April 22, 2024
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Car Buying Is Hard When You’re Paying Student Loans


Happy Thursday! It’s January 11, 2024, and this is The Morning Shift — your daily roundup of the top automotive headlines from around the world, all in one place. Here are the important stories you need to know.

1st Gear: Student Loans Are Getting In The Way Of Car Sales

When the world shut down back in 2020, so did student loan payments. All those recent grads, suddenly freed from interest rates that can hit 35 percent, decided to use their newly freed-up cash to participate in a little thing we call “commerce” — exchanging money for goods or services, participating in the economy. Many of them put their budgets towards automobiles, which come with their own monthly payments — payments that are now fighting newly resurgent student loans for control of grads’ wallets. From Automotive News:

Increased vehicle prices, interest rates and cost of living all strained the pocketbooks of American car buyers and owners last year. On top of all of that, student loan payments have resumed after taking a three-year break.

Federal student loan repayment paused during the pandemic and started back up in October. While payments were halted, 36 percent of consumers with student loans took on an automotive loan, according to TransUnion. Now saddled with more debt, those consumers are at particular risk, the credit reporting agency said.

The combination of overall increased costs and debt is straining young consumers, said Travis Bowie, general manager of auto finance at insurance company Jerry. In a December survey using Pollfish, Jerry found 28 percent of 1,268 Gen Z respondents said they were more than 30 days late on a debt or rent payment because of the cost of car ownership.

“I don’t really see an option where this gets any easier, at least until the car prices start to come down,” Bowie said. “I think we are probably going to still see elevated delinquencies and defaults in the months ahead.”

As of May, 40.6 million people had student loans totaling $1.6 trillion, according to TransUnion. The average student borrower has about $35,000 in debt, and some consumers have monthly payments of over $500.

Damn! It’s almost like there are far-reaching consequences from asking uninformed 17-year-olds to sign up for 20 years of payments. Ah well, it’s too bad there’s nothing that could be done about undereducated kids being subjected to rampant fraud and predatory lending.

2nd Gear: Toyota’s Solid-State EV Batteries Are Coming

Solid-state batteries are the future of electric vehicles, which means they may well be the future of cars as a whole. Yet, despite all the research, no one’s perfected their implementation in a consumer vehicles — at least, not yet. Toyota is aiming for that prize, with vehicles set to hit the market in “a couple of years.” From Reuters:

GANDHINAGAR, India, Jan 11 (Reuters) – Japan’s Toyota Motor (7203.T) will in a couple of years globally launch vehicles with solid-state batteries that charge faster and last longer, an executive said on Thursday at an investment summit in India.

Solid-state batteries promise to dramatically improve the driving range of electric vehicles (EVs), a key element of a strategic pivot Toyota unveiled in June to make up ground lost to Tesla and Chinese rivals, such as BYD, in the EV race.

Last year, Toyota and oil refiner Idemitsu Kosan (5019.T) said they would tie up to develop and mass produce all-solid-state batteries, which they aim to commercialise in 2027 and 2028, followed by full-scale mass production.

“We will be rolling out our electric vehicles with solid state batteries in a couple of years from now,” said Vikram Gulati, the India head of Toyota Kirloskar Motor. It “will be a vehicle which will be charging in 10 minutes, giving a range of 1,200 kms (750 miles) and life expectancy will be very good”.

If those specs are anywhere close to accurate — 10 minutes to charge, 750-mile range — the tables could start turning very quickly on ICE vehicles. I’ve never owned a car that got 750 miles to a tank, nor have I owned a car that I’d actually want to sit in for a full 750 miles before getting out and stretching my legs for 10 minutes.

3rd Gear: There Are Too Many Cars, Actually

Remember how dealer markups started happening because there weren’t enough cars to go around, back in the chip shortage? Well, now there are too many chips, which means we’re also faced with the possibility of having too many cars. From Automotive News:

New-vehicle inventory in the U.S. rose by more than 200,000 in December and started January half again as large as where it stood a year earlier, the highest in three years, according to Cox Automotive.

Cox said vehicle inventory stood at more than 2.7 million in its latest estimate, representing a 71-day supply, and up from an estimated 2.5 million a month earlier. Cox said new-vehicle inventories had recovered a year earlier to about 1.8 million as the industry slowly regained production from 2021’s component shortages.

Despite the surplus, enthusiast cars are still often limited in their production. Don’t expect dealer markups on the fun stuff to suddenly turn into cash on the hood.

4th Gear: 2023 Went Well For BMW And Mercedes

Last year was a mixed bag for many automakers, particularly in the ever-important Chinese market, but not for BMW and Mercedes. The two German luxury marquees continued to sell cars and rake in money hand over fist, as Germany luxury brands are wont to do. From Reuters:

BERLIN, Jan 11 (Reuters) – German premium carmakers reported sales at or above forecasts for 2023, with BMW (BMWG.DE) topping deliveries but Mercedes-Benz (MBGn.DE) set for the highest returns margin, in a sign of varying strategies towards going electric.

Volkswagen’s (VOWG_p.DE) Audi began closing in on competitors with total unit sales of 1.9 million vehicles, but battery-electric sales remained far behind at 178,000 to BMW’s of more than 375,000 and 240,600 at Mercedes-Benz (MBGn.DE).

Mercedes said on Thursday its fourth-quarter sales took a hit from supply constraints and model changeovers, but full-year car deliveries were in line with its forecast at 2 million.

Its group sales rose 1.5% to just under 2.5 million, but fourth-quarter sales were down 3% for the group and 4% in the cars division as a shortage in 48-volt battery systems and a model changeover for its E-Class limited output.

The EV push is going well for Germany, but a little less well over here. Perhaps someday we’ll match their level of nationwide charging infrastructure.

Reverse: The Greatest Threat To American Health, After Covid And Corn Subsidies, Is That Smoking Looks So Goddamn Cool

On The Radio:

Space Boy Initial D by Dave Rodgers

Was anyone going to tell me that Dave Rodgers made an updated mix of Space Boy, complete with a Caterham-based music video? You were all just gonna let me find that out on my own, huh?



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