The great American car conundrum

Why society demands car ownership, but fails to supply the financial equipment to succeed

The car is a foregone conclusion in American society today. With the exception of a few extraordinary places (New York City, for instance), cars are critical for functional, productive existence in modern-day society. They’re necessary for commuting, getting your family everywhere they need to be, and not just being mobile, but also being upwardly mobile.

Recent studies have shown that cars are an important lever for success in America. Laura Bliss of CityLab recently noted that “over the past 50 years, owning a car has been among the most powerful economic advantages a U.S. family can have.” The study she analyzes goes on to elucidate that “U.S. households without access to a vehicle have steadily lost income, both in absolute terms and compared to those with cars, as the landscapes around them were increasingly shaped to favor the automobile.” Cars are a cornerstone of American success, and they have subsequently woven their way inextricably into the very fabric of the American Dream.

So why, we must ask, do cars continue to be so untenably expensive when success is so clearly tied to car ownership?

It’s a thorny societal dilemma that lawmakers and social scientists are starting to surface with increased urgency. David King, a professor of urban planning at Arizona State University, cites the situation as “a crisis that’s been decades in the making… There are a lot of people who keep struggling because they can’t afford to get around reliably.” With limited access to mobility comes limited access to opportunity — and over time this phenomenon becomes a self-fulfilling prophecy of the haves and the have-nots.

More demand, more debt

Car ownership is so critical to economic success, in fact, that more and more Americans are assuming more and more debt just to gain access to the arena of opportunity that it affords them. The car is a necessity, but the car is also unattainable as price tags continue to hike.

Nathan Bomey at USA today recently noted that “the average price of vehicles hit an all-time high of more than $36,000 in 2018... and with interest rates rising, car shoppers are now borrowing more than ever and extending their loans to record lengths.” The average new car buyer, he notes, pays an average of $551 per month on his or her auto loans. Even used car buyers are shelling out more than ever — in an article published late last year, Bomey notes that “the average American used-car buyer is now paying a record high of $400 per month” with the longest average loan time ever.

Given that society demands mobility to be successful, the economics of car ownership are looking bleak — car prices are so high that Americans are going into debt to afford them.

Sources: 2010: Forbes; 2011: Forbes; 2012: Kelley Blue Book; 2013: Kelley Blue Book; 2014: Kelley Blue Book; 2015: Kelley Blue Book; 2016: Kelley Blue Book; 2017: Kelley Blue Book; 2018: Kelley Blue Book; 2019: Kelley Blue Book

Sources: 2009–2016: Edmunds, 2017–2018 Edmunds

Sources: 2011 & 2012: Experian; 2013: CNBC; 2014: Autonews; 2015: Edmunds; 2016: USA Today; 2017: Experian; 2018: CNBC; 2019: Forbes

According to Heather Long over at the Washington Post, “a record 7 million Americans are 90 days or more behind on their auto loan payments.” “A car loan,” she goes on, “is typically the first payment people make because a vehicle is critical to getting to work, and someone can live in a car if all else fails. When car loan delinquencies rise, it is usually a sign of significant duress among low-income and working-class Americans.” To add insult to financial injury, unlike investments that gain value over time (a home, for instance), cars do the opposite — they lose value over time, making them one of the worst types of investments out there.

Combining collaboration with innovation

Meanwhile, the auto industry is abuzz with technological promise. Each day, the car is getting more sophisticated, with autonomy, electrification, and connectivity saturating industry conversations.

But in the wave of technological advancements in automotive design, there are also simple, creative ways to leverage technology and good, old-fashioned human camaraderie to tackle this growing disparity between people and the cars they need to buy — peer-to-peer car sharing.

Peer-to-peer car sharing opportunities, fueled by companies like Turo, not only make cars more attainable for the masses, but also bring accessibility to people who choose not to buy a car. Turo’s unwavering mission is to put the world’s one-billion-plus cars to better use, and how better to level the playing field of car ownership and accessibility than sharing those cars?

Carculating better ROI

Back in December, Turo launched a new tool to help people across the US and Canada allay the pressure on finding affordable mobility options. Using years of proprietary data, the Turo Carculator calculates average earning forecasts for specific car makes and models in specific cities, so prospective car buyers can get a sense of how much they could earn sharing their cars in their cities. The goal of the tool is to help car buyers make responsible, informed purchasing decisions, and to show how sharing your car just a few days per month can make a world of a difference in affording a car, whether it’s your zippy dream car or a simple daily driver to set you up for success.

Since launching the Carculator, we’ve found that 20% of new Turo hosts said that they used the data from the Carculator to pick the car they purchased, 53% said that they use Turo to pay down their car loan or lease, and 36% said they purchased their vehicles recently with the intent to offset the costs with peer-to-peer car sharing. (1) Car sharing is proving its mettle when it comes to tackling the conundrum of a severely skewed car ownership landscape. Car sharing democratizes car ownership and increases accessible mobility options.

Car sharing is changing consumer car buying behavior

Our Carculator data reveals some interesting trends indicating which cars provide the highest return on investment. Interestingly, the cult classic Jeep Wrangler took the crown on a national scale — a base model could pay itself off by sharing it just five days per month. The Fiat 500, Ford Fiesta, and smart fortwo took the top three slots in the “Daily driver” category, with a nice mix of affordable SUVs and minivans showing strong return on investment when shared.

Vehicle ownership starts to look more within reach when you can actually generate some income to offset the steep cost of entry.

A bright road ahead

So what’s the moral of this story? All is not lost. Cars are increasingly sophisticated pieces of technology and are thus increasingly expensive. America’s reliance on cars as drivers of success is not likely to disentangle itself anytime soon, so we need creative social solutions to this sticky dilemma.

Car sharing is a tenable, immediate, and collaborative way to start tackling this problem. Everyday Americans can buy the cars requisite for success. If they don’t want or can’t quite afford a car, they can use other folks’ cars to gain access to mobility. I’ve previously called it the hybrid model of vehicle ownership, and I think that this model is becoming even more apparent as we move deeper into 2019.

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(1) Turo research study, 400 respondents polled from December 18, 2018 – January 31, 2019