Fun dealer shenanigans

[Mach1E]

You are missing the point. As I explained, due to all those various factors the dealers will be incentivized in moving inventory and that can only be done by cutting all those junk charges on top of MSRP.
Your other arguments about inflation are rather incomplete. Price inflation depends on more factors than you listed. In particular, the velocity of money is decreasing as the economy enters recession. The inverse wealth effect is increasing due to markets falling and mortgages becoming more expensive, and real estate prices inevitably falling after that. Price inflation is not uniform, while energy and food prices continue rising, the other components of the CPI will start falling. Cars in particular will see a lot less demand.

Again, all the things you’re saying about inflation may factor in, but with cars, it’s pretty simple right now:
Way too many dollars chasing too few products.

And dealers giving up on ridiculous (high profit) add ons? Wishful thinking.

If we see a recession in the near term, it will likely be short lived and have very little impact on car prices.

Why? The 9 month waiting list for starters. If the line to buy a product is longer than the recession lasts……. Every car is still pre-sold. Zero incentive to lower prices.

And possibly the most important factor about our next recession (if it happens soon) is that unlike past recessions caused by a bad economy (high unemployment, low demand for products, not a lot of cash out there, etc), this one will be caused by supply chain disruptions.

People want to buy products right now and will pay top dollar for them. We just can’t manufacture “stuff” fast enough. A recession right now will just be a statistical data point in a good economy.

“Recession” doesn’t equal bad economy any more than getting out of a recession equals a good one. “The Great Recession” officially ended in June of 2009. And economy in 2010 and 2011? Horrible.

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[yngwenli]

So I drove the 119 miles to dealership in Knoxville. Yep, price was MSRP...plus $4,450 for market adjustment.

This has always been my concern with the whole drive (or fly) 4 hours away (fly half a day to another state/drive back) dealership and if it has problems or the salesperson is lying (or bending the truth), you're already out time/$$/hassles if the dealer/salesperson just tells you to pound sand or the car was sold already, price has been raised, etc.

You can write all the google reviews, BBB, AG, whatever, but you're still at a loss of time/$$/stress/etc.

I think it's hard to change the salesperson's mindset since it's been like this forever and ultimately, it's a "sales" job (similar issues in other industries), but agreed that car buying in general is mostly not a pleasant experience for a lot of people.

 

[yngwenli]

You are missing the point. As I explained, due to all those various factors the dealers will be incentivized in moving inventory and that can only be done by cutting all those junk charges on top of MSRP.
Your other arguments about inflation are rather incomplete. Price inflation depends on more factors than you listed. In particular, the velocity of money is decreasing as the economy enters recession. The inverse wealth effect is increasing due to markets falling and mortgages becoming more expensive, and real estate prices inevitably falling after that. Price inflation is not uniform, while energy and food prices continue rising, the other components of the CPI will start falling. Cars in particular will see a lot less demand.

I sorta disagree pricing will drop much neither. There is simply a bigger gap among the folks who are easily buying these $50-$70k cars (and houses) than folks who are worried much about the economy.

People who bought homes in the past few years are sitting on massive home equity and with supply so massively constrained, anti-construction (CA here), maybe the days on market will be 14 days vs. 3 or 4, but homes are still selling for insanely high prices.

At the end of the day, it's still a massive supply/demand imbalance for new EVs and until that's all worked through, prices are not going to go down IMO.

Gas at $6+, $7 in some places in CA is also going to make anyone who drives a lot and has solar want EVs even more.

 

[DennisD]

You are missing the point. As I explained, due to all those various factors the dealers will be incentivized in moving inventory and that can only be done by cutting all those junk charges on top of MSRP.
Your other arguments about inflation are rather incomplete. Price inflation depends on more factors than you listed. In particular, the velocity of money is decreasing as the economy enters recession. The inverse wealth effect is increasing due to markets falling and mortgages becoming more expensive, and real estate prices inevitably falling after that. Price inflation is not uniform, while energy and food prices continue rising, the other components of the CPI will start falling. Cars in particular will see a lot less demand.

I have one simple question.

How does one move inventory that one does not have (in abundance)?

Riddle me that...........

 

[roamtheworld]

Again, all the things you’re saying about inflation may factor in, but with cars, it’s pretty simple right now:
Way too many dollars chasing too few products.

And dealers giving up on ridiculous (high profit) add ons? Wishful thinking.

If we see a recession in the near term, it will likely be short lived and have very little impact on car prices.

Why? The 9 month waiting list for starters. If the line to buy a product is longer than the recession lasts……. Every car is still pre-sold. Zero incentive to lower prices.

And possibly the most important factor about our next recession (if it happens soon) is that unlike past recessions caused by a bad economy (high unemployment, low demand for products, not a lot of cash out there, etc), this one will be caused by supply chain disruptions.

People want to buy products right now and will pay top dollar for them. We just can’t manufacture “stuff” fast enough. A recession right now will just be a statistical data point in a good economy.

“Recession” doesn’t equal bad economy any more than getting out of a recession equals a good one. “The Great Recession” officially ended in June of 2009. And economy in 2010 and 2011? Horrible.

Spot on with so many of your points.
This is happening with 90%+ dealerships in the US right now with all makes. Add in that EV's have a super LIMITED supply right now we don't have much choice. If we didn't have so much equity in our trade my wife and I wouldn't have purchased our Mach E. We sat in the parking lot for 30 minutes talking about the pros and cons of us covering the extra $10K markup and the $2K in accessories the dealer added to MSRP. The same dealer sold the 3 Mach Es they got in less than 2 days and that included the one we bought and the original one we had on hold for us while we drove 3 hours to the dealer. The only car dealer we found within 3 hour's drive from Austin that was selling at MSRP was a Mazda dealer. They had 1 car in inventory that we wanted and they simply said it would sell to the next person if we didn't want it. It sold later that afternoon. Weird times and I don't see it changing in the next year. I think the dealer sales model has changed forever. Dealers really have zero reasons to change at this point. I saw some reports showing the millions of new cars on dealers' lots beginning in 2020 and those figures are now in the thousands in 2022. Across the board car production volumes are down 50-80% from 2020.
Super happy with the decision to get the Mach E so far I hope it stays that way in the coming years because getting a replacement will be painful for the foreseeable future.

 

[Mach1E]

Spot on with so many of your points.
This is happening with 90%+ dealerships in the US right now with all makes. Add in that EV's have a super LIMITED supply right now we don't have much choice. If we didn't have so much equity in our trade my wife and I wouldn't have purchased our Mach E. We sat in the parking lot for 30 minutes talking about the pros and cons of us covering the extra $10K markup and the $2K in accessories the dealer added to MSRP. The same dealer sold the 3 Mach Es they got in less than 2 days and that included the one we bought and the original one we had on hold for us while we drove 3 hours to the dealer. The only car dealer we found within 3 hour's drive from Austin that was selling at MSRP was a Mazda dealer. They had 1 car in inventory that we wanted and they simply said it would sell to the next person if we didn't want it. It sold later that afternoon. Weird times and I don't see it changing in the next year. I think the dealer sales model has changed forever. Dealers really have zero reasons to change at this point. I saw some reports showing the millions of new cars on dealers' lots beginning in 2020 and those figures are now in the thousands in 2022. Across the board car production volumes are down 50-80% from 2020.
Super happy with the decision to get the Mach E so far I hope it stays that way in the coming years because getting a replacement will be painful for the foreseeable future.

Think about this:

Two years ago we thought home prices were “ridiculous.”

And today people wish they paid a “ridiculous price” two years ago.

Until they invent time travel, it’s best to just get the best deal you can at the time you’re buying something and move on with your life. Trying to predict (or wait for) price fluctuations is Judy going to drive you crazy.

 

[roamtheworld]

Mach1E said
"Two years ago we thought home prices were “ridiculous.”
And today people wish they paid a “ridiculous price” two years ago."

We moved from Colorado Springs in May 2020 during all the craziness and got lucky to buy our house in SW Austin at the asking price. Two years later, we are near $900K to $1M for the same house in the neighborhood even as things are starting to slow down now with interest rates climbing like crazy. Zero chance we could live in the same house today.
No time machines indeed

 

[DennisD]

Mach1E said
"Two years ago we thought home prices were “ridiculous.”
And today people wish they paid a “ridiculous price” two years ago."

We moved from Colorado Springs in May 2020 during all the craziness and got lucky to buy our house in SW Austin at the asking price. Two years later, we are near $900K to $1M for the same house in the neighborhood even as things are starting to slow down now with interest rates climbing like crazy. Zero chance we could live in the same house today.
No time machines indeed

Back in 1981, my Dad was getting 15% interest rates from CD's in the bank and his money was doubling at a fast rate. Farmland along with homes started to crater and he was able to purchase some land at 1/2 the rate it was just a couple years previous to that. He rented ground and saw most of his neighbors go bankrupt. He ended up buying much of the land the neighbors were selling. He said he just got lucky. Back then, Cash was King and if you held onto it, it paid dearly dividends as he proved.

I am not saying that this same scenario will happen again, but it just could.

The old adage is that your property is only worth what you end up selling it for and the same goes for cars.

With supply chain shortages, this is definitely unique but I wouldn't spend any equity just yet. I bought a second home back in 2019 and "on paper", it shows that it is worth 200K more than what we paid for it.

I feel sorry for the young couples starting out. They are running smack into this Crazy Train.
Crazy Train

 

[RedStallion]

I have one simple question.

How does one move inventory that one does not have (in abundance)?

Riddle me that...........

Abundance is a relative term. Abundance occurs when there are more cars than buyers. That may easily happen already in the fall.

 

[Mach1E]

Abundance is a relative term. Abundance occurs when there are more cars than buyers. That may easily happen already in the fall.

Fall of 2024 maybe.

If all the 2022 cars are already sold, and you can’t even order a 2023 until the fall (for Jan 2023 delivery), where do you expect this abundance of cars to come from?

 

[RedStallion]

Again, all the things you’re saying about inflation may factor in, but with cars, it’s pretty simple right now:
Way too many dollars chasing too few products.

It's not a static situation. It can flip pretty quickly. In fact in other industries it already started, have you checked Target, Walmart, and many other companies who suddenly found out the customers are not buying anymore?

And dealers giving up on ridiculous (high profit) add ons? Wishful thinking.

If we see a recession in the near term, it will likely be short lived and have very little impact on car prices.

I don't have a crystal ball as to how long and deep recession can be. My best estimate we are on downtrend at least until the middle of 2023.
It's a wishful thinking assuming that it won't impact car sales. It's actually one of the most vulnerable category that will experience serious damage. When the purchasing power falls, people cut first on expensive items they can live without. Cars are in that category.

Why? The 9 month waiting list for starters. If the line to buy a product is longer than the recession lasts……. Every car is still pre-sold. Zero incentive to lower prices.

And possibly the most important factor about our next recession (if it happens soon) is that unlike past recessions caused by a bad economy (high unemployment, low demand for products, not a lot of cash out there, etc), this one will be caused by supply chain disruptions.

If you believe that you live in a fantasy land. The supply chain issues have been contributing to the problem, but the bubble was pricked by the Fed tightening. The economy is very fragile. It won't take a lot of tightening for the Fed to send it into a tailspin. In fact, the situation is even worse, because all world economies are now in terrible shape. China is about to collapse, Europe is in dire straits, food crisis coming. It may turn out to be a worldwide depression rather than a recession.

 

[RedStallion]

I sorta disagree pricing will drop much neither. There is simply a bigger gap among the folks who are easily buying these $50-$70k cars (and houses) than folks who are worried much about the economy.

People who bought homes in the past few years are sitting on massive home equity and with supply so massively constrained, anti-construction (CA here), maybe the days on market will be 14 days vs. 3 or 4, but homes are still selling for insanely high prices.

It seems you are unaware that the housing bubble is turning to bust.

 

[DennisD]

Abundance is a relative term. Abundance occurs when there are more cars than buyers. That may easily happen already in the fall.

Two things on that.

1. Almost all of the cars that will come in this Fall are spoken for. They are already gone and no one can order any more.

2. Even if half the buyers backed out, the shortage is so great that the ones left over would soon be taken by those that are waiting to purchase to sneak in on the tax credit for 2022 that couldn't order in 2022.

If these were "normal times" and the cars were manufactured at a record pace, you may have a valid point.

The way it is now, there is such a demand and the shortage problem looks like it will go at least through 2023 due to a backlog of chips etc..

The Recession (and we may be in one now) will have little impact on the MME's already on order IMO. I would think a Depression would change that but it appears that a Recession is more likely and once again, we may be living in one now and it hasn't slowed it down at all (so far).

I think realistic, there may be (and that is a big maybe) a few more Dealership's that sell at MSRP but I don't think there will be car lots with new cars sitting waiting to be sold anytime in the near future and you sure as heck won't see them selling much under MSRP.

The average age of the car has gone up with each year for a while. https://www.usatoday.com/story/money/cars/2022/05/24/average-american-car-12-years-old/9907901002/

Now you seem to think that all of these people will stop buying cars this Fall?

I have some land in Florida that you may be interested in? Care to make me an offer?

 

[yngwenli]

It seems you are unaware that the housing bubble is turning to bust.

Not going to watch some random youtube video, but seriously...believe whatever you want and I'll believe whatever I choose as well.

Home prices can literally collapse to nothing because people still need a place to live. My mortage and many other folks who bought a while back has like mortgages of 1/3 renters and nearly anyone who bought in the past 5-10 years is up so much, it's sick.

Remember, people have to live somewhere and unlike a stock, a house is shelter and unlike the go go days of 2004-2008 housing with 0 money down, liar loans, rampant house flipping and no interest loans to flip, most buyers had to put skin in the game so as long as jobs are there, people aren't going under or losing their home.

Housing in my neck of the woods has doubled in like 3-4 years and I think I mentioned that one of my neighbors was so sure it was the peak, it just doubled instead after he sold.

Getting mortgages has been very strict for the past 14+ years. Most home owners have solid incomes, there is still massively low unemployment, businesses can't find workers as it is.

I guess we'll find out in 6 months on who's right and if as you state, everything is spoken for already with MME and we'll see all these MME sitting on lots wishing for buyers with dealers begging for MSRP and cutting price.

I personally don't see it happen. Gas prices are still insane and anyone who is running a gas car wishes they had an EV.

Lastly, if it's SOOOO bad as you claim, shouldn't Tesla start cutting prices? Instead, we see waits up to Feb/May 2023 for the lowest cost model.

 

[Mach1E]

It's not a static situation. It can flip pretty quickly. In fact in other industries it already started, have you checked Target, Walmart, and many other companies who suddenly found out the customers are not buying anymore?

I don't have a crystal ball as to how long and deep recession can be. My best estimate we are on downtrend at least until the middle of 2023.
It's a wishful thinking assuming that it won't impact car sales. It's actually one of the most vulnerable category that will experience serious damage. When the purchasing power falls, people cut first on expensive items they can live without. Cars are in that category.

If you believe that you live in a fantasy land. The supply chain issues have been contributing to the problem, but the bubble was pricked by the Fed tightening. The economy is very fragile. It won't take a lot of tightening for the Fed to send it into a tailspin. In fact, the situation is even worse, because all world economies are now in terrible shape. China is about to collapse, Europe is in dire straits, food crisis coming. It may turn out to be a worldwide depression rather than a recession.

Again, with a 9 month of supply already pre-sold and chip shortages and supply chain disruptions nowhere near close to ending……. How you do think it could “flip on a dime?”

Sorry, but it’s not “fantasy land,” just looking at the data.

Worldwide depression? Come on, seriously? I don’t think we live on the same planet.

Here’s a more realistic outlook article from a non-biased source published today:

https://www.morningstar.com/article...-recession-likely-and-how-much-does-it-matter

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