Industry News: Why Are New Car Sales Falling? Higher Prices

[William Maley]

Sales of new cars in the U.S. have been dropping in the past three months and analysts believe April's sales results will be much the same. But why are sales falling? It comes down to prices of new cars going up and up.

According to data from ALG True Car, the average new-car price rose two percent when compared to last year. Kelly Blue Book reports that the average transaction price in March increased 1.7 percent to $34,342 when compared to the same time last year. There are a number of factors as to why consumers are balking at larger prices; credit not being as easy to attain, younger buyers being saddled with debt, and inflation.

“It’s not just the price of the cars -- it’s the price of everything else. The price of things like health care, shelter -- all of that is fighting for the budget,” said Michelle Krebs, a senior analyst with Cox Automotive.

Automakers are trying to stem this decline by increasing the amount of incentives available. J.D. Power reports incentive spending reached a new high in the first half of April with an average of $3,499. 

Source: Bloomberg

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[A Horse With No Name]

A lot of saturated demand in the pipeline also, and we have had a relatively weak economic recovery.

Edited May 1, 2017 by A Horse With No Name
spelling.

[surreal1272]

Rising prices+rising debt+stagnant wages=our current automotive climate. 

[G. David Felt]

WOW, Common sense, raise minimum wage for no work experience and call it a living wage and you end up with forced inflation and everything else rising in cost.

There is no such thing as a living wage.

There is also too much gov oversight in regards to requiring auto's to have all the damn nanny devices. Sorry, but only about 15-20% max of the required safety devices I am really interested in.

Backup Camera is very nice, 360 camera also very nice, air bags cool and HUD. Otherwise the auto breaking I am not interested in, neither am I interested in blind spot warnings and so many more. 

This also has increased cost of auto's and we need more alert drivers paying attention to driving, not idiots playing with their smartphone ignoring the responsibility of driving.

Make a choice peeps, learn to drive responsibly, pay a taxi or take the bus.

[A Horse With No Name]

21 minutes ago, surreal1272 said:

Rising prices+rising debt+stagnant wages=our current automotive climate. 

Very much so...I could respond but it would get very political very fast, and that is not what the board seems to need right now.

4 minutes ago, dfelt said:

WOW, Common sense, raise minimum wage for no work experience and call it a living wage and you end up with forced inflation and everything else rising in cost.

There is no such thing as a living wage.

There is also too much gov oversight in regards to requiring auto's to have all the damn nanny devices. Sorry, but only about 15-20% max of the required safety devices I am really interested in.

Backup Camera is very nice, 360 camera also very nice, air bags cool and HUD. Otherwise the auto breaking I am not interested in, neither am I interested in blind spot warnings and so many more. 

This also has increased cost of auto's and we need more alert drivers paying attention to driving, not idiots playing with their smartphone ignoring the responsibility of driving.

Make a choice peeps, learn to drive responsibly, pay a taxi or take the bus.

Something like this...Americans seem afraid of their own shadow any more, might as well be afraid to drive also. We need tog et back to rugged individualism and personal responsibility as part of our national character.

[G. David Felt]

5 minutes ago, A Horse With No Name said:

Very much so...I could respond but it would get very political very fast, and that is not what the board seems to need right now.

Something like this...Americans seem afraid of their own shadow any more, might as well be afraid to drive also. We need tog et back to rugged individualism and personal responsibility as part of our national character.

This is so true!  

[smk4565]

2 hours ago, surreal1272 said:

Rising prices+rising debt+stagnant wages=our current automotive climate. 

That sums up the whole country.  Wages are flat for most, the rich get richer, the masses do not.  Cost of goods goes up, people buy less goods, economy slows.  All we are missing is a bubble to burst.

Looking at it only from a product perspective, every car model keeps going up market with more features.  Chevy used to sell a crap ton of Cavaliers because they were cheap.  Then they moved the Cobalt up, moved the Cruze up market even more so.  Kia and Hyundai are going up market, no one is introducing a low priced basic car.   For a while the car makers got by with 6 and even 7 year loans but now that has run its course and the prices keep rising.

[riviera74]

While it would be nice if automakers delivered a real price cut on their products, they do not want to.  Ideally, a $3000 to $6000 price cut depending on the model would do a lot of us a lot of good.  Here is the thing though: NOBODY wants to buy a no-frills cheap car anymore.  Even if all the safety equipment put in during the last 15 years were removed or made optional, NOBODY would buy a stripper model of any car, especially if the LS trim were $1000 more and the LT trim were $2000 more than the VERY BASE trim.  I forgot where I read this (possibly TTAC), but there was a time a few years back when KIA was selling the base trim Rio for about $12K.  Bad idea since they all sat on the dealer lots!  The highest model trim level was maybe $2500 more and everyone either wanted that one or was steered to it by salesmen.

Selling cheap Cavaliers was actually possible because higher trim levels were comparatively expensive 25 years ago, but thanks to 72 month financing the payments are ultimately quite manageable. Show me where selling a base trim cheap subcompact for $12K makes sense, especially when you can get a really good off-lease used car for about $15K!

[oldshurst442]

Another reason?

Its cyclical, non?

Car sales go up...and up...and up...for 1-2-3-4-5-6 years, maybe a 7nth..maybe an 8th, but that is pushing it...

Then, car sales come down....and down....for 1-2-3-4 years, maybe a 5th....then they go up again for 1-2-3 years, maybe a 4rth..maybe a 5th...then, car sales come down....and down....for 1-2-3 years....

I dont read too much into that...in 2009 and 2010 and 2011, car sales were at an all time low just AFTER they were at an all time high....and right after 2012 we started getting back to per-banckrupty(pre bank melt down) levels just to finish at an all time high again just to see the cycle be in retreating mode!

But yes...higher car price tags dont help...

People will adjust...

People will buy used...people will either just keep their old car or trade up for a newer used car and when the used car market will deplete itself again (due to the high levels of new car sales prior...and now there are less nice used cars available because new car sales have dipped recently) then the cycle of new car sales will increase...again...only to decrease....only to increase...

Leases make this up and down cycle happen more frequently...

Im assuming about the leases part....

Ive observed the up and down thing...

My analysis and conclusion maybe all wrong though....but to let you in on a little secret...

I dont think Im far off from the truth!

Edited May 2, 2017 by oldshurst442

[regfootball]

what is needed is a backoff from increases and new regs in CAFE and emissions and safety garb for 5-7 years. The automakers need a break from reinventing the wheel.  Lets make it cheaper and more reliable.  Save some of the investment dollars for moving to volt like or full electric powertrain development.

Market deprivation from 2009-2012 or 2013 created a pent up demand when people actually saw a bit of light in their budgets and were able to replace old clunkers.  the last 3-4 years literally made up for that pent up demand and therefore people voted with their dollars for crossovers and nicer cars.  Those that could.  I think the higher price market is tapering off and the automakers don't know it yet.  I think there will be a cycle where those manufacturers can sell value and lower prices will see benefit.  Its almost like no one is serving those customers anymore.  They really believe that everyone in the market has the ability to get into a 37,000 dollar vehicle.

The problem is now a used car glut that they think there's enough people that will pay 25 - 30,000 for a 3-5 year old car.  Most folks can barely swing the interest and tax part of those payments........

Automakers love it when buyers abandon compact and midsize cars because they can't get the same dollars for them as crossovers and larger cars and trucks, but they really do need to continue to push these segments with new products.  Case in point....a friend who is quite frugal her and her husband decided last week to finally trade off a mega years old compact.  The type of people that abhor any car expense.  They are in a much better place these days financially than 2009-2012 but still she refused to spend a lot.  They got a Fit that had discount and finance deal, even though they probably could have used a much larger vehicle.  Still an example of those pockets of people that will seek the good lower price options if the manufacturers serve those markets.

 

[smk4565]

Cutting CAFE won't matter when Europe and China are ramping up their standards.  Most of these cars are engineered to sell in 100 countries.   So they have to meet all these standards anyway, and consumers want more and more, and Trump floated the idea of a $1 a gallon national gas tax.  I prefer a gas tax to CAFE, that is a better way to cut fuel consumption or motivate people to buy more fuel efficient cars, but I doubt they will ever pass that.

Ride Sharing is what is going to change things in 5-10 years.  People won't buy cars, they will share them, that cuts their cost and still gets them from point A to point B, especially when autonomy arrives.  

[daves87rs]

2 simple reasons here-

1-Market falter-pretty much all goods are on the decline now. Whether it's a fridge, car, couch, less folks are buying. I expect the housing market to cool as well, as prices went up so fast people are just going to wait at this point. People just don't know what to think with everything going on at the moment.....

2-Used cars. Huge glut coming back, and need buyers. I'm seeing some cars going for almost half of what they sold for just a few years ago. Why pay 24 grand for a Cruze when a 2-3 year old one can be had for less than 15 grand?

[Robert Hall]

Not just rising prices, but also rising quality and reliability across the board.  100k miles is not an end of life figure as it once was.  Keeping a vehicle 10 years or more is not that unusual anymore...

[oldshurst442]

I dont think car sharing will ever be a thing.

We even have a form of it today...its called renting a car at Hertz or Avis or Thrifty etc...

And why I think that?

OK...where to start?

Ask a rental agency in what condition do some cars arrive back at their rental shop.

The vomit, the condoms and semen stains, the feces and the piss, the pizza stains and ketchup and salsa and Coca-Cola spills, the cigarette stinks and stains and butts, the drugs...

Who will be cleaning that shyte up?

At least when you rent a car from any rental agency, the agency cleans it up for the next person....

If you tell me that there will be rules in place that will make the user clean up his own mess....HA!

Most OWNERS of their OWN  cars dont keep THEIR OWN vehicles clean, what makes you think that an user will clean a car he dont own?

Besides....time will not permit this...

Im to use a car until 2:00 PM and the new user needs it at that time....by golly Ill be using that car until 2:00 PM...

OK....so the usage of the car will include cleaning time....

HA!

How many times have YOU rented a hotel room and YOUR room was NOT ready?!

How many times has ANY appointment of ANY kind been on time?!

 

ANOTHER POINT

 

WHO is in charge of the upkeep, regular maintenance costs of the vehicle?

People will agree to THOUSANDS of dollars of repairs to cars they dont actually own???!!!!

People WHINE about car repairs to cars they actually own and dont do them!!!

OK....Leasing FORCES them to do repairs...so this may be the same!

WRONG!

Leasing a car also means you the car is in YOUR possession at all times and you use it whenever and wherever YOU want it....like I said....sharing a car has restrictions on when you can use it as you have to wait for it and plan your life around waiting for a car to use....FREEDOM of TRAVEL WILL be RESTRICTED....and with that....NEGATIVITY towards ANYTHING regarding a car you dont own will be an issue....meaning people will just view car sharing as a burden especially when forcing to spend money on one will be forced upon them...like I said...who will be responsible for the thousands of dollars of repairs?

Remember...car sharing from NOW is being billed as a CHEAPER way to use a vehicle....

Remember....humans dont treat cars they own correctly, they treat cars they dont own even worse....again...ask the people who work at rental agencies....

 

Another point...

Will there be restrictions to where one could go or use the vehicle?

A car will ALWAYS represent FREEDOM, even if there are financial tie downs and our highways are congested limiting some of those freedoms....but restricting a shared car's usage limits that freedom even more....

When we own our own car outright....we have the right and FREEDOM  to do whatever the phoque we want with OUR car!!!

 

So...car sharing is just a dream!!!

 

 

 

IT COULD WORK....

If North America compensated with a plethora of alternatives for the car sharer as in if a citizen of a city and a suburbanite had access to better and abundant public transportation....a shyte load of more buses, a shyte load of  more subway systems and a high speed train network...that connects ALL OF NORTH AMERICA together...

Yeah....like that will ever happen!

So...like I said...car sharing is just a dream!

 

Edited May 2, 2017 by oldshurst442

[oldshurst442]

Car renting might evolve to something that may resemble car sharing...but car sharing the way Silicon Valley wants to sell it aint happening...

 

[riviera74]

10 hours ago, oldshurst442 said:

Car renting might evolve to something that may resemble car sharing...but car sharing the way Silicon Valley wants to sell it aint happening...

 

Silicon Valley believes that everything is a platform to be monopolized: think Uber or Lyft.  The notion that car sharing will take over the whole USA is laughable because it makes so many assumptions that turn out to be weak or false.  In large cities, it could probably be done, but not out here in Florida.  Cities with great public transportation could swing this but I fail to see how this would work in say rural Texas.

As for why car sales are slowing down, check out how many really good 2-3 year old used cars are available for sale, especially off-lease.  When the next recession comes, expect used car sales to greatly eat into new car sales quite rapidly.

[oldshurst442]

1 minute ago, riviera74 said:

Silicon Valley believes that everything is a platform to be monopolized: think Uber or Lyft.  The notion that car sharing will take over the whole USA is laughable because it makes so many assumptions that turn out to be weak or false.  In large cities, it could probably be done, but not out here in Florida.  Cities with great public transportation could swing this but I fail to see how this would work in say rural Texas.

As for why car sales are slowing down, check out how many really good 2-3 year old used cars are available for sale, especially off-lease.  When the next recession comes, expect used car sales to greatly eat into new car sales quite rapidly.

LOL!!!

And YOU just expressed what I want to express in 2 short paragraphs!!!

Unlike me, I wrote a book over a span of 2 posts!

But yeah....I 100% agree with you!

[A Horse With No Name]