Are New Vehicles Too Expensive?

[SubLGT]

https://www.autonews.com/world-congress/affordability-tops-concerns-nadas-welch

Quote
DETROIT — Average American consumers getting priced out of the new-vehicle market is "probably the biggest thing" that Peter Welch worries about, the CEO of the National Automobile Dealers Association said Tuesday at the Automotive News World Congress here.

Welch said the latest figures he's seen — through October of last year — show new vehicle retail prices hitting an all-time high of $35,377, with an average monthly payment at $538 and interest rates up to an average of 5.76 percent on new vehicles and to about 9 percent on used ones. Loan terms are longer than ever, and now average 64.3 months. And the number of vehicles delivering $1,000-a-month payments has never been higher, he said.

"You know, people buying $55,000 pickup trucks with $1,000-a-month payments — I've never seen it," Welch said. "A lot of people don't think that's sustainable."

Welch said most of the customers at NADA's 18,500 dealer rooftops aren't affluent buyers — they're a single mom buying a used Toyota Corolla, for example. As pressure on affordability mounts, Welch said cost can go "hand in hand" with government regulation. While stressing that he's not taking a position on the government mandating things such as fuel economy standards or new safety features, "they all come with a price," he said. He added that new-vehicle prices appear headed toward hitting $40,000 with $800 payments

"That is going to put a giant dent in the SAARs and it almost makes me wonder if at some point we're going to see another Henry Ford," offering new and more affordable vehicles, Welch said....

 

[E150GT]

uuh yeah. Trucks that are $50k. Insane. Chevy colorado thats $35k. Insaner.

 

[jeepman3071]

That last sentence doesn't make any sense, "A new Henry Ford offering new and more affordable vehicles". Vehicles still have to meet the ever increasing government safety and efficiency mandates along with having competitive features as other brands.

 

[addyguy]

Concur 100%...I work in car sales, and the amount most people sign up for - especially with rolling in negative equity on trade ins - is insane.

This can't last.

His last comment is interesting - Korean cars, until recently - were the 'cheapies' for people who had to have a vehicle cheap. Now, they are up there in price with the rest.

I'm waiting for the Chinese or Indian equivalent of the Hyundai Pony or Excel to hit the market. If there is a general slowdown in the economy, they will clean up.

 

[JLTD]

Originally Posted by E150GT
uuh yeah. Trucks that are $50k. Insane. Chevy colorado thats $35k. Insaner.


Try up to 70-80k with options on some trucks...."Insane" is right - at that rate you might as well buy a Peterbilt and go into business for yourself.

 

[jeepman3071]

Cars are expensive because people are willing to pay it. Most people paying $55k for a pickup feel it's okay because it's "only" $1000 a month for X months. Many just accept car payments as part of life.

 

[KrisZ]

The vehicles aren't getting more expensive, it is the easy credit and 7 year long loan terms that make a lot of people pick a higher priced SUVs and pickups, instead of regular cars because the monthly payment looks "affordable".
Small and mid size sedans/hatchbacks are at an all time low. These are some of the best bang for the buck vehicles one can have and are the most reliable. People simply aren't interested.

 

[PimTac]

Funny they bring this up now when most experts are predicting the future will not be ownership of vehicles but subscription type services.

Still, the only way to reduce vehicle prices is for consumers to stop buying them at the high prices they currently are. Demand plays the biggest role

 

[StevieC]

Originally Posted by JLTD
Originally Posted by E150GT
uuh yeah. Trucks that are $50k. Insane. Chevy colorado thats $35k. Insaner.


Try up to 70-80k with options on some trucks...."Insane" is right - at that rate you might as well buy a Peterbilt and go into business for yourself.

My neighbour and his Ram 1500. All the toys in it and it sits parked 5 days a week without moving, goes around town on the weekends.
(He drives his company van everywhere mainly and his fiance has a car that they usually go out in if they are going far because "it's better on gas".

 

[BMWTurboDzl]

There are basically a few reasons for this.

No 1: For the better part of a decade the Federal Reserve has encouraged banks to generate copious amounts of credit which has an inflationary effect on vehicle prices.
No 2: Auto manufacturers add the cost of financing to the purchase price of the vehicle when they say the customer is getting 0% financing.
No 2: Legacy costs for healthcare and pensions (Domestics, Euro) have also contributed to increasing prices because they act as a drag on earnings and cannot be easily jettisoned/renegotiated.

 

[CT8]

Originally Posted by E150GT
uuh yeah. Trucks that are $50k. Insane. Chevy colorado thats $35k. Insaner.

They are a much better value that a like priced car.

 

[csandste]

The last car I took out a loan on was a '13 Kia Rio (also last new car I'll ever buy) because they gave me $500. Paid it off at the minimum to get the cash --six month period. Everything else has been used and cash.

For the life of me I can't figure out why people take out seven year loans on a depreciating asset. I don't even have collision on my '17 Soul because any car I buy is going to be cheap enough so I can use cash and get another one. I guess if I suddenly decided to buy new again, and there was a five year, zero percent loan I'd take the free money, but doubt if I'll ever take the depreciation on a new one.

 

[dadto2]

People buy $55k trucks because they can afford them. Most of them could probably do everything they need to do in an inexpensive 2-door hatchback. Those who really need the full size truck could probably do just fine with a base model for half the price. (mine is a base, and under $24k slightly used)

What an inexpensive vehicle doesn't do very well is display an elevated social status.

When vehicles really are too expensive, small sedans and coupes will become desirable again.

 

[Alfred_B]

Adjusted for inflation, they are comparable with the past .

 

[Vuflanovsky]

If you believe the analysts, they'll tell you that people would rather buy a smaller SUV/CUV because of the utility, driving position, and relative gas mileage versus something that has less perceived utility, product/style status, and possibly more overall comfort level. I think the takeaway is that the public wants what the public gets probably as much as having a particular disdain for sedans or similar.

 

[Donald]

Originally Posted by SubLGT
https://www.autonews.com/world-congress/affordability-tops-concerns-nadas-welch

Quote
DETROIT — Average American consumers getting priced out of the new-vehicle market is "probably the biggest thing" that Peter Welch worries about, the CEO of the National Automobile Dealers Association said Tuesday at the Automotive News World Congress here.

Welch said the latest figures he's seen — through October of last year — show new vehicle retail prices hitting an all-time high of $35,377, with an average monthly payment at $538 and interest rates up to an average of 5.76 percent on new vehicles and to about 9 percent on used ones. Loan terms are longer than ever, and now average 64.3 months. And the number of vehicles delivering $1,000-a-month payments has never been higher, he said.

"You know, people buying $55,000 pickup trucks with $1,000-a-month payments — I've never seen it," Welch said. "A lot of people don't think that's sustainable."

Welch said most of the customers at NADA's 18,500 dealer rooftops aren't affluent buyers — they're a single mom buying a used Toyota Corolla, for example. As pressure on affordability mounts, Welch said cost can go "hand in hand" with government regulation. While stressing that he's not taking a position on the government mandating things such as fuel economy standards or new safety features, "they all come with a price," he said. He added that new-vehicle prices appear headed toward hitting $40,000 with $800 payments

"That is going to put a giant dent in the SAARs and it almost makes me wonder if at some point we're going to see another Henry Ford," offering new and more affordable vehicles, Welch said....


So are my taxes. I could buy a new Subaru for less than two years property taxes.

 

[SirTanon]

Depends on the vehicle, the buyer, and the market where you are, really...

On one hand, you can buy a brand new Kia Forte LX for around $12,500, and I don't consider that expensive at all.

On the other hand, there's this 2019 Ford F-150 Raptor selling for OVER $92,000!! That's almost as much as a small house! Definitely WAY too expensive.

 

[WyrTwister]

Yes .

One problem is large number of people are only interested in " What will my payment be ? "

No idea what they are paying for the new car smell .

 

[gman2304]

Manufacturers offering $15,000 off msrp......what does that tell you?

 

[StevieC]

Originally Posted by WyrTwister
Yes .

One problem is large number of people are only interested in " What will my payment be ? "

No idea what they are paying for the new car smell .

Same here with houses in Toronto going for over a Million. If one of them looses their job they have to immediately sell because they can't float the payments for long. It's nuts.