Is the Automobile Bubble Bursting?

[Walt34]

We are also in the "I can wait" crowd. My retirement present, a then special-ordered brand-new 2003 GMC 4WD pickup truck, will be 20 years old in a couple of months. It has just under 111k miles on it and there isn't a doggone thing wrong with it so other than some bells 'n whistles that I don't care about I don't see that a new one would do anything the current one won't do. And getting up there in geezerhood the gizmos would probably just annoy me anyway.

The daily driver is a 2014 Honda Accord with almost the same mileage on it now and that too is just "broken in" for a Honda. I hope. In any event we have no plans on replacing that or the truck until something very expensive breaks on one of them.

 

[ncbill]

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).

reminds me of:

Toyota recalls 1993 Camry

my daily driver is a 1996!

 

[livingalmostlarge]

2016 and 2015 cars which we'll drive until things become normal. If we really needed it we would buy something but not unless abosolutely needed will we do it now.

 

[Tetto]

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).

That’s awesome! A testament to Japanese engineering and assembly practices. Can’t beat them at automobile reliability. Motorcycles too!

 

[MichealKnight]

Points of view

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?

Depends on one point of view.

"I wanna buy direct!!!!" " I hate salesmen!!!" "Tesla!!!!!" "The dealership model is obsolete!!!" "I don't wanna haggle!!!"

Well, lately, the public has gotten a taste of that.....full price, is a fair price. "Show me your invoice!!!" "Oh yeah? Show me your underwear". Things have changed due to supply shortages. So many got what they wanted - no haggle.

It will tame. As supplies come back - yes, it will tame but I highly doubt it's going to go back to the crazy discounts of the last generation. "I'm walking!! I'm going to the other dealer!!" "Well don't let the door hit you where the good Lord split you". *Some* OEMs are this time gonna try and keep days supply of inventory down. This cuts their costs via floorpan subsidies (paying for interest costs for inventory for 60-90 days). Less supply will mean less discounting than before.

Sure, it'll end and flow. Some OEMS - WON'T learn. They'll go back to over producing and retailers will discount more. There will always be ebbs and flows.

Another wish being granted....

"I wanna buy direct!" - OEMs are watching. The Tesla model is full sticker price.

Other OEMs are starting to force dealers to do the same thing - - ok, full price MSRP. People got their wish no haggle. Oh lets look at the sainted manufacturers to "buy direct " from. Let's put aside the KNOWN problems with airbags and other things that the sainted OEMs sold people - knowingly.

One OEM just now - on some units - is putting a MANDATORY $1500 on the sticker for subscription services. Imagine that -wanna buy the car? Well guess what, swallow this $1500 pill.

'The Dealer is greedy!"

Really? the dealer profit margins - are NOTHING compared to the Apple, MSFT, TGT and other margins that we all applaud all the time. Furthermore - when the Dealers are gone - who REALLY thinks that that profit margins will go to the customer? Look at Tesla? Their margins are GREAT - why? They keep the money - they don't give it to the consumers. OEMs care about pleasing Wall Street, not being a charity. It's not Our Lady of Toyota.

So yeah, prices will tame a bit though not today. A cursory look at insider sales reports shows - that many dealers have 120 days of SOLD factory. orders in the pipeline - at full sticker.

I know what I speak of - I personally have helped in "2" metro markets - and subserviently their profit margins went UP.

Lastly.... eventually it'll be more corporate like people think they want. Guess what? Open the chat box for service. No more talking to a real professional whose pay depends on you being happy with the service.


My bottom line: Prices will come down- but NEVER EVER to where they used to be, The leverage is changing, the tables are slow turning. I believe the dealer model will remain to an extent and guess what? Fewer people will own more dealerships and control the market. It's already happening, I've seen it not just in public reports - but as an insider. I've both suffered, AND profited due to this.

 

[CP Soon]

Current SAAR is constrained to <14 Million, so until that increases to something above 16M or closer to 17M we will continue with the dealer pricing shenanigans. There will be some pent-up demand that will keep pricing higher, but that will ease over time, but the key is SAAR needs to be higher. Probably looking at 2024 before pricing eases.

 

[Bamaman]

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.

I'm on my second Toyota Hybrid--a year old Venza. I'm getting 42.5 mpg in everyday driving. My 3 year old Camry Hybrid was getting 49.5 mpg. Neither ever has seen the shop.

The hybrids I have both had/have lithium batteries instead of nickel batteries. They last substantially longer and get more mpg. I can tell you that the Toyota engineers are complete genius'.

Don't worry about how the modern hybrids drive. Mine is downright quick, and the Venza's closer to a Lexus in quality than a Toyota. They'll do anything you want--including cruising @ 90 mph if you wish. Underneath, the Venza is a Rav-4 with prettier sheet metal.

 

[MichealKnight]

Shenanigans -

Current SAAR is constrained to <14 Million, so until that increases to something above 16M or closer to 17M we will continue with the dealer pricing shenanigans. There will be some pent-up demand that will keep pricing higher, but that will ease over time, but the key is SAAR needs to be higher. Probably looking at 2024 before pricing eases.

https://www.thedrive.com/news/gm-ma...iption-mandatory-on-gmc-buick-cadillac-models

"GM Makes $1,500 OnStar Subscription Mandatory on GMC, Buick, Cadillac Models

Remember how GM said it was gonna make billions on subscriptions? "


I wonder - will other companies follow?

Whose shenanigans are these?

The "buy direct" is good. The people some want to buy direct from don't bother selling add ons. They FORCE them. Noble.

And who *pays* ? The same entity that one day will never see a discount again

Less competition in the future will be good for consumers.....don't ask me to prove that, I surely can't. Nobody could.

 

[CRLLS]

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.

We purchased a new Hyundai last March. I wanted to trade in a low mileage 10 year old Elantra. I did some homework and had on-line offers from Carmax and Carvana before I went to the Hyundai dealer. They offered me less than half of the higher (CarMax) quote I already had. When I told them no way, they said they would match the CarMax offer. I would have to go thru the CarMax in person confirmation. After a 2-mile trip to the Carmax and I had a written offer. I took it to the dealer and they accepted the offer. However, they discounted that by the difference in sales tax for a trade in vs getting the cash from Carmax and having no trade-in. Fair enough IMO.

Know what your trade-in is worth before going to the "st'ealers. You always have options.

This Hyundai dealer had a couple of non-negotiable options, but no market adjustment over MSRP. Another Hyundai dealer had the market adjustment but no non-negotiable options. Go figure.

 

[street]

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.

I understand why they don't build vehicle without all the gadgets & gizmos. I believe if they just built a simple auto without all the fancy stuff it would be a huge hit for the car industry.

I not into all the fancy most current tech stuff and I know not everyone has my taste. If an auto had 4 tires, engine, 4 wheels, seat. steering wheel etc. would work for me. Lol

The plain jane would cost more than the decked out one, I'm sure.

 

[DJRR]

A dealer I have been keeping in contact with received 120 cars per month pre covid. That was down to 20 per month last December and has been pretty consistent, but making some progress. They have been told to not expect pre covid inventory levels until 4th quarter 2023.

 

[Car-Guy]

I've averaged one new car a year since I retired. (over a decade now)... I've already bought a new one this year so I "expect" it will be 2023 before I buy again. I've been pretty lucky I guess since I've been able to trade in my "year old car" in on a new one for ~even money most of the time. Also, so far I've been able to find what I want on the showroom floor but it's getting harder and harder each year. The cars I like/want are being phased out of production. Already I wish I would have kept one or two since they are no longer being made.

I may get into the used car market again and buy a few late model "gently used" cars that I want and just keep them. It may become my only option to have/keep want I want.

 

[street]

I've averaged one new car a year since I retired. (over a decade now)... I've already bought a new one this year so I "expect" it will be 2023 before I buy again. I've been pretty lucky I guess since I've been able to trade in my "year old car" in on a new one for ~even money most of the time. Also, so far I've been able to find what I want on the showroom floor but it's getting harder and harder each year. The cars I like/want are being phased out of production. Already I wish I would have kept one or two since they are no longer being made.

I may get into the used car market again and buy a few late model "gently used" cars that I want and just keep them. It may become my only option to have/keep want I want.

You have done great with upgrading and trading. My experience in car purchasing is doing your homework and being patient and do some shopping.

 

[wrigley]

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.

My wife traded in a 2019 Honda CRV which she was driving for about 2 1/2 years on a 2022 Hyundai Palisade. They gave her $700 more for the Honda then she paid for it in 2019.

Mike

 

[REWahoo]

I understand why they don't build vehicle without all the gadgets & gizmos. I believe if they just built a simple auto without all the fancy stuff it would be a huge hit for the car industry.

I not into all the fancy most current tech stuff and I know not everyone has my taste. If an auto had 4 tires, engine, 4 wheels, seat. steering wheel etc. would work for me. Lol

The plain jane would cost more than the decked out one, I'm sure.

While I understand where you and W2R are coming from, I have to think you are in a very small minority as all those high tech features are the "sizzle" most new car buyers really want. The two major points of focus on all car and truck commercials are tech and power. Not even a whiff of simplicity and practicality.

I had a heck of a time with my recent new car purchase finding the model I wanted without a ton of extras I didn't want to pay for. The car has a base and a premium model, I wanted the premium without additional "packages", but could only find one unit equipped that way within a 500 mile radius, and I had to wait almost 3 months for a replacement drive battery before I could buy it. There were several others available for immediate purchase, all with both the option packages (sunroof/Bose stereo in one package, GM Super Cruise hands-free driving in the other). Those packages are $2,500 each, so I saved $5,000 by waiting three months rather than paying for options I would never use.

 

[Car-Guy]

You have done great with upgrading and trading. My experience in car purchasing is doing your homework and being patient and do some shopping.

It's been crazy the past few years trading cars... Most of what I bought have gone up (some significantly) from my purchase price... But then again, so have the newer ones... Still, there's been a lot of negotiating room (10 to 20+k in some cases) but I have stuck to my guns (so to speak) and done pretty well... Maybe if the bottom of the used car market falls out in a year or two, I can go back and buy a couple of the older models that I really liked for reasonable prices. No real rush, so I can wait. I've got the garage space from my car collecting days so that's not a problem... Funny how things have changed.

 

[Chuckanut]

I don't need all the gizmos, but I greatly appreciate the safety features.

My RAV4 has saved me from one serious accident when I had to deal with a potential side-swiper while the car in front of me had to slam on my brakes to avoid somebody nearly stopped in the lane. One driver, two very serious situations that each required a lot of my attention. I am pretty sure that by the time I hit the brakes to avoid the guy in front of me, the car was already starting to brake. I can skip power mirrors, and heated seats. But, not the safety features that help protect me from the idiots on the road.

Speaking of idiots on the road, I recently returned from an out of state trip where I found that drivers today seem to be less adverse to risk. They drive as though they expect everybody else to be a highly skilled defensive driver. At least four times some guy who passed me on the left, came close to nicking the front driver corner of my car because they could not wait a few seconds to put another 20 or 30 feet between their car and my car. That's just one example of the idiocy on the road that I saw.

 

[Car-Guy]

I don't need all the gizmos, but I greatly appreciate the safety features.

Personally, I like all the new gizmos. Well most of them anyway... Regarding the safety features, ABS, which has been around a while now, is one of the greatest safety features incorporated in cars in the past ~50 years. (IMO) HOWEVER, I have turned off things like emergency braking... Probably because of my driving style but I've had them start to brake when the opposite is what I wanted. (Yes, yes, I know) Lane departure can be a problem also, so I'll usually turn it off too. Traction control is great, especially when it's raining. But, when I buy a new car, I always look to be sure it has a traction control button so I can turn it off, when needed. The list goes on.

 

[Chuckanut]

FWIW, adaptive cruise control is another great feature when driving long distances. I find using it is less physically stressful on my body.

 

[MichealKnight]

Stock Market gives hint

"I want to buy direct! No games!"

I've said before - yes that is coming - and here's to the "savings" to the consumer as evidenced by higher Tesla profit margins. (I guess Elon wanted return in investment, go figure)

Another offshoot of this will be fewer entities owning more dealerships. Less competition and few people controlling markets and pricing. Some of the stock market folks here may want to Google:

Autonation F and I profits

Lithia F and I profits

Penski. F and I profits

The large auto groups......... with their "transparency" and "no haggle"........are crushing people. Somehow they've learned to make people appreciate it -- so I guess that is a skill they have.

Imagine when they control even more of the market.....

There's a reason they pay double for car dealerships..... and their shareholders and boards applaud it.

 

[TheWizard]

[/B]
I understand why they don't build vehicle without all the gadgets & gizmos. I believe if they just built a simple auto without all the fancy stuff it would be a huge hit for the car industry.

I not into all the fancy most current tech stuff and I know not everyone has my taste. If an auto had 4 tires, engine, 4 wheels, seat. steering wheel etc. would work for me. Lol

The plain jane would cost more than the decked out one, I'm sure.

I recall the cars my parents had back in the '50s: three-speed column-mounted stick shift. Crank windows. AM radio and heater, no a/c.
If you wanted cruise control, you could put a brick part way on the accelerator pedal.

I have no desire to go back to that level.
I'm happy with the advanced automotive technology we have nowadays and am willing to pay for it...

 

[DrRoy]

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.

Last Dec, when we were 4 months into looking for a Toyota Highlander Hybrid Limited, I happened to call a dealer on the very morning that they got their monthly allocation. They got exactly one, but it was 98% what we wanted down to the color. We put a deposit on it immediately, and did not have to pay over MSRP for it. We continue to marvel over how lucky that all was, and marvel more over how it should be so hard to buy something that is so expensive.

 

[JoeWras]

If you wanted cruise control, you could put a brick part way on the accelerator pedal.

My parents were rich. We got the upgrade. A stick.

 

[oiseux]

Current SAAR is constrained to <14 Million, so until that increases to something above 16M or closer to 17M we will continue with the dealer pricing shenanigans. There will be some pent-up demand that will keep pricing higher, but that will ease over time, but the key is SAAR needs to be higher. Probably looking at 2024 before pricing eases.

While the SAAR remained mired in the low 13s, the average transaction price peaked in August in the US market after many months of continuous increases, per LMC Automotive. However, global SAAR hit the highest since December 2020.

Supply chain woes continue on a wide variety of parts, but not just semiconductors (which have eased due to demand drops elsewhere, and capacity should shift to fulfilling backlog, although certain types of power ICs used in EVs will remain under pressure) but on certain raw materials (due to the war). Some makers and their Tier 1 suppliers have a lot of phantom inventory of partially completed vehicles or stockpiles of parts that they are starting to deplete, so you could see a measurable softening of prices in the 2H'23 instead of 2024. Things are improving, but not overnight.

 

[JoeWras]

There's a demand element to this that is still TBD based on employment, loan rates, feeling of job security, disposable cash, etc.

I'm not saying demand will crater and cause a crash, just saying it is part of the curve that could move the supply availability somewhat.