Auto makers with excess inventory as buyers refuse to pay high prices

[Calson]

Interesting article that covers how during the pandemic the auto companies started to load up the vehicles and the dealers then bought and sold these premium priced cars and trucks to customers who could afford to pay more. At this time many buyers are hold on to their current truck or car and waiting for more affordable vehicles to be produced.

https://finance.yahoo.com/news/automakers-hit-significant-storm-buyers-201410852.html

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[Bossharp]

When I decided to buy a new truck price was THE most important factor. It never occurred to me to spend over fifty grand and I question if any new truck is worth over $80,000.00…I did want a regular cab so it was fairly easy to stay within my budget. No RC from Ram and no V-8 short bed from Chevy and I never considered a Toyota so Ford was it!
I do wish I could have ordered carpet or a power driver's seat or ANY 110-volt option but at least in the 2024 RCSB we get the 12" screen and digital dash.

 

[Highway 11]

I went to a Ram dealer for a Ram 1500 Sport that had been on the lot for ~270 days. They wanted MSRP and refused to budge at all.

Incidentally, I was late because their lot was overfilled with inventory and I couldn't find a parking spot.

Ford wasn't much better. I got a better deal in late 2022 than I did in June when I priced out a 2024.

 

[Bossharp]

The refusal to discount,in my case for a order on a 2024 RC, is what led me to order from Granger in Iowa..

 

[Pedaldude]

The dealers are in deep denial and their crackhead pawnshop mentality is what’s both keeping inventory high as well as consumer resentment.

Just like with Beanie Babies and sneaker flippers; the dealers will start coming down to reality but they are so used to it being a seller’s market that they’re going to have to feel the hurt before the high wears off. Consumers are totally to blame and so are the banks writing crazy loan terms that supported the bubble.

These are mass manufactured goods and not priceless masterpieces or Fabergé eggs that will never be made again. They can literally build as many as they want if it weren’t for having to cook the books for EPA standards and keeping various suppliers, unions and foreign factories happy by juggling production.

The craziest part of all this has been the used car market and it’s unsustainable. A lot of people and not just the dealers need to fall back to reality and it’s often ugly. Consumers and dealerships can pretend all they want but once the banks stop making money all the 72, 84 and 120 month loans for $10K over MSRP, or rolling over underwater trades are going to disappear as though they never existed. A lot of people are going to be downsizing and not by choice.

Unfortunately, the manufacturers and dealers are always behind the curve and by the time affordable trims are good deals become available; nobody will want them and buyers will be asking when the new Excursion will be available!

Everyone remembers the scene from New Jack City where Pookie realizes that he can’t sell cars and trucks for $10,000 over MSRP anymore!

 

[redline]

Pookie sold cars in new jack city ? .. ?,

 

[redline]

Sales in Canada are up… so apparently we still have too much money and are feeding the beast

 

[fordtruckman2003]

I bought used last year because of ridiculous price of new. No regrets on that I knew what I was getting into. I normally buy new but since 2020 prices are higher and higher. That isn't going to change among auto makers anytime soon. Every dealer around city is hiring for sales people. I don't think anyone can sell right now so they can't keep staff.

 

[HammaMan]

Yeah, 23s are still on the lots because the 24s w/ more features are cheaper. I'm seeing XLT 302a that now have blue cruise and 360 cameras standard, stickered for 65 and being offered 10-14k off making them cheaper than similarly equipped 23s with 12k off. Roughly 70% of the 24s have the base BAP package because it's less ugly than the black/chrome. I've had about 18 trucks pulled up for 2 weeks, the lowest priced 302a for 300 miles, and all 18 are still sitting on the lots.

My sister just got a new expedition and the dealers were just so full of BS trying to not budge + BS cramming (I handled negotiations for her across ~18 dealers) even speaking with sales managers directly. One took the cake .... "I'll give it to you straight, I'm not one to bullshit" "ok, great, send the term sheet over". $900 dealer doc fee, $80 electronic filing fee $399 ($20 OBD2 GPS unit w/ 1yr of $7/mo service) and some other $400 nonsense. Needless to say I called him back and quite clearly explained that bullshit is anything other than what I offered to pay for the vehicle, the govt's share, and ford's incentives. Ended up about 3% under invoice + 2k worth of incentives which was about 12% off sticker price and 2.9% at 72mo. What's crazy is just how much the incentives vary. Had we lived just an hour north, incentives would have saved another $3k. Ford really needs to rework how they do incentives based on buyer's zip vs sellers allowing for an either/or situation allowing motivated buyers to get an edge.

Quite a few dealers moving a whole lot of nada right now. Now I'm working on another family member's vehicle purchase. To be fair, I do preface all calls with the numbers that should be on the term sheet and we're wasting each other's time if they put anything else on it as it's a hard pass, though a documentation fee may be entertained if it's compensated for in accessories. Having bought a few cars during the covidian days, it's nice having the shoe on the other foot with hardline 'negotiations'.

 

[Pedaldude]

Pookie sold cars in new jack city ? .. ?,

A: It’s a metaphor, dealership staff are behaving like crack fiends where they don’t want the high of having customers on waiting lists, begging to pay ADMs to end. Even if it means damaging their business.

B: The Cash Money Brothers were forced into selling crack cocaine because the sales managers at the dealers they worked at wouldn’t let them sell cars.

C: The 110° plus days here in Arizona and the ozone is frying my brain into making references from my youth. I don’t know what the culture of some regions is today but where and when I come from; if someone wants full MSRP on a vehicle languishing on a dealership lot for hundreds of days, I would tell them to put down the crack pipe!

D: All of the above, I’m bored with nothing better to do ?

 

[Parthery]

I bought a new leftover 23 because (a) I ended up 20 percent off sticker ($11K discount and a 4K PCO) and (b) 1.9 financing. Had it not been for the incentives, I would not have bought another Ford.

The reality of saving $9K in interest made the decision to buy the F150 a business decision.

 

[ReverendQ]

Interesting article that covers how during the pandemic the auto companies started to load up the vehicles and the dealers then bought and sold these premium priced cars and trucks to customers who could afford to pay more. At this time many buyers are hold on to their current truck or car and waiting for more affordable vehicles to be produced.

https://finance.yahoo.com/news/automakers-hit-significant-storm-buyers-201410852.html

I love the quote, “It's kind of ridiculous that anyone would have been surprised that this party was going to come to an end." See it in the PC industry too, and others. Anyway, just yesterday saw my favorite dealer is adding $45K to RaptorR. My guess is they will get $30K or so.

 

[Probity]

I love the quote, “It's kind of ridiculous that anyone would have been surprised that this party was going to come to an end." See it in the PC industry too, and others. Anyway, just yesterday saw my favorite dealer is adding $45K to RaptorR. My guess is they will get $30K or so.

The Party Crashers Have Arrived, but the Auto Retail Celebration Isn’t Over Yet. - Cox Automotive Inc. (coxautoinc.com)

From a month ago. Ironic. In the author's words, cops may not be on the doorstop but people are hearing sirens....a lot of headwinds out there.

"New-vehicle inventories are up nearly 1 million units or 50% compared to last year. In 2021, the ratio of new inventory to used was 55%; today, that ratio is 125%. Dealers are feeling the impact of rising floor plan costs on their financial statements. At today’s interest rates, franchise dealers collectively spend an estimated $540 million in additional holding expenses per month compared to 2019, when 1 million more new vehicles were in inventory!! Talk about a buzzkill."

"With new loan rates up 83% and used rates higher by 89% versus two years ago, the average monthly payment for a new vehicle is now $752, while the average used-vehicle payment is $571. Many reports suggest that only 50% of Americans can responsibly afford a $400 monthly car payment. This equates to about a $20,000 vehicle. The trouble is that you can hardly find a sub $20K-vehicle in the current new-vehicle market and it’s not easy in used. The net result of this situation is that households making over $250,000 represented 4% of total retail sales in 2019, but today, they represent over 16% – a 4x increase. One other byproduct of this scenario is that wealthy households are less likely to borrow money: The percentage of cash buyers has nearly doubled from 10% to 19% in the last three years.

"The combination of less retail volume and fewer leases during the pandemic has created a used-car acquisition challenge for dealers. Leasing shortens consumer trade cycles and enables used-car departments to pick up attractive inventory for their CPO programs. In the three years from 2019-2021, the industry had a steady flow of about 4 million off-lease vehicles per year returned to dealers. This year, off-lease volume will drop to 3 million and tumble further in 2025 to 2.3 million, before recovering a bit in 2026. This dynamic will pressure used-car departments to diversify their used-vehicle acquisition strategy.

"During my college years at the University of Wisconsin-Madison, there was a saying: “The party’s not over until the cops show up.” It’s fair to say the cops aren’t standing on the doorstep yet. However, dealers tell me the days of pre-selling 90% of their incoming inventory at full sticker are long gone, and they are increasing their focus on the controllables: inventory management, advertising efficiency, and headcount levels. Still, they acknowledge their business remains healthy and are optimistic about the second half of this year."

 

[Woody5.0]

Last week I went to a dealer they wanted for New 2023 f150 super crew 5k over msrp.
For a 2024 7.5k over msrp plus other add ons.

 

[Ruckus]

Last week I went to a dealer they wanted for New 2023 f150 super crew 5k over msrp.
For a 2024 7.5k over msrp plus other add ons.

You need to shop more, 15%-18% off ‘24’s are reality now if you do your homework. Tougher times coming, no doubt.

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