New Vehicle Virus Prices

[Ben]

I just saw a report on the teevee on the trouble the big three automakers are in. What do you guys think will be happening to new car prices in the very near future?

I really have no need for a new car, but my F150 is hitting the five year depreciation mark this year. I was looking at starting anew with a 4x4 F150 next year (2wd apparently isn't the best option where I live now - the dealers don't even sell any), but if  I could get a killer (as in mass murderer discount) deal now, it could be worthwhile to trade in early, especially considering the hit I'll take on the 2wd.

[Brad Johnson]

I'm seeing some pretty steep local discounts. Plus, the 2021 models will be introduced in four months. That means they are not only overrun with current inventory, they're staring down both barrels of inventory clearancing for new models. You also get hella good prices if you use factory financing. That's the only way I was able to afford my new ride. I took advantage of the factory finance discounts (about $6000, all told), made a couple of payments, then flipped the loan to my credit union for the six point reduction in interest rate.

Brad

[Perd Hapley]

If they're desperate to unload new cars, I'd like to think that means used cars will be cheaper.

[AZRedhawk44]

They've been in trouble ever since they've felt that a V8 4WD vehicle is somehow worth $50,000.

I just finished paying off my Jeep JK last month.  So excited to have that vehicle payment done and over with.  Jeep is running spectacularly, has only about 48k miles on it.  It ain't going anywhere.

I'm not getting another vehicle until they realize cars aren't worth 25% of a house, and the AZ state government doesn't need $800 a year for vehicle registration.

[Angel Eyes]

... and the AZ state government doesn't need $800 a year for vehicle registration.

Ouch.  That's California-level pain.

[charby]

I just saw a report on the teevee on the trouble the big three automakers are in. What do you guys think will be happening to new car prices in the very near future?

I really have no need for a new car, but my F150 is hitting the five year depreciation mark this year. I was looking at starting anew with a 4x4 F150 next year (2wd apparently isn't the best option where I live now - the dealers don't even sell any), but if  I could get a killer (as in mass murderer discount) deal now, it could be worthwhile to trade in early, especially considering the hit I'll take on the 2wd.

You already have a 4x4 vehicle, why not just keep the truck and run the wheels off of it? Until the mid 90s 2wd was way more common in pickups then 4x4. You're also retired so you don't need to go venture out in the middle of a blizzard to get to work or pickup supplies on your day off.

[Nick1911]

They've been in trouble ever since they've felt that a V8 4WD vehicle is somehow worth $50,000.

I just finished paying off my Jeep JK last month.  So excited to have that vehicle payment done and over with.  Jeep is running spectacularly, has only about 48k miles on it.  It ain't going anywhere.

I'm not getting another vehicle until they realize cars aren't worth 25% of a house, and the AZ state government doesn't need $800 a year for vehicle registration.

So much this.

In 1990 the base MSRP of the F-150 XLT was $12,986.
In 2020 the base MSRP on an XLT is $34,160
Yet the Consumer Price index for new vehicles has only risen 22% in that time.



New trucks are insane, so I use a 20 year old beater for my HVAC business, and just keep throwing parts at it.  I'd have to be extremely well off before I'd consider buying a new truck with the exorbitant prices they ask.

[charby]

So much this.

In 1990 the base MSRP of the F-150 XLT was $12,986.
In 2020 the base MSRP on an XLT is $34,160
Yet the Consumer Price index for new vehicles has only risen 22% in that time.



New trucks are insane,

I've argued this many times and get told I'm wrong by members on here. God Speed Nick!

[Fly320s]

Nick,

The F series are the best selling vehicle in the US.  Not best selling of trucks, but of all vehicles.  That might affect the price a bit.

[Ben]

You already have a 4x4 vehicle, why not just keep the truck and run the wheels off of it? Until the mid 90s 2wd was way more common in pickups then 4x4. You're also retired so you don't need to go venture out in the middle of a blizzard to get to work or pickup supplies on your day off.

I've quickly learned that snow isn't as big an issue for me here as I was afraid of. I have yet to use 4x4 in the 4Runner in the little snow we get. The truck thing is more around the farm. I've gotten the stupid thing stuck a few times in the middle of Summer using it on the farm here.

So I don't NEED 4x4, but for resale value, that's all that sells here truck-wise. I was surprised to see zero 2wd trucks advertised at any dealer. I'll need to look at my tax projections, but the 5 year business depreciation on my last two trucks has been ridiculously helpful. It's really a coin toss on "bang for the buck" in driving a business vehicle for 15 years (10 without a depreciation deduction) or trading it at five years and maybe paying $5000 on top for a new vehicle to start the depreciation clock again.

If I didn't have depreciation (plus deducting new tires, gas, car washes, insurance, etc.) there would be no question on driving it for at least ten years, which I do with my second (personal) vehicles.

[dogmush]

So much this.

In 1990 the base MSRP of the F-150 XLT was $12,986.
In 2020 the base MSRP on an XLT is $34,160
Yet the Consumer Price index for new vehicles has only risen 22% in that time.

New trucks are insane, so I use a 20 year old beater for my HVAC business, and just keep throwing parts at it.  I'd have to be extremely well off before I'd consider buying a new truck with the exorbitant prices they ask.

I don't disagree that new trucks are very expensive.  But I sold a 1995 F150 Eddie Bauer last year, and currently have a 2004 XLT, and have driven a 2018 Lariat FX4.  Comparing a 1990 and 2020 F150 isn't even apples to oranges, it's apples to ...I dunno a med-rare wagyu ribeye with a side of 18 YO Taslisker.

It's also pretty hard to argue that pick ups aren't worth what they ask for them, because they pretty much sell all of them that are made, so the supply and demand curve is pretty much spot on. If they aren't worth it to YOU, that's a fair statement, because clearly I agree.  My truck is 16 years old.  The US market as a whole is pretty clear about the value of a 1/2 ton truck though. 

I'm more inclined to bitch about not being able to find one used that isn't a four door and has a real sized bed on it.

As far as Ben's question: I would wait and see if the prices actually drop.  The dealers are frantic right now for the stuff in stock, but how many factories cut production during the shutdown?  How big will the over-supply actually be?  I don't have the answers to those questions, but it will drive the deals being made (or not).

[Brad Johnson]

I'm more inclined to bitch about not being able to find one used that isn't a four door and has a real sized bed on it.

Might be easier and almost as (if not more) cost-effective to buy new.

8' bed
5.0 V8
4WD
Heavy Duty Payload Package
3.73 E-Locker
Trailer Tow Package w/Integrated Trailer Brake Controller
36 Gal Fuel Tank
Engine Block Heater

MSRP $41,195. Could probably get it bought for around $35k if you could wrangle up a dealer to custom order it for you.

https://shop.ford.com/build/f150/?gnav=vhpnav#/config/Config%5B%7CFord%7CF-150%7C2020%7C1%7C1.%7C300A.F1E..JS...XLT.AWD.995.RCAB.41H.67T.RETAIL.627.SS8.%5D

Brad

[Nick1911]

I've argued this many times and get told I'm wrong by members on here. God Speed Nick!

Didn't realize it was controversial. Wonder why that is...

The F series are the best selling vehicle in the US.  Not best selling of trucks, but of all vehicles.  That might affect the price a bit.

How do you figure?  Don't economies of scale make things cheaper?  

I don't disagree that new trucks are very expensive.  But I sold a 1995 F150 Eddie Bauer last year, and currently have a 2004 XLT, and have driven a 2018 Lariat FX4.  Comparing a 1990 and 2020 F150 isn't even apples to oranges, it's apples to ...I dunno a med-rare wagyu ribeye with a side of 18 YO Taslisker.

If your argument is that new features, upgrades, and modernization account for the tripling in price... why hasn't that happened with passenger cars?  My 2012 corolla is absolutely light years ahead of the 1990 my dad had.  In 1990 a new corolla LE with the automatic msrp'd for $10,928.  My new corolla LE in 2012 was $16,500.

It's also pretty hard to argue that pick ups aren't worth what they ask for them, because they pretty much sell all of them that are made, so the supply and demand curve is pretty much spot on. If they aren't worth it to YOU, that's a fair statement, because clearly I agree.  My truck is 16 years old.  The US market as a whole is pretty clear about the value of a 1/2 ton truck though.

Well, yes, it's my own personal perspective that new truck prices are insane.  Is that worth it to some folks?  Sure, it's a matter of perspective.  I know someone who makes $18 a hour and has a $70k truck.  It's worth it to him.  I'm generally very thrifty.  I also don't really understand things like $1000 cell phones.

However, we can see objectively that trucks have gotten much, much more expensive in the last 30 years.

[AZRedhawk44]

CAFE is artificially driving 4x4/V8 prices upwards the same way the '86 FOPA is driving machine gun prices upwards.

Artificial constraint on supply side economics due to mandatory fleet fuel efficiency standards.

[dogmush]

Might be easier and almost as (if not more) cost-effective to buy new.

8' bed
5.0 V8
4WD
Heavy Duty Payload Package
3.73 E-Locker
Trailer Tow Package w/Integrated Trailer Brake Controller
36 Gal Fuel Tank
Engine Block Heater

MSRP $41,195. Could probably get it bought for around $35k if you could wrangle up a dealer to custom order it for you.

If it was my daily, sure.  That's a bit more than I paid for my car, but not outside the realm of possibility.

My truck is the third vehicle in a two driver household however.  I was willing to go up to $10k for the right truck when I bought mine, but that's it.  I actually found a steal of a deal on my 04, but I stumbled on to a friend of a friend deal.

I sympathize with the folks that wish they weren't that expensive, I just have to point out that you do get a lot of vehicle for that, and the market has clearly said they are worth that much to a bunch of people.

If I were shopping for a new F150, I'd probably be looking at a Raptor.  Seriously.  The premium they bring at resale makes the small price jump over an FX4 actually a pretty good decision.

[MillCreek]

So back when I bought the 2016 Toyota Tacoma 4x4 TRD Sport with various accessory packages at $ 41K out the door, I paid a premium to get a mid-sized truck with all the bells and whistles.  That decision was largely driven by my need to frequently drive to downtown Seattle on legal business and to try and park in the tight quarters of the typical skyscraper parking garage.  I tend to drive my vehicles into the ground, and the Tacoma replaced a 12 year old vehicle. 

Since my job has changed, and I am no longer driving to downtown Seattle very much, if at all, I wonder if I will look at a full-size truck when it comes time to replace the Tacoma.  With various incentives and rebates, many full-size trucks are cheaper than the Tacoma.

[Ben]

Might be easier and almost as (if not more) cost-effective to buy new.

8' bed
5.0 V8
4WD
Heavy Duty Payload Package
3.73 E-Locker
Trailer Tow Package w/Integrated Trailer Brake Controller
36 Gal Fuel Tank
Engine Block Heater

MSRP $41,195. Could probably get it bought for around $35k if you could wrangle up a dealer to custom order it for you.

https://shop.ford.com/build/f150/?gnav=vhpnav#/config/Config%5B%7CFord%7CF-150%7C2020%7C1%7C1.%7C300A.F1E..JS...XLT.AWD.995.RCAB.41H.67T.RETAIL.627.SS8.%5D

Brad

I just checked a couple of local dealer sites, and an F-150XL with the upgrade that makes it basically an XLT (about what I'd be looking for - I have an XLT with the ecoboost now that I paid ~$36K for new) is going for $31K after $10K in discounts. There are a bunch of them advertised,.

[dogmush]

If your argument is that new features, upgrades, and modernization account for the tripling in price... why hasn't that happened with passenger cars?  My 2012 corolla is absolutely light years ahead of the 1990 my dad had.  In 1990 a new corolla LE with the automatic msrp'd for $10,928.  My new corolla LE in 2012 was $16,500.

I would argue that the features and modernization of sedans has not progressed as far as it has on trucks.  Or perhaps it is fairer to say it didn't have as far to go.  A 2020 Corolla LE starts at 20k.  So it doubled where an F150 tripled.

But drivability, comfort, NVH, and handling of an F150 has progressed quite a bit farther from it's start then the sedan.  They made trucks drive like cars, while cars still just drive like cars, if that makes sense. while adding more bells and whistles then a base-ish Corolla gets.

Hell BMW gets $65k for a tricked out 3 series.  What did they go for in 1990?  

I think new vehicles are just more expensive because you get more for them.  Due to a metric *expletive deleted*it-ton of folks wanting to drive a 1/2 ton pickup like an everyday car, they got even more improvements stuffed into them, and they cost more for it.

[Brad Johnson]

One thing that hasn't been mentioned is how financing options affect vehicle prices. I don't recall specifics, but in the 1980 I remember financing being limited to 3 years. Five at most. Now there are seven and eight year amortizations available, as well as cheap (per month) leasing options. Since most people base the amount of vehicle they buy on what their monthly payment will be, today's lavish terms automatically bump the amount of vehicle people perceive they can "afford". Manufacturers aren't blind to it.

Using some basic online calculators, I ran the following. The first calcs are on a 1990 vehicle. The second set takes the 1990 payment, adjusts it for inflation, and backs into a current vehicle price.

1990 VEHICLE
$12,500 (about average for a new F150 in 1990)
7% interest
36 month amortization
Monthly payment = $385.96 ($690 in today's dollars)

VEHICLE TODAY
$690 / month (1990 payment adjusted for inflation)
4.99% interest (roughly average for what I'm seeing advertised)
84 month amortization
Amount financed = $49,000

It's no coincidence the vehicle price comes out to about median price for the most popular F150 trim (XLT). Throw in a modest trade-in or small cash down and you're at $57-$60K, exactly the price range you see most often on dealer lots.

Brad

[MechAg94]

I thought the CAFE environmental standards required auto makers to sell an average fuel economy with all their vehicles.  For every big truck with a lower fuel economy, they have to sell small cars to off set that.  That means the small cars are sold at commodity pricing and trucks are where they make their profit.  That is also why the full size sedans are no longer made.   There are more details to that, but environmental standards do a lot of distort the car/truck markets.

[AZRedhawk44]

I thought the CAFE environmental standards required auto makers to sell an average fuel economy with all their vehicles.  For every big truck with a lower fuel economy, they have to sell small cars to off set that.  That means the small cars are sold at commodity pricing and trucks are where they make their profit.  That is also why the full size sedans are no longer made.   There are more details to that, but environmental standards do a lot of distort the car/truck markets.

They aren't in the charity business.  They're not selling those tiny cars at a loss, or even at break-even.  Those tiny cars come with warranties that have to be honored, and those are expensive commitments.

The CAFE standards turn what used to be a market-driven volume of large vehicles into a fixed volume of large vehicles being competed for by the demand side curve.  Ford can only make so many F-150's for every dozen tiny cars they sell.  They can't roll more off the line and to sales lots until the crappy rollerskates are sold at quota.

This drives prices up for the trucks and 4x4's and sports cars.

https://www.heritage.org/government-regulation/report/fuel-economy-standards-are-costly-mistake

[cordex]

Good info AZ, thanks.

[MechAg94]

Good info AZ, thanks.

+1

I was close, but not quite there.   

[Boomhauer]

I’m looking at trading in my 16 Ram if I like the numbers, we will see