Are you, like me, curious about why new car sales are so strong at a time when households struggling to pay their bills is a big topic in personal finance? ?
Sales in seven out of 10 states last month exceeded pre-pandemic levels in January 2019, according to a report from DesRosiers Automotive Consultants. Total sales of new cars, SUVs and pickup trucks rose nearly 15% last month compared to a year ago.
Sales are skyrocketing, and prices are soaring. The average transaction price for a new car is about $47,000, according to the latest figures from J.D. Power. It’s no wonder the average monthly car loan payment is nearly $890.
One reason auto sales are strong is that dealers are recovering sales that were postponed or postponed due to the pandemic. Parts shortages slowed vehicle production, leaving dealers with little to offer customers and ending up holding older cars and SVUs for longer periods of time.
But strong car sales also speak to the wide gulf between households that are financially stable and those that are struggling. A recent report from TD Economics found that inflation-adjusted spending levels are declining everywhere except for the top 20% of households, as measured by income. “This is not surprising given that higher-income households were less affected by the withdrawal of government pandemic support and their net investment income increased as interest rates rose due to reduced debt burdens,” the report said.
TD expects consumer spending to grow at a below-average pace into next year, weighing on the economy. But the wealth of the top 20 percent of households is going to make things interesting in certain areas. Car sales show little sign of slowing, and the housing market has rebounded surprisingly strongly in recent months. Travel is also an area where people with money spend their money.
There is nothing new about the haves and have-nots in the economy. However, the pandemic appears to have widened the gap between the two groups.
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Reader comments
In our recent newsletter, we looked at where you can earn 4% interest on your savings. Several readers pointed out that EQ Bank offers him 4% interest if he auto-deposits his paycheck. Otherwise, the interest rate is 2.5%.
Do you have any questions? Please send it my way. Sorry, I can’t answer everything individually. Questions and answers have been edited for length and clarity.
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What I’ve written so far
- You’ve built up a great credit score, but how worried should you be about it going down?
- What’s the bigger risk to your retirement? A lower CPP or a decline in stocks and real estate?
- There are problems with the wedding. How much will you spend on gifts during this difficult time?
More coverage on Rob Carrick and money
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