A new report from Experia shows that the average cost of a new vehicle loan has hit $32,119 as of Q2 2019, a gain of $448 compared to the same time in 2018. The report also found that when comparing new car loans and loans for used cars, there is about a $12,000 difference between the two. That massive difference highlights the uptick in new vehicle prices in recent years.
As the price of new cars grows, more people are choosing to purchase used with the report showing that in Q2 2019, used car financing was up 1.2 percent compared to Q2 2018. More middle-class buyers are leasing now than in the past, with the number of leases increasing by 0.62 percent over a year. Recently we talked about Ford CEO Jim Hackett and his admission that car prices can’t keep climbing forever.
New car prices have climbed 38 percent in the past decade, despite only a slight increase in average income over that time. The average household income in 2009 was $59,000, while in 2018, the average household income was $62,000. Those numbers mean that while average household income has only risen by six percent, the average new car price has increased by 40 percent during the same period. That massive discrepancy is why the average middle-class family is finding it difficult to find a new car that fits into their budget.
While Ford CEO Jim Hackett says that Ford will start to remove items to help bring new car prices down, safety agencies are pushing automakers to add new safety features, and governments want to increase emissions standards. Both drive the cost of new cars ever higher. Many buyers have resorted to much longer car loans over the five or six-year period that was common with some finance companies pushing loans out to seven or eight years.
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Source: GMAuthority
Comments
Domestic car prices will continue to increase due to many reasons. The imports can charge less because they pay less for labor and parts, but get higher profits because they increase their prices to match domestics, then offer huge discounts (just a bit less profit) and sell for much less than domestics. As this continues, by 2050 all domestic manufacturing will be gone, then the imports will raise prices without any competition. A win for the imports, and a lose-lose for domestics and buyers!
Yes, I agree with your comment! I’d be 95 years old, in 2050!!!
I was BLESSED, that I was recently in a position, to purchase two new Ford vehicles! One, inexpensive one, for me,…and a LOADED one, for my dear wife!
YES, between the two, it’s set me back, over 40k!
I am only a middle-class, semi-retired, male nurse. I also collect social security. I don’t break thru the average “household,” income, per year, either! It’s just good, to be in a position, to purchase new vehicle(s), with up-to-date, safety items, and warranties!!!
If I could, I’d buy everyone a new vehicle!
84 month financing just insures that the customer will not be returning for 4-6 years.
Get back to individual option choices, and away from overly expensive “packages”
To get a 2020 Explorer XLT with a panoramic sunroof, ($1695) you must get the 502 package ($5100), and the Comfort Package, ($710) costing you $7500. There is no plain sunroof, only the pano., A plain power sunroof, which can be installed for $800 retail is not offered.
At my local Ford dealer, they have 2020 Explorer XLTs with $7500 in rebates and discounts, plus college student, 1st responder etc rebates to those who qualify on top of these
Blowout, year-end money on the hood, for an all new SUV that’s been on the market for less than three months.
I wholeheartedly agree with the comment above. One obvious way to help correct this phenomenon is to bring back built-to-order vehicles. Up until the practice was essentially halted a few years back, I ordered every new vehicle I purchased: exactly the way I wanted it. It was part of the enjoyment of purchasing a new vehicle! I’ve had a couple of pick-ups over the years, and one thing I always ordered on them were the cab roof ICC lamps. Usually less than $150 and for me it made the truck special: added a nice touch IMO. Today, they’re probably only available on the Super-Duty series and then only as part of a $2,000 package: and that doesn’t include the premium $$$ jump from an F150. It’s hard to believe sales wouldn’t increase if the manufactures brought this back. You had to put down a good non-refundable deposit to order, but is was worth it. Start with the basic non-stripped truck (auto, AC, PW/PL, decent sound, and go from there. The customer walks in and builds exactly what they can afford. I have the total price, loan terms and monthly payment before I even walked in the door. Easy sale: just check these boxes, take my deposit, send the order into Ford and call me when it’s in. Call it the F150 X.
I predict in five years that 90 percent of ALL new cars will be leases. I replaced my wife’s 06 Accord with a new Toyota RAV4 Hybrid and with over 2200 in taxes, dealer prep and an additional warranty because it is a hybrid and finance charges for the loan (6 years) I was close to 40 grand. Sounds crazy and I did get a discount off MSRP which is unusual for a hybrid. I would never do that again because I would lease. I predict that in the next few years CARMAX, CARVANNA and VROOM will become the largest vehicle dealers in the country. (PS: I didn’t get a loaded model either, I got the XLE which is what most people buy to get the most wanted features like a power and heated seat, sunroof, etc but not fully loaded up.)
That’s what happens when you buy an over priced, OVERRATED Turdatha. Every thing is extra over priced options.
Of course I could have purchased a “Gussie” upped fancy F150 with a list price of 65 thousand but I chose not to sell my house and have to sleep in the truck as I would be homeless.
If buyers could spec what they wanted ala carte, prices could be lower. Example: I want auto dimming headlights. To get that I have to get the drivers package which includes lane keeping assist and automatic braking and intelligent cruise control.I don’t want those two things but to get my auto dimming headlight I have to take the others. Cost? More money of course. This is how automakers make their money. But it’s coming back to bite them in the arse. Sport package, comfort package, luxury package, technology package, they all exist to make more money. And to think I only want three thing out all that stuff. Which would quite cheap bought individually.
Boy, you nailed it. I wanted all the stuff I got in my SUV (mid tier model) including the upgrade stereo and NAV, etc., but I wanted leather seats. Well guess what, just to get leather seats I would have to go to the “Limited” model which included stuff that was essentially useless and just eyewash like rain sensing wipers and auto dimming rearview mirrors, etc. It is totally crazy. They truly hit the gold mine with this “package” pricing system.