The most asked question in today’s market is – “WHEN are car prices gonna go back to NORMAL?”
The answer, of course, is NEVER.
To explain why, I’m going to go over two basic concepts that people are missing.
First off – we have inflation based on demand and supply.
Let’s look at the Lamborghini market for example.
Let’s say you purchased a Gallardo Superleggera in 2020 at 120k.
Well, that exact same car is now 180k.
2020’s 300k Aventador is now worth around 450k.
How do I know that the price is not coming back?
Because something very simple happened.
Not only did the demand increase, but money also got devalued.
I’ll give you an example to easily understand:
If you own a home, that home grows up in value (everybody knows that).
But what you’re missing out is that your home is not the only one that grows up.
EVERYBODY’S home grows up in value.
That means everyone in your neighborhood got richer at the same rate
And because of that – Everybody’s buying power went UP.
That means all the “luxury goods” prices these people could afford went up to adjust to their new net worth.
All that happened is – a new baseline was formed.
120k then is the equivalent of 180k now.
So now you can see why the prices won’t go back to where they were pre-covid.
The Second thing that people don’t understand in economics like this…
Is that the wealth gap gets even LARGER because of one thing:
CONTINGENCY.
Using Real Estate as an example…
When you buy a 500k home, you rely on the bank to finance that home.
When someone buys a 3M house, they rely on CASH.
So the contingency is the bank.
The element to understand here is that the fed comes in and regulates the people that rely on a bank to finance their home.
Basically raising the interest rates to make it HARDER to buy to slow down the market.
The Fed doesn’t care if you are on the rich side of the equation because you pay cash anyway.
You might think that this is unfair.
Why would they restrict REGULAR PEOPLE’S ability to buy but not rich people?
Because rich people are buying with THEIR money, their RISK…
When a normal person is using the bank’s money (aka the bank is risking here).
The fed actually regulates the banks to ensure you’re not exposing the bank to some significant risk.
This is the gist of what is happening in the entire car industry.
Notice that hypercars and collector cars above $300k where people buy in CASH have not been affected by interest rates, while the cars that people rely on credit to purchase have started to soften.
It’s the exact same thing.
As a car hacker, there is tremendous opportunity in buying the cars today that the cash buyers will want tomorrow.
V8-10-12, manual, rare, collectible exotics.
The people who buy those cars today will enjoy massive profits in the next 12-24 months.
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