In modern America, car debt has become a rite of passage. However, car loans are quietly pushing college students here at The University of Alabama and beyond into financial instability, all while car dealerships profit from our vulnerability.
One may argue that saying that car dealerships are profiting from our vulnerability is hyperbole. However, when one in six young adults ages 18 to 24 have debt in collections — meaning they are over six months behind on payments — and society continues to defend car loans even as the average new car payment surpasses $700 a month, it is difficult to deny that “buy now, pay later culture” is detrimental.
Car dealership profit margins have expanded markedly. According to the Bureau of Labor Statistics, average gross profit margins on new vehicle sales nearly tripled from 5% in 2019 to over 13% in 2022, illustrating that dealerships have sharply increased their markups for profit.
Walk into any car dealership today — most of the vehicles on the lot will have markups. Brands like Hyundai have warned their dealers against this practice, cautioning that excessive markups could damage the brand’s long-term reputation and erode trust among both new and old customers.
Hyundai is absolutely correct to call this out. For college students trying to secure reliable transportation, these deceptive dealership tactics unfairly exploit students’ limited budgets and leave them paying far more than they can afford. Loan payment money on these vehicles could go toward tuition, rent or savings. It could cover textbooks, groceries or even a weekend trip home to see family.
Choosing to avoid unnecessary car debt isn’t just a financial decision — it’s an indisputable choice to invest in yourself and your future. Developing this mindset in college will set you apart long after graduation, as many will continue to take on vehicle debt without recognizing the long-term costs.
Ramsey Solutions Personality Jade Warshaw, who works alongside personal finance expert Dave Ramsey, was keen to provide a statement on why car debt is so destructive.
“As it stands, the average car payment in the United States is $717 dollars per month! Maybe it sounds normal because your friends or parents have similar car loans. But let me be the one to tell you, the car payment is the trap that keeps most Americans in debt for life. Most ‘normal’ people have no idea how much that car payment is actually costing them,” Warshaw said in an email.
She stressed that while a car is necessary, you don’t need a payment, as every time you make one, you’re robbing yourself of the ability to focus on what truly matters — your education, your success and the pursuit of your dreams.
Purchasing a car in cash allows for freedom, and therefore, success.
It’s time we start demanding more from our personal finances. Don’t let car loans hold you back. Begin establishing fruitful money habits now and refuse to allow unnecessary debt to drive your future.
