George Kamel - Why Is No One Talking About America’s Wealth Killer?

Episode Date: September 11, 2023

There are currently 107.8 million auto loans in the US right now. Americans are losing their biggest wealth building tool (their income) to depreciating assets, and today we are going to talk about how we got here and what we can do about it. Links: Ramsey Car Guide EveryDollar Budget Deal: I love a good deal, when you sign up using this link, I’ll hook you up with a 14-day free trial and $15 off your first year of the premium version of EveryDollar. Learn more about your ad choices. Visit megaphone.fm/adchoices

At the crossroads of capitalism and consumerism, a silent killer lurks in the shadows, preying on unsuspecting citizens' hard-earned wealth and trapping them in a nightmare of financial despair. Masquerading as a luring offer's, the wealth killer reels in innocent souls with the promises of luxury and dreams fulfilled and third-row seating. But behind those glossy brochures and polished chrome exteriors lies a sinister trap. They say that once you sign that contract, you're bound to them. forever. The interest rates start low, but eventually consume your income. Before you know it, the hope of financial freedom vanishes like a puff of smoke. The once shiny car becomes a grim reminder of your looming debt, and you are continually haunted by the relentless pursuit

of America's wealth killer. The auto loan. And if you thought that was dramatic, wait until you hear these numbers. There are currently 107.8 million auto loans in the U.S. Right now? Right now? Right now. The total debt amount for all of those loans adds up to $1.58 trillion. For scale, that's $1,580 times. You see, ever since the pandemic, Americans have embraced taking out auto loans just like they've embraced overpriced loungeware. And those of us under 40 are the worst perpetrators for both of those things.

In fact, one in five Gen Ziers say that an auto loan cost them over 20% of their after-tax income every month. And to that I say, low-key, no-case. cap, big yikes. In other words, 20% of America's future income earners are losing their biggest wealth-building tool, their income, to depreciating assets during the most pivotal wealth-building years. If that doesn't scream wealth-killer, I don't know what will. So today, we're talking about what got us here and what you can do about it, starting with clicking that clicker on the like, share, and subscribe buttons. Be the change you want to see in this world. I think either Kanye or

Albert Einstein said that. Maya Angelou, Michael Jackson, DJ Khalid, Albert Einstein, Gandhi, Kanye, or Trump? No. I got a one out of seven chance. So you're telling me there's a chance. All right, let's rewind to February of 2021. Kim and Kanye had just split. We still didn't know which way to walk down the grocery aisle.

A space rover landed on Mars, and there were 2.6 million unsold used cars on dealer lots. Fast forward to February of 2023, and there are just 2 million cars for sale, down 21, in just two years. So because the supply was so low and demand was so high, car prices got jacked up. I'm talking jacked. But people were willing to take out loans despite high prices, thanks to the record low interest rates by the end of 2021. Now, auto loan interest rates have climbed back up to the highest levels since 2008. My, my, my, the turns table, but there's a, how do you say that backwards? These loans people took out in brighter times are now crushing them financially and robbing them of their ability to build wealth.

You see, when you finance that 2023 Whisper Blue Lincoln Corsair, you were thinking about how much more in touch you'd look than the minivan parents in the carpool line. You weren't thinking that you'd lose 9 to 11% of the value the second you drove it off the lot, thanks to our power depreciation. Side note, depreciation is just a $10 word referring to how much your car was worth when you bought it versus what it's worth when you sell it.

So with that $40,000 Lincoln Corsair, you're basically lighting $4,000 on fire and throwing it out the driver's side window on the way home. And from there, your Whisper Blue Baby's value is essentially headed for a trash landing. Here's what your Corsair's value journey looks like in those first five years. So it starts out, $40,000. One minute after you drive it off the lot, it's down to $36,000. One year later, it's down to $32,000. Two years later, down to $27,000. Three years later, we're down to $23,000. Four years later, we're under $20,000. And five years later, it has lost 60% of its value, and it's down to

$16,000. Don't miss that. Your brand new car loses on average 60% of its value in the first five years. But don't worry, even though your car is plummeting in value, you'll still be shelling out that same monthly payment for the entire length of the loan term, which on average now is longer than five years. And just to be completely clear on what a whack job this deal is, after 70 months of payments, you've got a paid off car that you finance for $40,000, but you paid a total of $50,000 for thanks to interest. That's now only worth $16,000. And the work. The first part about this is you're going to do this all over again when you finance your next car. You're going to do this over and over and keep on taking more car loans up until the day your grown children take away those Buick keys and declare you a danger to the public.

By the way, check on Grandma, would you? This is middle-class Groundhogs Day, and I will not stand for it, and that's why I'm sitting right now. I will not, I won't. I'm not gonna stand. Can't make me. Don't mess with me, poor job. This is the only type of debt you continually trade in and keep around and think that it's just a way of life, when the whole time you could have been using the money you spent on payments to build your wealth. Now, a couple of months back, I released a video all about how much money you would have if you invested your monthly car payment instead. And spoiler, it's enough

to buy over 7,000 massage chairs, aka $6 million. I mean, think about it this way. We know that the average new car payment is $717, meaning some people are spending way more. In fact, lots of people now have payments over $1,000 a month, especially in Texas and YW. Isn't data beautiful and sad? That's so sad, man. That is so... Sad. We also know that 63% of people are living paycheck to paycheck right now, and 55% of them feel behind and saving for retirement. So for most people, an extra $700 every month would rock their ever-loving world.

So here's some good news, even if you don't believe it right now. Having a car payment is not your only option. What am I suggesting here? How do you get a car without a car payment? Well, you buy it with cash. Krispy new $100 bills. You don't even need a duffel bag full of hindo's, unless that's your thing. If that's your personal brand for some reason, you can attempt it.

The key here is to just have the money in the bank, which if you're not there, start small. Start with the car you can afford today. And that may not be much. That may be an old clunker you got off Facebook marketplace. So what I'm talking about here is buying an affordable, used car that you can pay cash for, or write a check for, or get a cashier's check for in your bank, or even using a debit card. And I know when I say affordable, used car and cash, you might have just laughed me off saying, George, have you seen the car prices out there, man?

They're $30,000 for a car that's 10 years old. Yeah, I have. I research regularly because I have no life and hobbies, and this is all I do with my time. I sit in here and do these videos for you, just for you to be mad at me for making a video for you. I'm not mad. Just disappointed.

Now, the days of the $1,000-beter car may be gone. But you could save up around $4, 6, or 8 grand, and buy a solid car that gets you from point to point B. Now, finding this affordable car, it's going to take some research and digging. And you're not going to find this at your local brand new car dealership. You're going to have to go look at independent use car dealerships and Facebook marketplace and other areas. But the bottom line is, your budget should dictate the kind of car you can afford, not the other way around. Don't get it twisted. And if you're telling me the $6,000 card doesn't exist, you're just bad at Google.

That's the truth. I mean, here's a car from a local automotive shop selling a Camry for under $6,000. And I get it. You may not want that car. It may not. not be your dream car. But just because you don't want to drive it doesn't mean it doesn't exist. And I personally lived this out. I drove an 07, then I drove an 09, and I currently drive a 2013. That's right, a 10-year-old car. And I'm not broke. So if you are broke, it's time to reset your expectations about what kind of car you deserve and understand that you're not going to be driving this car forever. Now, it's easy to come up with all the reasons why you need that nice new car. But now is the worst time in history to buy that new car. And the second worst time to buy a car was

during the Civil War, because they didn't exist yet. Let me tell you, bad time to be car shopping. There's a war going on. The nerve. But none of those will be reason enough to go into debt for. All that matters is that your car gets you where you need to be, at least until you can save up for a better one. And if you know you're going to want a better car down the road,

get it down the road, then save up for it. Save what you would have spent on a car payment to fund that next car purchase in a savings account with no interest. In fact, you'll be making interest instead of paying it. Or even better, if you've released your ego into the ether and realize you only drive your car for two hours a week anyway, keep that used car and invest the money in mutual funds

to the tune of literally millions of dollars over the long haul. And drive that car as long as you can until the wheels fall off. All I'm saying is the less money you're spending on your car every month, then more money you'll have to put into other more important things, like paying off your student loans and putting away money in your kid's college fund or writing a redemptive novella about it. That's an option.

Or maybe you're saving to retire as a permanent resident on a cruise line. Also a strange dream that I don't have. It's a petri dish. Okay, have you seen people that go on the cruises? Just saying, I'm also, I can't swim. So where do we go from here? Well, living without a car payment is definitely not the norm in our culture. Most people have bought into the lie that you'll always have a car payment

and that Imagine Dragons makes bad music. Obviously, two unrelated points, but just felt the need to call that out. Thunder is a bop and I'm not sorry about it. So if the two cars in your driveway are stealing $700,000,500 bucks in car payments from your hard-earned money every month, it'll be close to impossible for you to get ahead of living paycheck to paycheck. And the truth is, few things will keep you as broke over the course of your life as car payments. The routine of making car payments every month of your adult life is one of the worst financial habits out there.

If you want to level up financially and get rid of money stress, you've got to break the car payment habit and replace it with the tried and true habit of saving up and having that delayed gratification. If you can make that mental shift and pay off your car and pay cash for future cars, you can free yourself up to build some serious wealth. Or depending on your situation, it might be time to see. sell your car before you even pay it off. How do you know if that's you?

When should you sell the car? Well, if the value of your vehicles adds up to more than half of your annual income, it's time to sell. And the reason is simple. It's too much of your financial world tied up in depreciating assets. And trust me, feeling good about the future is better than that new car smell. Plus, you can buy that smell on Amazon for like four bucks. That's it for me.

If you like this episode, share it with your friend who just bought that brand new car and has left you wondering, do they have a trust fund, a truckload of debt, or are they running a money laundering scheme a la Ozark? A lot of questions. a lot of answers. Thanks for watching. I'll see you guys next time.