I saw the $4,000. I dont know much about the car, but I thought they were a decent middle of the row vehicle. That rebate is almost like a capitulation its so huge.
...are easy to discover through occasional reading of Fortune, Business Week, WSJ. Lots of stuff that can be applied in any job.
The contracts with the automakers expire at the same time. UAW leadership always targets the mfr doing best because they have the most to lose and come to an agreement with them first. They then take that agreement to the others to match it which usually happens.
We bought a 2001 Focus at 0% financing in October, 2001. We like the car alright, but it's just smaller than we need (2 kids in college, etc.) I just ran the Edmunds TMV numbers and find that we have about $3,400 in negative equity. Any tips on how to get either a new car or a late model used car without losing our shirts? (We're not crazy about trying to sell it through a private sale.)
Most of which are non-union can kick their employees to the curb on a whim.........
The UAW/CAW are going to have to give major concessions sooner or later to help the big 2.5 more room to compete.
Toyota is underway building a new plant near TJ mexico to build the tacoma truck..... Gee.. whats gonna happen to the folks that make them now in the US? BYE BYE.... Heres you LAST check!
Any of you GM salesfolks: Have you had any new customers coming in with a coupon from GM called "GM in the driveway" program? I have gotten a few and passed them out. Got 2 bird dog fees too so far........... http://www.gminthedriveway.com
"UAW leadership always targets the mfr doing best because they have the most to lose"
These types of practices are gonna put them all out of work eventually. The high cost of labor makes them skimp on quality to compete pricewise with the Japanese.
"I think they should focus on quality and reliability if they really want to improve things."
The reliability has been greatly improved over 20 years in American brand cars. It also has improved in the foreign car brands at the same time. But advertising and image created for marketing has car buyers believing otherwise. My GM product has been very reliable. It goes back to the dealer support when something does need attention. In the last 10 years the domestic dealers have greatly improved their concern for the next car you'll buy if they don't take car of the current car. 20 years ago Honda and Toyota were already doing that...
I recall several years ago when Hondas were advertising how they drove past gas pumps in a TV commercial. I bought a Buick that got better gas mileage, was larger, and cost less to buy, less to maintain, and probably was worth less at 120K when I traded it. But it was peppier than the Honda and Toyota that I tested. It gave little trouble. But everyone thought a 6 cylinder Toyota or Accord got better gas mileage .
Image and marketing and product placement.
I read the Accord problems forum here. Lots of 03 problems. But people seem very forgiving of them to maintain the image. And there are owners who help. I watch a TV talking head read recalls about domestic brands (in a GM & Chrysler production town) with a a twitch of the head and a look that said "terrible." When she does read a foreign car recall (and they do occur lots) she softens her voice and hurries through it. Then I saw her gassing up her Camry at the local Speedway station one evening...
I'm no dealer. But, it seems to me one way to extricate yourself gracefully would be to trade the Focus in on another new vehicle that is offering huge discounts. Your vehicle of choice would have to have giveaways large enough to cover the negative equity so the dealer can write it up for enough to roll the NE into the payments on the new car.
Unfortunately, it's not saying much for the new car if it's discounted that much. You'll still find yourself way behind (NE) the minute you drive it off the lot. In fact, probably more so then you are now. But, at least you'd have something that you can live with until you can catch up on the payments.
Another alternative, that I am less sure about, is to bite the bullet and sell it privately. You'd have to pay off the NE out of pocket but you could then do basically the same thing I mentioned above. The difference being that you'd have to work it out such that the deal provides you with the cash to reimburse you for the NE out of pocket you spent doing the private sale. That "reimbursement" part is what I'm not sure about. One of the dealers here could answer that better. If this deal is possible it would probably minimize your losses.
Regardless, that much NE is going to be tough to hide, I think. Hopefully, one of the more knowledgeable dealers here will have a better option to toss your way. Good luck.
First thing is, if Edmunds TMV tells you you've got 3400 negative, than I bet its quite a bit more than that in the real world. You have to ask Terry about that one.
Second, if you are deadset on trading it and eating the negative, my advice is, if you have good credit, get a pre-approved loan through Peoplefirst. I buried my negative equity that way because they don't care what you are buying with the money if your credit is good enough. So you could pay $25K for a $15K car and it wouldn't make a difference to them. Just be prepared to keep whatever you buy for a LONG time because you are increasing your negative even further when you change cars and roll over like that.
'11 GMC Sierra 1500; '98 Alfa 156 2.0TS; '08 Maser QP; '67 Coronet R/T; '13 Fiat 500c; '20 S90 T6; '22 MB Sprinter 2500 4x4 diesel; '97 Suzuki R Wagon; '96 Opel Astra; '11 Mini Cooper S
No way around accumulating additional negative equity if you trade the Focus. From a money perspective, you'll limit the damage by buying and selling through newspaper ads, though.
Depending on the need for a larger car, consider renting?
OK if the trade in negative is $3400 then my experience is that you will be able to get maybe $1000 or (at most) $1500 more by selling it yourself. Used car buyers are looking for a deal just like you and probably won't pay any more than they have to. The going rate for private party used cars in my experiance is about $1000 over what a dealer will give you. That is unless you can find a (sucker) buyer who just has to have your car.
Keep in mind that your zero percent financing was instead of a big rebate. I don't know about the focus but GM is currently offering $4000 rebates on the Cavalier, so Ford can't be too far behind with the Focus. So if you trade the car now you are walking away from some of the incentives (financing) that were offered on your car when you bought it. This is just another example of why you should take the rebate instead of the discount financing when you buy a car, in case you sell/trade/crash it. So less your forgone rebate you really have no negative equity (approximately) in your car as I see it.
As far as trading it, I would advise against it unless the car absolutely won't fit your needs. I would suggest that you just drive it until it is paid off or at least a couple of years more until there is no negative in the car.
Another way to look at it, As some have suggested the negative equity in your car will cost you. If your credit is pretty good, I would ballpark the extra payment (due to the negative) at about an extra $66/month for a five year loan. Add this to whatever deal you can negotiate on your next car.
You have a good point but how would you suggest that a manufacturer utilize their (excess) capacity if they can't keep those factories humming ? As others have pointed out it costs a fortune to shut down those factories.
This is a problem that is not going away anytime soon as there is a worldwide glut of automotive capacity and new capacity gets added every year. Don't hold your breath for rebates and other incentive gimmicks to go away anytime soon.
The bottom line is that there is significant downward pressure on prices which is great for the customer. However because incentives kill used car prices, a customer trading in his late model car sees no real gain, as the net difference amount (new car - trade) that he then finances remains about the same. So for a person trading his late-model car in, incentives offer no real break in the amount he must finance and therefore in the payments he must make.
The manufacturers are spending a fortune on incentives, but for the target buyers, the cars are really not more getting more affordable.
The big 3 started with the 0% incentives right after 9/11. IIRC, a mucky muck with Toyota publicly acknowledged that if it weren't for Ford, GM, and DC implementing such drastic incentives, that the American auto market (and the economy) would have suffered a tremendous downturn.
Of course they have come to rely on incetnives to maintain whatever momentum they have since the economy is still in the doldrums. IMHO, if they stop the incentives, it'll hurt them more and perhaps even negatively affect the sales of Hondas and Toyotas as well.
As you all know, the value of a used car (and new car) drops as the model year gets longer. Clearly a new car is worth less in August/September than at the start of the model year. However once a new car gets it's price label (sticker) the MSRP remains that price throughout the year.
Therefore, one of the unsung aspects of incentives is that the manufacturers can effectively lower the price of the new cars as the model year progresses to reflect the true value of each car as the year progresses. This is tempered for each model, of course, by the sales rate of the car and the model backlog.
It will be interesting to see how big the incentives get towards the end of this year if the sales rate doesn't pick up. If history is any guide, then I predict that the incentives will get bigger by another $1000 or even a bit more.
Please do not take this the wrong way because I truly do not mean any disrespect, but you seem to live in a pretty insulated world. You post here about value vs price and how each month your sales increase (which is great for you, more power to you), but it contradicts every other automotive indicator available to the general public.
Every time you make a comment like "These constant rebates and artificial low interest rates represent corporate short term thinking at it's worst!....Now the shoppers DEMAND this or they won't buy!" I just chuckle and imagine a little kid throwing a temper tantrum because they canot get their way. (Again, no disrespect intended to you personally, that is just the image that pops into my mind.)
The economy is in the tank. Auto sells with it. You and your store may be doing great (like I said, great) but that is not what is happening all over the country. Go down the street and talk to your colleagues at the Ford or Chevy or DC store and see how they are doing. There is a reason for huge rebates and low financing..SELLS ARE DOWN. You think the CEO's at the big three say "Sales are through the roof, lets give more free money away?"
The rates are not "artifically low". As has been said many times on these forums, that is the current market, period. I am getting a loan for 3.9% at my CU. They are not being subsidized by a car manufacturer. 0% would be great, but I think 3.9% is pretty good from a regular lending institution.
I will grant you that Honda seems to have faired better than most of the other makes. Even toyota has rebates on most vehicles, in my area. Personally I think Honda intentionally limits production to keep prices high and that they alienate as many potential customers as they end up getting.
Being upset over the fact that most makers have huge rebates and low financing is not going to make it go away. I think they will be around for a while. of course you could get an appointment with the makers CEO's and convince them to drop all incentives and then see sells really slide. This issue points to a fundamental flaw in car pricing that has been getting worse over the last few decades. the problem is that car pricing has far out stripped wage increases and inflation. In the 50's and 60's people bought a car every few years and never financed a car longer than 36 months. Now people buy cars less frequently and they have to be financed at least 60 months if not longer by most buyer, and thats with a two income household.
Al Greenspan is not happy about it, but I think the big evil word "deflation" is about to come home to roost. Many products prices have increased way above what most people can afford to pay for them. That is one reason we have such a high amount of consumer debt, because people just borrow to pay for the things that they want that are overpriced to start with. Without a large increase in wages (which i do not see happening any time soon, hell we can't even keep everyone employed) the only other alternative is for prices to come down ( which in reality they are for cars, with $4K rebates).
1) don't beat up on Isellhondas (too much). He really has a point about the rebates. Incentives aside, The big 3 need to get away from selling good deals and convince everyone that their cars are really great on their own merits if they truly want to prosper.
2) You have a great point about affordability. because of all of the content added to modern cars their affordability has gone down quite a bit. New cars pretty much nowadays have to have automatic and air and a killer stereo and all of the safety equipment and all of the power equipment and smog equipment etc. Add to that the cost of UAW labor and benefits and you get what we have now - relatively expensive cars.
If anyone wanted to make classic cars again they could be made for not alot of money. If you adjust the list price of a 65 Mustang for inflation, I believe it only comes out to 7 or 8 thousand dollars. That's nothing these days and these cars could be made even less expensive with modern production techniques.
You may be right about Honda limiting supply (or you may not, I'm not privy to the inner workings of the company), but Honda is a special case. Many people believe that Honda is too small to ultimately survive as an independant auto maker and that they will need to forge a close partnership (at least) with another auto make to survive long term. I think though that they see another way and that is to make product that is appealing at a (relatively) modest price and in numbers that do not completely satisfy demand so that they may make a decent profit on each unit. That strategy (if that's what they are doing) makes perfect sense to me.
I am not beating up on Isell. I hope he does not take it personally as it was not intented as an insult at all. Its just funny to me how his posts paint this rosy picture of the car industry where every product is great and all cars sell for MSRP or close to it. That is just not reality to the majority of car makers or the buying public. Sign me up for that $7000 mustang. I cannot wait for the new body style to come out. it is hot and harkens back to the good ole days.
grand---I agree with you completely. if honda wants to limit supply, that is their business. But it is ironic that exactly the opposite is what is happening in most of the auto industry. These are the same shoe on two different feet. Honda has low supply, big demand. Price is at or near MSRP and buyers are turned off. Every one else has huge supply, low demand. Buyers want to buy less than invoice, salesmen are turned off. Its both ends of the market spectrum.
I don't have the exact numbers at hand, but I was alive in the '60s and I think you are way off on inflation numbers... I've got to believe $2500-3000 from 1965 would be way more than $20K now.. My mother was a school teacher in 1965 and made about $3500/yr.. A teacher now makes about $40K. We bought a house in 1964 for 21K that we sold in 1985 for $100K. I think on an inflation adjusted basis, the list price of the Mustang would be around $30K, which makes the Mustang of today a great value considering the higher levels of equipment.. I think thats due to modern manufacturing processes and increased productivity.
The delta between trade-in and private sale is more than $1000 IMO. Most books call it $2000-2500. When I sold mine last year, it was $3800 and this girl didn't seem just flipped out over my car. I mean who can get flipped out over a minivan anyways.
I agree with isell that incentive mania is not a good thing but for a slightly different reason. My point is that like you said:
"The big 3 need to get away from selling good deals and convince everyone that their cars are really great on their own merits if they truly want to prosper."
grandtotal: Honda is not a special case. Toyota, Nissan, BMW, Porsche and others are similar in that they don't offer alot of incentives and sometimes restrict production to pump up the price. I prefer restricting the supply instead of trying to pump up the demand. UAW needs to wake up and get this concept and assist GM, Ford and Chrysler in practicing this more. If something is forbidden to do or difficult to accomplish or acquire, doesn't it make that much more desirous?
I looked it up, a 1965 Mustang had a list price of $2320 (6 cylinder 3 speed) in 1965. If you adjust it for inflation using the consumer price index to 2002 (which is the most recent year available) I get $ 12949 (not 7 or 8 thousand as I stated previously). So I guess that I was off by a few thousand but this price is still quite a bit less than the current version. As stated previously, with modern production techniques these vehicles could be manufactured cheaply if anybody wanted them.
BIGORANGE: Are you sure that you are comparing apples to apples for your trade in price. I refer to trade-in price as the best price that you can get realistically (Actual Cash Value). I wasn't refering to a dealers first offer which is usually a lowball.
I was rather insulted by the trade-in offer of $4000 made to me by the dealer. Then I went and checked KBB and it matched almost exactly at $4100. KBB said the Private party price was $6200. I sold it for $8000.
I keep reading that auto sales are in the dumper along with the economy. Is that really true? I guess it depends on your perspective.
Here's some stats:
New cars & lt trucks sold in the US in 2002 - 16,847,000
Used cars and lt trucks sold in the US in 2002 - 43,025,000
Total sold new and used in 2002 - 59,872,000 Value of units sold in 2002 - $747 billion
Those last two numbers are the highest ever recorded in the US auto industry.
New car and truck sales were off a little in 2002 from the record high in 2000 of 17,402,000.
So far in CY03 new car and truck sales are off only 2.1%. May03 sales were UP 4.3% from May02.
The revised estimated 2003 sales of new cars and trucks in the US stands at approx 16,700,000, a slight drop (0.8%) from the sales numbers of 2002 noted above.
So while it appears that new car sales are slightly lower than last year, used car sales are more than making up for it. Overall auto sales are setting new records every year. 2003 appears to be on track to set another record.
Before you start believing the automotive sky is falling, make sure you research your numbers first.
As you figures show sales are not off for all of the manufacturers as taken together. The problem is that the Japanese and European transplants keep adding capacity for the North American market.
So Sales are about flat (or off a couple of percent) and every year there are more mouths to feed (capacity to feed).
Sooner or later this had to cause problems, and the overcapacity problems right now result in massive incentives and lost profits. Clearly this can't continue forever. Sooner or later there will be a shake out and it is not clear who will be left standing.
sales are up because incentives are up and prices are down. I told my wife that we should wait until hers is paid for in 2007 to buy another one but as low as prices are, I am encouraged to buy while the market is so good instead. I am afraid interest rates will be 7% and prices will be up 20-30% by 2007. I think the $ value sold you quoted as being up is because more units sold. I am curious though about the overall profit in the market last year. I am thinking it is down overall because of all the incentives and lower prices (deflation).
I glanced at those FREEP reports and some of their numbers contradict with what Auto News is publishing. Also I noticed that a good bit of FREEP's commentary was quite cynical and negative.
The Detroit free press articles, as you would expect, reflect how industry trends will affect the greater Detroit region. Therefore their articles reflect regional concerns of the area. Note from your figures that Chrysler and GM sales are off about 5 percent for the year but Hondas are up 15 percent. This trend can't be good for Detroit. Clearly the big 3 are in for a challenge.
I'd like to know the opinions of the dealers and sales persons out there. I'm thinking of getting a car dealer's license and work at it part time, moving maybe 5 cars a month. There's a huge auto auction right down the rode from me where I feel I can pick up vehicles and sell them for a modest profit, advertising on the net and in the local publications. I expect to have a very low overhead as compared to a typical dealer, just a small lot to hold a few cars and a small office space.
How would I get started with this and what are your thoughts and suggestions? Oh, and if you think I'm crazy, don't hesitate to tell me, I'm thick skinned.
When I was a kid, we had a 1969 Oldsmobile Vista Cruiser station wagon, three seats, glass ceiling over the second row seats, meadow green with the wood paneling. I think it listed for $4,000 new and had a 350 V-8. It was our first car with factory air and a power tailgate window!
M.
2010 Land Rover LR4, 2013 Honda CR-V, 2009 Bentley GTC, 1990 MB 500SL, 2001 MB S500, 2007 Lincoln TC, 1964 RR Silver Cloud III, 1995 MB E320 Cab., 2015 Prevost Liberty Coach
jasmith52 said in his post "I looked it up, a 1965 Mustang had a list price of $2320 (6 cylinder 3 speed) in 1965. If you adjust it for inflation using the consumer price index to 2002 (which is the most recent year available) I get $ 12949 (not 7 or 8 thousand as I stated previously)." A 2003 Mustang Coupe has an MSRP of $17,720 but comparing equipt available as standard it seems pretty close to me. Here is a list from Edmunds on the standard equipt compared with the 65 Mustang.
3.8 v6 with 190 hp (200 cu in 65, I doubt HP would be over 100 using current measurements) 5 speed manual transmission (3 speed in 65) tachometer (optional in the 65 mustang) clock (optional in 65) alloy rims (steel standard in 65, alloys were aftermarket only) variable intermittent wipers (not invented in 66) rear defogger (not available in 65) 4 wheel discs (4 wheel drums in 65) anti-theft alarm (not available in 65) remote power door locks (N/A in 65) power windows (N/A in 65 on the Mustang) dual power mirrors (N/A in 65, single manual standard) power steering (optional in 65) Air Conditioning (optional in 65, heater was also optional) AM/FM CD audio (AM radio optional in 65) All this and the vehicle meets all Govt. safety and emission regulations for an additional $4,771. That difference is before the $3000 rebate currently offered. I think I'd prefer the current vehicle over a stripper like the 1965 vehicle used in the example.
That '03 'Stang costs about 1000 more hours of minimum wage labor than the '65 did, even with the $3K rebate - i.e. 55% more. No matter how good a value it is, it is less affordable.
rivertown--great post, it is all about the affordability. if affordability were great today we would see more 36 month loans. I bet the salesmen can confirm, they mostly see 60 month or longer loans. Why is this? because most people cannot afford $600-$700 a month that a 36 month note would cost.
bret and others---great posts. I think as a whole the auto industry is struggling to stay on an even keel. their are makes like bmw, mb, honda that hardly ever discount. But the foundation is cracking. Jaguar and landrover are starting to have rebates and marketing support. When I looked at a freelander last year, I was quoted msrp, take it or leave it. What a difference a year makes. I still subscribe to my philosphy that if a car has a $1000 or more rebate it should sell pretty close to invoice, not msrp. Otherwise why wouldn't they just sell it $1000 off msrp and not have a rebate?
bret brings up some good points and facts. But I still believe that the industry as a whole is hurting. yes some makes are actually making money, but the majority are not. The ones making money are offsetting the losers in dollars and production. Why else would most cars, trucks, and suv's have rebates, or low finanacing? It is not like this has been going on for two months, it has been going on constantly for almost 2 years and the rebates just keep getting bigger. I agree with BO that sales are only being bouyed by incentives. if incentives ended tommorrow on all makes I bet June sales figures would drop dramatically.
I had a 67 and a 70. I think I would have to pick that over the current model too. Maybe it's the nostalgia. I had room around the engine to work on things. 3 speed/289 cu in.!!! Fun to drive.
Incentives: Has anyone tacked through the two years of incentives andthe base prices and the price increased. The prices increase ( by raises or by making standard items optional ) and then the incentives reduce it partially. Then they increase the incentives bringing the prices back to where they were a step or two earlier.
I'm not sure of your age, but I was making minimum wage in 1965. It was $1.00 an hour where I was. I can assure you that a new Mustang was not even close to being affordable to me at that time. Any new car was out of the question for me and I was single and living with my parents. Also, at least in the NY-NJ area and the DC-Baltimore area I just moved from, I don't know many companies that pay the current minimum wage. Fast Food restaurants and Retail stores are advertising most jobs starting at $7-9 dollars an hour to start in these areas. Also my main point was that cars today come with huge increases in content and safety for what is when adjusted for inflation a very small increase in cost. There are quite a few vehicles that sell for the same price or less than the adjusted price of the 65 Mustang that have the same equipt and safety that the 2003 Mustang has.
Rather than focusing on minimum wage jobs, look at starting salaries for a professional. My father started work in 1964 earning $8000/yr. The Stang was about 30% of his annual salary. I started working in 1995 with a similar degree and made 50K, and the stang cost about 15K, also 30% of my salary.
I think wages have (overall kept up with infation. However, minimum wage has not.
What has been the average wage for all people, including those who receive subsidy rather than working through those years. I'd like to know the data for that -- don't know where to find it. My point is looking only at above minimum wage workers doesn't give a true picture of affordability.
Too taxes on the above minimum worker have gone up greatly due to supporting a hugely bigger government at all levels and supporting subsidy programs. Therefore many higher paid workers have less left after property taxes, income taxes city, income taxes state, higher sales taxes, car license tax.
Is there a website with data on effective incomes through the years?
I just think these incentives and subsidized low/zero interest rates are a short term band aid.
In my former life I had to do a lot of long term thinking and planning. I watched as short term stop gap decisions impacted sales and profits down the road.
Honda isn't immune to downturns although sales are up 19% for the year.
I just think we are on a treadmill now that can't stop with these phony incentives.
there are some regions that are typically high in starting salaries for various areas of work (also not sure if we are discussing a graduate degree or bach) ... I believe he resides in VA (not sure where), but if he is close to Washington DC, obviously his salary may be a bit higher than the norm. This would also be true in various CA regions, northeast regions, etc... the cost of living in these areas has sky-rocketed since the 60's.
I would bet the avg starting salary in the US for a graduate with a bach degree is around in and around the low $30s. Graduate degrees are usually more, but can vary widely with the type of degree and field.
...the household incomes of virtually ALL sectors of workers in the US have risen quite nicely over the past 40 years. As a percentage, the expenditures on ALL taxes has NOT gone up significantly. In general, Americans have MUCH MORE wealth to spend than at any time in history. The trend over the last few years (since about 2000) has been MUCH flatter than the previous decade, when year-over-year increases were in the double digits, but "spendable money" has still risen.
There are certainly pockets of extreme poverty, though there are LESS people affected by that then there were 40 years ago. Similarly there are pockets of HIGH taxes, though they generally match areas with HIGH income (even if the tax is property tax, it is still primarily paid by folks with a large assets base...).
There are surprisingly few taxes directly attributable to "big government" and or "subsidy programs" that don't have OFFSETTING effects on household income -- every "mega bucks" contract with the military means that MORE folks are getting paid well in the jobs created (and some executives are probably becoming 'super rich', so their taxes increase in dollar amount, but not percentage) every 'subsidy' takes someone out of extreme poverty and a step closer to SPENDING money instead of having none.
If this WERE NOT the case we simply would NOT see cars starting at MANY times what they did years ago, nor would there be SO MANY vehicles sold over $40-50K. The SPENDABLE cash that Americans have is the envy of the world!
We've got two different numbers we're working with here about the '65 Stang - $12,950 adjusted by the CPI vs. $2320 list in '65 and 1856 hours' work in '65 vs. 2515 hours' work for a CPI adjusted '65 'Stang or vs. 2858 hours' work for an '03 'Stang.
The point is that the CPI has increased more rapidly than wages; thus, the affordability of most everything in the CPI (food, clothing, shelter, transportation, etc.) is lower. IMO, that's why there's a need for rebates to move cars.
We've been talking a '65 Stang here, costing 1856 hours' min wage labor. 1856 hours' min wage labor will buy you a $9,550 car today. To make it more interesting, consider a '68 Beetle. My family bought ours new for $1600, i.e. 1000 hours' min wage labor. The same labor will buy you a $5,150 car today.
We'd been talking about supply (i.e. production capacity) being up, thus prices being down. Maybe supply is up; I dunno. Whether it is or not, demand (as measure of the number of hours' work it takes to buy a car) is down. That cars are selling slower, being kept longer, being financed for longer periods, etc. makes perfect sense in the light of these facts. (As does the rise in BK's and bunch of other 'modern' phenomena.)
The range of income, thus the range of 'spendable money', has indeed increased. So, while more people than ever may well live at some multiple of poverty level, more people than ever also live below poverty level.
Comments
I cant wait to see what Ford does
The contracts with the automakers expire at the same time. UAW leadership always targets the mfr doing best because they have the most to lose and come to an agreement with them first. They then take that agreement to the others to match it which usually happens.
The UAW/CAW are going to have to give major concessions sooner or later to help the big 2.5 more room to compete.
Toyota is underway building a new plant near TJ mexico to build the tacoma truck.....
Gee.. whats gonna happen to the folks that make them now in the US? BYE BYE.... Heres you LAST check!
"GM in the driveway" program? I have gotten a few and passed them out. Got 2 bird dog fees too
so far...........
http://www.gminthedriveway.com
These types of practices are gonna put them all out of work eventually. The high cost of labor makes them skimp on quality to compete pricewise with the Japanese.
The reliability has been greatly improved over 20 years in American brand cars. It also has improved in the foreign car brands at the same time. But advertising and image created for marketing has car buyers believing otherwise. My GM product has been very reliable. It goes back to the dealer support when something does need attention. In the last 10 years the domestic dealers have greatly improved their concern for the next car you'll buy if they don't take car of the current car. 20 years ago Honda and Toyota were already doing that...
I recall several years ago when Hondas were advertising how they drove past gas pumps in a TV commercial. I bought a Buick that got better gas mileage, was larger, and cost less to buy, less to maintain, and probably was worth less at 120K when I traded it. But it was peppier than the Honda and Toyota that I tested. It gave little trouble. But everyone thought a 6 cylinder Toyota or Accord got better gas mileage .
Image and marketing and product placement.
I read the Accord problems forum here. Lots of 03 problems. But people seem very forgiving of them to maintain the image. And there are owners who help. I watch a TV talking head read recalls about domestic brands (in a GM & Chrysler production town) with a a twitch of the head and a look that said "terrible." When she does read a foreign car recall (and they do occur lots) she softens her voice and hurries through it. Then I saw her gassing up her Camry at the local Speedway station one evening...
2014 Malibu 2LT, 2015 Cruze 2LT,
Unfortunately, it's not saying much for the new car if it's discounted that much. You'll still find yourself way behind (NE) the minute you drive it off the lot. In fact, probably more so then you are now. But, at least you'd have something that you can live with until you can catch up on the payments.
Another alternative, that I am less sure about, is to bite the bullet and sell it privately. You'd have to pay off the NE out of pocket but you could then do basically the same thing I mentioned above. The difference being that you'd have to work it out such that the deal provides you with the cash to reimburse you for the NE out of pocket you spent doing the private sale. That "reimbursement" part is what I'm not sure about. One of the dealers here could answer that better. If this deal is possible it would probably minimize your losses.
Regardless, that much NE is going to be tough to hide, I think. Hopefully, one of the more knowledgeable dealers here will have a better option to toss your way. Good luck.
Second, if you are deadset on trading it and eating the negative, my advice is, if you have good credit, get a pre-approved loan through Peoplefirst. I buried my negative equity that way because they don't care what you are buying with the money if your credit is good enough. So you could pay $25K for a $15K car and it wouldn't make a difference to them. Just be prepared to keep whatever you buy for a LONG time because you are increasing your negative even further when you change cars and roll over like that.
'11 GMC Sierra 1500; '98 Alfa 156 2.0TS; '08 Maser QP; '67 Coronet R/T; '13 Fiat 500c; '20 S90 T6; '22 MB Sprinter 2500 4x4 diesel; '97 Suzuki R Wagon; '96 Opel Astra; '11 Mini Cooper S
Depending on the need for a larger car, consider renting?
OK if the trade in negative is $3400 then my experience is that you will be able to get maybe $1000 or (at most) $1500 more by selling it yourself. Used car buyers are looking for a deal just like you and probably won't pay any more than they have to. The going rate for private party used cars in my experiance is about $1000 over what a dealer will give you. That is unless you can find a (sucker) buyer who just has to have your car.
Keep in mind that your zero percent financing was instead of a big rebate. I don't know about the focus but GM is currently offering $4000 rebates on the Cavalier, so Ford can't be too far behind with the Focus. So if you trade the car now you are walking away from some of the incentives (financing) that were offered on your car when you bought it. This is just another example of why you should take the rebate instead of the discount financing when you buy a car, in case you sell/trade/crash it. So less your forgone rebate you really have no negative equity (approximately) in your car as I see it.
As far as trading it, I would advise against it unless the car absolutely won't fit your needs. I would suggest that you just drive it until it is paid off or at least a couple of years more until there is no negative in the car.
Another way to look at it, As some have suggested the negative equity in your car will cost you. If your credit is pretty good, I would ballpark the extra payment (due to the negative) at about an extra $66/month for a five year loan. Add this to whatever deal you can negotiate on your next car.
Who pays for this? The buyers, of course!
Now the shoppers DEMAND this or they won't buy!
You have a good point but how would you suggest that a manufacturer utilize their (excess) capacity if they can't keep those factories humming ? As others have pointed out it costs a fortune to shut down those factories.
This is a problem that is not going away anytime soon as there is a worldwide glut of automotive capacity and new capacity gets added every year. Don't hold your breath for rebates and other incentive gimmicks to go away anytime soon.
The bottom line is that there is significant downward pressure on prices which is great for the customer. However because incentives kill used car prices, a customer trading in his late model car sees no real gain, as the net difference amount (new car - trade) that he then finances remains about the same. So for a person trading his late-model car in, incentives offer no real break in the amount he must finance and therefore in the payments he must make.
The manufacturers are spending a fortune on incentives, but for the target buyers, the cars are really not more getting more affordable.
Incentive Hell !
And that isn't likely to happen.
It's like a person on drugs now...they can't stop!
Of course they have come to rely on incetnives to maintain whatever momentum they have since the economy is still in the doldrums. IMHO, if they stop the incentives, it'll hurt them more and perhaps even negatively affect the sales of Hondas and Toyotas as well.
Therefore, one of the unsung aspects of incentives is that the manufacturers can effectively lower the price of the new cars as the model year progresses to reflect the true value of each car as the year progresses. This is tempered for each model, of course, by the sales rate of the car and the model backlog.
It will be interesting to see how big the incentives get towards the end of this year if the sales rate doesn't pick up. If history is any guide, then I predict that the incentives will get bigger by another $1000 or even a bit more.
Please do not take this the wrong way because I truly do not mean any disrespect, but you seem to live in a pretty insulated world. You post here about value vs price and how each month your sales increase (which is great for you, more power to you), but it contradicts every other automotive indicator available to the general public.
Every time you make a comment like "These constant rebates and artificial low interest rates represent corporate short term thinking at it's worst!....Now the shoppers DEMAND this or they won't buy!" I just chuckle and imagine a little kid throwing a temper tantrum because they canot get their way. (Again, no disrespect intended to you personally, that is just the image that pops into my mind.)
The economy is in the tank. Auto sells with it. You and your store may be doing great (like I said, great) but that is not what is happening all over the country. Go down the street and talk to your colleagues at the Ford or Chevy or DC store and see how they are doing. There is a reason for huge rebates and low financing..SELLS ARE DOWN. You think the CEO's at the big three say "Sales are through the roof, lets give more free money away?"
The rates are not "artifically low". As has been said many times on these forums, that is the current market, period. I am getting a loan for 3.9% at my CU. They are not being subsidized by a car manufacturer. 0% would be great, but I think 3.9% is pretty good from a regular lending institution.
I will grant you that Honda seems to have faired better than most of the other makes. Even toyota has rebates on most vehicles, in my area. Personally I think Honda intentionally limits production to keep prices high and that they alienate as many potential customers as they end up getting.
Being upset over the fact that most makers have huge rebates and low financing is not going to make it go away. I think they will be around for a while. of course you could get an appointment with the makers CEO's and convince them to drop all incentives and then see sells really slide. This issue points to a fundamental flaw in car pricing that has been getting worse over the last few decades. the problem is that car pricing has far out stripped wage increases and inflation. In the 50's and 60's people bought a car every few years and never financed a car longer than 36 months. Now people buy cars less frequently and they have to be financed at least 60 months if not longer by most buyer, and thats with a two income household.
Al Greenspan is not happy about it, but I think the big evil word "deflation" is about to come home to roost. Many products prices have increased way above what most people can afford to pay for them. That is one reason we have such a high amount of consumer debt, because people just borrow to pay for the things that they want that are overpriced to start with. Without a large increase in wages (which i do not see happening any time soon, hell we can't even keep everyone employed) the only other alternative is for prices to come down ( which in reality they are for cars, with $4K rebates).
1) don't beat up on Isellhondas (too much). He really has a point about the rebates. Incentives aside, The big 3 need to get away from selling good deals and convince everyone that their cars are really great on their own merits if they truly want to prosper.
2) You have a great point about affordability. because of all of the content added to modern cars their affordability has gone down quite a bit. New cars pretty much nowadays have to have automatic and air and a killer stereo and all of the safety equipment and all of the power equipment and smog equipment etc. Add to that the cost of UAW labor and benefits and you get what we have now - relatively expensive cars.
If anyone wanted to make classic cars again they could be made for not alot of money. If you adjust the list price of a 65 Mustang for inflation, I believe it only comes out to 7 or 8 thousand dollars. That's nothing these days and these cars could be made even less expensive with modern production techniques.
grand---I agree with you completely. if honda wants to limit supply, that is their business. But it is ironic that exactly the opposite is what is happening in most of the auto industry. These are the same shoe on two different feet. Honda has low supply, big demand. Price is at or near MSRP and buyers are turned off. Every one else has huge supply, low demand. Buyers want to buy less than invoice, salesmen are turned off. Its both ends of the market spectrum.
$2500-3000 from 1965 would be way more than $20K now.. My mother was a school teacher in 1965 and made about $3500/yr.. A teacher now makes about $40K. We bought a house in 1964 for 21K that we sold in 1985 for $100K. I think on an inflation adjusted basis, the list price of the Mustang would be around $30K, which makes the Mustang of today a great value considering the higher levels of equipment.. I think thats due to modern manufacturing processes and increased productivity.
regards,
kyfdx
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I agree with isell that incentive mania is not a good thing but for a slightly different reason. My point is that like you said:
"The big 3 need to get away from selling good deals and convince everyone that their cars are really great on their own merits if they truly want to prosper."
grandtotal: Honda is not a special case. Toyota, Nissan, BMW, Porsche and others are similar in that they don't offer alot of incentives and sometimes restrict production to pump up the price. I prefer restricting the supply instead of trying to pump up the demand. UAW needs to wake up and get this concept and assist GM, Ford and Chrysler in practicing this more. If something is forbidden to do or difficult to accomplish or acquire, doesn't it make that much more desirous?
Minimum wage is now $5.15. Whatcha gonna buy for $5150?
I looked it up, a 1965 Mustang had a list price of $2320 (6 cylinder 3 speed) in 1965. If you adjust it for inflation using the consumer price index to 2002 (which is the most recent year available) I get $ 12949 (not 7 or 8 thousand as I stated previously). So I guess that I was off by a few thousand but this price is still quite a bit less than the current version. As stated previously, with modern production techniques these vehicles could be manufactured cheaply if anybody wanted them.
references
http://home.pon.net/hunnicutt/history_64_68.htm
http://www.westegg.com/inflation
BIGORANGE:
Are you sure that you are comparing apples to apples for your trade in price. I refer to trade-in price as the best price that you can get realistically (Actual Cash Value). I wasn't refering to a dealers first offer which is usually a lowball.
The same work will buy you a $9.5K car today. Anything that stickers that low?
Here's some stats:
New cars & lt trucks sold in the US in 2002 - 16,847,000
Used cars and lt trucks sold in the US in 2002 - 43,025,000
Total sold new and used in 2002 - 59,872,000
Value of units sold in 2002 - $747 billion
Those last two numbers are the highest ever recorded in the US auto industry.
New car and truck sales were off a little in 2002 from the record high in 2000 of 17,402,000.
So far in CY03 new car and truck sales are off only 2.1%. May03 sales were UP 4.3% from May02.
The revised estimated 2003 sales of new cars and trucks in the US stands at approx 16,700,000, a slight drop (0.8%) from the sales numbers of 2002 noted above.
So while it appears that new car sales are slightly lower than last year, used car sales are more than making up for it. Overall auto sales are setting new records every year. 2003 appears to be on track to set another record.
Before you start believing the automotive sky is falling, make sure you research your numbers first.
Sources: Automotive News and Manheim Auctions
As you figures show sales are not off for all of the manufacturers as taken together. The problem is that the Japanese and European transplants keep adding capacity for the North American market.
So Sales are about flat (or off a couple of percent) and every year there are more mouths to feed (capacity to feed).
Sooner or later this had to cause problems, and the overcapacity problems right now result in massive incentives and lost profits. Clearly this can't continue forever. Sooner or later there will be a shake out and it is not clear who will be left standing.
No sales are down about 3 percent (and profits are down too) in spite of the massive incentives.
Here's some fun articles for you:
http://www.freep.com/money/autonews/sales4_20030604.htm
http://www.freep.com/money/autonews/loss4_20030604.htm
http://www.freep.com/money/autonews/gm4_20030604.htm
Here's one article I got my numbers from:
http://www.autonews.com/news.cms?newsId=5483
Note the lack of alarmism from industry analysts. Just facts based on hard numbers.
The Detroit free press articles, as you would expect, reflect how industry trends will affect the greater Detroit region. Therefore their articles reflect regional concerns of the area. Note from your figures that Chrysler and GM sales are off about 5 percent for the year but Hondas are up 15 percent. This trend can't be good for Detroit. Clearly the big 3 are in for a challenge.
How would I get started with this and what are your thoughts and suggestions? Oh, and if you think I'm crazy, don't hesitate to tell me, I'm thick skinned.
Think some more before jumping over the fence.
M.
A 2003 Mustang Coupe has an MSRP of $17,720 but comparing equipt available as standard it seems pretty close to me. Here is a list from Edmunds on the standard equipt compared with the 65 Mustang.
3.8 v6 with 190 hp (200 cu in 65, I doubt HP would be over 100 using current measurements)
5 speed manual transmission (3 speed in 65)
tachometer (optional in the 65 mustang)
clock (optional in 65)
alloy rims (steel standard in 65, alloys were aftermarket only)
variable intermittent wipers (not invented in 66)
rear defogger (not available in 65)
4 wheel discs (4 wheel drums in 65)
anti-theft alarm (not available in 65)
remote power door locks (N/A in 65)
power windows (N/A in 65 on the Mustang)
dual power mirrors (N/A in 65, single manual standard)
power steering (optional in 65)
Air Conditioning (optional in 65, heater was also optional)
AM/FM CD audio (AM radio optional in 65)
All this and the vehicle meets all Govt. safety and emission regulations for an additional $4,771. That difference is before the $3000 rebate currently offered. I think I'd prefer the current vehicle over a stripper like the 1965 vehicle used in the example.
bret and others---great posts. I think as a whole the auto industry is struggling to stay on an even keel. their are makes like bmw, mb, honda that hardly ever discount. But the foundation is cracking. Jaguar and landrover are starting to have rebates and marketing support. When I looked at a freelander last year, I was quoted msrp, take it or leave it. What a difference a year makes. I still subscribe to my philosphy that if a car has a $1000 or more rebate it should sell pretty close to invoice, not msrp. Otherwise why wouldn't they just sell it $1000 off msrp and not have a rebate?
bret brings up some good points and facts. But I still believe that the industry as a whole is hurting. yes some makes are actually making money, but the majority are not. The ones making money are offsetting the losers in dollars and production. Why else would most cars, trucks, and suv's have rebates, or low finanacing? It is not like this has been going on for two months, it has been going on constantly for almost 2 years and the rebates just keep getting bigger. I agree with BO that sales are only being bouyed by incentives. if incentives ended tommorrow on all makes I bet June sales figures would drop dramatically.
tincup--I would take the 65 over the 03 anyday.
that over the current model too. Maybe it's the nostalgia. I had room around the engine to work on things. 3 speed/289 cu in.!!! Fun to drive.
Incentives: Has anyone tacked through the two years of incentives andthe base prices and the price increased. The prices increase ( by raises or by making standard items optional ) and then the incentives reduce it partially. Then they increase the incentives bringing the prices back to where they were a step or two earlier.
2014 Malibu 2LT, 2015 Cruze 2LT,
I think wages have (overall kept up with infation. However, minimum wage has not.
Too taxes on the above minimum worker have gone up greatly due to supporting a hugely bigger government at all levels and supporting subsidy programs. Therefore many higher paid workers have less left after property taxes, income taxes city, income taxes state, higher sales taxes, car license tax.
Is there a website with data on effective incomes through the years?
2014 Malibu 2LT, 2015 Cruze 2LT,
I just think these incentives and subsidized low/zero interest rates are a short term band aid.
In my former life I had to do a lot of long term thinking and planning. I watched as short term stop gap decisions impacted sales and profits down the road.
Honda isn't immune to downturns although sales are up 19% for the year.
I just think we are on a treadmill now that can't stop with these phony incentives.
Time will tell, I suppose...
I would bet the avg starting salary in the US for a graduate with a bach degree is around in and around the low $30s. Graduate degrees are usually more, but can vary widely with the type of degree and field.
There are certainly pockets of extreme poverty, though there are LESS people affected by that then there were 40 years ago. Similarly there are pockets of HIGH taxes, though they generally match areas with HIGH income (even if the tax is property tax, it is still primarily paid by folks with a large assets base...).
There are surprisingly few taxes directly attributable to "big government" and or "subsidy programs" that don't have OFFSETTING effects on household income -- every "mega bucks" contract with the military means that MORE folks are getting paid well in the jobs created (and some executives are probably becoming 'super rich', so their taxes increase in dollar amount, but not percentage) every 'subsidy' takes someone out of extreme poverty and a step closer to SPENDING money instead of having none.
If this WERE NOT the case we simply would NOT see cars starting at MANY times what they did years ago, nor would there be SO MANY vehicles sold over $40-50K. The SPENDABLE cash that Americans have is the envy of the world!
http://usgovinfo.about.com/library/blminwage.htm
(You got ripped off if you were paid $1/hr in '65.)
I agree, '03 cars are more car than '65 cars.
We've got two different numbers we're working with here about the '65 Stang - $12,950 adjusted by the CPI vs. $2320 list in '65 and 1856 hours' work in '65 vs. 2515 hours' work for a CPI adjusted '65 'Stang or vs. 2858 hours' work for an '03 'Stang.
The point is that the CPI has increased more rapidly than wages; thus, the affordability of most everything in the CPI (food, clothing, shelter, transportation, etc.) is lower. IMO, that's why there's a need for rebates to move cars.
We've been talking a '65 Stang here, costing 1856 hours' min wage labor. 1856 hours' min wage labor will buy you a $9,550 car today.
To make it more interesting, consider a '68 Beetle. My family bought ours new for $1600, i.e. 1000 hours' min wage labor. The same labor will buy you a $5,150 car today.
We'd been talking about supply (i.e. production capacity) being up, thus prices being down. Maybe supply is up; I dunno. Whether it is or not, demand (as measure of the number of hours' work it takes to buy a car) is down. That cars are selling slower, being kept longer, being financed for longer periods, etc. makes perfect sense in the light of these facts. (As does the rise in BK's and bunch of other 'modern' phenomena.)
2014 Malibu 2LT, 2015 Cruze 2LT,
The range of income, thus the range of 'spendable money', has indeed increased. So, while more people than ever may well live at some multiple of poverty level, more people than ever also live below poverty level.