with negative equity. That needs to stop. Ideally, for most people, they would be best off
12:56just sticking with a good, used, reliable car that they could comfortably afford, that they could pay
13:01off as fast as possible, and then keep until it doesn't run anymore. Or if you're thinking of selling
13:06your car because you could no longer afford the payments, now is a pretty good time still to sell
13:12and move on to something that's going to cost you a lot less, especially if it's an EV. Of course,
13:16let me know what you think of all of this down below in the comments. I will do my best to read
13:20and reply to as many of you as I can. And if you want to be kept up to date on the car market,
13:25I'd highly recommend CarEdge, who I'll also link to down below in the description.
13:29Thanks so much for watching, and until next time.
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