The Expert Podcast

So if you've been looking at cars to buy new or used for the last year or two you found that first of all there's a lot of, inventory shortages and the prices are high people have been waiting for a long time for prices to come down and thinking that maybe that interest rates are higher or that there's a recession happening that prices might come down. Well according to Barron's and many other sources And we've talked about this before. Inventories are coming up There is more availability of vehicles but there's not going to be any price reduction to especially on new cars. Why is that? Doesn't supply and demand kick in and make prices go down and we'll use cars follow well let's take a look at four reasons why new car prices are not going to come down. Really anytime soon or really ever, the price point right now is going to be permanent And it's kind of ratcheted up. There may not be as many dealer markups, but there will not be any, discounts from MSRP going forward Here's why. First there's still big demand. Even though. The prices are higher In fact, People are paying a thousand dollars a month for car payments. Because of interest rates and prices, there's still a very big demand for new vehicles So it's not that. There's a lot of inventory glut where car dealerships can't get rid of car So there's still a big demand So that's gonna keep prices high. The second thing is manufacturers and dealers are getting used to be able to make profit with lower volume. It used to be the dealer scrambled for every last sale selling three four or 500 cars a month to try to pay all their bills and have a profit for the dealership and manufacturers. Strove to sell. 12 or 14 million cars a year. for the U S market. Well now they've learned. How to make money selling less cars, you have a little more margin You do less advertising You have less overhead. You have less interest on your inventory. And you could make money selling less cars and it's less work. If you only have to sell a hundred cars a month that's a few a day. If you have to sell 500 cars a month, well now you have to sell 10. 15 cars a day. It's a lot harder of a scramble to sell high volume. vehicle So dealers and manufacturers are both learning. Gee we don't have to sell as many cars. We just don't have to discount them as much. Put a fixed price on them MSRP and sell it for that And we'll make money. The other thing is manufacturers are not this is number three. Putting a lot of money into creating new inventory Here's why within the next four to five or six years. There's going to be a huge switch to electric vehicles. Many states are making it illegal to sell gas powered vehicles in their states California New York Washington state are three big examples of states that said look. After 2028 and 2030, you can't sell gas vehicles So manufacturers are not going to be putting money. into R and D. And production of newer model vehicles. Lead times on coming out with a new model is three to four years So whatever models are being made right now that's going to be it for gasoline vehicles So why put a lot of investment? Into new vehicles. If you're going to have to just come out with electric vehicles anyways. Here's reason number four this is a big deal. The cost of producing a vehicle is much higher and you might think, well isn't that supply chain inflation That's part of it. That's a big part of it. Still getting sheet metal engines. manufactured goods. Components is all higher right Inflation Doesn't just affect you at the gas pump or at the grocery store. It affects the car manufacturer in their pre. plant. But more than that they are having trouble getting workers, getting employees to build these vehicles is harder and you have to pay more. The cost of manufacturing A vehicle has gone way up now in order to get a halfway decent vehicle. Of any substantial kind of not even luxury but just a nice vehicle. It's going to be 40, $45,000. The days of a 20 or $30,000 vehicle are over. There's still a few that are in that range, but they're very limited models. Stripped out vehicles. You're going to be spending. 40 grand 45,000 anyways to get a decent car in most manufacturers, that's going to put you at a payment of eight or 900 bucks a month. Right. So. People are getting used to that. A large percentage of car buyers are now paying over a thousand dollars a month for their car payment. The fact that now that's been baked into the system. Dealerships and manufacturers can be more comfortable with presenting that payment to customer So prices aren't going to come down on new vehicles anytime soon. Also there won't be huge discounts. On new vehicles there won't be $2,000 rebates or $2,000 dealer discounts or other. large, opportunities for reductions in price. So new vehicles are going to be pegged where they are. It's not going to come down now use vehicles a different story. If there's a big glut of used cars coming into the market that might lower them but they meant not be cars you want If they're 60 or 70,000 mile cars. They're out of warranty You might not want that car. Because as manufacturers are now building cars that they know are going to be replaced in three or four years with EVs. Why build them where they're going to last a long time? Why put the same amount of reliability into a car that you know you don't have to really warranty because people aren't going to be looking for a replacement for that car. In four or five years they're going to want nav or have to buy an Evie. So new vehicle prices are where they are They're not going to come down, expect us pay eight 900 bucks a month for a car payment. If you really are looking for a bargain, look at maybe a late model used that you can keep for three four years until you get forced into an electric vehicle.