Snowdoggie (Forum Supporter) said:
What happens if the government starts really pushing EVs and the consumer doesn't want them quite yet? The dealers could be filled with expensive lease deals on EVs and the consumer who doesn't want an EV will be forced into the used market. Those car prices won't be going down anytime soon.
That isn't the way supply and demand works. If fewer people want EVs than are produced, the price will go down until demand balances against supply.
As for the other part... all I will offer is that was from the UK where you are subjects.
One thing to consider- back in the 2008 crash, new car sales crashed to something like 15M cars in the US, and many people thought this was going to be the new normal. That didn't last long.
While I fully agree that it will take a while for new car production to catch up to demand, I also expect to see OEM's working REALLY hard to take sales from other OEMs to capture more market as things stabilize. So while it may appear that higher prices and low production makes more money, all it will take is one company to attack holes in the market and that will go back to a more discounted system just to maintain some kind of market presence.
The big thing that has to happen to reduce used car prices is that the constant permanent removal of cars from the system fleet has to really be caught up to. It will take a while, but I expect it to happen.
In reply to alfadriver :
Right. The automakers aren't all tied together. On then other hand, say, OPEC can cut production so price goes up so they can make back their losses from 2020...
(Edit: I hate this phone)
Erich
UberDork
12/29/21 3:00 p.m.
In reply to alfadriver :
Agreed. It looks like this year we are on track to finish with well under 15 million cars sold, and that's only due to a restricted supply, not demand. Once they are able to address the chip shortage, carmakers will increase supply - if anything they'll probably overcompensate in a rush to be the first ones to be able to sell in volume, and that will lead to lower new car prices, and lower used car prices to follow shortly after.
The timescale for that to happen is anyone's guess.
I did just check the carvana offer for my 2017 BMW i3 and it's now up to $6k over what I paid in April, which is up $3k from September. Car prices could still head up a bit in my opinion, as a lot of folks who have been holding out on buying a new car face external pressure to buy and overpay.
I'm gonna continue to hold that what was $3k is now $5k and what was $25k is now $35k.
Pete. (l33t FS) said:
Snowdoggie (Forum Supporter) said:
What happens if the government starts really pushing EVs and the consumer doesn't want them quite yet? The dealers could be filled with expensive lease deals on EVs and the consumer who doesn't want an EV will be forced into the used market. Those car prices won't be going down anytime soon.
That isn't the way supply and demand works. If fewer people want EVs than are produced, the price will go down until demand balances against supply.
As for the other part... all I will offer is that was from the UK where you are subjects.
They were talking about putting a carbon tax on gas powered cars in Southern California. We have done the cash for clunkers thing before. Cash for gas burners to crush in trade for EVs isn't out of the question, and it would take non-EVs out of the used car market. The government has been known to mess with the free market until they get the result they want. Expect to see it in California first.
I'm counting on the prices staying higher for another 6 months or so. KBB says my Fusion is worth $31k private party, and I only paid $33k for it almost 3 years ago, so that would be awesome. As we're most likely getting a Mach E to replace it, I'm probably looking at mid-2022 if I order it now.
Tom_Spangler (Forum Supporter) said:
I'm counting on the prices staying higher for another 6 months or so. KBB says my Fusion is worth $31k private party, and I only paid $33k for it almost 3 years ago, so that would be awesome. As we're most likely getting a Mach E to replace it, I'm probably looking at mid-2022 if I order it now.
I'm hoping this sticks around until October- when I need to return my '20 Fusion. I'm pretty confident that I can sell if for far more than the residual price- so I should be able to negotiate some good terms.
In the short term, prices may rise or stay flat, I'm sure there's some life left in the market.
What happens in the longer term, say 4-5 years? At some point prices for ICE cars have to start falling as the infrastructure to support them starts to break down. I'm curious as to how that plays out. I'm sure enthusiasts will continue to run ICE cars, I mean, steam cars still get driven around. Mostly by Jay Leno, but they still exist in small numbers.
BEVs should ultimately get very cheap once we figure out a better battery technology. There's a huge complexity advantage.
As the industry person said prices will go down when new stock production catches up to demand. One factor that I think will be important is the people purchasing those new cars that are finally back in stock and looking to trade in. If they bought an inflated cost car in the last 2 years they are going to want to trade it in and they are not going to get what they paid for it and that deficit is going to be huge. Without trade-in equity people won't be able to afford to buy new and prices on new are going to go down quickly with the used market falling even quicker.
docwyte
PowerDork
12/29/21 7:09 p.m.
Yeah, I want prices to stay high for another 6 months too. I'll likely sell my R to Carvana or Carmax, sell off all the mods and grab an E63 AMG wagon
In reply to dr_strangeland :
It's going to take decades for EV's to have that kind of impact. There are about 280M cars in the US, and lets say that stays constant, and new cars replace old ones. If EV's were 100% of new cars sales, it would take 14 years to replace all of the current cars on the road. It's going to take many years for EV's to become even 50% of the market. Right now, EV's are just under 3% of the entire market.
Basically, I would not worry about that.
As soon as the chip issue is resolved the OEMs will ramp production up until someone in the supply chain can't keep up. They'll go from 4 day per week to 6 or 7 in a heart beat if they can. I've seen it more than once in my years in the auto industry. The first OEM out of the gate will do everything possible to gain market share at the expense of the others and there won't be any collusion to limit supply. They live or die on market share and that drives all the behavior.
Snrub
Dork
12/29/21 8:10 p.m.
I tend to think they will eventually start to go down. There has been a 50% price increase, that's simply too much to make sense long term. I live in Canada and used prices are on a slightly weaker form of crack. Some new car dealerships are shipping ALL their trade-in cars south. We have all of the same dynamics, but a little less buying mania. Yes there's a shortage of new cars, but there's also a global manufacturing over capacity issue that can be put to good use with enough chips. Manufacturers can eventually increase production, but it may be a bit uneven in certain types of vehicles.
Also, cars have been driven a lot less during the pandemic. We likely have a permanent transition to increased work from home. Lots of people's cars will be used less, resulting in reduced future demand.
With prices as high as they are, I think fewer cars will go to the wreckers. Modern cars are super reliable, I strongly suspect most cars going to the wreckers could stay on the road with say $1000 in repairs.
I think smart sellers of newer vehicles will just sell to hungry, shameless dealers like Carmax and Carvana. I know I would (and I've already had them send me some offers).
I've spent the last few months shopping for a used (2012-2018) Jeep Wrangler. There's a huuuuuuge gap between the private party prices and the dealers. Used dealer prices are near new car prices, and private stuff is selling quickly.
I may have to discard some of my previous shopping tactics and (slightly) overpay if I ever find the right vehicle.
I'm interested to see what happens with incentives once we're back to full production. Prior to COVID and stimulus money, the manufacturers were relying on steep discounting to move cars, and even with those incentives, new car sales were declining. My friend leased a Jeep Grand Cherokee for something like $350 a month in 2018. When her lease expired earlier this year, they wanted $700/month to put her in the equivalent new model. With her husband working from home full time, they went down to one vehicle for the family, at least in the short term.
I'm waiting to see if there's a gentlemen's agreement across the companies where no one is going to offer incentives, or will the floodgates open again? I'm not sure what's more profitable for the OEMs - full volume with heavy incentives, or lower volume with limited or no incentives. The used car market might be the bigger profit center, so the new car sales may be less relevant (unless they have a significant new car financing arm).
The other factor is the whole work from home thing. I used to drive a lot for work, and I've been 100% remote since March of 2020. Our offices were scheduled to open up in September, then in January, and now that's being pushed back again. How will that factor into new car purchases, and how will it impact EV adoption? I expect more travel than I've been doing (none), but my company doesn't see a return to pre-COVID levels of travel ever. They're saving way too much money to ever want to go back!
Then there's overall inflation and the reduction of consumer purchasing power, I think we've yet to see what goods and/or services are going to take the hit if/when the stimulus money dries up. When we all have to make the inevitable budget cuts, where will they come from?
My prediction is that used car prices stay elevated for a while. Prices have risen quickly, but I think they'll be much slower to correct, if there's ever a significant correction.
calteg said:
I do this for a living.
The catalyst for used car prices returning to normal will be a steady supply of (discounted) new cars. We'll likely begin to see that this Summer, though I don't expect used car prices will return to "normal" until 2023, at the earliest
I respectfully disagree. There is a new paradigm going on where new vehicles will be built to order. It's part of the Just-in-time manufacturing.
Companies with a large stock of finished cars sitting in dealers lots waiting to be sold won't make the profit that Tesla is making by manufacturing based on orders.
Now Dodge for example has to build according to the old system because their volume is too small to build profitably.
It's also the reason GM& Ford stopped building cars here and started importing them. Trucks and SUV's are selling, cars are not.
frenchyd said:
There is a new paradigm going on where new cars will be built to order. It's part of the Just-in-time manufacturing.
I toured Ford River Rouge plant 2 weeks ago. Only the F150 is built here and all I saw was 4-door trucks. The trucks being built are for customer orders - nothing being built for stock.
600 a day x 2 shifts x 5 days plus 600 total on Sat/Sun. 3600 trucks a week.
My Buddy ordered one and just got it in November - 5 months of waiting telling me there were maybe 72,000 customers ahead of him.
Also the museum lady told me the plant ran on a 6-hour JIT inventory plan.
DeadSkunk (Warren) said:
As soon as the chip issue is resolved the OEMs will ramp production up until someone in the supply chain can't keep up. They'll go from 4 day per week to 6 or 7 in a heart beat if they can. I've seen it more than once in my years in the auto industry. The first OEM out of the gate will do everything possible to gain market share at the expense of the others and there won't be any collusion to limit supply. They live or die on market share and that drives all the behavior.
Absolutely. The current supply chain issues mean that the OEMs are unable to supply enough vehicles to meet consumer demand, and that means they are leaving profits on the table. Trust me, they are doing anything and everything in their power to rectify that. And they are all racing each other to do it.
Right now suppliers of industrial control equipment like PLCs, robots, sensors, etc are saying that they might fullfill their 2021 orders by December of 2022. It's pretty difficult to build a new production line or even maintain an existing one if industrial controls have a 6+month lead time.
Snrub
Dork
12/29/21 9:58 p.m.
Datsun310Guy said:
frenchyd said:
There is a new paradigm going on where new cars will be built to order. It's part of the Just-in-time manufacturing.
I toured Ford River Rouge plant 2 weeks ago. Only the F150 is built here and all I saw was 4-door trucks. The trucks being built are for customer orders - nothing being built for stock.
600 a day x 2 shifts x 5 days plus 600 total on Sat/Sun. 3600 trucks a week.
My Buddy ordered one and just got it in November - 5 months of waiting telling me there were maybe 72,000 customers ahead of him.
Also the museum lady told me the plant ran on a 6-hour JIT inventory plan.
I do suspect manufacturers will do somewhat of a rethink, but that's the current situation because of supply and demand. At one point they ran 1 shift, but previously ran 3.
Manufacturers have baked in capital costs which have to be amortized.
Woody (Forum Supportum) said:
I've spent the last few months shopping for a used (2021-2018) Jeep Wrangler. There's a huuuuuuge gap between the private party prices and the dealers. Used dealer prices are near new car prices, and private stuff is selling quickly.
I've also been car shopping the last few months and noticed exactly the same thing. Dealer prices are often double that of private and, at least the stuff I'm looking at, nothing is selling unless it's a really good deal, even the private stuff.
I wonder how much of the price problem is being caused, not by consumer demand, but new car dealers desperate for inventory bidding up prices on used cars, competing with the big lots? And at least here, where I suspect the problem is not as bad, ending up with old, expensive inventory that they're going to take a hit on.
