Guest Post by Eric Peters
Every kid knows what happens when you try pumping up a leaking tire. As soon as you stop pumping air into it, the tire begins to go flat.
New car sales have been working that way for the past couple of years – with effectively free (zero or little to no interest) loans extended over the horizon – and leases counted as sales – serving as the “air” in the tire.
We’ve been told that business is great.
In fact, it’s as rickety as a Jenga tower.
What’s happening in the used car market is a portent. Prices are collapsing – chiefly because of historically unprecedented depreciation. During the past twelve months, the average used car lost 17 percent of its value. This is almost twice the annual average depreciation rate just three years ago. It smacks of the post-2005 collapse of housing prices.
Continue reading “Pumping up a Leaking Tire”
