The $28,000 average price per car translates into a total sale value of $21 billion. Of that amount $3b will be borrowed by Treasury, the balance of $18b will be financed by the new owners.
A month from now the new payments will hit both households and Treasury. For Treasury the cost is $90 million a year. Just $7.5mm per month. Think of it as $7.5mm a month forever. For the households who are driving nice new cars the numbers are much worse.
If buyers finance their purchase with 8% money and a five-year payback the monthly nut for these cars is $375 million. Nearly $5b a year. The owners will have a fully paid asset at the end of the five years, but they have to pay for it in full. It comes to $500 per person each month on a fully loaded basis.
Over indebted consumers nearly killed us last year. CC’s, crazy mortgages, store cards, car loans you name it. We are not out of trouble yet from our debt binge. For the government to be crafting ‘solutions’ that just put another $18 billion of debt onto consumers is bad policy.