The Car Market COLLAPSE IS HERE

Right now, the auto industry is flashing some major warning signs on the U.S. 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 is 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 and see 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. Tricolor, 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 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 Belmarin Keys walking down Montego Key Street, I think it is. And you guys can see, it looks like a pretty middle-class 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 70 K 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're 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. OK, the seasonally adjusted annual rate slipped to 14.6 million vehicles down from 15.1 million in August. That is a big decline in just one month. New vehicle sales. They are off 2.4 percent month over month 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 percent for new vehicles and above 13 percent for used vehicles, according to Bankrate. 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 loans, just like they do with houses in order to try to play some financial shenanigans, whatever. And then they end up in this situation where they can't afford the car. You 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 U.S., GM, Ford and Stellantis, 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 one 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. Now, 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 and 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 flush 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 mid-September, 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 $30,000, 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 has 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've 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 obviously you're going to have a higher monthly payment if you have to buy the vehicle without the tax credit upfront. 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 five-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 trans union 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 two years now, federal student loans have been accruing interest once again, because they were kind of on pause during the pandemic and balances were not going up. But for the last two years, the balances have been going up, especially if you haven't been making any payments. 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. 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