New car deals coming?

[red_pill]

So, our vehicle situation is good.... the older vehicle is a 2011 Sante Fe with 130,000 km on it.  Needs new tires but otherwise is tip top (as far as we know) and has never given us any issues at all.  But, for all our talk of "we'll drive this one into the ground", it seems when our cars get this old we start to look at replacing it for really no good reason.  Sure, it is starting to look a bit worn out, lacking options, etc but totally safe so those are stupid reasons to drop a bunch of cash on anything else.

So, I want to keep it.  The wife is good with that, but thinks we should think about getting something newer. 

The one situation I might agree with her that on would be if the glut of cars sitting in storage lots results in substantial price drops in the next while.  I remember in 2008 we could have bought a brand new 3/4 ton diesel truck for $35K...totally stupid deal. They were pretty much giving them away. We could have driven it for 5 years and sold it for the exact same price.  But I balked only to regret it later as it would have been essentially a free vehicle for 5 years.

Anyone have any thoughts on what the potential new car market might do?   Is this downturn substantial enough to cause such a fire sale?

And I'll have to establish at what discount threshold is it just too good of a deal to pass up (again).  Thoughts?

[ender]

I'm wondering a bit about this too.

We've been idly talking about replacing a vehicle for quite some time. Course, not driving at all because of covid means we do not really need to replace the vehicle... so there is that.

We do not have a compelling reason to replace it until things settle down and my work is pretty accepting of WFH indefinitely.

[Greystache]

I'm in the same situation as you, two perfectly good cars that are 15 and 17 years old. Itching to get an electric car for years. I'm more interested in used than new.  Used car auction prices are down 11 percent last month. Don't know if they will fall further.  On the new car side, I have not seen MSRP drop but I have seen a lot of 0 percent financing and deferred payment offers.  I asked in another thread if lower prices where a good excuse to get rid of reliable older cars. The consensus was no.  Also, if you are trading in or selling your old car, you are not going to get much for it right now.

[nereo]

Was reading a report that auto sales had fallen 800,000 units from projections in the last two months. Seems there’s a glut, and it might get worse.

What’s less clear is how the shutdown of factories factories might factor into it.  Entire supply chains gummed up for weeks.  Possibly a glut of autos followed by a big gap?

We’ve bought exactly one tank of gas since March 1 — still have more than half a tank left.

[Duke03]

The deals are coming but won't start showing up till the end of the year.  Right now most consumers, government, and fortune 500 companies think the economy will bounce right back like nothing happen.  The only problem is 30 million people lost their jobs and I don't care what the experts say not all of those 30 million will find their old job waiting for them.  I'd bet they are lucky if 20 million get their old job back.....  So you currently have 30 million people on unemployment missing all types of payments.  Even if they get their jobs back and even if they wanted to go buy a new car their credit will be trash and will not qualify for the best rates.  New cars have been grossly over priced for the past 10 years.  The only thing that made them affordable was the cheap interest rates.  Offer someone a 40k car with a 13% interest rate and let me know how many people think it's affordable.  I think once the economy opens you will see a jump in car sales just due to some natural pent up demand.  Come October the car makers will be hurting and the discounts will be plentiful.

[reeshau]

Was reading a report that auto sales had fallen 800,000 units from projections in the last two months. Seems there’s a glut, and it might get worse.

There is no glut, because car plants shut down in Mid-March.  In fact, inventories are at an all-time low.

https://fred.stlouisfed.org/series/AUINSA

While I don't agree with @Duke03 on interest rates, I do think new car prices will be a race of sorts between re-establishing the supply chain and whatever stimulation is needed for demand.  The Fed is the #1 operator, and is supporting debt of domestically-domiciled financial companies, which includes those financing auto purchases.  So the debt will still be dirt cheap, as long as we can still call this a crisis.

The used market will be interesting.  Lease's, which have also been a growing part of new car sales, will have continued to age, so will people make their prior choice of going to a new lease, or save a buck and re-up on the same car?  Those are an important source of inventory into the used car market.  Supply and demand will find a more-natural balance there, although interest rates will still be low, even if not inventivized.

[nereo]

Was reading a report that auto sales had fallen 800,000 units from projections in the last two months. Seems there’s a glut, and it might get worse.

There is no glut, because car plants shut down in Mid-March.  In fact, inventories are at an all-time low.

https://fred.stlouisfed.org/series/AUINSA

The link you included does not cover the most relevant time period (i.e. April & May). Most places didn’t go into a stay-at-home order until the second half of March, and the mass layoffs began at the end of the month. 

Would be interested in seeing how inventories have changed in the last 8 weeks. 

[ender]

Used car sales might be where the real deals are.

Lease returns, rental car sales, etc.

[nereo]

This is a similar thread.
https://forum.mrmoneymustache.com/welcome-to-the-forum/car-deals/

 I said in the other one (and also heard on my local news yesterday) that due to factory shut down there is a pretty severe shortage of new cars right now and possibly into the future. However the used car market is down 80% and with rental companies unable to rent there cars now, or possibly going bankrupt like Hertz, there will be a huge glut of newer used cars on the market as they sell to off-load and recoup some of their billions in debt. I'm looking for a newer used car right now but will wait to see if prices drop further or if they really tank once Hertz is forced to sell their cars at a loss.

https://www everywhere.google.com/amp/s/www.bloomberg.com/amp/news/articles/2020-05-08/hertz-seeks-lender-leniency-or-faces-bankruptcy-within-weeks

Any data on plug in vehicles, used or new? Under normal times low oil prices reduces demand, ( but right now demand is down everywhere, as is production)

[Cranky]

After the 2008 recession used car prices were pretty high - people held on to the car they had and people who needed a car bought used.

[nereo]

After the 2008 recession used car prices were pretty high - people held on to the car they had and people who needed a car bought used.

Yeah, I remember that new pickups were being discounted so heavily to move them off the lots that they were actually about the same price as those 3-4 years old.

[Michael in ABQ]

Was reading a report that auto sales had fallen 800,000 units from projections in the last two months. Seems there’s a glut, and it might get worse.

There is no glut, because car plants shut down in Mid-March.  In fact, inventories are at an all-time low.

https://fred.stlouisfed.org/series/AUINSA

While I don't agree with @Duke03 on interest rates, I do think new car prices will be a race of sorts between re-establishing the supply chain and whatever stimulation is needed for demand.  The Fed is the #1 operator, and is supporting debt of domestically-domiciled financial companies, which includes those financing auto purchases.  So the debt will still be dirt cheap, as long as we can still call this a crisis.

The used market will be interesting.  Lease's, which have also been a growing part of new car sales, will have continued to age, so will people make their prior choice of going to a new lease, or save a buck and re-up on the same car?  Those are an important source of inventory into the used car market.  Supply and demand will find a more-natural balance there, although interest rates will still be low, even if not inventivized.

Auto dealerships make most of their money on service, financing, and used car sales. New car sales are essentially loss leaders to get people in the door for financing and service. Also to provide a supply of cheap used cars as trade-ins. There are some variable costs that will obviously go down - commissions on sales and financing costs for their new vehicle inventory. Still, at some point they will have to start offering deals to get buyers in the door and recharge their sales pipeline. Not that I would advocate buying a new car for most people, even a good deal will still almost always be a worse financial decision than a used vehicle.

I'm going to be in the market for a larger vehicle in a few months when the kids go back to school. My little pick-up can't fit them all so time to sell it and buy something larger. On the plus side I paid $2,700 for it a few years ago and can probably still sell it for about the same (albeit with $1,500 or so in repairs and maintenance since then).

[ender]

After the 2008 recession used car prices were pretty high - people held on to the car they had and people who needed a car bought used.

Yeah, I remember that new pickups were being discounted so heavily to move them off the lots that they were actually about the same price as those 3-4 years old.

Cash for Clunkers was a meaningful factor at that time.

[reeshau]

Was reading a report that auto sales had fallen 800,000 units from projections in the last two months. Seems there’s a glut, and it might get worse.

There is no glut, because car plants shut down in Mid-March.  In fact, inventories are at an all-time low.

https://fred.stlouisfed.org/series/AUINSA

The link you included does not cover the most relevant time period (i.e. April & May). Most places didn’t go into a stay-at-home order until the second half of March, and the mass layoffs began at the end of the month. 

Would be interested in seeing how inventories have changed in the last 8 weeks.

Right...including the car plants.  So, it won't be higher inventory, for sure.

[nereo]

Was reading a report that auto sales had fallen 800,000 units from projections in the last two months. Seems there’s a glut, and it might get worse.

There is no glut, because car plants shut down in Mid-March.  In fact, inventories are at an all-time low.

https://fred.stlouisfed.org/series/AUINSA

The link you included does not cover the most relevant time period (i.e. April & May). Most places didn’t go into a stay-at-home order until the second half of March, and the mass layoffs began at the end of the month. 

Would be interested in seeing how inventories have changed in the last 8 weeks.

Right...including the car plants.  So, it won't be higher inventory, for sure.

I’m not saying your assumption is incorrect - I”m saying your data does not support such a conclusion.  It’s an important distinction. 

[desk_jockey]

Was reading a report that auto sales had fallen 800,000 units from projections in the last two months. Seems there’s a glut, and it might get worse.

There is no glut, because car plants shut down in Mid-March.  In fact, inventories are at an all-time low.

https://fred.stlouisfed.org/series/AUINSA

The link you included does not cover the most relevant time period (i.e. April & May). Most places didn’t go into a stay-at-home order until the second half of March, and the mass layoffs began at the end of the month. 

Would be interested in seeing how inventories have changed in the last 8 weeks.

There are some indications of a growing inventory glut in new cars imports:
https://www.latimes.com/business/story/2020-05-01/auto-glut-parked-on-ships

I think we can expect a glut in < 4 year-old used cars, as rental car companies try to eliminate their older stock and individuals’ car leases end.   

[reeshau]

Was reading a report that auto sales had fallen 800,000 units from projections in the last two months. Seems there’s a glut, and it might get worse.

There is no glut, because car plants shut down in Mid-March.  In fact, inventories are at an all-time low.

https://fred.stlouisfed.org/series/AUINSA

The link you included does not cover the most relevant time period (i.e. April & May). Most places didn’t go into a stay-at-home order until the second half of March, and the mass layoffs began at the end of the month. 

Would be interested in seeing how inventories have changed in the last 8 weeks.

Right...including the car plants.  So, it won't be higher inventory, for sure.

I’m not saying your assumption is incorrect - I”m saying your data does not support such a conclusion.  It’s an important distinction.

Car plants in the US generally shut down around March 18.  Here is their restart schedule.  (all in May; very few already back)  In the meantime, there has been no new inventory made.  Even if there were absolutely zero sales, the data would pick up where they started.  (note, these inventories are in units of cars, not months of sales.  People measuring months of sales may report inflation, since two months of sales were essentially missed, and likely will restart slowly.  But again, production will also restart slowly)

https://www.autonews.com/manufacturing/follow-latest-assembly-plant-closings

[nereo]

Wow.  I never realized Hertz had 700k vehicles in its fleet (which I know they keep only for a couple of years). 

[norajean]

Wow.  I never realized Hertz had 700k vehicles in its fleet (which I know they keep only for a couple of years).

Most of the base model Chevys with AM radios.

[nereo]

Wow.  I never realized Hertz had 700k vehicles in its fleet (which I know they keep only for a couple of years).

Most of the base model Chevys with AM radios.

What’s an AM radio? :-P


...seriously though, I’ve never encountered one in a rental car.

[Michael in ABQ]

I was looking at the used vehicles available from Hertz. I'm hoping there will still be some deals available when I'm in the market in a few months. Looking for a daily driver that can also hold 5 kids when I need to take them to school (including some in booster seats or car seats). Probably an SUV or crossover of some sort. Looks like a lot of 2-3 year old models with 50-70k miles in the high teens. I'm looking for something around the $10k mark though and I don't think Hertz keeps vehicles around long enough to get to that price point.

[Zamboni]

I've been watching the market for used toyota avalon hybrids for a family member. Prices for "middle of the road" used cars (not nearly new and not clunkers, relatively low mileage) have fallen slightly already over the last two months from what I can see. More and more rated "great deal" by auto trader. They use Kelly Blue Book to determine the goodness of a deal.

I should look at minivans. My van is still going but it's 18 years old and it definitely shows! Then again, like most of you, I am barely driving it these days. Hmmmm.

[katsiki]

Thanks OP and @spartana

Spartana - is your example supposed to be a 2020 Sentra?  Just curious.  I am pretty sure you didn't mean 2010 :)

[Optimiser]

Tesla just cut prices on all of their models except for the Y
https://electrek.co/2020/05/27/tesla-cuts-prices-lineup/

Chevy is offering $8,500 "customer cash" for people who aren't financing on the Bolt
https://electrek.co/2020/05/27/chevy-keeps-bolt-ev-momentum-going-with-8500-cash-incentive/

[nereo]

Tesla just cut prices on all of their models except for the Y
https://electrek.co/2020/05/27/tesla-cuts-prices-lineup/

Chevy is offering $8,500 "customer cash" for people who aren't financing on the Bolt
https://electrek.co/2020/05/27/chevy-keeps-bolt-ev-momentum-going-with-8500-cash-incentive/

Hmmm. The Bolt is interesting. What does that do to the final out-the-door cost (and compared to a 2-4yr old Bolt)

[maisymouser]

Tesla just cut prices on all of their models except for the Y
https://electrek.co/2020/05/27/tesla-cuts-prices-lineup/

Chevy is offering $8,500 "customer cash" for people who aren't financing on the Bolt
https://electrek.co/2020/05/27/chevy-keeps-bolt-ev-momentum-going-with-8500-cash-incentive/

Hmmm. The Bolt is interesting. What does that do to the final out-the-door cost (and compared to a 2-4yr old Bolt)

If the Bolt catches your fancy, check out the Prius Prime. I got one last year and love it. Final cost after the tax break for me was about $21k (Mustachian move was to find a dealership with that deal, fly there, and drive the car ~9h back home to save about 6k). I was originally looking at the used Prius market for a car but couldn't pass a brand new one with EV up.

[Catica]

Tesla just cut prices on all of their models except for the Y
https://electrek.co/2020/05/27/tesla-cuts-prices-lineup/

Chevy is offering $8,500 "customer cash" for people who aren't financing on the Bolt
https://electrek.co/2020/05/27/chevy-keeps-bolt-ev-momentum-going-with-8500-cash-incentive/

Hmmm. The Bolt is interesting. What does that do to the final out-the-door cost (and compared to a 2-4yr old Bolt)

If the Bolt catches your fancy, check out the Prius Prime. I got one last year and love it. Final cost after the tax break for me was about $21k (Mustachian move was to find a dealership with that deal, fly there, and drive the car ~9h back home to save about 6k). I was originally looking at the used Prius market for a car but couldn't pass a brand new one with EV up.

What do you mean by "Mustachian move was to find a dealership with that deal", isn't a tax break a federal tax break? What does that have to do with a dealership offering that deal?

[red_pill]

I just read that the Jaguar I-Pace is selling for $20,000 soffits normal $73K list price.    I think we will soon see companies go from incentives like to payments, etc. to actual discounts.

[reeshau]

Wall Street Journal article today:  "Looking for a Deal on a New Car?  It's Probably Too Late"

Dealer inventories in May dropped to 2.6 million units, which is the lowest level in years.  Of course, the article focused on new unmustachian things like new vehicles and an acute shortage of full-size pickups.  But there you have it.

The factory rsmp-up will take weeks, and will be highly impacted by Mexico's stance on lockdown vs. ramp-up, meaning inventories will not increase for a while.  But if the overall economy doesn't pick up, then working hard to fill the supply chain may be a head fake, and generate a glut later on.