Economics & Racing Beyond Our Means

[Gary Smith]

During these uncertain economic times I can't help but wonder how many racers are leveraged beyond their financial capabilities. I've heard stories of maxed credit, mortgaged homes, etc. I know there are several class racers who have the capital to operate within a respectable budget without interference of their daily lives. But I also know some who have "bet the ranch" on keeping their "program" at full tilt.

With all the doom and gloom coming from media outlets ordinarily isolated from typical mainstream hype, I wonder how many racers will fall victim to these unforseen circumstances? As housing prices plummet it has to have put several racers in a precarious state such as "upside down" equity. Or how many have reconsidered their direction and started shoring up losses by liquidating their operation to keep a roof over their heads?

There's a wide spectrum of personalities in this sport and how each of these individuals approach such difficult choices. Some will make the gamble and continue, keeping racing at the top, with an optimistic outlook that this is only temporary. Others will opt on the side of conservatism and pass on events. In the last few recession cycles wealth seemed to shift between various resources. But this time it looks like there aren't any new prospects, at least in my opinion. I wished there were a crystal ball to let us see into the future, both near and far term. For now though, fuel prices alone have made me very hesitant even for local participation.

I'd like to keep this a serious thread and hope others share the same sentiments, especially those who side on optimism as it's a subject I'm taking very seriously. This is by no means an attempt to "air someone's laundry" poke fun at, or make anyone look bad. Ultimately this could have a serious impact on our sport sooner than later.

[Larry Munk]

Good post. NASCAR is pricing the fans out of the seats too.

[davyjones]

Gary


I have never had the needle that far into my arm that I would finance , leverege or charge anything related to racing . If I dont have the cash in my hand it wont happen period...

[J Kuchel]

Originally Posted by Gary Smith

During these uncertain economic times I can't help but wonder how many racers are leveraged beyond their financial capabilities. I've heard stories of maxed credit, mortgaged homes, etc. I know there are several class racers who have the capital to operate within a respectable budget without interference of their daily lives. But I also know some who have "bet the ranch" on keeping their "program" at full tilt.

With all the doom and gloom coming from media outlets ordinarily isolated from typical mainstream hype, I wonder how many racers will fall victim to these unforseen circumstances? As housing prices plummet it has to have put several racers in a precarious state such as "upside down" equity. Or how many have reconsidered their direction and started shoring up losses by liquidating their operation to keep a roof over their heads?

There's a wide spectrum of personalities in this sport and how each of these individuals approach such difficult choices. Some will make the gamble and continue, keeping racing at the top, with an optimistic outlook that this is only temporary. Others will opt on the side of conservatism and pass on events. In the last few recession cycles wealth seemed to shift between various resources. But this time it looks like there aren't any new prospects, at least in my opinion. I wished there were a crystal ball to let us see into the future, both near and far term. For now though, fuel prices alone have made me very hesitant even for local participation.

I'd like to keep this a serious thread and hope others share the same sentiments, especially those who side on optimism as it's a subject I'm taking very seriously. This is by no means an attempt to "air someone's laundry" poke fun at, or make anyone look bad. Ultimately this could have a serious impact on our sport sooner than later.

Gary, very good article but I'm afraid this might be the sign of the times.

[gmonde]

i am a farely new member to this site have been racing for over 20 years,had a few different drag cars,the step up to class racing this year will not happen due to the engine not being ready,,but i am still able to do bracket racing at my local track for now,i have made a ton of changes to the chassis of my car i hopes of being ready for a divisional race,but i even passed on the opening day at the track to get the car down the track after all of the changes that i made,reason is abvious the cost of fuel,race fuel,entry fees,at this point in the game my race program is loan free and i own it(truck,trailer,race car, tools,)the vehicals that i drive are all over 10 years old,i have a 9 year old son and of coarse my wife and between the two of us we make ok money,we certainly do not live any kind of high standard of life,but we live in the state of connectitciut,the car and property taxes are crazy,home heating fuel is nuts,i pay bills in the family and it makes me sick what an average family has to make to in order to survive,in my younger days i would leave lights on,doors open,computers running all night,shops lights on all night,long showers,a/c on all day,heat on all day,spend money like it grew on trees,now!!!!!! different story i make the wife and kid wear extra clothing,put a lock on the thermostate, to keep the heat down,"enough with hour shower",chasing lights,shop on ebay,i even brokedown and started using coupons, and so on, just so i can at least continue to do a little racing,one of my racing buddys has money to burn,he just purchased a twin screw blower for his race deal "$6500.00" just for the blower,thats my race budget for three years

i cant complain ,iknow of alot of people who are in diar straights because of the present economy,when times where good i looked at those people "said these guys are making money hand over fist what am i doing wrong"now there asking me if my comany that i work for is hiring

i read some storys on people who have purchased $400,000.00-500,000.00 homes with no money down on a varible rate and now face $3000.00-$5000.00 monthly morgage payments ,whos mistake was that,the people buying the home or the lenders?


they say "when it goes bad,it realy goes bad" not offend any one on this site, just my .02 cents your average joe GMONDE

[Chad Rhodes]

we were planning a second stocker, now it will just be a footbrake car. mostly to get shots at the tree when we can't afford to travel

[Chuck Porter]

In Canada many of us are watching the troubled U.S. economy and wondering ?if? and ?when? the ripple effect will make it?s way north of the border. There?s an old saying that goes something like this, ?When the U.S. sneezes, Canada catches a cold?.

Presently, our economy is still robust, especially in the western prairies where the ?oil patch? drives much of the growth. With $110+ per barrel oil, it seems unlikely ?Big Oil? will slow production. They will continue harvesting as long as the price holds out.

We see it every day, the people who have stars in their eyes and truly believe the ?well won?t run dry?. The huge house, big diesel pickup, an SUV and of course then there?s the toys. In most cases financed to the max. Mostly young folks but others who should know better too. Don?t get the wrong idea, I?m not slamming the young people of our respective countries. We were all young once. These people help to drive the economy because they ?are? young and full of piss and vinegar and not afraid to spend money. On the other hand there are some of us who are a little more seasoned and we remember the 80?s and early 90?s when our economy went sideways. Interest rates went through the roof, inflation was in the stratosphere, there were no jobs, few prospects etc. etc. The banks were the largest land owners in western Canada. The oil industry was stagnant and life in general was bleak. The young guys haven?t had those experiences ? at least not yet. It?s hard for them to believe an economic downturn could be just around the corner,
Back then there used to be a bumper sticker out this way and it said, ?Lord, please let there be another Oil Boom and I promise not to piss it away this time?.

Can we learn from our history? It?s been said life is a cycle of events.
There?s going to be some who aren?t going to make it through this financially and it will take years to recover if at all. It?s easy to sit in judgment on how others have spent their money, but remember life can change in a heartbeat. A lot of good people are going to get hurt.
These people are our friends and neighbors and will need our moral support when times get tough.

Chuck

[Julie Jordan]

Chuck ~ Good post. From behind my desk (I'm a CPA) I see so many people who live way beyond their means. It's been going on for years and now it's catching up to these people. They've run out of the ability to refinance their homes to pay off credit cards, car loans, etc. and they have little to no savings. Yet, they still spend. It amazes me to no end. I had a couple come in the other day...in their early 30's, two kids. Last year they decided she should be a stay-at-home Mom so she quit her job. She withdrew her 401(k) funds and they put in a pool. He works in the construction industry so hasn't been working full-time for most of this year. Now they owe income tax (and early withdrawal penalty), have no money and are crying the blues. I don't know what they were thinking when they made the decisions they did!!

So many people are used to spending on credit, it somehow doesn't feel like they are spending real money. They buy now and worry about how they are going to pay for it later. Or they don't realize how much extra they pay when it's "only" costing them a $100 per month payment. It sure is different from how I was raised. My Dad only financed business equipment purchases and paid it off as soon as possible. If he couldn't pay cash for racecar stuff, trips, extras, it didn't happen. They drove used cars, my Mom cooked dinner virtually every night, they saved to put up for their retirement. Thankfully, I had a good example to follow. I think one of the most important things we can teach our children is fiscal responsibility.

As for my racing? I have an open trailer I tow with, my car could use a paint job, I don't have the trick parts and I only race 4-5 times a year. I have a son in law school and a daughter working towards her nursing degree. They are my priority. I won't jeopordize my family's finances for a racecar.

[Dave Cook]

As housing prices plummet it has to have put several racers in a precarious state such as "upside down" equity.

Those people that are upside down in their home mortgage put themselves there, with the help of unscrupulous lenders and developers, and the idiots that maxed their credit cards, then covered them with "home equity" that NEVER existed.

When you finance 125% of the home value, WHO is at fault for being upside down?

Has anyone seen the teevee commercial where the realtor claims that home values double every 10 years?
WTF over?

[Jeff Lee]

I've got the race car being extensively worked on. The money is put away so I can pay cash when it's done. I do a lot of wheeling and dealing to buy what I want for the race car. I sold two clutches to pay for my new dual 7" clutch. A bunch of other parts sitting on the shelf collecting dust no longer appear important when making improvements to the car, so they make it to e-bay. The timing of these repairs / modifications is perfect because if the car were done today, I wouldn't race it more than a few times this year and that would be at a T&T only just to see if it all works, no NHRA events. With real estate (I'm a Realtor) basically in the toilet, I can't justify spending a dime of the families income on racing. I'm with Julie and others. Never been (or ever plan) to be a "full-time" racer and I use my Expedition and an open trailer to get to the races.
One year I raced both S/ST & Stock and it was a great year for real estate. At the end of the year I figured my income was down $30K+ due to that splurge from opportunity lost scenario. That was the end of that!
And please, anybody that believes borrower's didn't know what they were getting into, do I have some beach-front property in Arizona for you! The Lenders only became "predatory" when the borrower's figured out the home was no longer appreciating at 25% to 50% per year. Then all the sudden it became important to read the contract! I have no sympathy for those people who treated their home like an ATM.
Last I heard, the oil company's were operating on the same profit margins as any other successful business in the USA, around 8% - 10%. If you want to lower the gross profits of the oil companies, stop buying petroleum based products. Taxes per gallon are higher than profits per gallon. Figure out what programs or services you can live without and the gas tax will come down.