Industry News: NADA's CEO is Concerned About Consumers Being Priced Out

[William Maley]

Ask Peter Welch, the CEO of the National Automobile Dealers Association (NADA) what worries him the most, he'll admit that it is average consumers getting priced out of new cars.

He admitted this yesterday at the Automotive News World Congress in Detroit. Welch said that the latest figures he has seen - through October of last year - reveal the average retail price of a new car climbing to a new high of $35,366. The average monthly payment is hovering at $538, and interest rates have climbed to an average of 5.76 percent (new) and 9 percent (used). Longer loan terms are becoming common, with the average length standing at 64.3 months.

"You know, people buying $55,000 pickup trucks with $1,000-a-month payments — I've never seen it. A lot of people don't think that's sustainable," said Welch.

"That is going to put a giant dent in the SAARs and it almost makes me wonder if at some point we're going to see another Henry Ford," offering new and more affordable vehicles.

Aside from more people buying more expensive trucks and utility vehicles, Welch said other reasons for the increases in prices come down to new fuel economy standards and safety equipment. He sees new car prices rising towards $40,000 with $800 monthly payments.

On a slightly positive note, NADA predicts that 16.8 million light vehicles will be sold in 2019. While down from 17.3 million in 2018, Welch notes there are some positive economic indicators "such as high employment rates, a solid GDP and a healthy economy overall."

Source: Automotive News (Subscription Required) 

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[David]

So true, Auto companies have got to find a way to get basic starter auto's out for people in college and right out of college, otherwise we are truly headed to a cast system.

[ccap41]

14 minutes ago, dfelt said:

So true, Auto companies have got to find a way to get basic starter auto's out for people in college and right out of college, otherwise we are truly headed to a cast system.

Absolutely.

Not everybody has a family income of 100k. It isn't uncommon for younger people to start making 30k out of college with monster loans.

24 minutes ago, William Maley said:

The average monthly payment is hovering at $538

Seriously? This is average? 😂

[A Horse With No Name]

24 minutes ago, ccap41 said:

Absolutely.

Not everybody has a family income of 100k. It isn't uncommon for younger people to start making 30k out of college with monster loans.

Seriously? This is average? 😂

Yeah...I don't know how people manage big car payments...especially with big mortgages. 

[David]

46 minutes ago, A Horse With No Name said:

Yeah...I don't know how people manage big car payments...especially with big mortgages. 

Totally agree, I saved up for 3yrs to buy my Escalade and still financed 1/3 of the price. Mortgage, car loans, student loans, regular credit cards, home costs, maintenance, costs have gotten out of control in comparison to income.

[oldshurst442]

I do not think its the car manufacturers that are pricing the consumers out of new cars. I think its the consumer itself that does it. 

Why is it that Ford is cutting its sedans in favor of producing and selling CUVs and SUVs? 

Why is GM almost doing the same?

Why are Toyota Camrys and Honda Accords selling at a slight lesser rate than once before and why is it that Toyota's and Honda's CUVs outselling their sedan counterparts?

When was the last time you actually saw or heard a suburban wife talk about how she wants to buy (not lease, because leasing too causes the consumer to  out-price himself out of a new car) a base bare bones  compact car?

It seems suburbanites all want the most recent, option filled truck or SUV and who cares how much it costs... 

There was a time when down and out folk used to buy pick-up trucks, no options pick-up trucks,  because these were the cheapest means of transportation anybody could buy...

The consumers DEMANDED fully equipped cars over the decades and have migrated to higher priced CUVs and SUVs and 100 000 doallr work trucks to outshine their neighbors...

Even if car manufacturers make and produce "affordable" no frill CUVs, the masses will NOT buy them or lease them.

America has become a voracious consumer oriented society that just wants to outdo their neighbor...

[frogger]

There definitely won't be any big car payment for me until the mortgage debt is under 500k lol.

 

[oldshurst442]

I remember a decade ago, when the politicians and the greenie folk were scolding the Detroit Big3 CEOs why do they keep on producing gas guzzling SUVs and the Detroit Big3 CEOs defended themselves by saying that that is what the consumers want.

The politicians and the greenie folk all said bullshyte on that and forced FoMoCo, GM and Chryco. to produce smaller more economical cars...

This is how Obamas new mileage standards came to be...

THIS is how we got small displacement 4 bangers with turbos in our cars.

THIS is how FoMoCo. got the name ecoboost from...

https://www.nytimes.com/2009/05/19/business/19emissions.html

 

 

Quote

 

One ranking industry official said that the administration wanted to get the new mileage rules in place before General Motors made a decision on a bankruptcy filing, which could happen by the end of this month. The new rules also provide some certainty for Chrysler, which is already under bankruptcy protection, so that it can plan its future models.

To meet the new federal standards, auto companies will have to drastically change their product lineups in a relatively short time.

The companies have declined so far to comment on the costs involved in meeting a fleet standard of 35 miles a gallon. For starters, the automakers will probably have to sharply reduce the number of low-mileage models, like pickup trucks and large sedans.

The president’s decision will also accelerate the development of smaller cars and engines already under way.

 

 

As you coud see, a decade later and the consumers NEVER gave two shytes about what greenies and politicians cared for...

[riviera74]

I am not a fan of the new CAFE standards put in several years ago.

The real issue is keeping up with the Joneses when it comes to everything, not just cars.  I cannot blame the president of NADA for lamenting high new car prices.  He should blame the automakers for the start of leasing cars 35 years ago in the first place.  Without car leases, the race towards higher-priced vehicles slows down.  There are also too many 60-72 month car notes out there too.  I thought that Hyundai/KIA would actually force prices down.  Instead they joined all others in their car pricing too, with slightly lower pricing.  Also, cars are not falling apart like they used to 30-45 years back, so new car replacements are less likely.  If it wasn't for used car pricing, car sales may end up being half of what they are. 

Where is the $10,000 small crossover?  Where is the $8000 small sedan and/or hatchback?

[A Horse With No Name]

1 hour ago, frogger said:

There definitely won't be any big car payment for me until the mortgage debt is under 500k lol.

 

Mine is under 100k and I still don't want big payments. I enjoy tools, eating out, good wine, travel, good books, live hockey...and a bunch of other things.

Even if I had Mitt Romney level money I can't see going beyond the thirties for a personal car purchase...

Okay...maybe a CTS V or a Shelby Mustang...but only if I can pay cash for it new.

And even then clean Shelbys and V cars are available used in the thirties all day long.

14 minutes ago, riviera74 said:

I am not a fan of the new CAFE standards put in several years ago.

The real issue is keeping up with the Joneses when it comes to everything, not just cars.  I cannot blame the president of NADA for lamenting high new car prices.  He should blame the automakers for the start of leasing cars 35 years ago in the first place.  Without car leases, the race towards higher-priced vehicles slows down.  There are also too many 60-72 month car notes out there too.  I thought that Hyundai/KIA would actually force prices down.  Instead they joined all others in their car pricing too, with slightly lower pricing.  Also, cars are not falling apart like they used to 30-45 years back, so new car replacements are less likely.  If it wasn't for used car pricing, car sales may end up being half of what they are. 

Where is the $10,000 small crossover?  Where is the $8000 small sedan and/or hatchback?

The Ford Ecosport is as close to a ten grand crossover as you will find. Chevy used to build a very decent bare bones small suv.

[balthazar]

Find an (online) clean Chevette and marvel at the interior. It had nothing inside, and you sweated. It was 10,000 miles away from a Cadillac/mercedes.

Now a kia forte HAS to have a leather-wrapped steering wheel, touch screeen, full power features/A/C, active safety warning features, 17" alloy rims, etc etc etc. It even looks like a low end mercedes. How they hell could it possibly be $8000??

Then we have the supposed wave of electrics coming, just about ALL of them priced 25% higher than their gas counterparts. Heading right toward $40K average price? Yep, I think so; electrics are supercharging that price push.

If a brand was to offer a quirky, futuristic, Minimalist Kar with a base sound system, A/C, crank windows/manual seats, no heated seats/wheel, no screen, peppy performance, upper class MPG- it has a chance but at those levels it starts to simply compete with used stuff, better equipped. So it hopes to 'win' volume on those who are willing to do without but HAVE to have a brand new car. How many consumers is that pool comprised of?

I blame the massive upgrading of entry level cars in features and design; it's eroded the degree of difference vs. upper crust cars, and upended the pricing range. Ultimately, a lot more model lines are going to fall- as amenities greatly overlap and size differences are minimal and everyone has 3 or 5 CUVs- the industry sags with oversaturation.

I've advocated for this before and I still think it has major merits. Less model lines, more variants within the model line. Mainstream brands STILL have too many model lines- it's not going to last ESP if new EV brands actually start producing.

[David]

2 hours ago, riviera74 said:

I am not a fan of the new CAFE standards put in several years ago.

The real issue is keeping up with the Joneses when it comes to everything, not just cars.  I cannot blame the president of NADA for lamenting high new car prices.  He should blame the automakers for the start of leasing cars 35 years ago in the first place.  Without car leases, the race towards higher-priced vehicles slows down.  There are also too many 60-72 month car notes out there too.  I thought that Hyundai/KIA would actually force prices down.  Instead they joined all others in their car pricing too, with slightly lower pricing.  Also, cars are not falling apart like they used to 30-45 years back, so new car replacements are less likely.  If it wasn't for used car pricing, car sales may end up being half of what they are. 

Where is the $10,000 small crossover?  Where is the $8000 small sedan and/or hatchback?

Lets add in the other HORROR of auto sales, dealerships that flip an upside down auto value and roll it into a new auto purchase just increasing the debt making it hard for the person to ever pay off the auto.

@balthazar Gov requirement for all the nanny devices makes having a fully base auto with only say auto trans but manual windows, manual door locks, manual everything an impossible choice as many younger people feel entitled to fully loaded luxury auto's.

Example is the neighbor that took out a line of credit to buy their son a BMW as he was a marketing graduate and needed to arrive at interviews in a proper auto representing his capabilities according to them.

STUPID, Job interviews know nothing of what you drive and careless about it as it does not affect if you can do the job.

I never did that for my kids and see no reason to do it at all. If you want to help with a down payment as a graduation gift, fine your money, but I see no reason for parents to buy their kids luxury auto's and go in debt. 

[daves87rs]

It’s a push toward shared and public transportation, that’s why. About control. People are dumb enough that they would but piles of chit if it was the thing to buy.....

Having two bare bones Cavaliers over the last ten years make you realize what you can do without. I think they only real add on the cars have seem is a tom Tom GPS.....Having my Nox is like a whole new world compared to the cavs and Cobalt .

I’d rather not have all my money wrapped up in car and house payments....

[balthazar]

I can't believe the average new car payment is $538/mth. Here at Rancho Balthy, the highest monthly we've had over... 8 different vehicle loans is $249.  Yet I build & price different new trucks and cringe at the payment which comes in between that low-mid $500 to low $600 range.

[ocnblu]

14 hours ago, William Maley said:

Welch notes there are some positive economic indicators "such as high employment rates, a solid GDP and a healthy economy overall."

Even with this reality, losing the cellar is not a good move.  GM fullsize truck prices are exorbitant in nature, for example.  They are trying to extort their loyal customers into paying for an iffy "future".  Homie don't play dat.

[balthazar]

So you're boycotting??

[A Horse With No Name]

7 minutes ago, balthazar said:

So you're boycotting??

Methinks yes, that is what he is doing. 

[Robert Hall]

Prices are getting crazy..anything under $30-35k seems to be fwd/transverse 4cyl appliances, nothing interesting.---just despair gray interior generics.

Since I drove my last new vehicle 17 years, I'll probably be in my current for a while..but not that long..not going to keep it past 100k miles.

 I've been happy w/ my CPO experience, I can see doing that again... 

[William Maley]

10 hours ago, daves87rs said:

It’s a push toward shared and public transportation, that’s why. About control. People are dumb enough that they would but piles of chit if it was the thing to buy.....

 

But people aren't taking advantage of public transportation. Here are some quotes from a recent article from The Economist that someone posted about a week ago.

Quote

The American Public Transportation Association’s figures show that the number of journeys in the country as a whole has fallen in each of the past three years. In 2016-17 every kind of mass public transport became less busy: buses, subways, commuter trains and trams. New Yorkers took 2.8% fewer weekday trips on public transport and 4.2% fewer weekend trips in the 12 months to April 2018, compared with the previous year. In Chicago and Washington, DC, the decline in public-transport trips has been even steeper.

Quote

One explanation, which is convincing in some cities, is that public transport has deteriorated. Look at Madrid, says Richard Anderson, a transport analyst at Imperial College London. Public-transport trips fell there beginning in 2008, as you would expect in a recession-hit country where unemployment was rising. In response to the downturn, the city cut services. People noticed, and stayed away. Between 2007 and 2013 the Madrid Metro lost 19% of its customers. Service levels, perceptions and demand have all improved since then, but the Metro remains quieter than it used to be before the financial crisis.

Quote

Perhaps public transport has come to seem relatively dismal because people have acquired better options. Uber, Lyft and other “ride-hailing” car services are probably luring people away from trains and buses, just as they are demolishing the taxi trade. In San Francisco public transport accounts for 16% of all weekday trips, ride-hailing for 9%. People mostly seem to use Uber and Lyft to get to places well-served by mass transport (see map). One study of the city by five Californian academics asked ride-hailing customers how they would have made their most recent trip if the service did not exist. One-third replied that they would have taken public transport. In a study of Boston, 42% said the same thing.

 

[A Horse With No Name]

52 minutes ago, Robert Hall said:

Prices are getting crazy..anything under $30-35k seems to be fwd/transverse 4cyl appliances, nothing interesting.---just despair gray interior generics.

Since I drove my last new vehicle 17 years, I'll probably be in my current for a while..but not that long..not going to keep it past 100k miles.

 I've been happy w/ my CPO experience, I can see doing that again... 

CPO seems worthwhile to me also, it is how I bought the bug. Thinking maybe CPO Cherokee. They are priced nicely and are not bland FWD appliances.

[Robert Hall]

16 hours ago, oldshurst442 said:

I do not think its the car manufacturers that are pricing the consumers out of new cars. I think its the consumer itself that does it. 

The consumers DEMANDED fully equipped cars over the decades and have migrated to higher priced CUVs and SUVs and 100 000 doallr work trucks to outshine their neighbors...

Even if car manufacturers make and produce "affordable" no frill CUVs, the masses will NOT buy them or lease them.

America has become a voracious consumer oriented society that just wants to outdo their neighbor...

 Yes, I can understand that...in a daily driver, I want the most creature comforts I can get...I couldn't imagine driving a depressing 4cyl FWD econobox w/ a despair gray interior...

 

5 minutes ago, William Maley said:

 

6 minutes ago, William Maley said:

But people aren't taking advantage of public transportation. Here are some quotes from a recent article from The Economist that someone posted about a week ago.

  

  QUOTE

Perhaps public transport has come to seem relatively dismal because people have acquired better options. Uber, Lyft and other “ride-hailing” car services are probably luring people away from trains and buses, just as they are demolishing the taxi trade. In San Francisco public transport accounts for 16% of all weekday trips, ride-hailing for 9%. People mostly seem to use Uber and Lyft to get to places well-served by mass transport (see map). One study of the city by five Californian academics asked ride-hailing customers how they would have made their most recent trip if the service did not exist. One-third replied that they would have taken public transport. In a study of Boston, 42% said the same thing.

Public transit isn't really a realistic option here in the suburbs..there are bus lines that run into downtown Cleveland and a light rail, but nothing practical for me.  If I were working downtown or in another suburb, I'd be commuting by SUV as I've done most of my career in other cities.    I do like Uber, I use it occasionally if I don't want to deal w/ parking in some areas or want to have a few drinks at dinner.  Very convenient. 

[ccap41]

9 hours ago, balthazar said:

I can't believe the average new car payment is $538/mth. Here at Rancho Balthy, the highest monthly we've had over... 8 different vehicle loans is $249.  Yet I build & price different new trucks and cringe at the payment which comes in between that low-mid $500 to low $600 range.

I can't agree more! The most I've had was $279/month for me Escape. As long as it is under $300 I don't mind it and I still feel like I'm in control of the loan and not worried about not having the money to ever pay for it.

My current Focus is $114/month. 

[David]

45 minutes ago, William Maley said:

But people aren't taking advantage of public transportation. Here are some quotes from a recent article from The Economist that someone posted about a week ago.

 

Could this also be due to more companies embracing work from home rather than office space which is costly. 🤔

[Robert Hall]

1 minute ago, dfelt said:

Could this also be due to more companies embracing work from home rather than office space which is costly. 🤔

After doing it the last 18 months, I love working from home/working remotely...definitely driving much less than when I was in a cubicle in Scottsdale. 

[A Horse With No Name]

20 minutes ago, Robert Hall said:

After doing it the last 18 months, I love working from home/working remotely...definitely driving much less than when I was in a cubicle in Scottsdale. 

But then you are sitting at home working, looking out your front window and this happens...