Auto Pricing Will Never Go Back to 2019 Levels.
Follow-up to an earlier article.
In another lifetime I was a sales guy at a Mercedes-Volvo dealership. There’s a certain mindset in that business, which I really disliked.
2019 Pricing: It was negotiatble, to a point. Sales people were paid on gross profit = the retail price minus the wholesale price + options. I’m leaving out a lot of needless detail on purpose.
2022 Pricing: Most if not all retail pricing is based on supply-demand PLUS what the customer will pay.
The chip shortage is true. Logistic problems are true. Supply and demand, true. The critical fact is, car buyers are paying the higher prices. A precedent has been set.
Late 2022 approximately, when the chip & logistic issues are solved or improved, what will happen to car prices? There will be some relief.
“Prices will be going down, but they’re not going to get to 2019 levels.” David Paris, at JD Power & Associates.
“History tells us a decline [in retail pricing] over 10% is exceptionally rare.” Jonoathan Smoke, at Cox Automotive. “Average transaction price may well edge UP,” he said, perhaps even faster than inflation.
Car dealers are slick-smart. Customers have demonstrated they will pay more. They also want pizazz. Electronics, automatic braking and cruise control, exceptional audio. Many want upmarket SUVs and trucks. Car fever.
Buyers will also pay more for financing, insurance and service.
Who’s at fault? Global industry, for not recognizing that there was only one manufacturer of chips, in Taiwan. Buyers, whose lust for a car defies any common sense. Please: be an exception!
What can I do? Get over car fever. I’m aware that a lot of our “image” relies on what we drive, especially- but not exclusively- for men. That image stuff is not practical and we genuinely need to get over that.
If you need a car, Hondas and Toyotas are overall, repeat overall, the most reliable. Avoid as much electronics as possible, because it’s not reliable. If you can find a 3-year old lease car, overall that’s a pretty good decision. But expensive, relative to 2019, and maybe hard to find.
Me? I didn’t have ‘future vision,’ but in 2012 I found a 2009 Honda Accord, a former lease car. I still have it. It’s been well maintained, reliable, always clean and waxed and looks perfectly fine. No optional electronics. Paid off years ago. Reasonably lower insurance rates. If anyone is going to judge me on a car, have at it. They’re no one I want to be around.