As Incentives Soar, Auto OEMs Argue That Sticker Prices Are Dragging Down Sales

Tyler Durden's picture

Apparently Bloomberg and some auto executives are convinced that soaring car prices are the reason that sales are starting to slump.  Bloomberg attributes the problem to new, costly technology being added vehicles:

To understand why the U.S. auto market isn’t growing, consider a top-of-the-line minivan from Fiat Chrysler Automobiles NV now costs about $50,000.


With twin second-row touch screens, reclining third-row seats, a vacuum and automated parallel parking, the Chrysler Pacifica packs plenty of features to justify a hefty expense. But this big a price tag puts the prototypical family vehicle out of reach for most Americans.

Ford CFO, Bob Shanks, was quick to confirm the theory because pretty much any explanation is better than the truth, which is that auto sales have been propped up by low interest rates, a subprime debt binge that puts the 2008 mortgage crisis to shame and stretched out terms of new loans.

“At some point that will be one of the aspects that will continue to drive down the volume,” Bob Shanks, Ford’s chief financial officer, said in an interview. “It will become tougher.”


“It’s not just the price of the cars -- it’s the price of everything else,” she said. “The price of things like health care, shelter -- all of that is fighting for the budget.”

And while this explanation may seem logical, it's patently false.  While average auto sticker prices tend to rise 2-3% per annum, as TrueCar recently pointed out, industry incentive spending in March rose 13.4% year-over-year to an average of $3,511 per vehicle sold.  So while sticker prices may be rising, the price that people are actually paying is coming down, courtesy of very generous auto OEM shareholders.


Of course, we'll get out latest look at the numbers tomorrow when OEMs report April sales.  Here's how the 'experts' see things playing out:



So what say you...temporary blip or is the U.S. car buyer tapped out?

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nmewn's picture

Hi! My name is Robbie the Robot! How may I assist you in putting you into this other inanimate object today! 

NoDebt's picture

GM- same shit, different decade.  All they know how to do is "rebate technology" and feet sales.  I mean it literally has never changed in my lifetime.


nmewn's picture

No shit, how many times have they been bailed out now, two-three?...I lose track and forget. 

Lee THERE was a used car salesman! With Ricardo Mountalban & "rich corinthian leather" the sky was the limit! ;-)



divingengineer's picture

It's V-8 engine deliver smooth plentiful power.
Ah, The Chrysler Córdoba!

nmewn's picture

The Chrysler just sounded so much better when Ricardo Mont-o-Bawn said mean, you could practically hear the sales & marketing weasels pants ripping open in the background thinking every joe in America was gonna say..."Turn off that stove Edna! We're-a-goin-down and gettin one of dem dahr Chrysler Koar-do-beeez! I'm gonna look just like Ricky Mountbatten toolin around with mah main squeeze!"

"Fred, did he say Corinthian leather?"...lmao!

GunnerySgtHartman's picture

Exactly right, and GM is now buying marketshare with rebates to keep the lines running, just like they did before going belly-up the last time.

The next time GM files bankruptcy, I say LET IT DIE.

Dudeskis's picture

I can buy a 2015 Mercedes E350 with 20k miles for $30k.  How exactly is GM going to sell me a car when the off lease market is going full China Syndrome to the center of the earth?

yogibear's picture

Have at automakers, double prices again. Make it so autos cost $100,000 for the top of the peices of crap.

I'll just keep buying older and older cars.

pliny the longer's picture

well i'm with you yogi, but pretty soon us weirdos are going to run out of affordable used cars.  it now makes more sese to lease a no money down POS than roll the dice on some used POS. the ' market' for 5 - 7 yr old cars makes no sense at all.  

Re uber:  make a buddy with an uber driver, ask if you can make a private deal in exchange for exclusivity.  did this with an old retired guy, he's now my personal driver, i can work while travel time and still come out money ahead.  plus don't pay for parking!  its almost cost push!!  plus i funnel cash to someone local.  its just fantastic.  sure, he's a weirdo and he goes to philipines for god only knows what, but when he's around my life is better and he makes more money than uber would pay him.  drives some fiat POS, i hate that car but i really, really like being dropped off at the door at a downtown location  



RovingGrokster's picture

I'm looking for an older car - Ford, diesel, no engine computer - gubmint-proof.

GunnerySgtHartman's picture

1980s Escort, Tempo, Ranger, or F-250 will fill the bill. :-)

Archibald Buttle's picture

my 1980s escort didnt make it to the 1990s. what a POS. fucker literally broke down on the way home from the dealer. 

clade7's picture

Good Luck there Buddy...I check all the CL 'Autos for Sale by Owner' postings everyday early, and the prices are not coming down..even on 2001 models  with 200K+ on the clock...Its danged tough to be the first one in with cash on hand if a viable honest sounding post comes up...And a guy has to really know how to wring out the validity of a rig over the phone and then in person...


I expect this will change as people discover they are asking too much, and as brother FreeShitter aptly stated, niggas are broke, etc...

tuetenueggel's picture

Try to find a brandnew Dacia Duster, 4wd diesel 1,6 Liter, 100 HP for just 15.000 €.

Tax included. Impossible ? no, quite state of the art ( produced by Renault Romania )

in a former Renault factory.

tuetenueggel's picture

Try to find a brandnew Dacia Duster, 4wd diesel 1,6 Liter, 100 HP for just 15.000 €.

Tax included. Impossible ? no, quite state of the art ( produced by Renault Romania )

in a former Renault factory. take a look here:

Pigeon's picture

Wait, the Ford guy's excuse is "patently false" because you're getting $4+k discount off a $50k mini-van? 

Oh, well, yes, a $45k mini-van makes SO MUCH MORE SENSE. I'll get two at that price.

I can't even count the savings re: discount to sales tax, insurance and DMV robbery that $4+k will make.

RovingGrokster's picture

A luxury car for $50-60k, I understand, but I've been watching decked out domestic pickups and vans climbing over $40k and being snapped up by idiots with little income and less sense, as they trade upside-down cars on subprime loans into even upside-downer cars on sub-subprime loans, all the while bragging about the great deals they made..... right up to the point when the repo man cometh.
Then, if they still hope to drive to work, they go and by an aging piece of crap worse than anything I drove at their age.

Basic cars will be back, because buyers won't take frills they can't afford. Make my Nav and Bluetooth cheap and functional, or I'll buy them from Garmin and Blue Parrot.
(And cars from Hyundai and Kia)

Oh, and BTW, note how the Japanese brands are still the least discounted, especially Subaru, because if you can't afford an overpriced truck from Gubmint Motors, you'll take a second look at the AWD cars and SUVs that just keep on running.
And if you think GM is bad, exactly what kind of value and reliability do you expect from merging American Motors, Dodgy, and Fiat?
I'll bet on Ford at least surviving, because they didn't take King Obama's shilling, and they are still here.

CRM114's picture

Good Advice.

I have a old Ford truck, and a Jap AWD SUV for the winter.

Oldwood's picture

If we deserve, if we are entitled, to healthcare, food and housing, then why the fuck aren't we entitled to a nice diesel F250 with all the bells and whistles? There is no point in setting limits at this late date. Drinks for EVERYBODY! It's on the HOUSE!

Archibald Buttle's picture

damn, youre making me want to get a bunch of credit cards and quit my job tomorrow. nicely done!

Joe Mama 3's picture

If you incorporate in Montanna, and your llc owns the vehicle, registered in Montanna, you wont pay any tax !!!!!!!

NoDebt's picture

Just FYI, much of the rising cost of vehicles is government-mandated shit that's gotta go in them.  If you are even remotely a "car guy" you probably know much of the list but here's one you probably don't know:  a black box that records everything going on with the vehicle for a period of time before it detects airbag deployment (and accident).  It can be downloaded as legal evidence in court.  It can be remotely sucked out of the vehicle's computer(s) via OnStar or similar service (and often is automatically upon airbag deployment).  No, you can not wipe it's memory by disconnecting the battery.  No it can not be removed because it's functions are shared between differernt computer systems on the car including the engine computer, the inflatable restraint computer, the transmission control computer and the cabin power computer.  It's not ONE thing you can just find and unplug.  It's fully integrated in multiple other computer systems on the car.  Nor can it's data be wiped using typical computer diagnostic computers like at a dealership or a mechanic's shop.  It can track everything in real time, including your GPS coordinates, even if you don't subscribe to OnStar.  It can remotely shut your vehicle down, or unlock the doors or, really whatever they want it to do within the capability of the computer's control.

It's also subject to being "hacked" by those who really know this shit backwards and forwards.  You don't need to cut somebody's brake lines any more to kill them (leaving evidence).  You can just deactivate the brakes or pin the throttle wide open with a few keystrokes now.

Sleep tight.

Hurricane Baby's picture

Attention drooling retards at Bloomberg: it's "archetypal", not "prototypical".

OKUSA's picture

A new car. I wish.

RovingGrokster's picture

I buy new when times are good, and then keep on running them for ten years or more. Hoping times get better before maintenance costs get to high, but at least there's no loan payment.

Hal n back's picture

not only no loan payment but if you keep a car for 15 years vs getting a new on every 5, its also about sales taxes.

I have always bought upper level cars, but keep them for a long time which includes ocst orf proper maintenance.

even when I need tires and battery thats petty cash compared to paying tax on a new car.


the big concern of course now is the electronics.

My wife left something under ht eassener seat -when I had the car washed they moved the seat fwd and broke, crushed some sort of module-dealer price to fix $900, local shop using OEM 500.


tires are expensive-1100 to replace a lexus 450 tires, and 1500 to replace run flats. Thats routine stuff.


but yeah, govt regulations create jobs. That was one obama trick.

the other trick he has was saying budget deficit was 597 billion  when  debt was up 1.3 trillion. on all the  fake news media nobody discussed that 700 billion mia.



SnottyBubbles's picture

... ripped us all off when they got the guv'mnt to outlaw toting the family around town in the back of the pick-up. Even if you had them sitting in lawn chairs for gosh sakes.

OKUSA's picture

I work in a small town outside of a city, and I have seen multiple people driving lawnmowers around. Instead of a new car maybe I should be browsing the lots at Home Depot?

Joe Mama 3's picture

In texas and im sure lots of other places, ag equipment, tractors, earth movers, are almost untouchable. no license, inspection, cause ag is so protected in texas. If a horse kills your kid at a petting zoo or rodeo, oops... tough shit, ag protected.

Codwell's picture

LMAO, your town too ?  My town also has unemployed 18 to 35 year heroin addicts rolling around on bicycles wearing stocking caps year round and a small fortune in tats on their arms. 

CRM114's picture


Build shit that nobody wants at a price they can't afford, then rely on marketing to sell it?

What could possibly go wrong?

10 year old truck for $8k. My local mechanic can fix it. I can do all routine servicing.

Don Pancho's picture

Tapped out...


auto loan default coming soon to a theater near you...


3Wishes's picture

I have a great idea, lets build a car that the middle class can't afford, that'll work.

tuetenueggel's picture

"climate warming" problem also would be ended.

Only cows must be forbidden to fart.

Stormtrooper's picture

Just a slight pause until the Feds print another 5-10 trillion into the economy and the stawk markets gains will keep piling up for the average American.  Then the buyers will be back in droves.

Falling Down's picture

$50,000 for a "top-of-the-line Mopar minivan"? You could buy 50,000 $1 houses in Detroit for that.

Ain't nobody got time fo that!

tuetenueggel's picture

Detroit ? not as a gift I´d take one to live there.

RU4Au's picture

Hey, Maduro is giving away houses! He musst have a bunch of extra ones nobody wants. I'm sure he'll be popular with some folks that got them.

We seem to have a bunch of extra cars that are just sitting around on lots. Starts a good Marxist to thinking...

tuetenueggel's picture

Those cars worldwide are counted into Millions.

Dragon HAwk's picture

Supply and Demand Bitches..

ps. a old diesel farm tractor is great prepper investment.

World Cash Day's picture

And while this explanation may seem logical, it's patently false.  While average auto sticker prices tend to rise 2-3% per annum, as TrueCar recently pointed out, industry incentive spending in March rose 13.4% year-over-year to an average of $3,511 per vehicle sold.  So while sticker prices may be rising, the price that people are actually paying is coming down, courtesy of very generous auto OEM shareholders.


Hang on.

If auto sticker prices (say $50,000) is rising 2-3% that's a rise of $1,000-$1,500 per annum.

If industry incentive spending rose 13.4% to $3,511 - that's a rise of ($3,511- ($3,511/1.134)) = ($3,511-$3,096) = $415.

So yes, despite incentives, the prices of autos is rising faster than incentives are rising - in dollar terms. (Well, for a car that costs $50,000).

At some point obviously this would be in parity, maybe for a $25,000 car - but I can't be bothered working it out just now.

This is basic percentages ZH!

Archibald Buttle's picture

i had a feeling the numbers would work out something like this. thanks for doing the heavy lifting! maffs being hard and whatnot. i will raise a toast to you when i get back from the fridge with a fresh beer.

khakuda's picture

Over the past 10 years, zero rates and extended terms allowed the average monthly payment to stay fairly constant while the average selling price skyrocketed and debt skyrocketed.  It was another intended consequence of a deranged Federal Reserve - encourage everyone to live above their means, create massive inflation in average car selling prices, home prices, stock prices, healthcare prices, college prices.

They can't find inflation???  FUCK THEM!

Zoomorph's picture

Your incentive spending = 2.5% off the cost of the vehicle. It's negligible. Hardly noteworthy. Trust ZH to make a big deal out of nothing.

I agree with Bloomberg. Millennials such as myself are not interested in today's vehicles because they are full of crap "features" that we don't want (things waiting to break, necessitating expensive repairs), and way overpriced.

If Ford would go back to producing the trucks of the 90s or 70s, I'd be much more likely to buy new. You know, trucks that I can fix myself, that don't run on proprietary software, that don't report my driving habits to the police, can't be hacked, that I can park myself without cameras or AI assistance, etc. I want a new truck about as much as I want a new appliance which will end up in the landfill after 5 years.

1.21 jigawatts's picture

How bout this scam:  They could give the cars away and write off the loss but with the caveat that the car recipient gets hit with a prize tax. 

Then their Jews on retainer play some kike hoodwink tax sneakery, bribe some officials and all is magically saved. 

All we'll need at that point is a final solution for the board members.

Sonny Brakes's picture

If you love what you do you'll never have to work a day in your life. If you never buy a vehicle you'll never have to worry about loving what you do. Egos buy expensive vehicles because there's really nothing in the marketplace to spend your money on. Do you really need a $50,000 pickup to buy a cup of coffee at McDonald's? If you drive an average of an hour a day your car will be parked over 95% of the time. Not including taxes, license fees, insurance, maintenance, parking, repairs, tires, gas, oil, and assuming you're paying cash and you'll be driving your $50K car for 10 years, you'll be spending $13.70/day for the privilege. Here's a thought experiment, how much real estate is devoted to automobiles? It's a lot.

Zoomorph's picture

My car cost $2000 and I've been driving it for 8 years now. I just did the math and it's cost me roughly $5.80 a day.

Every year: $1000 insurance + $80 registration + $300 in maintenance = $3.80/day

Initial purchase is down to $0.70/day

$5 per 100km.

Driving is not cheap! In the future humans won't be allowed to drive anymore - the government will love that.

Manipuflation's picture

Never buy a Dodge.  I have seen too much now.  If you think your Dodge is great then check out your cooling system routing around the back of the engine up against the firewall.  Explain that to me.  You have a six dollar part that will fail and it will cost you $700 to fix.  Why is your battery located where it is?  Bueller?

Full retard.