Average new vehicle purchase price tops $45k.

Obviously, these aren't normal buying times, but Jeez Louise!

So, now that carmakers know they can charge full MSRP, and they can survive on primarily their highest margin vehicles alone, is there a chance that things don't go back to the way they were in The Before Times? It seems like a lot of the startup EV companies were already taking the MSRP or else approach. Will we ever see inexpensive or heavily discounted new vehicles again or am I destined to pay way too much for my wife's new truck?

Some quickly found old data (from The Before Times):  

STM317 said:

So, now that carmakers know they can charge full MSRP, and they can survive on primarily their highest margin vehicles alone, is there a chance that things don't go back to the way they were in The Before Times?

Laws of supply and demand still apply.  We currently have a reduction in supply but none in demand, so prices are going up.  Assuming the world doesn't end things should go back to normal supply levels at some point, which will neutralize that factor.

That's not the same as saying that discounting will come back.  Supply and demand affect the actual selling price, MSRP is an artificial number that may or may not bear any relationship to actual price.  If you buy the same vehicle for $30K, does it really make a difference if you paid MSRP or if you got a $5K discount off an MSRP that was $5K higher?

For those curious about the inflation, $45,000 in 2021 is

• $41,940 in 2019
• $35,772 in 2010
• $28,249 in 2000
• $21,441 in 1990

In reply to codrus (Forum Supporter) :

I get the supply/demand thing, but what would motivate car makers to return to previous levels of supply that outpaced demand and resulted in lots of vehicles sitting in parking lots and eventually selling below MSRP? If I were an auto Exec, I'm not sure I'd change much of anything once supply was closer to meeting demand. It seems like the ideal scenario for a producer of goods would be to make make N-1 items, where N is the number in demand.

Before the pandemic, we were already seeing car makers abandon their most inexpensive models and focus on higher profit vehicles. There's a reason why the thread about the Ford Maverick has so many pages, and part of it is due to the lack of vehicles in that price range, let alone desirable vehicles. EV makers (often without a dealer network) were rarely discounting in any way. It seems like just another way that the auto industry could see a major shift in the coming years.

STM317 said:

I get the supply/demand thing, but what would motivate car makers to return to previous levels of supply that outpaced demand and resulted in lots of vehicles sitting in parking lots and eventually selling below MSRP? If I were an auto Exec, I'm not sure I'd change much of anything once supply was closer to meeting demand. It seems like the ideal scenario for a producer of goods would be to make make N-1 items, where N is the number in demand.

Becuase all it takes is one.  Imagine you're the CEO in charge of one of those car companies -- profits and margins are great, but if we could just produce a few more cars we'd squeeze over the magic percentage improvement for the next quarterly numbers.  So he does that, and then someone else does that, and pretty soon the whole thing has fallen apart.  Fundamentally human nature and "greed" will destroy this.

You can't make explicit agreements and contracts to keep it together either, because that's market collusion and it's illegal.

codrus (Forum Supporter) said:

STM317 said:

I get the supply/demand thing, but what would motivate car makers to return to previous levels of supply that outpaced demand and resulted in lots of vehicles sitting in parking lots and eventually selling below MSRP? If I were an auto Exec, I'm not sure I'd change much of anything once supply was closer to meeting demand. It seems like the ideal scenario for a producer of goods would be to make make N-1 items, where N is the number in demand.

Becuase all it takes is one.  Imagine you're the CEO in charge of one of those car companies -- profits and margins are great, but if we could just produce a few more cars we'd squeeze over the magic percentage improvement for the next quarterly numbers.  So he does that, and then someone else does that, and pretty soon the whole thing has fallen apart.  Fundamentally human nature and "greed" will destroy this.

You can't make explicit agreements and contracts to keep it together either, because that's market collusion and it's illegal.

Yep. 

The idea would work if the manufacturers all differed greatly, but if you can't get your Highlander, then you can get a Pilot or an Acadia or a Santa Fe... Most buyers aren't going to quibble over the differences like many here would. Whoever has the inventory will go ahead and price them to sell, and will kill the others. Now, if you were comparing a Mitsubishi Mirage to a BMW 1 series, it is a different story. But the reality is those two don't compete. 

Given our current "labor shortage" and supply chain breakdown, coupled with certain governments' manipulation of materials supply, one thing is certain--it's going to get worse before it gets better.  But don't take my word for it.

https://www.nbcnews.com/business/autos/car-buyers-pay-chip-shortage-outlook-dims-n1277193

https://www.zdnet.com/article/hunker-down-the-chip-shortage-and-higher-prices-are-set-to-linger-for-a-while/

https://www.cnbc.com/2021/09/06/vw-ford-daimler-fear-chip-shortage-could-persist-for-some-time.html

In skimming the article I didn't see if the $45,000 included TLR & destination charge.  If not, you're typically looking at something like ((45,000 X 1.1) + 700) = $50,200 at least in California.

mtn said:

For those curious about the inflation, $45,000 in 2021 is

• $41,940 in 2019
• $35,772 in 2010
• $28,249 in 2000
• $21,441 in 1990

In 2004 we paid $27,500 for our brand new TSX, about $3k off sticker.

Interpolating from your numbers above, that puts sell price a bit below average and sticker price right on the average, for a nice-but-not-extravagant car.  There were certainly much more expensive AND much cheaper options.

That seems about right, and by extension, $45k doesn't seem that far off base.

I'm content being less than average. 

The last new car we bought was a 2010 Mazda5 base model.  It think it was $17-something off a $19-something sticker.  Generally about 50% of the average price in 2010 of $35k

In 2020, we bought a used 2019 Grand Caravan for $15,100.  The chart above shows that in the year previous (2019) the average used car price was $20,200.  Again, happy to be less than average!  

You guys just keep buying them.  Otherwise I won't have any used cars to buy later. 

And here I am having never bought a car for more than $2800. Slummin' it. 

I read stuff like this and I don't really get angry. I just decide I'm happy with what I have.  Hopefully I won't have a need to replace any of my vehicles anytime soon.

It looks like from the article, the increase in luxury sales is behind the higher average price. 

Which makes sense, most upper-middle class/upper class people haven't been financially impacted by COVID. 

z31maniac said:

It looks like from the article, the increase in luxury sales is behind the higher average price. 

Which makes sense, most upper-middle class/upper class people haven't been financially impacted by COVID. 

Also, when faced with the current component shortages, manufacturers are choosing to prioritize putting the parts that they CAN get into higher end vehicles that have higher margins.  If you've only got 10,000 body control modules it makes more sense to put them in vehicles with a $5000 profit margin per unit than in ones with a $1000 profit margin, after all.

I don't buy new vehicles so it matters little. I hope VW resale remains as horrible as it is currently so I can keep buying nice ones for 1/8th their original selling price.

Trucks, OTOH...looks like I'm keeping what I have until I die.

45k sounds right if you take a walk around any new car lot.  The reality of it is that the average new car buyer (Not the average GRMer) may SAY they want a basic affordable car, but when they walk in to the dealer they suddenly want all the bells and whistles they can get for whatever payment they told the sales rep.  Then, when they bought a loaded RDX instead of a CRV and cant work any of the fancy doohickys, they become a problem for us on the service side. 

Just gonna give my 2002 Camry a hug today, maybe a good wash and some tire shine.

logdog (Forum Supporter) said:

45k sounds right if you take a walk around any new car lot.  The reality of it is that the average new car buyer (Not the average GRMer) may SAY they want a basic affordable car, but when they walk in to the dealer they suddenly want all the bells and whistles they can get for whatever payment they told the sales rep.  Then, when they bought a loaded RDX instead of a CRV and cant work any of the fancy doohickys, they become a problem for us on the service side. 

As practical as I am, this described me in my very first new car purchase.  I was in the market for a new mid-sized sedan, and figured I'd get one with manual windows.  Next thing I knew, I was signing the paperwork on a brand new 1989 Mazda 626 LX 5-speed Sport Sedan.  That thing was pure decadence, from the blue velour seats, power windows and cruise control, to the amazing oscillating center vents for the A/C.  All for the princely sum of $14,100.

Of course, it was as reliable as a hammer, and pretty much never saw  the dealer.

codrus (Forum Supporter) said:

STM317 said:

I get the supply/demand thing, but what would motivate car makers to return to previous levels of supply that outpaced demand and resulted in lots of vehicles sitting in parking lots and eventually selling below MSRP? If I were an auto Exec, I'm not sure I'd change much of anything once supply was closer to meeting demand. It seems like the ideal scenario for a producer of goods would be to make make N-1 items, where N is the number in demand.

Becuase all it takes is one.  Imagine you're the CEO in charge of one of those car companies -- profits and margins are great, but if we could just produce a few more cars we'd squeeze over the magic percentage improvement for the next quarterly numbers.  So he does that, and then someone else does that, and pretty soon the whole thing has fallen apart.  Fundamentally human nature and "greed" will destroy this.

You can't make explicit agreements and contracts to keep it together either, because that's market collusion and it's illegal.

More likely it's because there's going to be a demand decrease that has the same net effect. At some point the rapid inflation of the last year is going to catch up with us and once all the money we saved sitting at home for a year is gone nobody's going to be able to afford anything, particularly not buying cars at or above MSRP.

Some other thoughts that I have on this - they don't reach a singular point, and I'm not sure how much truth there is in them, but I think that there is some truth in all of them: 

• Cars are lasting longer than ever, generally more reliable than ever, and for 95% of people, better than ever. Because of this, some people are more willing to spend more money on cars than before
• Cheap and easy financing for ridiculous amounts of time. 84 month loans are common nowadays. First question a salesperson asks is often "What do you want your payment to be", which irks me to no end because that is completely irrelevant. 
• Cars do more than they ever have. It is a freaking super computer on wheels now. Go compare a 1990 Jeep to any new vehicle today. The closest thing to that will be a side by side. 

mtn said:

Some other thoughts that I have on this - they don't reach a singular point, and I'm not sure how much truth there is in them, but I think that there is some truth in all of them: 

• Cars are lasting longer than ever, generally more reliable than ever, and for 95% of people, better than ever. Because of this, some people are more willing to spend more money on cars than before
• Cheap and easy financing for ridiculous amounts of time. 84 month loans are common nowadays. First question a salesperson asks is often "What do you want your payment to be", which irks me to no end because that is completely irrelevant. 
• Cars do more than they ever have. It is a freaking super computer on wheels now. Go compare a 1990 Jeep to any new vehicle today. The closest thing to that will be a side by side. 

84 month loans are bonkers to me. That is still a $600/month payment for a $45k vehicle.

logdog (Forum Supporter) said:

The reality of it is that the average new car buyer (Not the average GRMer)

This is a major factor that's often overlooked, the average new car buyer is now not an average person at all - these are people making ~$80kUS/yr. The stats tell us that new cars are now a luxury for, at least, the upper-middle class, like owning a small aircraft.

• Cheap and easy financing for ridiculous amounts of time. 84 month loans are common nowadays. First question a salesperson asks is often "What do you want your payment to be", which irks me to no end because that is completely irrelevant. 

Also a major factor especially affecting new trucks, it's been reminiscent of pre-Great Recession housing finance or arguably student loans for years now, the price of new pickups keeps going up apparently based only on the loans people can get/are willing to take on.

I have 4500 into my 2002 suburban. Thanks to having to replace all the brake lines this week.  
 

thanks Minnesota. 
 

anyways  I'll keep driving it until it breaks badly. Then I'll do another.