Toyota’s head of sales for North America thinks we’re in a recession, just a weird one that doesn’t conform to traditional data. He also thinks, fairly, that new car prices are going to rise above $50,000 on average. What, exactly, is going on here?
More mixed news this morning as Ferrari gets excited about combustion engines, Tesla has to face another NHTSA investigation, and the U.S. and Japan come together on mineral extraction.
Why Should New Cars Cost More?
On a call with reporters yesterday, Toyota Motor North America’s head of sales, Jack Hollis, said four things that are important to understanding the current state of the new car market in the United States:
- The average new car transaction price will push above $50,000 at some point this year.
- Ongoing shortages will keep about 2 million cars from being sold in the United States.
- Used-vehicle demand will keep used car prices up, along with most residual values
- We’re in a recession, albeit a weird one.
I wasn’t on this call, but Automotive News was and filed this report, which has a fuller quote:
Let’s take these in the order I proposed, just because it makes more sense to think of it that way.
- It’s not particularly a stretch to think the average new car transaction price is going to be above $50,000 this year. According to KBB (via ArsTechnica), the average transaction price rose 4.9% in 2022 to a high of $49,075 in December. All it takes is another 2% increase and we’re at $50,000. Why should it still go up, even as the feds raise interest rates?
- There aren’t enough cars. There’s no debate here. Automakers from across the globe have complained about production woes and, while it’s improving, it’s not improving fast enough. Quick numbers from Automotive News and Cox Automotive show U.S. inventories at 1.83 million cars, which is up 73% from 2022. That’s an improvement, but it’s still way down from what was available in 2021. Fewer cars and higher prices, means buyers who are priced out have to look at used cars.
- According to Cox Automotive, used vehicle supplies are tight again. The average listing price is $26,068. If there’s good news, it’s that the average price has dropped from their 2022 highs to the lowest level since 2021, but they’re still high and the average mileage of a used vehicle sold is now over 70,000 miles. The golden days of the just-off-lease, good quality used certified-pre-owned car are largely behind us.
- We’re in a… recession? This is where it gets weird. The seasonally adjusted unemployment rate stood at 3.6% in February (though layoffs are happening in tech). Technically, a recession requires two quarters of negative GDP and we sort of had that in the first two quarters of 2022, though the last two quarters have been strong. The Federal Reserve is still raising rates, which is a sign that they think the economy is still too hot and costs are too high. That’s not what a recession is, either, of course. It’s probably not stagflation (inflation + low economic activity). So what’s going on?
Here’s my Grand Unified Theory of the car world: There is no single normal, instead there are now multiple abnormals. No two automakers are going to be the same because supply constraints vary greatly across automakers. From quarter-to-quarter, month-to-month, automaker-to-automaker, expect to see a lot of divergence in pricing and customer experiences.
We will not see a normal again until we have a reset, which could come slowly or quickly. A slow reset will be at least six quarters of significant inventory increases. Prices will continue to probably climb, but over time incentives and other factors can bring average transaction prices down. For large automakers, ability to make cars is the ultimate determinant in whether or not you pick up or lose market share this year. A fast reset will be a large shift in macroeconomic conditions (bank runs, stock market implosions, massive increase in unemployment). That might drive enough people out of the market to let inventory catch up and force prices down, but it’ll suck for most people.
Confounding factors here include the fact that markets seem to be responding more to rates set by the Fed than economic production, automakers (like Tesla) are employing far more variable pricing strategies, and the government is heavily subsidizing electric car purchases.
The used car market will continue to slowly improve, but it can’t move fast enough to keep up with demand because there aren’t enough cars.
Ferrari Is Gonna Keep Making ‘Dem Gas Powered Cars
As we mentioned yesterday, the EU has taken the German’s e-fuel compromise. What’s good for Porsche, in this situation, is good Ferrari. The compromise basically says that low-volume manufacturers can keep making gas-powered cars after 2035 if they use carbon neutral e-fuels. This means that your Kuga ST probably isn’t going to go to the petrol station, but rich people can get Ferraris.
The CEO of Ferrari, Benedetto Vigna, was at a Reuters Newsmaker event (sounds like fun!) and had this to say:
“The good news for us as a company (…) is that on top of electric cars, we’ll also be able to go on with our internal combustion engines ones,” CEO Benedetto Vigna told a Reuters Newsmaker event.
“This decision is very interesting for us because it allows ICEs to go beyond 2036,” he added.
Rich people buy Ferraris and rich people seem to like options, so Ferrari is keeping the door open for everything:
“We don’t want to tell clients which car to use. We want to make three kinds of propulsion available for them – hybrid, electric and ICE – and they will chose”.
Oh to have those kinds of choices.
[Editor’s Note: I, for one, am glad sports car companies will be able to continue building ICE cars. At this point, the most fun ICE cars are simply more of a joy to drive than the most fun EVs (in my opinion). -DT].
Tesla Is Getting Investigated Over Seat Belts
Making cars is hard. Every little damn thing has to be right. Hundreds of independent systems have to work together to form one functioning vehicle. It’s hard! From the AP we have this story on an investigation into the Tesla Model X and its seat belts, which may or may not keep people in their seat during a crash (sort of the point of seat belts):
The agency says it has two complaints from Tesla owners that the front belts weren’t sufficiently connected at the factory.
Documents posted by the agency Tuesday say the belt linkage and pretensioners, which tighten the belts before a crash, are anchored to the seat frames.
Both complaints allege that the linkage and pretensioner separated from the frames when the vehicles were driving and force was exerted. Neither incident involved a crash.
Well, that’s not great. Maybe figure that one out.
Metals Processed In Japan Count For Inflation Reduction Act
If you walk up to someone and hand them a $5 bill, you cannot expect them to be overly grateful. It’s nice, but it’s just a fiver. Now imagine you walk up to someone and dump a gallon of milk on their head. You reach into your pocket and they wince because they don’t know what’s going to happen next. And then you hand them $5. They’re likely to be a little more grateful.
This is the Inflation Reduction Act if you’re a country that isn’t Mexico or Canada (or a party to one of our free trade agreements). All of a sudden, with one bill, the United States made it way more expensive for all other countries to sell cars here by effectively raising the prices of electric cars not made here (the milk). How to make it up to those countries if you wanna stay friends?
Here comes the Abe Lincoln, again from the AP, via The Detroit News:
The Inflation Reduction Act, enacted in August, requires a portion of the critical minerals used in EV batteries to be mined in or processed domestically or from countries with which the U.S. has free trade agreements. Japan and the U.S. have no such FTA, but the deal will grant Japan the same treatment as an FTA partner regarding such minerals, Japanese officials said.
As a result, the two sides said they agreed to not impose export duties on trade in lithium, cobalt, manganese, nickel and graphite — all strategically important minerals.
Good news for Japan. Probably good news for U.S. consumers. Probably good news for other countries looking to avoid being hosed by the law. It’s only bad news for China, which is seeing itself pushed out of more markets as the world divides itself in China/Russia/Iran and Everyone Else.
The Big Question
How long will it take for new car prices to go down?
Regarding Japan and the Inflation Reduction Act:
So, Japan will (or possibly will?) be exempt from this? That is, EVs or EV batteries can be sourced from Japan, and they will be eligible for IRA tax credits (for consumers or just for wholesalers)?
Seems kind of random. Why Japan? Why not Korea or the EU?
And what were the negotiations like – any concessions from Japan, for instance?
Not EVs themselves, just battery minerals/components. Korea already has this treatment via free trade agreement. I suspect they may come to a similar agreement with the EU if any major lithium refining and battery production start pushing for it there.
I think the market is ripe for a wave of cheap foreign cars to hit again, a couple of Chinese/Vietnamese/Indian brands could land and sell big like Japan in the 70s/80s, Korea in the 90s.
If they came in with decent $25k new cars, nothing special but pass safety and smog and able to get you places, people would buy them(what choice do they have?) and the rest of the market would have to follow suit again.
Probably won’t happen as you have BYD and VinFast doing the all EV thing, but if China really wanted to nail it to US auto makes they’d partner with somebody who didn’t care like Nissan/Mitsubishi for the dealerships and start selling some cheap seats.
I’ve pondered a lot why Mitsubishi and Nissan haven’t partnered development on a small, RWD economy car. Nissan can call it any old Datsun name, Mitsubishi calls it the Colt or GTO. A small, RWD, stick-shift economy car equipped like the Mirage and sold for mid $20ks would fly off shelves, it’s perfect for first-time drivers, enthusiasts who want a Miata alternative, etc..
that’s just not the demographic for small cars. generally it is the starter car for new drivers, thy want 4 seats and room to haul the Groceries and since half the country has snow to deal with RWD is dead, and of course only us weirdos around here really lament the manual trans. most of the small car crowd would gladly put their life in the hands of AI if it got them to work and back safely 95% of the time.
They already have one: the Renault Twingo. Sell it here as a Nissan or Mitsubishi 🙂
The new Twingo is 4-door rear-engine RWD
What is the best way to ensure prices go up? Have the government provide rebates or cheap financing. See EV pricing and college tuition.
New car prices will come down when there is an actual recession and people stop buying them.
It’s like a huge part of the media is trying to wish a recession into existence to discredit the current President…
And yet automakers are selling as many as they can make at full price.
I have no comment on the average car price, but I do wonder what will happen if prices stay the same while fewer and fewer used cars are filtering down to those of us that can afford them. Eventually, I have to imagine someone is going to need to step in to bring prices back down, as even the poorest will need a car to get to work and back. If it starts seriously affecting labor, I could see the government stepping in. That said, perhaps as manufacturing for EV’s normalizes, we’ll see prices forced to come down.
The Ferrari thing is interesting, as it’s something I’ve been saying to my wife for a couple of years now. I think in 20-years, ICE vehicles will be pretty similar to how horses went from being common transportation to only the domain of the rich, who can afford to keep them. Whether that’s something like this newer fuel or simply having an older car and being able to afford to put gas, oil, etc in it simply as an item of conspicuous consumption.
The traditional auto makers are going to hand a huge part of the market to the first Chinese firm that can break into the US market. And once they have a toehold, they’re going to eventually price the american manufactures out of the picture across the portfolio
And yes we have seen this movie before. In the 70s, US automakers couldn’t be bothered competing with VW and the Japanese small cars. How did that work out?
This is in part why “safety” regulations keep getting more stringent. They’re less about safety, and more about keeping cheap, inexpensive competition out of the country and are written accordingly by lobbyists. There are bakers dozens of small European subcompact cars that are survivable at 100+ mph crashes on the Autobahn, often without occupant injury, that will not meet U.S. “safety” standards. The big automakers do NOT want the Chinese to come in with a $15,000 200-mile range EV. The ability to make that kind of inexpensive electric car when measured in today’s money was technically feasible a decade ago.
And the 60 month term is no longer the average. We’re now about 70 months. As interest rates rise, I fully expect to see that increase further to keep those low payments, which is going to mean paying A LOT of interest over time.
With GM purposely shutting down plants to retain the highest profits while also not providing desperately needed vehicles at lower prices because of profit points, it is not hard to believe most other car companies would not do the same. Also it is hard to sell EV at 50K+ if ICE alternatives are 10-20k cheaper. Since Ford is using those lower priced cars that are profitable to cover the massive EV losses, I can see prices going up to support the Ideals even if it is not ideal for the average working class person.
I am about to drop over $48,000 on a new midlevel Sienna after being on a waitlist. Amazingly this is less than a used one on Carmax. Shit’s weird.
New car prices are never coming back down. They simply won’t.
It’s been a “rocket and feather” market for as long as they’ve been making cars. Prices shoot up like a rocket, and fall like a feather.
Most oligopolies run “rocket and feather” markets. But this time, the manufacturers are able to prevent the fall entirely by using the common excuse of supply chain issues.
Because cars are so much more reliable, and 200,000 miles without significant trouble isn’t very rare anymore, new cars are actually providing much more value to the buyer, so that’s an additional reason that prices will never come back down.
Agreed. My car is a 2016 and has (low) mileage for its year at just 71,500, but for all intents and purposes, it still runs, drives, and looks like a new car. I’ve taken care of it and maintained it, yes, but nothing special. It just does what I need it to and doesn’t require a lot of extra attention. A few decades ago, a 72,000 mile 7-year-old car was gross to say the least.
Cars are lasting longer and people are holding on to them longer, so used car values are up. New cars have electronic everything and profit margins are higher on trucks and SUVs, of which the market is almost exclusively composed of. In short, prices are never coming back down.
“A few decades ago, a 72,000 mile 7-year-old car was gross to say the least.”
Radwood says otherwise. Some folks here are adamant the 1990s was peak car.
It also depends heavily on whether the car was in the rust belt, whether it was properly maintained, smoked in, etc. Where I live I see some of those 72,000 mile 7-year-old cars now with more miles and time still around. There’s a few shiny, still loved Volvo 240s, as mid 80’s Peugeot 505 and a bright red and chrome mid 80s 6 series BMW both in dirty unrestored but not shitbox condition all on a mile or so stretch of my daily bike ride.
There are many others around as well, those are just the highlights. W123-6 Mercedes and E30 BMWs are common enough to be unremarkable.
I know. I have a 1990 Pontiac Sunbird with 62,000 miles that is pretty much showroom fresh.
I was talking more 1970s malaise era.
The important thing to remember is this is the average, made by adding the price of every new car sold over the year and dividing by the number of cars – it’s very easily skewed by very expensive pickup trucks and the like at the high end, it doesn’t mean that “all cars will cost $50,000” or even that “all cars in 2023 cost $49,000”. If you don’t want to spend that much, then just don’t, buy a Corolla or an Impreza or an Elantra or something.
I’m sadly not sure new car prices will ever come down. Even in Canada where it is illegal to sell cars above their advertised price, the car companies have seen during the pandemic that they have maximized profits by only focusing on the most profitable models and trims. Therefore, car companies have little incentive to lower prices or offer lower priced cars considering they have seen people clamouring over each other just to get any new car at just about any price.
We have already seen the discontinuation of small “affordable “ new cars from North America, the next step will be/is the discontinuation of lower trim levels. Let’s face it, used car supply and prices are of little to no concern to car companies because every used car bought/not scrapped is one new car not bought.
Used car supplies are determined by the rate of turnover for leased cars (decreasing leasing rates), rental car fleets (downsized during COVID) and the subset of the population that simply has to have a new car (decreased due to affordability and supply). Simply by reducing the supply of used cars, car makers are forcing a larger portion of the population into buying a new car (using extended loan duration as an affordability incentive). Forcing more people to buy new higher trim level cars, even at reduced sale numbers, increases profitability for the car companies and dealers. This introduces a win win for car makers and dealers and a lose lose situation for both the consumer and the environment.
Aren’t times great.
The Big Question…
Elon suggests 420 more days, of course.
🙁 I’m never going to get a nice parsh, am I?
What’s your definition of nice? Nice by normal standards or nice by Autopian staff standards? Because if we’re talking normal standards not gonna happen but if we’re talking Autopian standards then you’re in luck!
For e-fuels to work they have to be as easy to find as gas is now.
If it’s a Porsche/Ferrari rich people thing only then fuel stations will become rare, and then range anxiety will hit people in ICE cars as they try to make it 100 miles to the next fill-up in their 2035 quad-turbo Ferrari F3000 4-door coupe crossover. This doesn’t really work for anyone (apart from the ultra rich who’ll be followed around by a truck full of boutique artisan fuel in champagne bottles).
E-fuels have the next twelve years to become a volume product and as easy to find as premium gas or ICE really is dead.
I’ve said it before, but e-fuels are the only way to make the current vehicle fleet carbon neutral. Millions of cars are ready to stop being a source of CO2 right now. Or we can put all our environmental eggs in the EV basket and have ICE vehicles burning dinosaurs for another couple of decades.
Or, and I’ve put no thought in to this at all, we could breed millions of carbon-consuming modern dinosaurs and then extinct them, bury them deep and make fossil fuels carbon neutral.
The other thing e-fuel cars will have to do is to discriminate between gasoline and e-fuel. If we were to make a octane in a carbon neutral way, it will still be octane which means it will be chemically identical to the octane distilled from dino juice.
It’s too hard to detect chemical composition of liquid fuels as they flow up a pipe from the tank. Or it was ten years ago when we dismissed it’s as a flex-fuel strategy. Instead we detect knock and retard to suit the fuel.
The only way I see of guaranteeing the 2035’s ICE cars are running on e-fuels is to have stopped selling fossil fuels by then.
Doesn’t Holley’s stand-alone FI system do this? There are cars out there fitted with it that can tell the amount of methanol in the tank and adjust fuel maps automatically. I don’t play in those leagues, so no idea as to cost, though.
So we just get to make up what “recession” means?
Technically, we make up all words!
Excrumply!
There’s literally a group of economists that do that, yes. They have changed the official indicators several times and retroactively declared prior recessions, in some cases more than a decade after they happened.
And that’s just how the US does it. Every country can do it differently.
I mean, we (society, government, whatever) print money to make it easier to convert our work to other goods and services. We set interest rates, taxes, minimum wages, and the amount of money printed in ways that try to control for the many variables around production, services, trade, and labor. When things don’t go as expected, we label it a recession, a depression, stagflation, hyperinflation, or whatever else. When things take unexpected turns that we haven’t already labeled, we either expand labels or make new ones.
It’s all made up, even the stuff we take for granted as immutable laws, like supply and demand curves. Economies rarely react how the theoretical perfectly rational actors of the model predict.
They’ll never see substantial decline in real dollars. Based on the numbers in the story, they’re already increasing slower than inflation, which is a functional decline.
Now, whether that’s because specific model prices are increasing slower than inflation or people are selecting less expensive options that are seeing prices rise faster than inflation is a different matter. We’re just working with the top line numbers.
Increasing car prices are just another means that the wealthy use to drive the working class into full-on indentured servitude. In 1980, a year of work at minimum wage could buy you a basic new car. Good luck with that now.
This is playing very fast and loose with numbers. Was a 40hr/wk job at $3.10 going to gross that much in a year? Yes. Could that person buy that car? No.
A Chevette had an MSRP of ~$4000. Nobody making $6200 a year can buy that car and pay their other bills.
Correct, and even now doing that same calculation with 40 hours/wk at $7.25 (leaving aside the many states and cities that are higher) gets you basically to the MSRP of a Mirage.
There are a lot of factors here, but the person making $6200/year could make the car payment on a $7k car (avg price then) better than a person making $15,080 can make the payment on a $48k car, even with the rise of longer loan terms at low interest rates.
Really rough math here, though: loans in 1980 were generally 36 months, somewhere around 15%. Loans now are creeping up to nearly 70 months, averaging around 6% interest. I didn’t do all the math with payments over the terms, just a simple compound interest calculator, but the 1980 car cost just under 11k and today’s car would be just over 68k. So 1.775 years of work vs 4.509 years of work total at minimum wage.
(If you want hours of minimum wage work, it’s 3548.39 hours in 1980 at 3.10 vs 9379.31 at 7.25 today. Even if we went to a $15 minimum wage, that average car loan costs 4533.33 hours of work now.)
Also important and a little harder to quantify: cars (can) last longer now. A 300k mile vehicle isn’t the outlier these days. That said, the average used car costs 26k. Still pretty rough for minimum wage earners.
1000 dollars a month on groceries? maybe with multiple kids, for a single person that’s insane
According to the FDA, the cost for groceries per month for one person is 229 to 419. Still doesn’t get you out of the hole, but you’re closer to breaking even each month.
That said, if you want to live anywhere in the US with the transit to go without a car, you’re looking at cities where the 1200 rent is comically low. Even here in Boise, the average rent for a 1 bedroom apartment is 1500 and we have very limited bus service and terrible walkability. Also, we still have a 7.25 minimum, less for tipped employees.
With a $1,000 per month budget, I could eat nothing but restaurant foods every day and still have money left over. I’m not eating high-end very often, and some days would be leftovers, but I wouldn’t ever need to cook a meal.
A loaded large pizza every single day at full menu price is only about $480 per month.
That doesn’t sound anything like “Ramen and hunger” to me.
Forget it, he’s rolling
Yeah, make that $500. On the other hand, my gas bill is between 200 and 350, and rent in NYC starts at $2,500 for the outer boroughs.
Gonna come in with slightly different numbers.
1200 rent
200 groceries
100 electric
20 natural gas
100 water
40 phone
1660 without transportation costs, home internet, insurance, or entertainment.
At ten bucks an hour with no taxes or anything coming out, you’d be down 60 each month, except for the couple months you get a third check for 800 (assuming 2 week pay periods). You’re careful and you make it work, that’s an additional 133/month. So you have 73 dollars to use on transportation costs, spending more than the average one bedroom, or perhaps clothes and other necessities. Except you still have to pay into social security. And you’re probably paying income tax, though you’ll get it back at tax time.
Federal minimum? Down hundreds of dollars a month. Maybe you can break even with roommates, but you certainly don’t make up enough to get ahead.
I wonder what model years of Tesla would have to be recalled for seat belts. Depending on the size of the recall, this will be a good test of their service network. And hopefully they can learn a thing or two in the process, from what I’ve read (though it’s probably anecdotal) their service model, outside OTA updates, is lacking. Seat belts coming loose isn’t a new issue, didn’t Ford do a recall for that just last year? I’m just interested to see how Tesla handles a potentially large scale recall.
Or it could just impact like, 50 cars and not be a big deal.
It says it just affects Model X, which is their priciest (and lowest volume) car. (The photo is of their high-volume Model Y, however — so a bit misleading.) The linked article says the recall roughly affects 50,000 Model X SUVs from the 2022 and 2023.
Seatbelts will be fixed with an over the air software update.
What do you mean that’s not possible? That’s how all Tesla recalls are fixed. Why are you anti-Tesla!
Company that sells cars says car prices will get more expensive should not shock anyone.
Car prices may not ever go down. The well off will always get to buy the expensive new cars with every more luxury and us poors will fight over the used and abused scraps.
IF somehow car manufactures would (probably by force) so make and sell small cheaper new cars then the prices will drop. I just do not see that happening. Car companies are there to make money and making cars is just one way they make money. fewer bigger more expensive cars just makes them MORE money.
Luxury goods have always been small volume and high margin, but now that the top 20% of earners are making more than the bottom 80% combined, the market catering to the top 20% of consumers is becoming bigger in both revenue and profits.
I suspect that a lot of industries are going to bifurcate into either extreme decadence or increasingly predatory X-as-a-service.
That lede image, if I stare at it long enough and let my eyes go out of focus will I see a schooner?
“You know what? There is no Easter Bunny! That over there, that’s just a guy in a suit!”
It’s that time of year and just last week we walked past the Easter Bunny at the local mall and my wife and I started quoting that line. A bit too late we realized the kids waiting in line could probably hear us. Oops.
Hard to say. That one guy has been trying to see the sailboat for days. He brought his lunch today though, so he’s dedicated to the task.
Hahahaha, you dumb bastard, it’s not a schooner it’s a sailboat.
This is exactly what I was going for and it delights me that the joke landed.
I swear, this is exactly why I’m a member of this fine bastion of online automotive journalism.
A schooner is a sailboat!
“At this point, the most fun ICE cars are simply more of a joy to drive than the most fun EVs”
Well no one has makes a purely fun EV yet. There’s a couple of we stuck batteries in a normal gas coup but that’s not the same. Besides crazy low-volume supercars like the Rimac, which I don’t think any have reaches customers, there isn’t any EV sports car.
All the fastest EVs are giant Sedans
And that makes sense! Focus on high-volume stuff to offset development costs.
Tesla (well, Lotus) made an EV sports car. No one has made one since. Such a shame.
Yes, the Tesla Roadster is out of this world.
Maybe 5 years. By then enough mines and processing facilities will be operating to drive down the cost of lithium.
We’re never going back to the dirt cheap bare bones car. Insurance has made that so pricey there’s no margin in it. The cheapest we may get is $30k for a Bolt or something. All those sensors and advanced materials are expensive.
In addition to the points you made, new cars at the bottom end of the price range now not only compete against each other but also against lightly used cars.
Thirty years ago, if you had $10k to spend on a car, you could get a brand new base-model, or if you were feeling lucky you could roll the dice on a used midsized car that may not have much life left in it. But cars last longer now, and that’s a good thing! Today if you have $16k in your car budget you could buy a brand-new Mitsubishi Mirage or you can get a Toyota Corolla that’s only a few years old but has better features and will likely last longer than the Mitsu.
More carbuyers are realizing that there’s less of an advantage to buying new than there used to be and adjusting their purchases accordingly. As a result, car companies are realizing that there is little incentive to releasing small cheap cars.
That’s why I cringe when I see comments wishing automakers would bring some of their cheap tiny cars stateside. Sure, there’d be a few people jumping on a Tata Nano, but most drivers in that price bracket would find a better-equipped lightly-used car more appealing.
In addition to both of these salient points, I would also add that the buying public doesn’t seem to buy base models, preferring mid-tier with nice amenities. Think about buying a car WITHOUT heated seats *shudder*. Hell, Jeep sells plenty of wranglers with luxury options you wouldn’t find on a 2005 S-Class. And They don’t “Wrangle” any better than the base model.
Of course; part of that is dealers and their inventory selection, but they logically want to stock what sells (or has margin).
And of course a dollar ain’t what it used to be, and never will be again.
Also 30 years ago normal people didn’t lease, so the used market wasn’t full of 2 year old cars.
Not only that, but the manufacturers don’t want it. They are not producing as many cars as they can anymore, they are artificially keeping inventory scarce because it drives up their margins. When they don’t have to offer incentives anymore, they make more.
Tesla first it was steering wheels that fly off when you’re driving, now it’s seatbelts that break away, what’s next? Seats that eject passengers through the doors at the push of a button? Floors where the rivets pop off?
Rivets popping off floors only happens when there is danger to the manifold.
Ejectable seats are a safety feature that comes with the FSD package.
“How long will it take for new car prices to go down?”
Have they ever, at least since the Model T?
Cars will go down in price at some point, relative to purchasing power, but the number will never get lower.
My dad has an MBA and I fairly regularly have to give him stick about car prices (and just about everything else). He KNOWS how inflation compounds and how to do the math and it still gets him. How is Billy the plumber supposed to grasp the time value of money in relation to purchasing power parity?
Yes, given the headline (OMG $50,000!!!) I interpreted the question to mean cheaper in nominal terms. Which is never going to happen. Incomes are rising fast though, so cars probably will get cheaper in real terms if they aren’t already.
As for your other question, Billy knows enough to understand that he is charging a lot more per hour than he was 4 years ago, even if his truck and tools cost more too.
Interestingly the answer is yes (although the info can be hard to find because searching “new car prices over time” returns dozens of “OMG ARENT PRICES HIGH” News stories).
Data linked below is 1970-2016. There were dips overall during the dot com crash and the Great Recession and car prices declined slightly from the turn of the century. Interestingly the overall light vehicle index was dragged up by the massively increasing price of trucks as companies worked out they could sell them for high margins to bros.
https://www.energy.gov/eere/vehicles/articles/fact-988-july-31-2017-average-price-new-light-vehicle-was-nearly-32000-2016
Interesting. I imagine the product mix played a part in that (a lot more small cars sold in the aftermath of the recession). Still I’m surprised to see that.
I suspect the answer might be in the data. As well as people buying down market as you suggested, more customers were buying double-cab trucks over higher-end sedans and wagons. That takes the upper end out of the average calculation so it’ll fall. It would be interesting to compare it to European data where fewer trucks are sold.
It is also interesting when you think about how much safer, longer lasting, and tech-filled vehicles are compared to vehicles from even the 90’s.
FYI, that 2016 average price equals $39,849 of today’s dollars.