The auto market is out of control

The number of car buyers paying $1,000 or more monthly to finance a new vehicle is creeping higher, closing in on nearly one-fifth of new-car buyers — an all-time high. The average monthly car payment has topped a whopping $730 recorded in the first quarter to now sit at $733, according to second-quarter vehicle transaction data from Edmunds.

In a report by Kelley Blue Book, the average MSRP for a new car has gone up 13.5% to $47,148 in May 2022. Add in higher monthly payments and limited budgets; more Americans have trouble paying for cars bought in the last two years. According to Edmunds, 12.7% of customers who bought a new vehicle in the last two years are making monthly payments for at least $1,000. 

Not too long ago I was looking to bey a new car. Unfortunately everywhere I went prices were above MSRP. When I finallu found one that I liked the dealer wouldn’t take cash. To get the discount I needed to finace the car. Why? Because the dealer was getting kickbacks from the brand’s loan department.

Higher interest rates mean monthly payments will increase, but auto manufacturers have learned that limiting inventory can do the same thing. Buyers seldom find the model they want with the options they want. They either overpay or go without heated steering wheels. The auto industry has to be the most unfriendly consumer product category.

Is it any wonder that consumers still hate car shopping?

The auto industry is ripe for disruption. Car dealers that don’t charge above MSRP and are willing to work with consumers are rare. Meanwhile, brands like Hyundai and Kia charge consumers what the market will bear.

The slowdown is starting to show up in Americans’ personal finances. According to a recent survey from Bankrate, 49% of U.S. adults have less savings compared to a year ago. Ten percent of those surveyed said they have no savings at all. 

The upshot: The most disastrous outcomes for U.S. households, like auto repossessions and home foreclosures, have begun to climb.

So are we stuck with high prices car prices? No, not really. Reality is a cold, hard lesson, and power will eventually be shifted back to buyers. The real question is, what will auto brands do about dealers who overcharge consumers? Will their brands suffer? My feeling is “yes.” I follow the auto market carefully, and have a high number of consumers vow to never buy a specific brand again.

Unfortunately, car brands don’t have any leverage over dealers. Too many are jumping on the EV bandwagon, even though EVs are a massive scam.

Consumers who want a new car must research and consider alternate brands.

About richmeyer

Rich is a passionate marketer who is able to quickly understand what turns a prospect into a customer. He challenges the status quo and always asks "what can we do better"? He knows how to take analytics and turn them into opportunities and he is a great communicator.

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