Everyone talks about the weather, but no one does anything about it. Sometimes it feels like that’s what’s happening with vehicle affordability. It’s the beginning of a new year, so we’re getting a lot of data about 2023, and yeah, cars are expensive. So expensive. It’s getting better, maybe, at the same time that it’s getting worse.
Welcome to The Morning Dump, our daily feature where we look at the car news and try to paint a larger picture for you. Anyone can tell you the sales numbers, and we’ll do that, but we’ll also try to tell you what it means.
Yesterday, we learned that BYD edged out Tesla for electric car deliveries at the end of last year. Today, it’s Kia and Hyundai reporting good news.
We’ll end the dump on a weird rumor about Chinese automaker HiPhi, because rumors are fun.
17.9% Of Monthly Car Payments Are $1,000 Or More
The nature of inflation and modern economies is that, over time, many things will get more expensive. Gone are the days when you could get a movie, popcorn, and a candy bar for a quarter.
In theory, wages also rise along with prices and complex goods get relatively less expensive. Back when a movie cost $0.10 a computer cost, not adjusted for inflation, almost half a million dollars.
Cars seem to be resisting this trend. A base Mustang GT in 1965 cost, inflation-adjusted, about $28,000. Today it’s about $41,000.
Cars, however, are faster, safer, more comfortable, and loaded with technology. That 1965 Mustang looks great, but it would get smoked by a modern Mustang and would crumple like a can of Pabst in an accident with an F-150.
So, that’s part of why, in Q4 of 2024, approximately 17.9% of new-vehicle monthly car payments were at or above $1,000. That’s up from 17.5% in Q3 and way up from the 15.7% share in Q4 of 2022, according to Edmunds. There’s a little more to it than that. Trimflation plays a role, of course, as automakers have added more and more features and reduced the inventory of entry-level vehicles (though that’s improving).
Interest rates are up. According to the same Edmunds analysis, the average APR on new vehicles climbed to 7.4%, up from 6.5% in Q4 of 2022, but flat since Q3 of 2023. The average new car payment is now $739 a month for a 67.8-month term with a down payment of $7,074.
Cars are more expensive, interest rates are high, and the inventory of affordable vehicles has been restricted. Additionally, the lack of available used cars and off-lease used cars is down, making used cars still quite expensive, which puts pressure on new car prices.
The final factor is, of course, the existence of very wealthy people in the United States.
92.5% of equities are held by the top 10% wealthiest Americans. A record high concentration. pic.twitter.com/YhGQC0j0cL
— Lyn Alden (@LynAldenContact) January 1, 2024
The share of $1,000+ car payments usually goes up in Q4 as very wealthy people can do the thing most of us can’t, which is buy someone a car as a Christmas or Hannukah present.
Is the news all terrible? Not quite.
“On the surface, car financing appears to be following the harsh trend line of the past few years, with average monthly payments and down payments reaching all-time highs for new vehicles,” said Jessica Caldwell, Edmunds’ head of insights. “But there are some very encouraging signs as we kick off 2024 when considering the makeup of deals in the latter half of Q4 2023. Incentives are slowly coming back as inventory improves. Most consumers are looking for low APRs with longer loan terms, so the growth in those loans is helpful to lure consumers who have been sitting out due to adverse financing and pricing conditions.”
That’s good news and the Edmunds analysis showed that 0% APR loans were available for longer terms, which means that they’re not just limited to shorter loan periods.
Kia Sets Sales Records, With Cheaper Cars Performing Best
The first bit of news from Kia that’s worth noting is, of course, that it set a sales record of 782,451 vehicles, up 13% year-over-year. Kia is killing it. The cars are great. Even without tax credits for sales, Kia’s EVs and hybrids were up 41% year-over-year.
But here’s the fun thing. If you look at Kia’s best-selling SUVs/Crossovers they generally sell better the cheaper they are.
Ok, well, first a big caveat. The exceptional Kia Carnival was extremely delayed during the pandemic and those vehicles are finally coming to the market and sales of the Carnival were up 93%. This thing rules. I just put 2,000 miles on one and it’s fantastic. A review will hopefully come this week.
Putting that aside, let’s take the crossover lineup from cheapest to most expensive:
- Kia Seltos ($24,390) up 17%
- Kia Niro ($26,840) up 25%
- Kia Sportage ($27,090) up 12%
- Kia Telluride ($35,990) up 11%
Notice a trend? Generally, there’s more action at the bottom of the lineup. Some of this might be due to availability and vehicle age (the Niro was recently redesigned), but it just goes to show how much demand there is these days for affordable cars.
Hyundai Is Also Having A Good Time
Hyundai, the sister company of Kia, also had a great month/quarter/year, posting an annual increase of 11% over 2022 to a whopping 801,195 models. We’ll see how that compares with everyone else, but Hyundai and Kia are moving up in the market.
Gone are the cheap and fun Hyundai Veloster and Hyundai Accent, so the most affordable Hyundais are now the Elantra and Hyundai Venue. And no surprise, over the year the Elantra saw a 14% increase in sales (though down in Q4 and the Venue was up only up 3%).
Hyundai’s still reasonable crossover, the Hyundai Kona, was also up dramatically this year by 24%, though by volume, it was the Hyundai Tucson that had the biggest impact on total sales. In total, the Tucson was up 20%, meaning more than 209,000 of them were sold last year.
Hyundai and Kia are in the sweet spot of offering cars that look and feel premium but can still be purchased at a relatively reasonable price.
What’s Up With HiPhi?
Here’s a tweet from contributor/Chinese car watcher Tycho de Fiejter that caught our attention this morning:
HiPhi in trouble in China?
HiPhi is our favorite new Chinese EV brand. They made totally mad cars with mad lights, mad doors, and madder dashboards. I went to two of their shops in the summer, and stayed for hours checking it all out.
Perhaps it was all a tad too mad for the… pic.twitter.com/2BYwADc91k
— Tycho de Feijter (@TychodeFeijter) January 3, 2024
I’ve been watching HiPhi as well and it seemed like the automaker was starting to consistently sell cars so this is a bit of a surprise. More on this as we learn what’s going on, since it’s just at the rumor stage.
What I’m Listening To As I Write This
Apple TV+ is out with a new series based on Edith Wharton’s posthumously published novel “The Buccaneers” and the soundtrack is killer. Here’s Warpaint’s Emily Kokal and Miya Folick covering “North American Scum”
The Big Question
What was your most recent car payment? Mine was $500 a month at 1.9% for 48 months.
Top graphic image: Saturday Night Live/YouTube
Picked up a ’22 Tacoma in may of 2022 when I saw that Toyota was offering 1.9% for 36 months. I wasn’t in a rush and I think thats the key… I knew the trim I wanted and waited for the right time.
Like @Toecutter, I’ve never financed a car. I’m Gen X but have only bought four cars in my life, all in cash: $4K for a Subaru Loyale wagon (RIP), $10K for a Subaru Legacy wagon, $7.2K for a Prius (RIP), and $2.1K for another Subaru Legacy wagon. I buy for the long haul and have never sold a car.
I’m at a $0 payment now but have an order in that will put me at $750/mo for 36 months after my trade in plus a big pile of cash. The heart wants what it wants.
The low payments in the States are nice. We’re at $830 or something on a top spec Santa Fe (I wanted cooled seats, and I’m very comfortable with that decision), with a balloon…
Anyway, it’s interesting with the financing talk. In the land of Oz, there is a few ways you can claim at tax your car costs. One is a log book, where the % of work related kms v total kms = % of car costs you can claim. Ie, even if I don’t go through any tolls for the work drives, its a cost against the car, so I can claim the ratio against it. Also things like fuel, car washing expenses, but more importantly, interest repayments, and depreciation can be claimed. Particularly in the higher tax brackets, it starts adding up fast. The fun bit is, you only need record 3 months every few years. So it isn’t unreasonable with a fair commute, and some decent site visits, to get in to the 50-60% work related travel range.
We also can package cars with our jobs. So ALL the car costs can come out of pre-tax dollars, meaning your taxable income is reduced substantially. They usually run at a higher interest rate, so you’ve still got to run the numbers properly. Interestingly the Aust Govt currently has a rebate setup where in effect a $60k ICE car has the same monthly repayment as a ~$90k car.
My Nissan Titan. $550 per months, 36 months. 3% interest. And that payment conceptually hurts my boomer bones.
it would be interesting to know how long the average term is for these $1000+ payments.
people are spending stupid money for vehicles. It won’t last.
However the used car market hasn’t been the same since cash for clunkers. What a horrendous idea it was, on so many levels
I was wondering why I don’t see many classic 50s to 70s era cars. I figured it was where I’m living, near a large-ish city. I was in school during cash for clunkers and wasn’t really a car spotter before then. That’s why I may never get a chance to ride in or own a proper luxo-barge cadillac.
I’ve got 7 more payments of $362 on my ’19 AllTrack. 60 months, 1.9%. After that, fingers crossed, next payments will start in the mid ’30s.
“The average new car payment is now $739 a month for a 67.8-month term with a down payment of $7,074.”
That has to be because of all these loaded-to-the-gills pickups and SUVs, right? That average down payment amount in particular is startling. I know what I’m about to say is anecdotal, but as a loan officer for more than ten years, the ratio of trucks/SUVs to sedans/coupes I’ve financed is about five to one. But also I’ve NEVER seen someone put down more than $5,000 on a car.
I’m currently rocking a $356 payment with 23 months left on a 60-month loan and I’ve been over here thinking “Why did I let myself get into such a high monthly payment?”
I don’t think I’ve ever put less than $5k down on a car. I realize it’s not the smartest move and my down payment often just covers the first year’s depreciation, but I don;t want to be upside-down on a car. If there was a situation where I had to pay a lender for a car that was stolen / totaled, I’d be very likely to burn a structure to the ground before making that payment. I’d rather put more down than buy gap insurance. Insurance companies are the only entities I hate more than lenders.
That’s a good way to look at it, and probably smarter than what most of us do.
I assumed that down payment number included equity in traded vehicles, otherwise it seems very high to me as well.
That’s a good point. I hadn’t considered that, but it would make sense to include it equity since it’s serving the same purpose.
The only car I ever financed I put down 7k. I would have been able to pay cash for it but I didn’t want to be cash poor in case an emergency came up.
Current car payment is $227 (4.5%) for 36 Months. I really want a different daily driver but reality is with interest rates as they are, unless I come into more cash, it ain’t happenin’. There’s nothing wrong with my current DD…it’s a fine car…I’m just getting that itch to try something different.
Same here with the itch! I drive a Corolla hatchback with only 84,000 miles, no issues whatsoever, yet I keep picturing myself in a lower-trim Colorado or Canyon, and every time I look at interest rates it’s the splash of cold water I need to snap out of it.
If there’s someone hanging around these parts who doesn’t have that itch, I’d be shocked. Maybe not right this second, but in a general and recurring sense.
I’m paying about $250 for my Acura, but I pay extra every month, because I hate car payments.
We’re at about $350 a month for our used Bolt and I feel like that was higher than I wanted by about $50. I feel like $200 a month should be a normal car payment, but think I’m getting into grumpy old man territory so there’s that.