Inflationary Times

[Leo]

Since they no longer make full sized sedans, I really have trouble getting excited about spending 40K on a car that I do not really want.

I keep hearing about the amount of auto loans in default coming close to doubling, but the finance companies must be working with the borrowers, I sure do not see lots full of one and two year old repo 'ed cars.

 

[BehindBlueI's]

As I said, let’s revisit this in a year or so and see where we are trending.

Why are you so sure that buyers that currently can make payments on a Raptor at $10-20k over will not be affected by the changing economy, inflation, and interest rates? Case in point, I know a boat salesman that bought a new loaded corvette a year ago, customer traffic at the dealership has fallen significantly, as with cars some boats still have strong market demand but he doesn’t have many to sell, he would not be in the market to make that purchase today. I just do not understand how you believe the economic changes will have no affects…

For the same reason the manufacturers are betting on it. Demographics of who buys them and how relatively sheltered they are from the concerns you are worried about. Ford will let you lock in an interest rate of 2.9% if you order a vehicle today...but not on the Tremor or Raptor. Why? They know those buyers will buy those trucks regardless.

I can order a new 2023 Power Wagon today. It will take 6-9 months minimum to be delivered. This is the progression on base price:

2019 MODEL YEAR RAM 2500 POWER WAGON CREW CAB 4X4 Base Price: $52,900

(early) 2022 MODEL YEAR RAM 2500 POWER WAGON CREW CAB 4X4 Base Price: $55,960

(late) 2022 MODEL YEAR RAM 2500 POWER WAGON CREW CAB 4X4 Base Price: $62,615

(pre-production 2023 order) Model: DJ7X91 2500 POWER WAGON / REBEL CREW CAB (149 in WB 6 ft 4 in Box) 69,345

Now the jump from 2022 to 2023 isn't quite as severe as it looks, because (like Ford) Ram dropped the bottom trim level. You are now getting the old "level 1" upgrade package in the base price. That's still something like a $4k price increase, though.

While demand may or may not return to '18-'19 levels, prices sure aren't. No way you're going to see that much movement in the market in the next couple of years on the high end trucks, the manufacturers will just make fewer and crank out more fleet vehicles in their place. Look how much money Ford is making on Raptor Rs and Dodge is making on limited edition "Last calls". Zero incentive to flood the market and cut their own throat.

 

[BehindBlueI's]

Since they no longer make full sized sedans, I really have trouble getting excited about spending 40K on a car that I do not really want.

I keep hearing about the amount of auto loans in default coming close to doubling, but the finance companies must be working with the borrowers, I sure do not see lots full of one and two year old repo 'ed cars.

The defaults are largely in the sub-prime or lower borrowers category, and largely in used cars. Defaulting on a 1-2 year old car is tough when used car prices are very close to original purchase prices, or even appreciated.

 

[Ingomike]

For the same reason the manufacturers are betting on it. Demographics of who buys them and how relatively sheltered they are from the concerns you are worried about. Ford will let you lock in an interest rate of 2.9% if you order a vehicle today...but not on the Tremor or Raptor. Why? They know those buyers will buy those trucks regardless.

I can order a new 2023 Power Wagon today. It will take 6-9 months minimum to be delivered. This is the progression on base price:

2019 MODEL YEAR RAM 2500 POWER WAGON CREW CAB 4X4 Base Price: $52,900

(early) 2022 MODEL YEAR RAM 2500 POWER WAGON CREW CAB 4X4 Base Price: $55,960

(late) 2022 MODEL YEAR RAM 2500 POWER WAGON CREW CAB 4X4 Base Price: $62,615

(pre-production 2023 order) Model: DJ7X91 2500 POWER WAGON / REBEL CREW CAB (149 in WB 6 ft 4 in Box) 69,345

Now the jump from 2022 to 2023 isn't quite as severe as it looks, because (like Ford) Ram dropped the bottom trim level. You are now getting the old "level 1" upgrade package in the base price. That's still something like a $4k price increase, though.

While demand may or may not return to '18-'19 levels, prices sure aren't. No way you're going to see that much movement in the market in the next couple of years on the high end trucks, the manufacturers will just make fewer and crank out more fleet vehicles in their place. Look how much money Ford is making on Raptor Rs and Dodge is making on limited edition "Last calls". Zero incentive to flood the market and cut their own throat.

But that is not what you can go to a lot and buy one for, that is the real market price. And dealers are playing games by ordering trucks in without deposit and an agreement that the orderer will not have to buy it to get inventory for their lots.

One other point, auto manufacturers are no longer capitalist entities, so the rules of capitalism do not apply, they are state run and state bailed out institutions.

 

[Super Bee]

I keep hearing about the amount of auto loans in default coming close to doubling, but the finance companies must be working with the borrowers, I sure do not see lots full of one and two year old repo 'ed cars.

Repos are up. . . way up. I attend the auctions usually twice a week. I am watching auctions go from 400 to 500 cars a auction to 800 to 900.

To be fair, not all the increased inventory are repos. Some are and some are dealers trying to dump inventory as sales are slowing or for some dealers all but stopped. Lots of dealers sitting on overpriced inventory.

 

[BehindBlueI's]

But that is not what you can go to a lot and buy one for, that is the real market price.

I understand that. If you compare actual sales prices, it's worse.

*edit*

As best I can tell, this is the best pricing available on a 2022 in the nation at the moment:

2022 RAM 2500 Power Wagon Lake Charles LA | Beauregard Parish Calcasieu Parish Sulphur Louisiana 3C6TR5EJ0NG292549

Research the 2022 RAM 2500 Power Wagon in Lake Charles, LA at Mark Dodge Chrysler Jeep. View pictures, specs, and pricing on our huge selection of vehicles. 3C6TR5EJ0NG292549

www.markdodge.net

That's less than $7k off sticker on a heavily optioned truck. In 2019, $5-$6k off was reasonable. If you're expecting 2019 pricing, you need prices to drop by nearly $1k a month in a time they are still creeping up, just slower. I don't see it.

 

[gregkl]

While demand may or may not return to '18-'19 levels, prices sure aren't. No way you're going to see that much movement in the market in the next couple of years on the high end trucks, the manufacturers will just make fewer and crank out more fleet vehicles in their place. Look how much money Ford is making on Raptor Rs and Dodge is making on limited edition "Last calls". Zero incentive to flood the market and cut their own throat.

This is true. Historically, auto manufacturers don't reduce prices. And labor rates will remain higher. When was the last time there was wholesale reduction in hourly wages?

Increased wages alone will keep prices from returning to '18-19 levels. The over MSRP stuff might go away, but mfrs have already said they will not return to the period of time when they kept months worth of vehicles sitting on lots. They will have days supply and expect buyers to order. The way it was decades ago.

The only thing that might change that is if a mfr sees loss of sales because another mfr has product on the lot. Then they may start stocking more. But that will take longer than most of us are in the market for vehicles.

Times have changed.

Little trivia for you: we are expected to reduce the price on the components we sell to the car makers. Usually it is in the neighborhood of 3-5% for the first 3-4 years of production. And this is common across most Tier suppliers to the OEM's.

Shouldn't the OEM's be reducing the price of their vehicles the same?

 

[Route 45]

Shouldn't the OEM's be reducing the price of their vehicles the same?

 

[Ingomike]

Increased wages alone will keep prices from returning to '18-19 levels.

I am focused on the used market. I do expect used vehicles go back to the same percentages on new price within 12-24 months. The whole buy it drive it for 18 months and get your money back is not sustainable

 

[Ingomike]

The over MSRP stuff might go away, but mfrs have already said they will not return to the period of time when they kept months worth of vehicles sitting on lots. They will have days supply and expect buyers to order. The way it was decades ago.

Do you really believe they will be able to hold that line? The cost of shutting down lines and restarting them will keep them building cars as they always have and that will create cars for dealers lots. It seems strange they would forsake the impulse buyers altogether.

 

[WebSnyper]

I am focused on the used market. I do expect used vehicles go back to the same percentages on new price within 12-24 months. The whole buy it drive it for 18 months and get your money back is not sustainable

That used market could sustain if the OEMs do keep lot inventory lean and get folks to order when they want new. Would essentially be the impulse tax.

I hope not, as both of my kids may be in the market in the next couple of years to buy something else (daughter's hand me down pilot is getting closer to 300k miles than not, and my son's 2004 Ford f150 is a concern because he lives down in ATL though he does have some extended family in that area in case he needs a ride).

 

[BehindBlueI's]

As best I can tell, this is the best pricing available on a 2022 in the nation at the moment:

2022 RAM 2500 Power Wagon Lake Charles LA | Beauregard Parish Calcasieu Parish Sulphur Louisiana 3C6TR5EJ0NG292549

Research the 2022 RAM 2500 Power Wagon in Lake Charles, LA at Mark Dodge Chrysler Jeep. View pictures, specs, and pricing on our huge selection of vehicles. 3C6TR5EJ0NG292549

www.markdodge.net

That's less than $7k off sticker on a heavily optioned truck. In 2019, $5-$6k off was reasonable. If you're expecting 2019 pricing, you need prices to drop by nearly $1k a month in a time they are still creeping up, just slower. I don't see it.

Fun fact: I was working a deal on this truck for the past 3 days, by the time I could get my affiliate pricing and 1st responder discount codes to him today it sold. I had it down to $71,603 with incentives.

 

[DoggyDaddy]

Fun fact: I was working a deal on this truck for the past 3 days, by the time I could get my affiliate pricing and 1st responder discount codes to him today it sold. I had it down to $71,603 with incentives.

That's more than half of the balance on my mortgage. For a vehicle. Not only no, but hell no.

 

[BehindBlueI's]

That's more than half of the balance on my mortgage. For a vehicle. Not only no, but hell no.

It's more than half my mortgage as well. But it's also less than my available cash. Everyone is in a different place financially, but I don't have a lot of expenses, don't buy much, and am good at saving money. I've been putting money back for a bit over 5 years for my next truck purchase at this point. To put this in perspective, that's an average of roughly $260 a week saved. I get not everyone can do that...but how many spend that much on eating out, cable bills, impulse buying nonsense they immediately forget about, etc? Buying a hugely expensive house?

I've driven my current truck for over 10 years and am only getting rid of it because I'm giving it to my son. I'll have this truck for 10-15 years as well, most likely. 10 years from now we'll be talking about how cheap they were "back then"....

For me, it's not just a vehicle. It's a ticket to experiences I can't have without an off road worthy truck.

 

[DoggyDaddy]

It's more than half my mortgage as well. But it's also less than my available cash. Everyone is in a different place financially, but I don't have a lot of expenses, don't buy much, and am good at saving money. I've been putting money back for a bit over 5 years for my next truck purchase at this point.

For me, it's not just a vehicle. It's a ticket to experiences I can't have without an off road worthy truck.

Well I admire your discipline. I'll be the first to admit that I'm not nearly as good at saving as I should be. We're basically a SINK (Single Income (mine), No Kids) household, so I pay for everything. I make good money but it seems to go quickly!

 

[BehindBlueI's]

Well I admire your discipline. I'll be the first to admit that I'm not nearly as good at saving as I should be. We're basically a SINK (Single Income (mine), No Kids) household, so I pay for everything. I make good money but it seems to go quickly!

We've been single income with a kid pretty much the entire time. My wife worked maybe 1 year and just recently went back to work part time. Our son is about to be out of the house, so we'll be 1.5 income no kids. I certainly wasn't making a ton of money, and comparatively still don't. I just use what I have carefully.

I'm lucky in that my wife is also a saver. She buys clothes, mostly, but she runs an online business and resells things so she gets her money back out of a lot of it.

We spend money on travel and things that matter to us, we just don't spend money on "convenience" and on fleeting things. We also well underbought on our house, and now with the "then price" in "today money" and low interest rates it's a very easy note to pay.

 

[armalitesheepdog]

Add to that 2 million "new arrivals" that all need to eat, gas up, and what not.

 

[gregkl]

Do you really believe they will be able to hold that line? The cost of shutting down lines and restarting them will keep them building cars as they always have and that will create cars for dealers lots. It seems strange they would forsake the impulse buyers altogether.

They won't forsake the impulse buyer but some of the domestics had 6+ months supply sitting in dealers lots. Subaru, one of the better run OEM's, and one that weathered the last two years decently, has the lowest inventories, measured in weeks.

Do I believe it? To a degree, yes. They will hold the line for awhile as long as they are at 85% capacity and moving cars. Keeping some scarcity is good for the margins.

As far as shutting down the lines, that won't happen if/when we return to an adequate supply chain that can handle a SAAR of 17 million. They will produce customer orders and level load the plant with stock orders. Sorta like primers I hear. They make primers to be able to load their factory rounds and level out the production with primers for us reloaders. Or at least that is what I have been told.

Like I said I think it will take losing market share to get that to change. If Ford can keep the F150 as top dog with 60 days inventory vs 180 days, they will maintain.

Of course this is all my opinion based on what I do. I have been wrong many times and may very well be now. If I was right more than I'm wrong, I'd be retired living on a huge portfolio of income producing stocks!

 

[BehindBlueI's]

As I said, let’s revisit this in a year or so and see where we are trending.

Why are you so sure that buyers that currently can make payments on a Raptor at $10-20k over will not be affected by the changing economy, inflation, and interest rates? Case in point, I know a boat salesman that bought a new loaded corvette a year ago, customer traffic at the dealership has fallen significantly, as with cars some boats still have strong market demand but he doesn’t have many to sell, he would not be in the market to make that purchase today. I just do not understand how you believe the economic changes will have no affects…

So it's been about a year. Who was right?

Raptors, especially the "R", are still way over MSRP.
Broncos, still unobtainum and used examples routinely sell for over original MSRP
C8 Corvette, pffft, good luck.

Actual Power Wagons are unobtainium on lots. The ones advertised as new Power Wagons are almost universally Rebels once you click on them. You can tell on the sticker if it has: "Customer Preferred Package 2GR –$1,095" on it, the Rebel is cheaper as it deletes several key components that make a PW a PW, like the locking front axle and softer suspension. So, let's use a Rebel version: https://www.markdodge.net/new-Lake+Charles-2024-RAM-2500-Power+Wagon-3C6UR5EL8RG126551

Mark Dodge is one of, if not *the*, cheapest dealer on Rams in the country, and since I posted a truck I looked at before, I'll stick with them here. $6k discount, but still that leaves you at $82,910 for a level 1. Now, in fairness the 'level 1' today is the old 'level 2', but still the same discount as last year but with a $1k or more rise in MSRP since I posted about Mark Dodge last.

Prices on the high end/halo vehicles have remained high like I said. The recession didn't really materialize for those buyers, did it?

 

[Ingomike]

So it's been about a year. Who was right?

Raptors, especially the "R", are still way over MSRP.
Broncos, still unobtainum and used examples routinely sell for over original MSRP
C8 Corvette, pffft, good luck.

Actual Power Wagons are unobtainium on lots. The ones advertised as new Power Wagons are almost universally Rebels once you click on them. You can tell on the sticker if it has: "Customer Preferred Package 2GR –$1,095" on it, the Rebel is cheaper as it deletes several key components that make a PW a PW, like the locking front axle and softer suspension. So, let's use a Rebel version: https://www.markdodge.net/new-Lake+Charles-2024-RAM-2500-Power+Wagon-3C6UR5EL8RG126551

Mark Dodge is one of, if not *the*, cheapest dealer on Rams in the country, and since I posted a truck I looked at before, I'll stick with them here. $6k discount, but still that leaves you at $82,910 for a level 1. Now, in fairness the 'level 1' today is the old 'level 2', but still the same discount as last year but with a $1k or more rise in MSRP since I posted about Mark Dodge last.

Prices on the high end/halo vehicles have remained high like I said. The recession didn't really materialize for those buyers, did it?

It ain’t over, this stuff takes time to filter through the economy, longer than I expected but it still appears to be coming. Rates are up, foreclosures are rising, layoffs are beginning. Lots of people have not yet felt the changes in the economy. The cash the fed printed is still in the system

Reminds me of the joke about difference between a recession and depression, recession is when your neighbor loses their job, depression is when you lose your job…