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:

Auto

 

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

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
buckstopshere's picture

Consumers are tapped out.

Retail and restaurants are seeing declining sales.

Uber drivers are seeing fewer customers.

The cash flow to sustain the auto market is shrinking.

FreeShitter's picture

Niggas are broke these days.

D Nyle's picture

GM-Government Motors, What do you expect after Fucking Americans out of 39 Billion

Juggernaut x2's picture

At least GM makes an actual useful product- the fucking worthless banks got trillions

matinee55's picture

They killed 134 with defective products, known defective & then tried to hide it. Now union owned gov. company after screwing bond holders. F gm

Haus-Targaryen's picture

Anxiously awaiting collapse of U.S. auto market.  I think I'll import a 16 or 17 Ford Edge Titanium for the wife when it does.  With some luck it'll collapse here in Germany as well. 

dicksburnt's picture

after owning Toyotas and Nissan for the past 23 years I recently acquired a 2017 Ford Edge SEL I4 turbo. The vehicle impressed me enough to choose it over a Highlander and Murano.  Last week I had to get into traffic and 'punched it'.... at 4500 rpm I found our what the turbo does :)

detached.amusement's picture

When I didnt like how the computer in my ~90 mustang acted, I took the damn thing out and put in another one

good luck disagreeing with the computer in your car ;)

Abbie Normal's picture

4-cyl turbo engines will not last long attempting to power a 4000lb SUV.  You'll be lucky to get 60K miles before major repairs are needed.

Ex-Oligarch's picture

The rent is too damn high!

Mr Pink's picture

If a person doesn't have a million dollars in the bank why the fuck would they spend 50k on a fucking pickup truck??

Hal n back's picture

cause the dealer can get you into the pickup no money down and 600 per month.

"you look good in that car Mr. Smith"

why do we have uninsured motorist coverage when states will not allow you to drive without insurance?

 

 

detached.amusement's picture

because there's hair left on the scalp

AGuy's picture

"If a person doesn't have a million dollars in the bank why the fuck would they spend 50k on a fucking pickup truck??"

if a person has a million dollars in the banks, its probably because they didn't by a $50K pickup truck!

scoutshonor's picture

If they have a spare million--even less chance they will prop 50 large on a pickup truck.

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

////

LMMFAO!!!

https://www.youtube.com/watch?v=tfKHBB4vt4c

divingengineer's picture

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

nmewn's picture

The Chrysler Cor-Dow-Bah...it just sounded so much better when Ricardo Mont-o-Bawn said it...lol...I 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  

#thinkaboutit

 

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. https://www.youtube.com/watch?v=ybF42LTyJSQ

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: https://www.youtube.com/watch?v=ybF42LTyJSQ

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

Wow!

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...

STRATEGIC DEFAULT ON UNSECURED DEBT BEGINS NOW...

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

YMMV...

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.