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--:-- Noel King: A popular TikTok trend I don't pretend to understand is where someone armed with a video camera across their co-workers and asks, "How much is your car payment?" "$1,800. How much is your car payment? Pay like $1,200. How much is your car payment? What's for lunch? That's the real question."
--:-- [Chuckles from the audience]
--:-- Noel King: If some of those numbers sound to you like rent, you're not wrong. Owning a car has gotten more and more and more expensive. Insurance is up, repairs are up, interest rates are up, and it wouldn't be America if scams were not also up.
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--:-- Noel King: Coming up on Today Explained, we're not going to ask if you should just ride a bike or walk. That makes everyone mad. But we are going to examine what has happened to make car ownership so unaffordable.
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--:-- Noel King: I might not have money for food or to hang out with my friends, but I always have money for candles. I always have money for candles. I love candles.
--:-- [Chuckles from the audience]
--:-- Noel King: Support for Today Explained comes from Saks Fifth Avenue. Fall is here. Might be time to find some nice new pieces you can wear again and again.
--:-- [Soft music transitions to a commercial break]
--:-- Noel King: This is very Sean. This is very Sean-coated. Gucci loafers. Saks says Saks makes shopping feel totally customized to you, whether that's from an in-store stylist or a visit to Saks.com, where they can show you just what you want to see.
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--:-- Noel King: They say they'll even let you know when arrivals from your favorite designers are in or when something you've been eyeing is back in stock. You can find inspiration for your personal style every day at Saks Fifth Avenue.
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--:-- Noel King: Having a night out with your friends is awesome. Dealing with hangovers sucks. Meet Senorita, the THC-infused margarita that lets you skip the booze but keep the vibe.
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--:-- Noel King: Made with real fruit, organic agave, and Himalayan pink salt, every sip is like a mini getaway. No fillers, no hangovers, just full flavor and a better buzz. Find your flavor at senoritadrinks.com. Use code VOX20 for 20% off. Must be 21 and over.
--:-- [Soft music transitions to a commercial break]
--:-- Noel King: Thank you, Spot. Here we go. Explained. It's Today Explained. I'm Noelle King with Vox senior correspondent Maren Kogan.
--:-- Maren Kogan: Hi, Noelle. Thanks for having me on the show.
--:-- Noel King: So, Maren, you've been covering the auto beat for Vox, and you've written about how car ownership has gotten more and more expensive. Can you tell us a little bit about that?
--:-- Maren Kogan: Yeah, sure. So, the average price of a new car is $48,000 right now. And there are a couple of different reasons for that. It has something to do with changing fuel economy standards. It's also just that manufacturers are favoring more expensive luxury cars and consumers are buying them more.
--:-- Noel King: Five years ago, shoppers looking for an inexpensive car could choose from about a dozen models selling for less than $20,000. Now there's only one, the subcompact Mitsubishi Mirage, and there are reports that it will be phased out in 2025.
--:-- Maren Kogan: But it's not just car prices. It's car prices, it's auto insurance, and it's the cost of gasoline. Basically, everything associated with owning a car has gotten more expensive.
--:-- Noel King: Let's break them out into individual little buckets there. Insurance, a thing that everybody must have, should have, is up how much? And how long has this been going on?
--:-- Maren Kogan: So, insurance rates for cars have risen dramatically over the last few years. The Consumer Price Index report that came out last week shows that Americans are paying 22.2% more for car insurance than they were the same time last year.
--:-- Noel King: And that's the highest jump rate since 1976. And since February alone, prices jumped 2.7%, so almost seven times higher than the broader inflation reading.
--:-- Maren Kogan: And previous CPI reports have shown that car insurance is up more than 38% since January 2020. My original insurance was $2,400 for six months, and it went up to $4,000.
--:-- Noel King: What's going on? Everybody turned into a bad driver all of a sudden?
--:-- Maren Kogan: Actually, yeah, that is a part of it. The big insurance companies have been relatively quiet about what's going on. Inflation is definitely a big part of this equation. Everything costs more, and those costs are being passed on to consumers.
--:-- Noel King: But the way we're driving plays a role, too. During the pandemic, risky driving behavior like speeding and reckless driving and people using their phones while driving increased dramatically.
--:-- Maren Kogan: No seatbelts, speeding and impaired drivers. These trends of risky driving skyrocketed during the pandemic, which has led to more crashes and deaths than pre-COVID years.
--:-- Noel King: And those numbers are reportedly staying high. You can see this when you're on the road, right? You can see people on their phones all the time when they're driving.
--:-- Maren Kogan: I'm cruising on the highway and I look to my right and I see this lady just on her phone with no tents. Like she just don't care. Like she don't care about no police. She don't care about no state troopers. She just on her phone having a nice conversation.
--:-- Noel King: That's not just a vibes-based statement. There's actually data behind this, too. So I spoke to an expert who has access to driver data for millions of drivers.
--:-- Maren Kogan: There are people who download apps via their insurance companies that measure things like speeding and hard braking and other risky behaviors. And they said you could basically see the distracted driving behaviors go up basically as soon as everything started shutting down during the pandemic.
--:-- Noel King: And they haven't come down since. This is what's left of an SUV that was split in two around 4.45 this morning. A driver ran a red light and the result was a horrific, deadly crash.
--:-- Maren Kogan: Oh, my God. Oh, my God. Perhaps not coincidentally, the number of fatal accidents spiked during the first few years of the pandemic and the severity of auto insurance claims went up too.
--:-- Noel King: So cars came in with more damage and it was more expensive to fix them. Why is it more expensive to fix a car these days?
--:-- Maren Kogan: Okay, so if you think about the car that you had in 2004 versus the car that you could buy in 2024, if the two crashed, the car from 2024 would probably be a lot more expensive to fix because it's more likely to have a lot more bells and whistles and advanced technology, things like backup cameras and lane sensors.
--:-- Noel King: A new AAA study finds these high-tech features can double and sometimes even triple repair costs. The sensors are all around today's vehicles. For cars with front cameras even a minor chimp in a windshield may lead to a costly replacement.
--:-- Maren Kogan: So there's a report that I read that said the estimate for a front claim in 2022 was... and that was up 15 percent over the year before. Vehicles that are more than seven years old were about $1,000 less to repair.
--:-- Noel King: Insurers are paying out more on claims, though. Motor vehicle repair, look at this one. It jumped 3.1 percent over the previous month. Car and truck rentals up 5.7% in a month.
--:-- Maren Kogan: If you get into an accident, then your insurance rates will go up. But you're saying, it sounds like what you're saying is insurance is getting more expensive for everybody. So even if you haven't been in an accident, you're paying more for insurance.
--:-- Noel King: That's exactly right. So I spoke to an industry insurance executive who said basically that we are all paying the cost for this increase in reckless driving and reckless behavior.
--:-- Maren Kogan: So it's not just if you get into a crash. We're all now paying more. What's like the average? Do we know?
--:-- Noel King: So the average cost for insurance is now about $2,000 a year, but that varies by so many different factors.
--:-- Maren Kogan: So it's what state you live in. Certain states have way higher rates. It's your driving record. It's the type of car you have. So many different factors.
--:-- Noel King: So people are paying a really wide range, but it's often the people who can least afford it who are paying the most.
--:-- Maren Kogan: Your insurance rates are often determined by the neighborhood you live in. So if you live in a high-crime neighborhood, you're likely to pay more. It's also often determined by your credit score.
--:-- Noel King: So again, this is just one of the many ways that it's really expensive to be poor in this country. And so insurance is going up because people are driving differently and in some cases a lot worse.
--:-- Maren Kogan: What does that have to do with the pandemic? I know that we've talked about like since the pandemic, things on the roads have kind of seemed like they're falling apart. But why?
--:-- Noel King: So we had inflation, right? Supply chains were severely disrupted. That made cars more expensive. At the same time, you had drivers getting more dangerous. And then at the same time that happened, law enforcement in many parts of the country started really pulling back from traffic enforcement altogether.
--:-- Maren Kogan: The I-team obtained data showing last year Milwaukee police issued its fewest number of citations since 2017.
--:-- Noel King: And there are a number of different reasons for that. One is that it was during the pandemic and there were concerns about having close contact with people in public. The other is that there were major staffing shortages that started to present themselves during this time.
--:-- Maren Kogan: And then also there was all of the unrest and conflict after the murder of George Floyd. A number of these fatal police encounters began with traffic stops. So there was a lot of criticism and scrutiny on the police about their actions, and a lot of them pulled back.
--:-- Noel King: But that was one of the key ways that insurers used to determine your rate. And when they lost that key metric, they raised rates for everyone.
--:-- Maren Kogan: Are insurance rates going to stay this high? Yeah, so the experts I spoke with really didn't have any form of agreement on that.
--:-- Noel King: Some of them said, one guy I spoke to said, you know, really, this was about insurance companies were taking a real hit when everyone started getting in crashes early in the pandemic. So they raised their rates and now they've since caught up in those rates should come down, especially as inflation eases.
--:-- Maren Kogan: But I will say I spoke to that expert maybe five, six weeks ago, and that was before this latest consumer price index report came out. And it shows that they've actually gone up.
--:-- Noel King: So now we're looking at the steepest rise in insurance rates since 1976. So I'm not so sure that they're going to come down anytime soon.
--:-- Maren Kogan: It's really, it's hard to say, but there's no consensus right now about whether they're going to come down.
--:-- Noel King: What are people doing to cope? There are a number of different things people can do. I don't know how widespread this is, but for example, my mom lives in Florida. Her insurance rates were getting really high. She took a class that was offered for senior drivers that will help lower your rate if you take the class.
--:-- Maren Kogan: You can also shop around. You can also download one of these telematic apps. They're offered by a lot of insurance companies that will measure your driving behaviors, speeding, hard braking, that sort of thing. And if they can measure that you're driving safely, they will give you a discount, too.
--:-- Noel King: So there are different ways to cope. But, you know, we are all still going to be paying more. Unfortunately, there's no magic bullet for this problem.
--:-- Maren Kogan: Coming up, making what amounts to a mortgage payment or a month's rent on your car. It's happening all over.
--:-- Noel King: Support for Today Explained comes from Chime. Nobody likes fees and complicated banking, says Chime. And Chime gets that, says Chime. Chime is a financial technology company that says they understand that every dollar counts.
--:-- Maren Kogan: So when you set up direct deposit through Chime, they say you get access to fee-free features, such as free overdraft coverage, getting paid up to two days early with direct deposit, so much more.
--:-- Noel King: Chime says with qualifying direct deposits, you can be eligible for free overdraft, up to $200 on debit card purchases and cash withdrawals. Plus, they say you don't need to worry about monthly fees or maintenance fees.
--:-- Maren Kogan: You can work on your financial goals through Chime today. You can open an account in two minutes at Chime.com slash explained.
--:-- Noel King: That's Chime.com slash explained. Chime feels like progress. Chime is a financial technology company, not a bank. Banking services and debit card provided by the Bank or Bank N.A. or Stride Bank N.A. Members FDIC.
--:-- Maren Kogan: Spot me eligibility requirements and overdraft limits apply. Timing depends on submission of payment file. Fees apply at out-of-network ATMs. Bank ranking and number of ATMs according to U.S. News and World Report 2023. Chime checking account required.
--:-- Noel King: We'll see you next time. Visit sierra.ai to learn more.
--:-- Maren Kogan: Support for Today Explained comes from Upwork. If you run a business, you know that scaling your business requires the right expertise at the right time.
--:-- Noel King: I sometimes wonder how many of you are running businesses out there. I would love to know. Please email me, noelle at king.com.
--:-- Maren Kogan: With Upwork, you can find specialized freelancers in IT, web development, AI, design, admin support, marketing, and more. Experts who they say are ready to help you take your business to the next level.
--:-- Noel King: With more than two decades of experience, Upwork has a simple and ambitious goal to pioneer a better way of working. Companies at every stage turn to Upwork to get things done and find more flexibility in the way they staff key projects and initiatives by accessing a global marketplace filled with top talent.
--:-- Maren Kogan: Plus, Upwork makes posting your job easy with no cost to join. You can register, browse freelancer profiles, get help drafting a job post or even book a consultation.
--:-- Noel King: You can visit Upwork right now and post your job for free. That is Upwork to post your job for free and connect with top talents ready to help your business grow.
--:-- Maren Kogan: That U Upwork. I'm a driver. I'm a winner. Things are going to change. I can feel it.
--:-- Noel King: It's Today Explained. We're back with Maren Kogan. So recently for Vox, you wrote about an increasing number of car scams. And you started by talking about one specific TikTok video that you'd seen that sort of illustrates the problem. Tell me about that video.
--:-- Maren Kogan: There's this woman on TikTok. Her name is Blaise Arnold. And she posted a video about her Chevy Tahoe that's been viewed more than 2.5 million times.
--:-- Noel King: So three years ago, if you're an OG on my TikTok, you know that I have bought my Tahoe for a lot of money.
--:-- Maren Kogan: She has this Chevy Tahoe. She loves it, but it's time for her to give it up. Three years ago, I was in a mindset of where if I wanted something, I was going to get it. No matter what it was, no matter what I had to do, no matter how much I had to pay, I would work and get the money that I needed and I would buy it.
--:-- Noel King: So in the video, she reveals that she took out an $84,000 loan to pay for the vehicle.
--:-- Maren Kogan: And it gets worse. Since then, she said she'd been paying about $1,400 a month for the last three years.
--:-- Noel King: And if you do the math, you will see that $1,400 a month payments in three years should be around $50,000 worth of payments.
--:-- Maren Kogan: You know, she's basically making a mortgage payment on her car.
--:-- Noel King: Yes, she is indeed. Yeah, well, I've only paid off $10,000 of the balance.
--:-- Maren Kogan: So my $84,000 car that I bought three years ago is now still at a balance of about $74,000, almost $75,000.
--:-- Noel King: What she didn't realize is that because she has a really high annual percentage rate, that's her interest rate plus whatever fees were added on when she signed up to finance this car, only $10,000 of that $50,000 she paid actually went towards paying off the car.
--:-- Maren Kogan: The rest went to the APR.
--:-- Noel King: All right, for people who don't quite understand the importance of the interest rate, how is it possible that this woman took $50,000 of her own money and put it toward an $84,000 loan, and at the end of the day, it was like she had only paid $10,000?
--:-- Maren Kogan: When you take out an auto loan, you pay something called an annual percentage rate. People will see this on their credit card loans, too. Basically, the annual percentage rate is the interest rate, and it's whatever fees and services are added on.
--:-- Noel King: So it's a total percentage that you're paying on the loan every year.
--:-- Maren Kogan: We don't know exactly what Arnold's APR was, but it must have been extremely high because she was paying all that money, and she paid $50,000. But $10,000 of that went to the actual balance of the loan.
--:-- Noel King: The other $40,000 were being eaten up by interest and all of those other fees that were packed into her annual percentage rate.
--:-- Maren Kogan: Okay, so she got two and a half million views, and you can absolutely understand why. And then nobody ever posted on TikTok about this again, because this has only ever happened to this woman, correct?
--:-- Noel King: Well, actually, a lot of women started posting about their incredibly high car payments. And it was, interestingly, I only saw videos of women posting about it, but they were talking about, like, I'm paying $1,400, I'm paying $1,200, I'm paying $1,000 a month because I really wanted this luxury vehicle.
--:-- Maren Kogan: The stakes for these folks are what exactly? If you stop paying, then...
--:-- Noel King: So if you have endless amounts of cash and you can always afford to pay for it, then you're probably fine, right? But if you don't, things can get really hairy.
--:-- Maren Kogan: So in Arnold's case, she posted a follow-up video where she was talking about what she was going to do with her car. And she made some jokey comments like, oh, people told me to hire the mob or leave it in a bad part of town. I think I'm just gonna not care if it gets repossessed because I'm not gonna pay for it anyway.
--:-- Noel King: So if they do the repossession, put it against me, oh well, I don't have a car payment anymore. It's fine.
--:-- Maren Kogan: There are major consequences to that. That can wreak havoc on your credit score. You can have debt collectors coming after you. It is likely that your car will be repossessed. And that kind of thing can follow you around and make it harder for you to get loans in the future.
--:-- Noel King: Had Blaise Arnold with her high interest rate, had she really personally screwed up? That's a great question.
--:-- Maren Kogan: So a lot of people on the internet were saying, well, this woman is clearly, she made a huge mistake. Just because a lot of people have high car payments, it doesn't mean it's any less stupid. No hate to her. I don't care what people do with their money. But is that crazy? Because that is crazy.
--:-- Noel King: You don't need a $35,000 car. You want a $35,000 car.
--:-- Maren Kogan: They said a lot of things about her, but I will say they seem to think that, you know, she had made a really poor decision.
--:-- Noel King: And look, people can draw whatever conclusions they want. I personally, I'm not a financial advisor. I would not recommend making mortgage-sized payments on your car.
--:-- Maren Kogan: I would say if you're paying that much, probably you need a cheaper car, unless you're a very rich person, in which case you can probably afford it.
--:-- Noel King: So, yeah, there was a lot of sort of shock and criticism about her. But I think what was interesting about it to me is that there is this much larger world of very scammy practices in the auto dealing and the auto lending industry.
--:-- Maren Kogan: And that stuff really takes advantage of a lot of people. So I think like her example is very interesting, but there's a much broader sort of structural issue happening here that is making people pay, even aside from the extreme costs that we talked about before, making people pay way too much.
--:-- Noel King: And it's particularly preying on people who can least afford to pay for those cars.
--:-- Maren Kogan: Okay, so you're using one of our favorite words, which is scam. Cars getting more expensive because of supply chain disruptions. Insurance getting more expensive because people are getting in more crashes. Those things are knock-on effects. They're not scams.
--:-- Noel King: Tell me why you're talking scammy, though.
--:-- Maren Kogan: Yeah, because some auto lenders and dealers are just straight up scamming people. Somewhere between us signing on the computer and us waiting in the lobby and having the papers printed out, they added that $4,000.
--:-- Noel King: I asked the question since I was lied to.
--:-- Maren Kogan: Sometimes they will jack the prices up for users with poor credit. They'll add tons of hidden fees that aren't obvious when people sign up.
--:-- Noel King: And they're often giving people loans that they know they can't sustain because they know that they'll collect really high interest rates.
--:-- Maren Kogan: And then when the people default on those loans, they can take the car back and profit that way.
--:-- Noel King: To give you one example from a book called Cars and Jails, the author spoke to a bunch of men who had recently been released from prison who found that their credit histories often prevented them from getting a reasonable loan at an affordable interest rate.
--:-- Maren Kogan: So they interviewed people driving these incredibly fancy vehicles and they were saying how are you able to get cars like this with low income and poor credit.
--:-- Noel King: And it turns out that they were going into the dealerships and these men were being told that they couldn't get financing for the Honda they wanted, but they could get financing for a top of the line Mercedes.
--:-- Maren Kogan: And they were doing this because they were knowing they were giving them loans that these men were likely to default on and then they could repossess the car really quickly.
--:-- Noel King: Were the men being lied to? Could they have gotten financing for the little Honda?
--:-- Maren Kogan: They probably could have if they had shopped around and known exactly what they were doing.
--:-- Noel King: But the way these loans are being presented to them, they're being basically told that this is the thing that makes the most sense. And the loans are being presented in a way that makes the most sense. And, oh, wow, I can actually afford this. I can't believe it. But you actually can't afford it, and you're not going to realize it until it's too late.
--:-- Maren Kogan: So you said there's no federal interest rate limit, which makes me wonder. That hadn't even occurred to me. Could there be one? Like, could the government just say, nah, anything over, I don't know, 25 percent, we're not doing?
--:-- Noel King: Yeah, conceivably, there could be one. The government could definitely crack down on these dealers more.
--:-- Maren Kogan: And in fact, there has been some action in the last year, which is, I think, a positive step. There is a new rule that the FTC put out at the end of last year called CARS. The acronym is Combating Auto Retail Scams, and it's designed to address this exact problem that we've been talking about.
--:-- Noel King: To target the scams, the FTC has a new cars rule requiring dealers to provide a vehicle's actual price and cost, spelling out optional add-ons, and prohibiting dealers from adding bogus add-ons like duplicate warranties, oil changes on EVs, or unwanted subscriptions.
--:-- Maren Kogan: So they're going to try to crack down on these sort of shady lenders who are jacking up the prices, who are adding hidden costs that buyers don't realize that they're getting.
--:-- Noel King: There's a whole section specifically on lenders who are targeting military members to make sure that they're not getting scammed.
--:-- Maren Kogan: And it could have a major effect in cracking down on some of these shady behaviors. This rule is really designed to create some honesty and fair rules of the road so that Americans can buy cars without worrying that they're going to be tricked or scammed.
--:-- Noel King: Particularly for military service members, it's going to require lenders to be more upfront and honest about whether they have any affiliation with the military, because oftentimes military members will show up on a base, need a car right away, and they have all these lenders going after them saying, and all these auto dealers going after them saying, like, we're affiliated with the military, we have special discounts, and they end up saddling with service members with a lot of debt.
--:-- Maren Kogan: So it's going to try to cut back on all of these different ways that they are sort of sneakily making cars way more expensive than they need to be.
--:-- Noel King: Vox senior correspondent Maren Kogan.
--:-- Maren Kogan: All right, listen, next week we're doing an episode about reproduction. Birds do it, bees do it, even educated fleas do it. But nobody does it quite like human beings in a capitalist economy.
--:-- Noel King: Egg and embryo freezing is big business. And we're interested in hearing what your experience of that business has been like.
--:-- Maren Kogan: So maybe you and your partner made some embryos and froze them and then you broke up. And then maybe you tried to get them back.
--:-- Noel King: I've heard of stories like this. We're interested in hearing yours. Maybe your embryos were moved without you knowing about it.
--:-- Maren Kogan: The thing is, it's not the norm for fertility clinics to warn couples that stuff can get hairy if you don't end up making a baby with the embryos that you've made.
--:-- Noel King: And we're going to be reporting on that. So if you've got a story, please give us a call. Our number is 844-453-4448.
--:-- Maren Kogan: 844-453-4448. Please leave us your name. If you'd like, you can also leave us a callback number. You can also email a voice memo to todayexplained at vox.com.
--:-- Noel King: All right. Today's episode was produced by Victoria Chamberlain and edited by Matthew Collette.
--:-- Maren Kogan: David Herman is our engineer and Laura Bullard is our fact checker.
--:-- Noel King: The rest of the team includes Halima Shah, Avishai Artsy, Miles Bryan, Hadi Muagdi, Amanda Llewellyn, Jesse Alejandro Cotro, Patrick Boyd, Rob Byers, Sean Ramos-Firm, and Amina El-Sadi.
--:-- Maren Kogan: Our executive producer is Miranda Kennedy.
--:-- Noel King: We use music by Breakmaster Cylinder.
--:-- Maren Kogan: I'm Noelle King. Today Explained is distributed by WNYC.
--:-- Noel King: This show is a part of Vox, which is totally free, thanks in part to contributions from our listeners.
--:-- Maren Kogan: You can join us by going to vox.com slash give. Thank you.
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