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New-car buyers agreed to pay an average of $551 per month for 69 months in January, according to car-buying advice site Edmunds. That’s nearly 10 percent more per month than three years earlier.
Today's vehicles perform far better than the cars of 30 years ago - ride better, handle better, accelerate better, get better gas mileage, safer in a crash, some can even help avoid a crash, plus they have a ton of additional features, and they last longer too! Once you account for general price inflation over those 30 years, all in all, in my opinion they are still a fair deal. They're still a big expense mind you, not brushing that aside, but I don't think it's any kind of ripoff, just normal price inflation adding up over time, plus a different level of product.
Case in point: A new 1989 Honda Civic LX sedan costed $10,720 back in 1988, and a new 2019 Honda Civic LX sedan costed $20,250 in 2018, and it's somewhat bigger and much nicer than the 1989 model year was. According to an online inflation calculator, $10,720 in 1988 is equivalent to $22,970.04 in 2018. So in this particular case, you're getting a better car for a little less money today.
I do think that there are a lot of higher-end vehicles being sold these days, I saw a new Ford F150 "Raptor" pickup earlier today that was top of the line, had all the toys and listed for $73K! But these are just not remotely comparable to even the top of the line F150 of the 1989 model year.
And you also have the option of getting something like a Kia Soul brand new for around $14k. Very reliable and with a 10 year warranty. That's a bargain. Not much more gets you into creature comforts only found on luxury cars just a few years ago.
People want to spend so much more that's up to them. But there are certainly alternatives out there even in the new vehicle space.
I think the issue has less to do with a payment and the total debt balance that american consumers have along with depreciation rates.
My hypothesis is that we go into a recession in the next 18 months. Credit markets tighten significantly and interest rates skyrocket. These dynamics will hault the sale of new vehicles and place constraints on the new market and used car market. Manufacturers will have to run aggressive incentives on price or lending rates to subsidize sales. I would think this will disproportionately affect the secondary market especially vehicles pricing in the first 3-5 years after purchase.
If you can pay cash you likely will have access to some really great used cars during that scenario.
I think the issue has less to do with a payment and the total debt balance that american consumers have along with depreciation rates.
My hypothesis is that we go into a recession in the next 18 months. Credit markets tighten significantly and interest rates skyrocket. These dynamics will hault the sale of new vehicles and place constraints on the new market and used car market. Manufacturers will have to run aggressive incentives on price or lending rates to subsidize sales. I would think this will disproportionately affect the secondary market especially vehicles pricing in the first 3-5 years after purchase.
If you can pay cash you likely will have access to some really great used cars during that scenario.
You sir have hit that proverbial nail squarely on the head.
People are paying huge sums overall on an asset that began depreciating the second it rolled off car lot.
Even in mint condition after five or six years that vehicle will have taken a huge hit in value, and unless we're talking about something extremely rare/highly sought after likely never will never fetch total cost of purchase price plus total financing.
And you also have the option of getting something like a Kia Soul brand new for around $14k. Very reliable and with a 10 year warranty. That's a bargain. Not much more gets you into creature comforts only found on luxury cars just a few years ago.
People want to spend so much more that's up to them. But there are certainly alternatives out there even in the new vehicle space.
I agree, I think that desires and expectations have moved ever-higher as carmakers offer ever-more elaborate vehicles. And obviously many people are willingly paying more and more for those up-market cars. But that's not all the carmakers are making, and better compact cars today, even some sub-compacts, are a fine value.
I drove a Civic EX hatchback just a few weeks ago and I was genuinely shocked at how nice it was for the price - 0-60mph was something like 6.8 secs and it got 40mpg EPA-rated highway mileage at the same time! It was quiet, rode well and handled great, 5-stars safety rated. Also came with a sunroof and Apple CarPlay/Android Auto. MSRP was just $24K! I didn't wind up purchasing it, but it wasn't a matter of inadequate quality or features, it was really that getting in and out of this low-slung car wasn't easy for me at age 59, and I was looking for the kind of hatchback space you only get with a boxier back end, while this was more sleek and swoopy at the tail. I was shocked though at how much car you were getting for the money.
And you also have the option of getting something like a Kia Soul brand new for around $14k. Very reliable and with a 10 year warranty. That's a bargain. Not much more gets you into creature comforts only found on luxury cars just a few years ago.
People want to spend so much more that's up to them. But there are certainly alternatives out there even in the new vehicle space.
Yup. I love when people say they NEED $30,000+ to get a new car... no, you really don't. If that's what you WANT to spend, go right ahead! But to say that's required for anything reliable is nonsense, especially if you're willing to go gently used. I bought myself a 2 year-old (in 2016) Volkswagen from Enterprise with 40,000 miles and a 2-year warranty + roadside service for $12,900. It works just fine, and even with a high interest rate (working on my credit score) and basically nothing down, my payments are $280/mo. I'm planning to refinance once my credit score recovers, and then it'll be closer to $200-220.
I only pay $640 for 36 months at zero percent interest on my special order Dodge Charger Scat Pack!
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