Same here.
An ICE vehicle is useless without fuel.
FJB promised to end "fossil" fuels.
I believe him.
Posted on 02/15/2023 6:02:24 PM PST by george76
The average monthly payment for a new car sold within the United States has reached a record $777, according to Kelley Blue Book’s parent Cox Automotive. That represents roughly one-sixth of the median household income and is about twice the price of what would have been considered average in 2019. How the hell has it managed to come to this?
Well, Bloomberg has effectively accused automakers of intentionally keeping inventories low so they can maximize profitability – which doesn’t sound all that far-fetched if you’ve been following the market closely these last few years. The outlet claimed that chip shortages are becoming a thing of the past, with inflationary pressures and corporate greed now being the largest contributing factors to record prices. That certainly was the case with dealerships, with many putting ridiculous markups on vehicles in the hope that panic buyers would go along with the price.
The spike in profits was impossible to ignore and it wasn’t long before automakers were conducting widespread price adjustments of their own. But it’s still unclear just how much was the result of industrial snafus stemming from lockdowns, inflationary adjustments created by unfettered government spending, or executives noticing they could probably goose their customers for more money.
...
That’s a bummer because average folks having the ability to purchase a new automobile used to be one of the metrics by which American excellence was measured. But the whole situation seems to have come undone in a staggeringly short amount of time. Jonathan Smoke, the chief economist at Cox, told Bloomberg that the average new-car payment hovered around $400 a month for roughly a decade. But things began pitching up in 2019, with a brief reprieve at the start of the pandemic due to nobody leaving their homes to buy anything. Then feces made contact with the proverbial fan for consumers as we saw record-breaking prices month after month.
How is this even possible when the last couple of years represent the lowest sales volumes in over a decade? Easy. Automakers just started selling to people with more money or an unhealthy willingness to put themselves into severe debt. Based on data from JPMorgan, the average price for a new vehicle sold inside the U.S. has soared to almost $50,000. That represents a staggering 30 percent increase since 2019, which has been reflected in the overall profitability of automakers.
What are the chances of things going back to normal? It depends on who is answering that question. While we’ve seen wholesale used vehicle prices starting to come down from what can only be described as insane levels, they’re still quite a bit higher than they’ve been historically. Partially due to the fact that companies aren’t building enough new cars, the average payment on a secondhand vehicle is now $544 per month – more than the typical new car would have set you back just a few years ago.
Meanwhile, there are plenty of manufacturers signaling they’re not interested in giving consumers a break on new models because it’s so damned profitable to keep everyone desperate.
“We’ll never go back to the inventory levels that we were at in the past,” General Motors CEO Mary Barra told investors last year.
Vehicle inventories remain low, averaging about half of what would have been considered normal prior to 2019, and that’s just fine with most automakers. By producing the bare minimum, manufacturers can reduce overhead and maintain higher prices by avoiding any temporary vehicle surpluses that would encourage discounts/incentives. Ford, Nissan, Toyota, Ford, and a slew of other big names have signaled this will more-or-less become the dominant corporate strategy moving forward. Though the official strategy varies between brands.
“You’re not going to see most manufacturers go back to where it was three or four years ago,” Judy Wheeler, vice president of U.S. vehicle sales for Nissan, told Bloomberg. “We’ll keep that supply and demand in a level state.”
Whether or not that’s tenable down the road is another matter, however. Some dealerships have signaled that they’re not all that excited about the long-term prospects of this strategy. With automakers having spent the last decade eliminating small, affordable models from the U.S. market (to pursue higher margin pickups, SUVs, and crossovers) the lower end of the new vehicle market doesn’t really exist anymore. But not every brand can pivot toward selling luxury products and it's absolutely crazy to pretend excluding a large subset of consumers is somehow indicative of the industry being in good health.
Nearly 30 percent of the market now stems from households with annual income above $150,000. Mark Wakefield, managing director at consulting firm AlixPartners, said that’s up from 22 percent in 2016. With a widening wealth gap in most developed countries, this phenomenon is likewise expected to increase – even if vehicle prices do end up coming down slightly.
“You’ve seen a move to more wealthy people buying cars,” Wakefield said. “The bottom part of the market sort of fell out.”
While this is probably of little comfort to our readers in North America, Europe reportedly still has it worse than we do. Cox predicts that the average price of a new vehicle will likely drop by 4 percent this year on our market. But Europe isn’t expected to see any declines in pricing for 2023, with average transactions staying at (if not exceeding) the present record levels.
Our advice? Unless you're in desperate need of a new automobile, there's nothing to be gained by feeding into this. Automakers seem broadly committed to testing the outer limits of what they can get away with and likely won't begin acting differently until it becomes crystal clear that their consumer base refuses to tolerate such treatment. It may likewise be important to oppose any future government bailouts that would seek to financially advantage companies that have been profiteering off the widespread economic duress incurred since 2020.
Same here.
An ICE vehicle is useless without fuel.
FJB promised to end "fossil" fuels.
I believe him.
In my more than half-century on this planet, I have purchased exactly ONE new car. Used/low-mileage/cash is the way to go.
Same here (sort of). I have a 2005 Acura TL that I bought new. Now has about 210,000 miles on it and mechanically it’s going strong. Cosmetically, the clear coat has started to peel all over and the vinyl that wraps some of the metal trim pieces has started peeling off as well. Once in a while I think about replacing it, but it runs perfectly and I hardly drive it these days since I’m now semi-retired and working part-time from home.
The “sort of” part comes from having to replace my wife’s car about a year ago. She abuses her cars, so when her Santa Fe started having problems, it was dire, with metal shavings in the oil and the engine failing. She drives a lot more than I do, so we set out to replace hers. Initially planned to get a used car, but supply and pricing were so out of whack that used cars were barely any cheaper than new (if you could find a new one available anywhere). We got lucky though and managed to find a dealer that had what we wanted (a Honda CR-V). Given the state of the market, had to pay close to sticker, but the only alternative was one that was a year or two older with 10,000 to 25,000 miles or so and barely cheaper.
Dave Ramsey is right, cars are the worst thing you can spend money on if you’re in debt or otherwise not in a solid financial position and even then he advises buying used unless you’re financially very well off. Even when you can afford it, a car (especially new) has a big long-term effect on your finances. Many people don’t think that through.
Do not buy a new car this year. Just don’t.
The supply of used cars today is killing many dealers. They have way, way too many of them and the average wholesale/retail prices are dropping daily.
And dealers can’t afford to sell them! Most of their used car inventories are units they bought 2-3 months ago at wholesale prices.
And in the meantime those prices they paid for those used cars are higher than average retail now. In just the last 60 days!
Don’t you just feel so sorry for those used car dealers? (sarc). They can’t even afford to offload their inventory at auction.
It’s a buyers market for used cars right now. Buy used.
I know two guys that had a small, side hustle. They’d go to car auctions and buy a few cars. They knew the owners of the different tow I t companies in the city and were allowed to walk the lot before the auctions to find the decent cars. They had a shade tree mechanic that could fix anything he touched. They made some decent money.
Cash For Clunkers ruined it all for them.
50,000 is a lot for a new car.
Best car in the world, Toyota Camry tops off in the high 30,000s.
Same here. I love my 2000 Z24 convertible.
12 years after retiring, I still drive it around town. It's got a manual transmission and runs like a top. Minimal electronics to fry. Basic transportation
My spousal unit thinks I should buy a new car. I reason that $1500 a year (or less) in maintenance is less than $8000+ in car payments.
The last car I owned was a 2005 Nissan Altima. When it got to the point where I couldn’t trust it to take it out of State, I would rent a car from Enterprise for a couple of weeks to visit my youngest son. The car was almost 15 years old when I decided to trade it in, and leased my first car from Nissan. This past August I traded that car in for a new lease on a 2022 Nissan Altima. I’m 75, and won’t ever take out a bank loan to buy another car, as it would be less of a hassle for my kids to return a leased car if I dropped dead.
“I could afford a new car. I choose not to.”
Same with us. I bought my wife a new Lexus RX 350 in 2018. I usually take her to work when I leave the house in our worn out Ford F-150. I maintain the Ford and don’t see any need to replace it. My wife tries to get me to buy a new truck from time to time. A new replacement for one just like it is north of $75k. No thanks. When we go on trips, we take the Lexus.
My kid had a pickup destroyed by a drunk while it was parked. He bought an old beater from a friend a few weeks ago.
The beater caught fire and burned to a crisp a couple days ago. Guess that experiment failed.
Much like I can’t afford a graphics card anymore :/
“I could afford a new car. I choose not to.”
Same for us. We have paid cash for new cars before, but stopped that nonsense about 15 years ago. CarMax is our go-to place and we feel we get fair deals.
Our cars are 2012 and 2015. I resent the money spent on a new car.
Glad I’m so old a new car ain’t in my future
This has been ongoing since the early 1990’s, in my opinion. Buying new stopped working for us in 1991, when we bought a ‘90 Mazda new from a dealer. We drove the heck out of it for 9 years, and have bought late model used ever since. The economics of buying new and trading in 3 or 4 years just wasn’t working any more. Now we’re considering an extended warranty on our 6 year old van, and hope the used market returns to normal in a year or two.
Ditto. There's a sucker born every minute, and I ain't one of 'em!
What could change this is: manual roll-up windows, manual door locks, no dash computer screen, rubber floor mats, eliminate all the computer controlled components in the engine operation.
Look at the cars of yesteryear. They got people where they needed to go and were simpler to maintain.
My son is going to learn that lesson. He bought a 2023 Bronco a few weeks ago. He makes great money and paid cash, but cars are such a horrendous cash suck.
We bought my 2018 Murano in 2019 for $21,000 from Hertz, which was our most positive experience at a dealership. It had 43,000 miles and only has 65,000 miles now. The only problem I had with it was when the battery died in 2021. Otherwise, it’s been a dream car.
It’s as bad as taking out a mortgage on a house - they don’t give you 30 year fixed rate mortgages on cars.
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