C&D: Middle-class car shoppers priced out?

Non-repair car talk
kevm14
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Joined: Wed Oct 23, 2013 10:28 pm

C&D: Middle-class car shoppers priced out?

Post by kevm14 »

https://www.caranddriver.com/news/a3006 ... 498&src=nl

I think this is supposed to be some sort of indictment on the "system" (or you could use it as evidence to support a point along those lines) but what I take away is very simple: people continue to make incredibly stupid decisions and there are consequences for those.

First, from a statistics point of view, it is not legitimate to look at the average cost of a new car, and then throw out some numbers that may be the MINIMUM for "middle class" household earnings, and attempt to draw some kind of inequality argument. That's BS. I would ask for data on what the distribution of household incomes is vs car purchases/loans, etc.

But aside from that, the more important point is, lower income households HAVE ACCESS to affordable NEW transportation! It says so right in the article. Let me repeat: affordable NEW cars already exist! What exactly is the problem again? That people are ELECTIVELY making stupid financial decisions?
This shouldn't come as a surprise, since, as we reported recently, almost half of Americans are more likely to research what TV show to watch than to learn more about financing options for an auto loan.
Apparently it is politically unpopular (or considered rude) to inform people of their own stupidity but there's a blurb right there in this article that makes the point.

The good news is, left to its own devices, the free market always sorts this kind of thing out - if the price of cars is truly unsustainable, it will be resolved through a number of mechanisms. You know, unless the government steps in and tries to "fix" it.
bill25
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Re: C&D: Middle-class car shoppers priced out?

Post by bill25 »

There are other things that are driving up the costs. Autonomy, for one, is totally unnecessary, and adds cost to what was once a mechanical machine to now a full blown computer on wheels with various sensors. That's all extra, and comes with a multitude of additional costs on top of what already existed.
kevm14
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Re: C&D: Middle-class car shoppers priced out?

Post by kevm14 »

I'd say fancier interiors are also adding cost. It would be nice to actually see a BOM though. Powertrain prices are probably creeping up, too.

I guess my point was the price of cars and all offerings associated are the result of the collective industry's BEST attempts to guess what people will buy.
kevm14
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Re: C&D: Middle-class car shoppers priced out?

Post by kevm14 »

A more sensible article on this topic: https://www.caranddriver.com/news/a3029 ... 865&src=nl
Personal-finance expert Dave Ramsey says your vehicle should cost no more than half your annual income. As car lovers, we interpret that to mean you can spend half.
I'll be that guy...I think this is still high. You could do a 1/4 of your annual salary on a good used car most likely. And everyone knows my rule anyway. Pay cash. Whatever the number is where you start to wince when that money comes out of your account, there's your budget.

Here are their suggestions for 4 income zones.
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Hey, loans enable people to strategically buy more than they can afford at that time, but you can take up smoking, drinking and gambling legally, too....self-restraint is kind of a key thing, right?
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bill25
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Re: C&D: Middle-class car shoppers priced out?

Post by bill25 »

These might be good guidelines for an average, or ballpark, but people have different priorities. If a person takes out a loan, and pays their bills, it is not up to anyone to tell them they are overextended. People have choice. That is a good thing. Maybe someone decided to spend less somewhere else in their lifestyle, and want to spend more on their car. I don't see the big deal.

There are 2 sides to the story in my opinion.

There could be people spending more than they should, and needing loans, and the ability to get loans allows for prices to rise. (which seems to be your argument)

Prices could also be rising due to the added tech and safety equipment (etc.), and loans are making it possible for people to buy a car to get them to work. Also, cars are lasting longer so everyone (banks included, because this wouldn't be happening if there weren't collateral) is more comfortable with paying loans longer because the car is more likely to still be around and dependable.

I mean, economy cars are rising too, not just luxury stuff.

Sure you can buy used, but in many cases, the used "reliable car" isn't a lot less than the new especially when you look at interest rates etc.
You can get something more used, but then you are going to be incurring other expenses, along with possible down time that may be worse than the repair cost. If you keep missing work due to an older car, you could lose your job, and that is more "expensive" than a X$/month payment.


I would be more inclined to agree that it is people's irresponsibility if everyone were stretching for 60K+ Luxury cars or whatever. People having to stretch to buy an average or even small car is the issue. That is where the discussion of cars being unaffordable is coming from.
kevm14
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Re: C&D: Middle-class car shoppers priced out?

Post by kevm14 »

You can buy new cars in the $20k range without too much issue (a Honda Civic - bigger than an Accord from 99 but inflation adjusted as much as a 99 Civic still) if someone really has no clue how to buy a reliable 3-5 year old used car. No one needs to spend $35k, $45k or more on a car, period. Have the luxury to? Great, enjoy your disposable income. That's not where my issue is.

People are spending more because they can, not because they need to (or should). That's my issue.
kevm14
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Re: C&D: Middle-class car shoppers priced out?

Post by kevm14 »

kevm14 wrote: Sat Dec 28, 2019 7:11 pm Have the luxury to? Great, enjoy your disposable income. That's not where my issue is.
I lied, I have an issue there, too. It's slightly tangential to the article, but still related.

And that is the thought that 60 payments of $718.75 is affordable and reasonable, but $43,125 is totally unaffordable and/or not reasonable (it's the same - $40k for 5 years @ 3%). If your mental max cash price is not $43,125, but is instead, say, $25k, then you are breaking your own budget by signing up to that loan for $43k, and that is regardless of whether you pay it off early, or not. I guess my issue is why this is controversial? It seems like basic financial responsibility.

In this hypothetical scenario, if you said, well, what if I took a loan on that $25k max cash budget instead, keeping cash liquid in case of emergency? If you are being honest with yourself then I guess that makes sense to me. But if you are not sure if you have enough reserve for emergencies, that is a very good sign your budget is less than you think it is. And I think this pretty much explains why the average price of a new car is so high, when you can get something as decent as a Civic for waaaay less. Families got by with less vehicle than a 99 Accord 20 years ago, so there is no way a Civic is totally inadequate today.
kevm14
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Re: C&D: Middle-class car shoppers priced out?

Post by kevm14 »

Just to keep going on my rant that there are plenty of affordable cars if people choose to purchase them...

https://www.motortrend.com/cars/honda/a ... 86F53BF9CF
The base-model Accord is the LX trim, which is available exclusively with Honda's 192-hp turbo-four engine. Standard features include automatic emergency braking, a lane-keeping assist system we found excellent in the real world, 17-inch alloy wheels, a 7.0-inch touchscreen, LED low-beam headlights, a cavernous 16.7-cubic-foot trunk, and a single 1.0-amp USB port.

The base hybrid isn't badged as an LX, but it has a similar standard-features list. Aside from the much-improved fuel economy, the 2020 Accord Hybrid also adds hands-free keyless access and paddles that can subtly decelerate the car.

If a low price is your primary concern, we'd suggest considering a 2020 Hyundai Sonata SE, which offers a larger touchscreen than the base Accord, and also adds Apple CarPlay and Android Auto. The 2020 Subaru Legacy also undercuts the 2020 Accord, and throws in standard AWD and those two phone-mirroring features, too. The value equation may change drastically once you consider regional incentives. For example, if you don't mind that a new Kia Optima is on the way and that the outgoing car isn't very efficient, try a heavily discounted 2020 Kia Optima LX.
What is the MSRP of a 2020 Accord LX? $23,870. It comes with dual zone auto climate control and LED headlights! And according to the last paragraph above, you can get even cheaper vehicles than this, in this class.

I'd rather have a used higher trim example than a new base model but without even getting into that, I just want to continue to make the point that there are affordable NEW cars. Plenty of them.
bill25
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Re: C&D: Middle-class car shoppers priced out?

Post by bill25 »

Is this part of the equation? Seems very similar to this discussion.

https://www.msn.com/en-us/autos/news/mi ... spartanntp
kevm14
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Re: C&D: Middle-class car shoppers priced out?

Post by kevm14 »

Original article: https://www.caranddriver.com/news/a3044 ... -tractors/

Yeah that is related but not the same. I think agricultural equipment is not the same as cars. The closest thing would be the price of trucks. I always thought farmers happily paid 6 figures for big equipment and just wrote off as necessary and/or made payments. However, it is not surprising that there is a limit. Historically, I suspect that buying a new tractor every once in a while made business sense for a production farm. But at some point, the price and non-farmer-friendly systems tilted the tables back in favor of used equipment. I totally get that. Fortunately if this is wide spread enough, the market will respond.

On the other hand, this just means that tractors are entering an era that is similar to where cars were in the 80s when EFI and computers were being introduced. LOTS of complaints about specialized equipment, difficult or impossible DIY repairs. This sounds familiar. The repair market and DIY market caught up. It takes time.

This is a little misleading without going into more detail:
For many years, independent car repair chains fought a similar development in the automotive world, and in 2014, automakers agreed to a right-to-repair deal, making access to diagnostic tools standard across the industry. Since tractors don’t have similar legislation concerning their repair, farmers are going to lengths such as gaining access to the tractors’ software through Ukrainian firmware to make repairs.
What is the implication, that cars before 2014 are too proprietary to diagnose and repair? BS, that is not true.

C&D Backfires discussion: https://backfires.caranddriver.com/foru ... 5-30444879
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