New Vehicle Prices: I don't get it?!?

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SwedishRider

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I've considered (on and off) upgrading my wife's car to a new 5-7 seat SUV, but I haven't priced out vehicles in some time. I was thinking about being in the $25,000-$30,000 mark, but had an open mind and didn't know what to expect. Well, I checked out the prices.. and I just don't get what the heck is going on with modern car sales...
confused.gif


I first looked at a 2013 Ford Explorer with about 20K miles on it. It looked really nice and still had factory warranty left on the vehicle. There was no sticker price on the car, so I used my phone to look it up on the dealership's website (dealership closed on a Sunday). For a 2-year-old Explorer with 20K miles, they wanted $41,000!!!
shocked.gif


So next to it was a brand new 2015 model... MSRP'd for about $49,000!!!
shocked.gif


And the local Chrysler and Kia dealerships weren't much better. Kia Sorrento's were going for $41,000 new, and Durangos and Cherokees going for over $30,000 (and some over $40,000). Just stunning amounts of money IMHO.

And that's just the sticker price, not the taxes, reg, conveyance fees, and financing (and any other ridiculous add-on costs to jack up the price). It was incredible to see prices that high. I don't remember it being this bad even a few years ago.. but in fairness I wasn't looking that hard at that time either.

But here's what I don't get... who the heck is buying these obscenely priced cars? A quick Google search pegs the average American household income at $50,500. So how are dealers moving cars? Only things I can think of are:

1) coming way down off MSRP?
2) creative financing, including 84 month payments?
3) leasing?
4) um, maybe they aren't moving cars? (though seems unlikely since they are still in business)

I get that there will always be wealthy folks that will drive in, buy the exact car they want, write a check and drive out. But with the average income at $50,500, the majority of folks out there are definitely NOT in or near that position.

So, anyone have any insight into what is going on? I am genuinely stunned at how crazy car prices are right now. Or am I doing something wrong (or thinking wrongly)? Something just seems out of whack when a Kia SUV tops the $40K mark... are people really paying that?!?!?
 
Yep 72 month financing allows people to purchase what they can't afford.
 
I think there is going to be a bubble and fall out in the car market just like what happened with housing. Too much 72 and 84 month financing.

All they ask is " what will my payment be?".
 
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I was sticker shocked too looking at a Chevy dealership near me. I got back into my freshly washed truck, smiled at my ride, and bought a coffee and breakfast sandwich and forgot about the dealership. Wow....
 
The only thing that I'm missing by not buying a new truck is the monthly payment for the next 6 years.

This is why you make a good vehicle decision based on your best judgment, and then make it last as long as you can.

Someone posted a good deal on a butt-ugly F150 a few days ago. Maybe that same dealer has a good deal on a butt-ugly Explorer...?
 
Originally Posted By: Tzu
I was sticker shocked too looking at a Chevy dealership near me. I got back into my freshly washed truck, smiled at my ride, and bought a coffee and breakfast sandwich and forgot about the dealership. Wow....


I've been watching some videos on how to detail cars, and I've been buying a few tools to help with that process. I think I'm going to continue to do so with the cars I have now. They are 8 years old with about 100K miles on them. I've taken good care of them, both bodywise and mechanical. I could detail both and get them to shine better than the dealership's lot cars... and I have no payments on either of them.

I am just speechless as to what they are getting for new (and used) cars right now. Just ridiculous realy..
 
Originally Posted By: CT8
Yep 72 month financing allows people to purchase what they can't afford.


Average car payment is almost $500 a month.
 
They are up to 7 year financing now.And leases are very popular.And because the market is willing to pay what they ask for these rigs...life goes on.Had you in 1980 said "I will never pay over $10,000 for a new vehicle...ever" you would have been eating your words come late 80s..
 
Originally Posted By: CT8
Yep 72 month financing allows people to purchase what they can't afford.



It's the (new) American way (live above your means)...Our government is the biggest culprit...
 
You have to look at it this way. There are over 300 million people living in the USA.
There are approx. 17 million new car sales each year. So that only about six per cent
of the population are buying new cars every year.
 
Its interesting. Recently I watched some HGTV over a few days where everything I saw (multiple episodes over multiple days) was $400k-2.5M homes. It was people throwing a hundred thousand here, a few hundred k elsewhere. In one show, a 25 year old girl with a new job was approved for up to $400k mortgage, and was using all of it to buy a condo with $560/month HOA fees.

All at the same time when the typical TV watcher is earning $46k/year and lives in a home that is $218k (I think those two are about what the US average is right now).

People look at monthly payments and expect to be tethered to payments for their life. Paying off their debt is not a factor.

I think real estate and cars are both the same scenario...
 
Originally Posted By: Mr Nice
Originally Posted By: CT8
Yep 72 month financing allows people to purchase what they can't afford.


Average car payment is almost $500 a month.



This is EXACTLY why I'll never own a new vehicle. I've only bought used and have never regret it.
 
Mr. silv04 has just shown that you can buy a very well equipped Explorer in the mid $20 K range. I know that Sorentos are available at that price also.

A person just needs to lower their "wants" and address their "needs". Those bells and whistles add up really quick.
 
Originally Posted By: JHZR2
People look at monthly payments and expect to be tethered to payments for their life. Paying off their debt is not a factor.


I think you are correct, this is a factor as well. The only debt I have left is my mortgage. I've paid off everything else: no student loans left, no consumer debt- just the mortgage (and I need to live somewhere). I don't mind it as I get the mortgage interest tax deduction, and I get to live here... or I'd have to pay rent elsewhere.

But the notion that one has to accept debt as a lifetime expense is probably the norm and not the exception. That's a scary proposition, but I watch families that I know make much less than mine take lavish vacations and drive Mercedes SUVs... and I wonder what the heck I am doing wrong. But the difference is clear.. they are okay with debt payments, and I am not.

Who's right? Who is better off? Sometimes I wonder...
frown.gif
 
Originally Posted By: SwedishRider
I first looked at a 2013 Ford Explorer with about 20K miles on it. It looked really nice and still had factory warranty left on the vehicle. There was no sticker price on the car, so I used my phone to look it up on the dealership's website (dealership closed on a Sunday). For a 2-year-old Explorer with 20K miles, they wanted $41,000!!!
shocked.gif



Late model used cars are very expensive to buy at a dealer. Try a private party instead.
 
Just accept that you are middle class and budget your salary accordingly.

Lots of cash poor Americans that are a few paychecks away from financial disaster if they got layed off, hours cut at work, long term illness, house needing new roof, ....etc....
I've seen cash poor people driving fancy vehicles and they have zero worries about their financial futures. Pride and ego destroys lots of people's financial security.
 
Originally Posted By: doitmyself
Mr. silv04 has just shown that you can buy a very well equipped Explorer in the mid $20 K range. I know that Sorentos are available at that price also.

A person just needs to lower their "wants" and address their "needs". Those bells and whistles add up really quick.


Yep. It's a "base" model.

But it has:

3.5 liter V6
Power driver's seat
Back up camera
Satellite radio
18" wheels
Tilt and tele steering wheel
LCD tail lights
Cruise Control
Power windows
Auto headlamps
Chrome exhaust tips
Power mirrors
Tinted glass
A/C
CD/MP3
Sync
All of the airbags

Reminder... that's a "Base" model.

People need a reality slap every now and then.
 
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