[Crumpler]

This is going to be off topic but I fell into a worm hole last night.

This is US data, but potentially ROW too with global economics and human behavior.

Average new car price $ 50,000.00.
Average used car price ( 3 years old or newer) is $30,000.00.
Average age of car on the road is now 13 years old, which is also telling in its own right.

I see people paying incredible prices, both used and new vehicles, with horrible interest rates and loans going out to 96 months in many cases. It smells like 2008, but this time the auto market.

I think the first implosion will be American pick ups.

Pimped out to $80,000.00 trim levels. Grumbling of QC issues right out of the factory. The big three have no desire to undercut each other, which smacks of price fixing to my uneducated mind. I believe heavy tariffs on foreign pick ups go back to LBJ in the 60’s.
God knows what the new tariffs imposed by the Dear Leader have done to that equation.
It’s just weird that no one is acknowledging a problem.
I saw data of over three million pick ups repossessions on bad financing last year alone.

I have always gone with the theory that the car you can afford is the one you can pay cash for, but that obviously is not how the majority feel.

[worf]

Interesting that a couple of the vehicles “non-grata” you speak of are Fords. The Mach E “Mustang “ and the Broncos with the little ecoboost engine. No waiting lists now, is there.

From my armchair...

It's important to attempt to deconvolve abysmally poor product decisions from idiotic government technology policy and from idiotic macroeconomic policy. Ford made some retarded product decisions in the context of idiotic technology policy that's now festering due to macroeconomic policy.

Those models - and the (E)F-150 - are terminally fucked because of product decisions. Had Ford made better product decisions, then Ford would be better off now, but still walking bow-legged. I don't think those models would have survived even if the economy was booming.

Ford's stupendously stupid product decisions don't translate into deflationary pressure on the auto industry as a whole.

Now I do think that the industry will downsize in terms of production numbers. Fewer people will be able to afford a new car at current ASPs even with 120 month financing. I think new car sales will not grow as they have, used cars will have lower depreciation rates and fleet age will increase.

Could car makers make less-expensive cars to counter the above trend? In the US and EU? No. In China? Yes.

In the US, labor and regulatory costs place a floor on minimum build cost for a car.

In China, cheap cars for export are effectively subsidized via many vectors from direct subsidies to currency manipulation.

I for one don't think CCP-subsidized economy cars are good for the US even though they might be good for 50% of the US population in the very short term.

[maddog2020]

trucks sell for more because of the IRS schedule 179 loop hole. Yes the car industry is wonky for sure. I just picked up a 2020 GLE 580 with 40k miles on it CPO and 100k mile pre paid service package, for about 60% less than MSRP from 2020. 60% depreciation in 6 years is crazy. Part of it is the SUV market with Thirsty V8's is soft right now. Having a twin turbo V8 is a blast to daily drive tho.

[Fox_]

Cars became too expensive then interest rates went up.

Automakers are in trouble across the board.

[worf]

https://www.federalreserve.gov/econres/ ... 51124.html

[Crumpler]

That report is telling.

Again, with my economically illiterate mind, I don’t see the auto market adjusting back to pre-COVID?status, at least not in the foreseeable future.
I’m assuming the cost of new autos drives the continued over pricing of the used car market.

[maddog2020]

a lot of people have forgotten about cash for clunkers. That took almost 800k affordable cars off the market. The affordable cars left went up in price raising the bottom floor on car prices in general Used car prices go up, manufacturers get the green light to raise new car prices. then covid hit. the rest is history. When I was younger I bought several cars in the 80's and 90's for under $100 and drove the crap out of them.

[Sazerac]

Good point about the cash for clunkers. I had already forgotten it. I also remember driving super cheap cars when I was a kid. It makes no economic sense to just take good assets out of service, if you can still use them.

[worf]

Again, with my economically illiterate mind, I don’t see the auto market adjusting back to pre-COVID?status, at least not in the foreseeable future.

What specifically do you mean by "pre-COVID status?"

If you mean, will prices go down? Hell no. Outside of fungible commodities, prices don't go down in a functioning economy. That would be deflation and is a demonic economy killer.

[Crumpler]

At some point I would expect the prices to drop if you can’t sell the vehicles sitting on your lot. Market day supply on many models now exceed 365 days, with some out to 1000 days.
That can’t be sitting well with the industry.

[worf]

At some point I would expect the prices to drop if you can’t sell the vehicles sitting on your lot. Market day supply on many models now exceed 365 days, with some out to 1000 days.
That can’t be sitting well with the industry.

Well, IIRC the 1000 day-to-turn cars are one or three very specific models that no one wants at any price.

IMO...

We might see average price stay the same or stop going up at fantastic rates. We will see changes in production segments based upon consumer demand. But, I very much doubt we'll see a non-trivial reduction in prices in all segments. Everybody's (e.g. burger flippers, UAW sheep, etc.) gotten there covid-era raises. That's a floor on the price of a new car.

Thank you inflation! All due to the irrational (or deliberately evil) profligate deficit spending to increase demand across the entire economy in the face of a mandated contraction in supply.

If we do see price declines across all segments it means that the economy has stalled and is pointed straight down.

[Crumpler]

Interesting that a couple of the vehicles “non-grata” you speak of are Fords. The Mach E “Mustang “ and the Broncos with the little ecoboost engine. No waiting lists now, is there.

[worf]

Interesting that a couple of the vehicles “non-grata” you speak of are Fords. The Mach E “Mustang “ and the Broncos with the little ecoboost engine. No waiting lists now, is there.

From my armchair...

It's important to attempt to deconvolve abysmally poor product decisions from idiotic government technology policy and from idiotic macroeconomic policy. Ford made some retarded product decisions in the context of idiotic technology policy that's now festering due to macroeconomic policy.

Those models - and the (E)F-150 - are terminally fucked because of product decisions. Had Ford made better product decisions, then Ford would be better off now, but still walking bow-legged. I don't think those models would have survived even if the economy was booming.

Ford's stupendously stupid product decisions don't translate into deflationary pressure on the auto industry as a whole.

Now I do think that the industry will downsize in terms of production numbers. Fewer people will be able to afford a new car at current ASPs even with 120 month financing. I think new car sales will not grow as they have, used cars will have lower depreciation rates and fleet age will increase.

Could car makers make less-expensive cars to counter the above trend? In the US and EU? No. In China? Yes.

In the US, labor and regulatory costs place a floor on minimum build cost for a car.

In China, cheap cars for export are effectively subsidized via many vectors from direct subsidies to currency manipulation.

I for one don't think CCP-subsidized economy cars are good for the US even though they might be good for 50% of the US population in the very short term.

[worf]

Oh... my prediction?

Well, CarChick's 991S 7-speed, bought after someone did a two-year lease return, has appreciated in the 8 years we've owned it despite having twice as many miles now.

Well-maintained manual sports cars will appreciate. Not above the inflation rate of course.