The answer?Â Miller High Life, the self described champagne of beers.
But seriously, this article aboutÂ folks who buy cars that they can’t possibly afford hitsÂ close to home for me.Â The author discusses theÂ often delusionalÂ rationale that goes into many new car purchases.Â The most perplexing ofÂ which is the justification of taking onÂ higher debt because the more expensive purchase will depreciate moreÂ slowly.Â Â
Car valuations matter because an increasing number of consumers are “upside down” on their auto loans, meaning they owe more than the car is worth. In the first quarter of 2007, 29 percent of consumers were upside down on their vehicles, Kelley Blue Book reports. Additionally, on average, people traded in cars on which they still owed more than $3,600. And what do many of these buyers do with that loan balance when they want another car?
They roll that negative equity — the $3,600 and often much more — into yet another vehicle loan.
“It is a pandemic,” says Jack Nerad, executive market analyst for Kelley Blue Book.
It is also financial lunacy. And making matters worse are risky lending practices similar to what we’ve been seeing in the mortgage industry.Â
Aside from the fact thatÂ when you factor in the total cost of the loan theÂ slower depreciationÂ rationalization is completely untrueÂ IÂ think it should be pointed out thatÂ buyers do this for more than just cars.Â An example I can think of that is even more baffling is the purchase ofÂ personal computersÂ with a high interest loan.Â In two years you’re still making payments on anÂ item that’s worth less than a tank of gas and thatÂ you’re going to have to dump off at the Goodwill store to get rid of.Â Â How smart is that?Â Intelligent or not it’s typical of a culture that isÂ locked into a “something for nothing” mindset.Â The ultimate embodimentÂ being Las Vegas.Â America’s favorite place to go and pretend to be rich.