I’ve only ever bought one brand-new car in my life: an F56 Mini Cooper S, to replace our R56 after all the mechanical problems it had (“It’ll be different this time,” I convinced myself, like someone getting back together with a terrible ex who swears they’ve changed.) We also made that decision because we found some heavily discounted base models that our local dealer was happy to be rid of for about $25,000, which I thought was a very solid deal for a BMW-built baby hot hatch.
That was about seven years ago. Today, it feels unfathomable to score that kind of deal on almost any new car, no matter which one you want. New cars are priced out for all but the wealthiest American buyers. And how long can that last?
Our collective pricing grievances lead the morning roundup today, along with an update on Vietnam’s VinFast, more shakeups at Volkswagen’s software division and China’s automakers are about to conquer another market. Hop into the car you’re holding together with duct tape and prayer because replacing it would cost $48,000, and let’s get moving.
The Widening New Car Affordability Gap
At this point, we’re not telling you anything you don’t already know: The new cars are too damn expensive. A few weeks ago, one of Toyota’s top U.S. bosses predicted the average new ride would soon be around $50,000; it’s already pretty close at about $48,000 in March, according to Kelley Blue Book. The average new car payment is around $730 now.
But more mainstream news outlets like The Washington Post are starting to hit back at automakers over this too, and even the car dealers are starting to express frustration about their growing inability to move some of this metal:
Manufacturers determine which cars get sent to dealerships, and typically won’t send new inventory until the current stock gets sold. In Maryland, where Andrea White has expensive cars sitting on her lot, she said she’s “just suffering through it.”
“We have some final edition Dodge Challengers for $80 or $90K,” White said. “We don’t even want another one.”
Dealers say manufacturers are lifting prices beyond what customers will go for, in some cases leaving dealers stuck with models they can’t sell. Earlier this spring, White had 76 new vehicles on the lot of her Annapolis, Md., car dealership. At the time, she had no takers on the $88,000 Jeep Wagoneer. The $115,000 Grand Wagoneer? Not budging. Many of her cars cost between $50,000 and $60,000.
“I’ve got a few that are so expensive, I would do anything to get them off the lot,” White said. “I’m just giving people prices so that we would just break even. That’s how desperate I am to dump this expensive stuff, because it’s hurting us.”
That’s because what we’re seeing is a total shift toward the top of the market — the wealthiest American buyers — leaving basically anyone else to either find a decent used car (which has become incredibly difficult and also expensive) or to over-extend their budgets to the point where delinquencies and repossessions are skyrocketing.
Only three cars in America are now priced below $20,000: the Kia Rio, the Mitsubishi Mirage and the Nissan Versa. That’s kind of shameful. Check out these trends, also from the Post:
Even as inflation is easing and global chip supply shortages are beginning to resolve, more Americans are being priced out of the nation’s new car market, industry and government data suggests. Spending on new cars by the lowest 20 percent of earners dropped to its lowest level in 11 years. Meanwhile, spending on new cars by the top 20 percent reached its highest level on record, going back to 1984, according to the most recent data from the 2021 Consumer Expenditure Survey, not adjusted for inflation.
We know why this is happening: chip shortages, labor shortages, rising interest rates, bigger tastes for bigger cars, the need to shore up cash to transition to electric vehicles, and outright greed on the part of the car companies [Editor’s Note: One could also just call it smart business. Maximizing profit is any American company’s goal. -DT] just who run on margins and are raking in record profits. Meanwhile, the rest of us are left to figure out if a bus pass is a better investment these days.
But what I wonder is, where does it end? Does it ever?
If the dealers can’t actually sell these comically overpriced cars—and the $100,000+ Grand Wagoneer is a great anecdote here—when do the automakers back off on pricing? Of course, that would mean fewer profits and shareholder returns, so I suppose it’s completely out of the question.
China Aims To Conquer Australia Next
Here’s one answer to this problem, and you might even call it a market-based solution: new players show up to take the place of the overpriced brands. And in many places, those cars are coming from China. That’s already happening more and more across Europe.
Add Australia to that list now, too. And not even with EVs—not yet, anyway, but soon enough. Here’s Bloomberg on the rise of Chinese cars Down Under:
Never mind the auto industry’s relentless push toward electrification, Chery Automobile Co. is the latest Chinese carmaker trying to win over Australians with gasoline-powered SUVs pitched at the lower end of the market.
Chery’s mid-size Omoda 5 is selling across Australia for as little as A$32,000 ($22,000) for the base model. A colleague and I drove a high-end version around Sydney for four days. It’s stuffed with extras you’d normally find in luxury cars — think heated steering wheel and exterior puddle lights — and costs not much more than A$35,000.
Australia’s best-selling car, Ford Motor Co.’s Ranger pickup, can go for more than double that price.
Wuhu-based Chery joins Chinese rivals Great Wall Motor Co. and SAIC Motor Corp. — owner of the MG brand — in pouring relatively affordable cars into an Australian market that’s been slow to turn to electric vehicles. Chery was China’s second-biggest car exporter worldwide last year.
And yes, Australia has the same problems I listed above that we do. Interest rates are high, the market already loves trucks and SUVs and prices are through the roof. So Aussie buyers are turning to this new crop of Chinese brands—which are now apparently pretty good—such that sales of vehicles from China have increased 69% in Australia this year. Nice.
Australia’s market is now 8% EV (a little higher than America’s) and you know these Chinese brands have big plans for global electric domination. So are they any good?
How did the Omoda 5 stack up in the flesh? The car’s technology, at least in the better-equipped EX model, appears to punch above its weight. There’s a powered passenger seat and tailgate, heated front seats and an electric sunroof.
Most startling of all, a 360-degree camera system can beam onto the driver’s display a semi-translucent image of the vehicle, as if you were looking at it from outside. The trick reminded me a little of James Bond’s much-ridiculed “invisible” Aston Martin in the 2002 movie, Die Another Day.
I’m very curious about the quality and reliability of these cars, but even if they aren’t great, Hyundai and Toyota’s early efforts abroad weren’t always spectacular, either. The point is, they’re priced to compete and take over quickly in Australia.
Chinese-made cars face a steep 28% tariff in America and I don’t see that changing anytime soon; it’s part of why Volvo and Polestar are pushing for more U.S. production. But if it ever does, expect a seismic shift. You know they want in on this market.
So Does VinFast, But It’s Been A Rough Go So Far
One of the more perplexing newcomers in this space is VinFast, the electric upstart automaker from Vietnam. On one hand, its parent company Vingroup is as massive as it gets, with ventures in hospitals, hotels, smartphones, Big Data, pharmaceuticals—just about everything. And it’s flush with cash.
On the other hand, making cars is hard, as we like to say. This is a car with massive ambitions from a country that’s experience making cars beyond CKD kits is minuscule; VinFast is still the only domestic passenger vehicle brand in Vietnam. Now it wants to break into America’s EV market, not to undercut competitors but to compete with Tesla.
It’s been tough so far, as these things usually go. Here’s Anurag Kotoky and friend of The Autopian Sean O’Kane at Bloomberg to explain the latest. The story centers on Pham Nhat Vuong, the richest man in Vietnam, and his troubled entry into the car game:
Vuong’s difficulties are proving costly. VinFast, his automaker that filed for a initial public offering a year ago, has delayed plans to list in the US. Vingroup JSC — Vuong’s conglomerate spanning homes, hotels, hospitals and shopping malls — and its affiliates and lenders have deployed a staggering $8.2 billion to fund the car company’s operating expenses and capital expenditures the last six years.
The return on all that investment has been meager: VinFast sold just 93,000 vehicles and 162,000 e-scooters.
Vuong has only doubled down, lining up another $2.5 billion for VinFast, $1 billion of which will come from him personally. This month, the company plans to start delivering longer-range versions of its VF 8 sport utility vehicles to US customers.
What’s still unclear is how quickly those SUVs will catch on in what is an increasingly cutthroat EV market, with Tesla slashing prices and putting pressure on incumbents that have been around more than a century. VinFast will need to spend heavily to familiarize Americans with its brand and set up networks for distribution and retailing vehicles, not to mention overcome the growing pains Musk endured when trying to mass manufacture cars.
As that story notes, various early reviews, including ours (thanks for the link, Bloomberg) have been mixed at best. The company is burning through cash, experienced executives from Western auto brands and customer goodwill. VinFast has just 310 cars on U.S. roads now but should add another 100 soon. And the Inflation Reduction Act, which incentives U.S. car and battery production, has done VinFast zero favors.
(As a side note, who’s buying these things? If you bought a VinFast, we want to talk. Get in touch.)
This may be a venture that keeps going as long as Vuong wants it to. But the odds are long here, as we all know.
More Upheaval At Volkswagen’s Software Division
The Volkswagen Group just can’t catch a break on the software front. In December I wrote about the long-stewing effort at VW to overhaul its in-house software division, now called Cariad. The goal was to unite what were previously disparate, every-brand-does-its-own-thing software and infotainment system strategies under one roof in order to prepare the entire conglomerate for a future of connected cars, subscription services, over-the-air updates and advanced autonomy.
It’s not hard to understand why that’s crucial. Given everything that’s coming, it doesn’t make sense to have, say, the Volkswagen brand doing its own thing on the software front and Audi and Porsche doing a different thing. Unifying this stuff is the only way to make it scale.
But things are still not going great at Cariad, according to Reuters. Such that a bunch of people there could soon get fired:
Carmaker Volkswagen is set to dismiss all but one of the executive board members at its software division Cariad next week to try to resolve development problems, a person familiar with the matter told Reuters on Saturday.
The unit – set up under former VW group CEO Herbert Diess -has exceeded its budget and failed to meet goals, contributing to Diess’ departure and replacement by Oliver Blume last September.
Cariad’s supervisory board is expected to sign off on the dismissals in a meeting next week, the source said on Saturday, adding that only the unit’s head of personnel, Rainer Zugehör, might stay on.
A VW spokesperson said the German company was analyzing Cariad and its projects.
One big reason for the frustration, apparently, is more delays for crucial future EV products like the Porsche e-Macan and Audi Q6 e-tron. That’s interesting because last year, software issues pushed those same cars back to 2024. I guess they still haven’t figured it out, and that’s a big problem because it needs those Tesla-fighting EV crossovers like yesterday.
Anyway, this morning Reuters also reported that Bentley’s production chief Peter Bosch is due to take over. Here’s an interesting tidbit from that story:
[VW Group CEO Oliver] Blume is not planning to shift gears completely with the new leadership, sources told Reuters on Monday – but he does intend to place greater emphasis on partnerships to get the carmaker’s software plans underway, rather than going at it alone.
“We will certainly make some changes, but this is not a 180-degree turn,” one source said.
The VW Group’s goal is generally always world domination; don’t just make cars, but Make All The Cars. If it wants this future at all it has to get the software right, but now it looks like it will turn to some outside help to get that done.
What’s your solution to new car pricing woes? When was the last time you tried to buy new, and how much did you pay?
Here’s one idea: just be rich! That’ll solve any new car-buying woes you may have. Have you tried being rich, or even better, being born rich?
Top Photo: Erik McLean/Unsplash
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bought my first and only new car during Cash for Clunkers – got $4k for the old Subaru and bought a 2009 Honda Fit, $11k after the Clunkers payout. A 2009 Honda Fit today is about $8-9k..
I was going to get a Maverick hybrid as my second new car ever, and last car. That was in the fantasy world where Ford actually sold them. Instead there’s a lottery system which you have to enter during the one week a year that orders are open, then wait to see if Ford will get the car made the next year. If unlucky in lottery it’s another year. If unlucky in getting your car made, you can maybe order next year’s model at the increased price. Currently Carvana is paying $33k for the $23k base model. Several guys on the Maverick forum have taken the payout.
Toyota etc undercut the US makers by starting with reliable small inexpensive cars. Then Hyundia/Kia took that market position from Toyota etc. Who’s next I wonder – there aren’t any obvious contenders I can see.
Imagine if every clock/watch manufacturer decided to become Rolex in an era before alternatives like TV/Payphones.
Something that was a cheap/ubiquitous quality-of-life upgrade that you were expected to own now costs a year’s salary for seemingly no reason.
So a respectable salary man could no longer afford to tell time on his commute without help because even an old junky watch would put him in substantial debt. And the clocks posted around town are miles apart and almost always wrong.
This is akin to rural and middle-American car ownership right now.
2020 Civic LX for Mrs Ocean. $23,500 out the door in January 2020 before the recent craziness hit
“Editor’s Note: One could also just call it smart business. Maximizing profit is any American company’s goal. -DT]” Fair enough, but there is more than one way to do that. Selling more at a lower margin does the same thing, and establishes brand loyalty. There is some money to be made on the lower end. I really feel like a car company could clean up in the next decade selling simple regular old cars while everyone else is pushing electric luxury vehicles that very few can afford new and have limited infrastructure.
My wife wants something different, so I’ve been looking for options. Typical suburbanite SUVs and minivans are in the running.
My options seem to be: less expensive vehicles that are 10 month waits and you might not even get what you want, less expensive vehicles with a healthy tribute to the dealer for the priveledge, or go into a pricing level that most people cannot responsibly go into.
I could *afford* an expensive vehicle, but it makes me sick to either think of plunking that much down in cash or sign up for those payments. So no good options I guess.
Used? Under 30k miles, 1-3 years old, almost no discount compared to new. Maybe $5k on a $60k brand new vehicle. Is it really worth it at that point? Want a discount? Sign up for a car nearing 100k miles. My current car doesn’t even have 100k miles on it.
Plus add Virginia’s car tax, and then you really don’t want to buy a new expensive vehicle.
“Even Some Dealers Hate It”
I’m guessing that is 100% bullshit. Dealers habitually stocking vehicles with a bunch of unnecessary crap is something that has gone on for decades.
Dealers do this deliberately and they LOVE doing it.
Those are crocodile tears you’re seeing from that talking head from that dealer in Maryland.
“What’s your solution to new car pricing woes?”
I don’t see any legitimate car pricing ‘woes’. Prices are what they are due to recently constrained supply. That supply constraint is coming to an end. As supply increases and as it sits for longer and longer, eventually prices will come down and we will see deals again like we saw pre-COVID… on an inflation-adjusted basis.
And if someone can’t afford a fancy new vehicle, they can either buy a less fancy new one or buy something used.
Bought a new ’22 Maverick 2.0T, AWD, Towing Pkg, XLT from local Ford dealer Commercial lot a year ago (April ’22) for window sticker $32.6k, no Market Adjustment / Money Added to Dealer Hip Pocket BS fee.
Ford 1.9% for 36 months financing…
Bully for you!
Forget purchase price and financing cost. Depreciation is most of what you are paying for in a new car. As long as the used car prices remain crazy high, maybe the rise in new car prices isn’t as terrible as it first appears. Pay more upfront, get more back after a few years.
My personal goal has been to lose no more than $2k to depreciation per vehicle per year, averaged over the time that I own it. Has worked for me for the past 20 years, and my current vehicles (’12 Highlander and ’15 Leaf, both bought in ’17) will easily meet that goal also.