Is the Automobile Bubble Bursting?

[CaptTom]

Shameless rip-off of the "Is the Real Estate Bubble Bursting" thread...

We've heard all the reasons. Chip shortage. Supply chain issues. Pent-up demand. General inflation.

The net result is, it's been hard to buy a new or used vehicle for a while. My vehicles are getting long in the tooth, and I've wanted to replace at least one of them for a while now. But I would prefer to wait until the supply comes back up and, maybe, prices come down a little.

Anyone have an auto industry crystal ball they'd like to gaze into and tell us what you see for the future?

 

[Midpack]

None of the factors you note have really changed yet, so you've answered your own question. Search the inventory for the car(s) you want to buy - if there are very few you will likely pay MSRP maybe plus a market adjustment, unless you are looking at something obscure, maybe. When inventory begins to sit on dealer lots and/or factories, prices will come down, same as it ever was. I just read an article that said prices probably won't fall in 2022, 2023 maybe, but not to pre-pandemic levels for quite a while if ever.

 

[REWahoo]

"Don't nobody know nothin" is the operable phrase here.

 

[ShokWaveRider]

VW Dealer gave me 10k more than my lease buyout for my 2 year old (39 month lease) lease car. I turned it in early for a brand new top of the line model, with all the toys, with another 39 months lease for the same lease payments. I have no idea how they did that, but they did.

 

[TheWizard]

I'm hoping to factory order a new Mustang by next summer to replace my '08 one.
So my question will be: how will dealers play with the MSRP?

 

[aaronc879]

I'm hoping to factory order a new Mustang by next summer to replace my '08 one.
So my question will be: how will dealers play with the MSRP?

I would never pay over MSRP. I bought my current vehicle earlier this year and paid MSRP but got a better than expected trade in value so I was happy. Dealers charging over MSRP will only do so if people are willing to pay over MSRP. Don't it and they will come down.

 

[Midpack]

I'm hoping to factory order a new Mustang by next summer to replace my '08 one.
So my question will be: how will dealers play with the MSRP?

No way to know what next summer will bring yet. At the moment you can’t factory order a Mustang but that could change. And you can’t bypass dealers even if you factory order. You will order and negotiate with the dealer, and take delivery there.

As vehicles are updated from one model year to another, there are times when orders are accepted and times when they are closed. If you do not see your preferred vehicle here, please contact your local dealership for help.

Final sale prices are all negotiated between the customer and dealer, but Ford does not charge extra for customer orders. [But the dealer can]

https://www.ford.com/custom-order/

 

[njhowie]

Until we get a recession and/or real drop off in demand, I don't really believe that the prices are going to be cratering or coming down by any significant amount. Best case is likely that we won't see markups above MSRP. I think that there is still some real pent up demand, like OP, wanting to buy but holding out. At some point, folks have to replace their cars and the past couple years have seen rising demand and rising prices. Similarly, prices to take your car in to a garage and have a mechanic work on it are also escalating rapidly.

My objective is to keep our cars running as long as possible. My 2011 HHR is approaching 130k miles, and I have a mental goal of it lasting to 200k. I have had to do a couple of repairs on it myself the past few years. Every other year as it passes state inspection I have a little burst of joy. I simply cannot fathom paying $30,000 or more for a new car, or $20,000 or more for used. It's not really a case that we couldn't afford it, I just do not value it that much.

The wild card in all of this is once again subprime borrowers. I have seen stories about how delinquencies are beginning to rise, and most new car purchases are financed well above 80%. If we see the double whammy of a recession and a flood of repossessions, it could make for a wave of vehicles hitting the used car market and potentially some good deals.

 

[Another Reader]

If you want an interesting perspective on car sales, I suggest following CarDealershipGuy on Twitter. @GuyDealership. He thinks inventory of new cars will be back up next summer. Meanwhile, used car prices will drop dramatically as demand collapses starting in the next 30 to 60 days. The lack of demand is already showing up in the auctions.

 

[TheWizard]

No way to know what next summer will bring yet. At the moment you can’t factory order a Mustang but that could change. And you can’t bypass dealers even if you factory order. You will order and negotiate with the dealer, and take delivery there. https://www.ford.com/custom-order/

I'm well aware of the factory order process, having done that with two of the last three Fords I've bought.

So my question is a bit academic. I'll find out local dealers are doing once I put together my order details next May or June, hopefully.
I usually check with about three local dealers to see how eager they are to do business...

 

[Masquernom]

I just checked our local Toyota dealer online. No hybrids in stock. A few Rav4 hybrids on the way, but already sold. If you want a Rav4 Prime, it's MSRP + $10,000 to get on the wait list.

I would like a hybrid of some sort, but I'm hoping to wait until there are actually some on the lot to test drive. We have two good vehicles right now, so no hurry. Maybe battery tech will improve in a couple of years, so might be good to wait.

 

[ShokWaveRider]

I would like a hybrid of some sort, but I'm hoping to wait until there are actually some on the lot to test drive. We have two good vehicles right now, so no hurry. Maybe battery tech will improve in a couple of years, so might be good to wait.

The cost outweighs the ROI and the benefit. IMHO YMMV +$10k is ridiculous.

 

[ShokWaveRider]

What I have noticed, is Hyundai do not seem to be playing. I have 2 friends who wanted to trade in their 3 year old cars on a new one, both have luxury Hyundai cars. The "St"ealers offered them more than ~$7k in each case LESS than Carvana and Carmax would pay them in Cash for their cars. So one should do their homework before jumping in.

 

[Sunset]

Many folks have more cars than they actually need. So this part of the demand can delay buying a new car.
This will cause a problem even as supply increases as these folks will then go out and buy an auto.

I know as DW is holding onto her 24 yr old Camry, but is keen to buy when prices go down. We have another vehicle so there is not really a "need" to buy another.

 

[W2R]

My objective is to keep our cars running as long as possible.

Same here. Our cars are not new, but both have very few miles on them. Both get good gas mileage, too. We don't drive much, since everything we need or want is nearby. Problem solved!

Another factor is that none of the new cars have any appeal for me. I don't want more gadgets or gizmos, I don't want an electric car or hybrid or subscription to a music service, or a car that can go 6x faster than the speed limit. Manufacturers seem to have lost sight of the appeal that outright simplicity can have for some of us.

 

[Teacher Terry]

W2R, I totally agree with you. Unless some moron totals my car I probably will never need a new one. I have a 2008 Toyota Corolla with 66k miles and I put on 4K/year. I have never had a repair beyond routine maintenance and brakes.

 

[W2R]

W2R, I totally agree with you. Unless some moron totals my car I probably will never need a new one. I have a 2008 Toyota Corolla with 66k miles and I put on 4K/year. I have never had a repair beyond routine maintenance and brakes.

Exactly! I knew you would understand. Same here except my 2009 Toyota Venza has 38k miles on it and I put 3K/year on it. No brakes issues yet, bought new tires and battery a few years ago so I'm set for a while. I am hoping that I never need a new car. I'd buy one anyway just for kicks, if there was a model of new car that I wanted, but there isn't.

Watch out for those morons on the road! I also have to watch myself and make sure I don't inspire road rage with my occasional honking at idiots.

 

[RetiredAndLovingIt]

The Mitsubishi dealer has a lot of new cars on the lot now and the salesman keeps e-mailing me that they're ready to deal again, I may pop by next time I'm in the area.
In the past year and a half I've had 3 offers from Carvana for my 2014 Mitsubishi Outlander Sport with 50K miles on it. Originally $12,400 then $13,784 and today $12978 and the offer is good for three weeks.
I like this little SUV a lot but don't go very far these days so I might as well hold onto it but the offer is certainly tempting. I'm also thinking there might be better deals and tax rebates in 2023 if I wait and buy a hybrid.

 

[JoeWras]

You're not going to hear it from the dealers. They will be happy to keep the shortage talk going as long as they can. They will continue to ask for more than MSRP until people call them on it.

The Fed and loan rates have consequences. Even if personal loan rates haven't changed, people who buy houses will have less money for cars, and so on...

Someone upstream mentioned used cars. I agree. Watch the used car prices in the CPI data. They were first to skyrocket, and have been first to show weakness. The weakness is minor right now, if it shows significant downward trend, then we'll know new cars will follow and you can ignore everything the dealer and industry pundits* say, if you aren't already.

* - it is in the interest of industry pundits to talk up the problem too, for more clicks and more screen time.

 

[Teacher Terry]

A friend of mine is driving a Toyota Camry which is 32 years old and has 110k miles. She had it painted once as it looked bad and now it’s looking bad again. I told her that I forbid her to have it painted again).

 

[aja8888]

My bright red 2005 Mustang convertible just turned 65 K miles. And it's in perfect shape. I guess I'll keep it.

 

[11522914]

Excellent article on used car prices.

https://wolfstreet.com/2022/09/10/b...l-sky-high-up-nearly-50-from-three-years-ago/

Prices of used vehicles that were sold at auction in August fell by 4.0% from July, and are down by 12.5% from the peak in January, on a mix-, mileage-, and seasonally adjusted basis, according to the Used Vehicle Value Index by Manheim, the largest auction house in the US. But these wholesale prices, despite the declines, remain sky-high.

 

[ER604me]

We agree about not needing a new car anytime soon. We have two 2016 Cmax energi. We average 7k/year between them and they each have an electric range of about 20 miles. That covers a lot of our local trips and we have a level 2 charger so they are fully charged in about 2 hrs. So far only routine maintenance and inspections.

 

[jollystomper]

DW's car was totalled in December. We have 2 other cars, and we have yet to replace it. We are part of the "do not need, can delay, but might jump in at some point to buy" group. Having a 3rd card is BTD desire for us. So far renting another car as needed has been far cheaper (car rental prices, while not down to pre-pandemic levels, have definitely fallen a lot since the beginning of the year).

 

[Montecfo]

Excellent article on used car prices.

https://wolfstreet.com/2022/09/10/b...l-sky-high-up-nearly-50-from-three-years-ago/

Prices of used vehicles that were sold at auction in August fell by 4.0% from July, and are down by 12.5% from the peak in January, on a mix-, mileage-, and seasonally adjusted basis, according to the Used Vehicle Value Index by Manheim, the largest auction house in the US. But these wholesale prices, despite the declines, remain sky-high.

Yes. There is definitely some softening. It also was evident in the recent CPI print, where used car prices dropped for second straight month, though new car prices continued to climb.

A buddy who sells used cars says August was softest sales month in history.

Also there is a sea of almost finished new cars awaiting chips. Those could begin to hit the market and it would be a flood. Add in the repos and you could have a significant decline in pricing.