Q: How can we get car companies to stop selling us cars? Think about it, many of us are figuring out how to pay bills and buy food, and the president is funding car manufacturers to get us in more debt?
Santa Barbara, CA
A: What? Not sell cars? Are you nuts? Are you un-American?
Okay, I’m kidding. You’ve asked a good question, in part. You are right. There are too many people who are spending way too much money on their cars. Too many people are buying cars when they should be holding onto their beaters or hoopties.
But with financial troubles plaguing the U.S. auto industry, if you need to buy a car, this is the time. There are great price breaks.
In fact, the purchase of an average-priced new vehicle took only 21.5 weeks of median family income in first quarter 2009, according to Comerica Bank’s Auto Affordability Index. That’s down 1.3 weeks from the prior quarter and is the lowest on record. The total cost of buying an average-priced light vehicle fell to $26,000 in the first quarter, down $1,700 from the prior quarter.
“With consumers sharply cutting back on their spending in the context of the severe recession, the car companies became much more aggressive in offering reduced financing rates, as well as other types of discounts,” said Dana Johnson, chief economist at Comerica Bank, in a release about the company’s affordability index.
There’s also the new “cash for clunkers” program recently introduced. President Obama signed into law a program the National Highway Traffic Safety Administration calls the Car Allowance Rebate System (or CARS). This is a new federal program that helps you purchase a more fuel-efficient vehicle when you trade in a less fuel-efficient vehicle. If you trade in your gas-guzzler, you get a voucher toward the purchase of a new more fuel-efficient vehicle (doesn’t apply if you are buying a used car). The amount of the credit is $3,500 or $4,500, and generally depends on the type of vehicle you purchase and the difference in fuel economy between the vehicle you are purchasing and your trade-in. The program started July 1.
Overall, there is nothing wrong with selling cars to people who either can afford them or need them. But it is up to individuals to know their financial limit. You are not what you drive. And if you purchase a car you can’t afford, you could help drive yourself into the poor house.
As for me, I keep my cars until they are rusting off the road. I try to limit the amount of money I put into an asset that depreciates every year. It’s just one way to put yourself on the road to wealth!