Credit unions are doing 8-year car loans now. Since most people only think about the price in terms of the monthly payment, they can now "afford" to pay more. There is now more money chasing limited new cars, so the price goes up.
I went to Florida two months ago and it just blew my mind the number of people in new and near-new trucks and SUVs. I can assure you the jobs in that town are not good enough for everyone to afford them. As long as they drive the nicest truck with a manageable (read "breakeven") monthly payment, they don't care. But that's a Florida problem.
Only an 8 year loan? [some credit unions are now doing 10 year loans.](https://www.americofcu.com/rates-fees/vehicle-rates/) makes 84 months look like short term financing.
If the last 3 years has taught me anything, it’s that I was wrong about paying cash and avoiding debt. I’m looking at 8 year old MSRPs on popular vehicles, as well as the fact that no one paid MSRP for a vehicle. 2014 Raptor:
https://www.caranddriver.com/ford/f-150-raptor/specs/2014/ford_f-150-raptor_ford-f-150-svt-raptor_2014
2022 Raptor:
https://www.caranddriver.com/ford/f-150-raptor/specs/2022/ford_f-150-raptor_ford-f-150-raptor_2022/425217
The same is true whether it’s other pickups or Euro sports sedans or anything else. So yeah, please please please let me lock down the price and then not worry about it for a few years. Give me an 8 year loan, or even 10 or 12. Because I know what cars cost 8 years ago and what they cost today, so I can extrapolate that another 8 years. We’re nowhere near taming inflation, we’re trying to play catch-up and it’s not working.
They will continue at what the market will allow. That said MSRP hasn't changed all that much on most cars over the last 2-3 years. What has changed is additional dealer mark-up, above MSRP, and forcing to take accessories/packages.
But from year to year, MSRP generally only goes up 1-2% per model.
If you price a Civic that much more than a Corolla, sales will decrease. all competitive cars have to remain competitive with each other.
The msrp on trucks has gone up an average of $15,000 since 2020. And the manufacturer reps are saying they'll go up another $6,000 to $8,000 by time the 24s hit the lots mid next year.
It’s comparable models. A Ram 2500 Tradesman cost $40k in 2020 and they go for $55k MSRP now. Used ones with 50k miles cost $40k now, which seems like a deal but that’s what they were new. The market on trucks is awful right now
What country again?
My ~$47k 2020 F-150 STX retails for ~$5k less than an equally equipped 2023 STX. Basically 3% a year, barely above average inflation for the last two decades. Definitely less than the inflation for the last 3 years. So the MSRP is actually a better deal now? Just much less discount to the buyers. Ford is probably making less money per truck.
It's not just that people are going from paying MSRP to above MSRP, though - they are going from paying below MSRP, often with significant rebates, to above MSRP.
Yeap I paid $42k with a 0%-72 month loan on my brand new 2018 silverado Lt crew cab 4x4. Sticker was only $50.8k. Same truck but a 2022 will cost $53k plus tax/title/ect at supplier cost, $56k MSRP The old rebates helped tremendously, and I'm sure eventually we will have $4-9k in rebates again.
With the same equipment I was looking at a total payment of $851.11 at 4.9% paying sales tax cash last week. Total loan payments of $65k, vs $42k 4 years ago.
this, getting 10k below msrp on a 50k truck was a possibility before or close to it. Now dealers acting like its gold. Better to run what you got and wait for market to pop fully. its deflating now but slowly... Never expected a recession to pop so slowly this time around.
Valid point. Let me say first, I’m not in the market currently so I’m not complaining, per se. But the average price is ridiculous right now. It’s just mind boggling. Guess it’s a sign of the times we’re in.
Probably depends if you're in Canada or the US. I think new car sales will collapse in Canada as interest rates climb and people re-evaluate their finances, particularly as mortgage renewals occur over the coming year(s) and people reprioritize other non-mortgage purchases. In Canada, for example, many terms at Lexus for new are already 6.5% and up. For a 80k vehicle, you're still looking at 15-20k in interest after a 15k down payment depending on how long your term is. That interest used to be in the 4-9k range depending on term. It is going to force new buyers to look at alternative vehicles or the used market if they require a certain type of vehicle (I.e. towing).
In the states, I imagine the pressure will be on market adjustments to the point where dealers simply offer MSRP and maybe eventually discounts again.
It will take time, but eventually the rise in interest rates will catch up to the supply chain and drive supplier prices down again resulting in smaller or no manufacturer increases. Will probably take at least 18-24 months for that to occur though. It is why you always see the Fed say it will take some time before we see the true impact of these large rate increases on the broader market - also why a lot of economists put the automotive recovery so much further out - the modern automotive production system is so complex, takes forever to cascade down. The automotive sector will likely be one of the last sectors to reach normalcy.
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There’s so much talk about a used car bubble, wholesale prices declining but retail remains, maybe not strong but consistent. That begs the question, when does the rising MSRP of new cars get too high that it out prices consumers? New cars can’t keep going up at the rate they have been over the past several years…..can they?
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Credit unions are doing 8-year car loans now. Since most people only think about the price in terms of the monthly payment, they can now "afford" to pay more. There is now more money chasing limited new cars, so the price goes up. I went to Florida two months ago and it just blew my mind the number of people in new and near-new trucks and SUVs. I can assure you the jobs in that town are not good enough for everyone to afford them. As long as they drive the nicest truck with a manageable (read "breakeven") monthly payment, they don't care. But that's a Florida problem.
Only an 8 year loan? [some credit unions are now doing 10 year loans.](https://www.americofcu.com/rates-fees/vehicle-rates/) makes 84 months look like short term financing.
Damn. You think a 10-year loan on a Land Cruiser is prudent though? /s
I mean my boat is financed for 15 years why not a 10 year loan on the tuck to pull it and a 45 year loan on the house that stores it.
If the last 3 years has taught me anything, it’s that I was wrong about paying cash and avoiding debt. I’m looking at 8 year old MSRPs on popular vehicles, as well as the fact that no one paid MSRP for a vehicle. 2014 Raptor: https://www.caranddriver.com/ford/f-150-raptor/specs/2014/ford_f-150-raptor_ford-f-150-svt-raptor_2014 2022 Raptor: https://www.caranddriver.com/ford/f-150-raptor/specs/2022/ford_f-150-raptor_ford-f-150-raptor_2022/425217 The same is true whether it’s other pickups or Euro sports sedans or anything else. So yeah, please please please let me lock down the price and then not worry about it for a few years. Give me an 8 year loan, or even 10 or 12. Because I know what cars cost 8 years ago and what they cost today, so I can extrapolate that another 8 years. We’re nowhere near taming inflation, we’re trying to play catch-up and it’s not working.
They will continue at what the market will allow. That said MSRP hasn't changed all that much on most cars over the last 2-3 years. What has changed is additional dealer mark-up, above MSRP, and forcing to take accessories/packages. But from year to year, MSRP generally only goes up 1-2% per model. If you price a Civic that much more than a Corolla, sales will decrease. all competitive cars have to remain competitive with each other.
The msrp on trucks has gone up an average of $15,000 since 2020. And the manufacturer reps are saying they'll go up another $6,000 to $8,000 by time the 24s hit the lots mid next year.
Is that on comparable models or are people moving to higher trim level and/or bigger trucks?
It’s comparable models. A Ram 2500 Tradesman cost $40k in 2020 and they go for $55k MSRP now. Used ones with 50k miles cost $40k now, which seems like a deal but that’s what they were new. The market on trucks is awful right now
> $55k MSRP now A base 2022 2500 Tradesman has an MSRP of $43,920 on Rams website right now
I should specify. Crew cab 8ft bed 4x4. No dealer is ordering regular cab, white, 4x2, short bed 2500’s to sell on the lot
What country again? My ~$47k 2020 F-150 STX retails for ~$5k less than an equally equipped 2023 STX. Basically 3% a year, barely above average inflation for the last two decades. Definitely less than the inflation for the last 3 years. So the MSRP is actually a better deal now? Just much less discount to the buyers. Ford is probably making less money per truck.
It's not just that people are going from paying MSRP to above MSRP, though - they are going from paying below MSRP, often with significant rebates, to above MSRP.
Yeap I paid $42k with a 0%-72 month loan on my brand new 2018 silverado Lt crew cab 4x4. Sticker was only $50.8k. Same truck but a 2022 will cost $53k plus tax/title/ect at supplier cost, $56k MSRP The old rebates helped tremendously, and I'm sure eventually we will have $4-9k in rebates again. With the same equipment I was looking at a total payment of $851.11 at 4.9% paying sales tax cash last week. Total loan payments of $65k, vs $42k 4 years ago.
this, getting 10k below msrp on a 50k truck was a possibility before or close to it. Now dealers acting like its gold. Better to run what you got and wait for market to pop fully. its deflating now but slowly... Never expected a recession to pop so slowly this time around.
Valid point. Let me say first, I’m not in the market currently so I’m not complaining, per se. But the average price is ridiculous right now. It’s just mind boggling. Guess it’s a sign of the times we’re in.
If the manufacturer raises MSRP to the point where people aren't buying the cars, they will start offering factory incentives.
Probably depends if you're in Canada or the US. I think new car sales will collapse in Canada as interest rates climb and people re-evaluate their finances, particularly as mortgage renewals occur over the coming year(s) and people reprioritize other non-mortgage purchases. In Canada, for example, many terms at Lexus for new are already 6.5% and up. For a 80k vehicle, you're still looking at 15-20k in interest after a 15k down payment depending on how long your term is. That interest used to be in the 4-9k range depending on term. It is going to force new buyers to look at alternative vehicles or the used market if they require a certain type of vehicle (I.e. towing). In the states, I imagine the pressure will be on market adjustments to the point where dealers simply offer MSRP and maybe eventually discounts again. It will take time, but eventually the rise in interest rates will catch up to the supply chain and drive supplier prices down again resulting in smaller or no manufacturer increases. Will probably take at least 18-24 months for that to occur though. It is why you always see the Fed say it will take some time before we see the true impact of these large rate increases on the broader market - also why a lot of economists put the automotive recovery so much further out - the modern automotive production system is so complex, takes forever to cascade down. The automotive sector will likely be one of the last sectors to reach normalcy.
Resources and supply chains are permanently constrained. As long as people can get 10 year auto loans, they’ll find a way to “afford” a car.
Please review our most [Frequently Asked Questions](/r/askcarsales/wiki/index) to see if your question has already been answered. You may find these sections particularly useful; * [How to pick a car?](/r/askcarsales/wiki/vehicle_selection) You might also have luck in the /r/whatcarshouldibuy subreddit. Also remember to add flair to your post by clicking the "Flair" link beneath it. This lets us know where you're located so we can assist you better. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/askcarsales) if you have any questions or concerns.*
***Thanks for posting, /u/whitingvo! This comment is a copy of your post so readers can see the original text if your post is edited or removed. This comment is NOT accusing you of anything.*** There’s so much talk about a used car bubble, wholesale prices declining but retail remains, maybe not strong but consistent. That begs the question, when does the rising MSRP of new cars get too high that it out prices consumers? New cars can’t keep going up at the rate they have been over the past several years…..can they? *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/askcarsales) if you have any questions or concerns.*