Kindof a side-bar — In most cases i strongly prefer median, any dataset with outliers or that is skewed in some direction is usually better represented by the median. And in my experiences most real-world datasets do have one or both of those.
All news/public relations/research publications without details about the distribution of the data are clickbait. It would cost nothing to provide deciles, or even quintiles.
That still would not really clarify the main question, which is whether the average transaction price may be rising due to consumer shift, with those of less means choosing to not buy.
I just can't understand who is buying these cars. As a single person with a 90th percentile income and zero debt or dependents, I literally can't even comprehend having a $1,000 car payment. How anyone else is affording this just doesn't make sense.
8 or 10 year loan. Then you roll that remainder into the next loan when you get another car.
It's absurd, to be honest. We financed our last vehicle, because we got a price discount via financing. The FIRST payment term they brought us was 8 years. And this was for a 19k vehicle.
People aren't looking at the terms, they're just looking at the payments. They're paying more for cars than they are for houses, monthly. I don't get it.
> It's absurd, to be honest. We financed our last vehicle, because we got a price discount via financing. The FIRST payment term they brought us was 8 years. And this was for a 19k vehicle.
I’m gonna go out on a limb and guess it was a Nissan dealership. Nissan can’t sell enough cars without subprime lending, that’s my guess as to why you were offered a 96-month term lol.
With a prime credit score, Toyota offered a 3 year term loan to me which I changed to 5 years (2.5%, it’s free money)
I could afford it, but I’d much rather put that money into my mortgage, pension, or an investment account. But then I don’t get much pleasure out of cars. If I loved nice cars then I might think it’s worth spending disposable income on one.
Completely agree here. I came from a family that loved its fancy cars, but the practical difference between an average car and a high-end luxury model is pretty minimal. Until you need to fix the latter.
> ... but the practical difference between an average car and a high-end luxury model is pretty minimal. Until you need to fix the latter.
You're right: broken gearbox on mine was a solid 15 K EUR at least. But... I paid zero.
My solution is simple: I buy a high-end luxury car used (four to five years old) but I then religiously pay every year for the official extended manufacturer warranty.
I pay 1400 EUR per year for that warranty but then any yellow or red light on the dashboard, any issue (sunroof not opening, sound system speaker broken, NAV issue, anything really), I bring it to any official dealership, in any country in the world and they fix it (it's already been at least to dealerships in Belgium (various little issues), France (gearbox but they didn't fix it: they didn't believe me it was broken), Germany (gearbox replaced), Spain (wipers broke down after a 1700 km road trip under heavy rain: like... it was just too much for the motor 15 hours non-stop), Andorra (yellow light, forgot what it was) and Poland (headlight was getting old and cranky, this summer)).
Car is now 12 y/o and 115 000 miles / 190 000 km and I just renewed the warranty for another two years, unlimited mileage.
For that's the thing with high-end luxury cars too: you have fancy stuff like a warranty valid until 15 years old and 350 000 miles / 400 000 km if you want (if I were to bring it in two years in Sep 2027 with 400 000 km and a broken engine, they'd be forced to replace it just like they were forced to replace the gearbox).
And that warranty is valid in any country in the world. And they give you a spare vehicle. And you've got assistance taking care of everything should you be stuck. For 120 EUR / month on a used car to me it's a no-brainer.
And in two years I'll just sell the car for 15 K EUR or something and buy another high-end luxury car, used (four or five years old), again.
I think for people who enjoy high-end cars but don't want to deal with the stress of having an engine or a gearbox breaking, a used high-end luxury car with an extended warranty is a good solution.
Practically I give to you that it's still just metal on four wheels.
The business model of most higher-end makes has evolved: the first customer leases the car for 3-4 years and then returns it to the dealer, who turns around and sells it to a customer with a full warranty for another 3-4 years.
So modern lux cars are actually pretty well-made and pretty reliable these days. The only catch is that they’re designed with the assumption that all maintenance will be done at the dealer and that the driver never sees a bill.
Once you exit that - do maintenance elsewhere or not under warranty, the costs become ridiculous and people start skipping necessary items. So the car breaks down and the repairs are even more ridiculous. So off to the junkyard it goes.
Stay inside the dealer+warranty bubble and you have a pretty good time, although many people will question your sanity buying an expensive extended warranty for a 12-year old car ;)
Not to mention that insurance is crazy with such high vehicle values. Easily another $200-300 a month, and that's if you're a good driver over 30 with no accidents.
I had a > $1000 car payment, but the interest rate was only 2.5%, not to mention I overpaid, so it was paid off early. I'll keep the car for at least 10-15 years.
Just looking at the "blue book" site suggests that a 5-year-old Accord with 50k miles can be traded for $20k and a 10-year-old Accord with 100k miles can be traded for half that, but a 2005 model with 200k miles is virtually worthless. So there's a cliff somewhere, but neither the 5 nor 10 year old example are negligible.
One point of annecdata to backup your figures: I traded my 2018 Accord (7.5 years old, 97k miles) this past weekend, was offered $11k and negotiated them up to $15k. So, trade ins are definitely worth more than nothing.
They've been snookered by American culture into believing that the bicycle is useless, and/or they've become trapped in an American exurb where the bicycle is in fact useless. I have a car but it mainly just sits there and like you I refuse to buy anything that costs more than about $30k. I drive a Honda Insight which at the time was the cheapest car Honda was selling in this country. The new Civic Hybrid annoyingly has 18-inch wheels so if I was looking at cars today I would probably favor the Corolla Hybrid. It blows my mind that people will by a Rivian.
The used car market is pretty rough too. A 10 year old Toyota Corolla with 100k miles is still a $10-15k car. Not terrible if you have the cash for it and you know it’s been maintained, but $15k is a lot to gamble on the previous owner having kept up with the maintenance.
Not saying that means you drop 50k on something else, when when a new Corolla can be had for between $22k-28k MSRP, I’d think pretty hard about gambling my $15k on a 10 year old unknown.
I paid $1300 and another $320 in fees for a 20 year old car but this is New Orleans where no one maintains anything so there was further down the pike in short order.
If that passed the functioning test, then great for you!
Statistically, the vast majority of buyers would prefer to buy a nicer car and finance it.
The reality is - unless you know a lot about cars - more times than not - you're going to spend WAY more money on a 20 year old car with >150,000 miles - then you are on financing a car 4x the price - and, especially, you don't need the $1520 that those people don't have to begin with.
>30% of Americans wouldn't even have the $1520 you paid.
Either you get ripped off at the point of sale (the car is totalled from any sane valuation) or you'll eventually get ripped off by mechanics.
Again, if this doesn't apply to you - then great - but it's not really surprising why people ignore the age-old adage to buy a car in cash when interest rates were negative in real terms for a generation.
I ended up spending about $3000 more on top of the $1620 to fix it up (160k mi) fully so while that was within my means, I am now free of a car payment for the foreseeable future so it really is kind of a Sam Vimes’ boots problem. I do know a fair amount about cars as do my friends.
This used to be what people did before COVID. Now it's a hardcore seller's market in the US:
The car chip shortage caused the resale value of cars to skyrocket. In the past few years my 15 year old CRV, which just passed 100k miles, has gone UP in value according to my mechanic because the used car market is so bad.
Many car dealerships, already well-known for poor consumer practices, have straight up refused to sell cars to people who don't wish to finance because they can make a lot more money off someone who wants to finance. You used to be able to convince them you planned to finance, then buy the car in full at the last minute, and the salesperson would do so because of sunk investment. Not anymore, many of my friends have experienced this firsthand when shopping for a new vehicle.
Combine this with it being all-but-required for people in the US to have a personal vehicle and drive if they want a job ("reliable transportation" in job postings), new & used car dealers have the additional leverage of time pressure as people can and do get fired for their car breaking down.
What I see a lot of wealthy people do, on the other hand, is finance a luxury vehicle, drive it for 3-5 years, then trade in for a newer model. Used to be lots of luxury vehicles, like the Giulia Quadrifoglio, with 20-30k miles for 30-40% of the original vehicle cost (25k-35k) which is an incredible deal for a luxury brand. This isn't really a thing anymore as the cost of a new car skyrockets.
Nothing old fashioned about buying a depreciating asset in cash. Why buy a depreciating asset on margin? You lose on the interest and the depreciation. The exception is some 0% APY car deal where you pay off the entire loan the moment interest comes due.
They don't even need to be Chinese EVs. Europeam and Asian brands are selling €15k small cars in Europe that pass European safety standards, comparable to the US ones.
My guess is that it is another form if hidden predictionism, even though Americans desperately need cheap cars, just like they need cheap apartments.
When I went to the site you listed, and checked the C3, it looked like the purchase price was much more than 15k. List price was 19k, and with Meinauto discount, 17.6k.
For me it offers 15000 plus transport to the dealership for the C3, but there’s plenty of other cars for less money on the list. Also: German prices, German taxes - the pricing is likely entirely different elsewhere.
The existence of environmental protection is fine, the existence of CAFE fscked up perverse incentives is a problem.
Having some labor quality of life concerns, making sure we aren't being undercut as a national security issue is fine. Having the chicken tax, destroying investments in solar energy and electric grids and EV charging is not.
We have bad manufacturing incentives in this country, our government wants the US to fail at solar, and the Chinese are playing to win.
If you have environmental protection and they don’t, your manufacturing is going to be more complicated than theirs, and therefore more expensive. It’s that simple.
We can also pressure them to enact equivalent environmental protections and refuse to trade otherwise, which would be great for the planet. Checking compliance would be difficult though, lying is culturally treated differently in different places.
Yes and I believe others in their own society penalized them for that, yes? Because it violates the local moral norms by placing greed over honesty. Would that happen in China? Like their approach works fine for them, it seems like at some point culturally they just gave up on trying to get people to be honest and just routed around that. Similar to how they routed around trying to get people to be humble with face culture. Making observations about a culture has to be allowable, because cultures are actually different. Why wouldn’t they be? They’ve been isolated from each other for a long time, from a purely memetic evolution perspective we would expect them to be different. And Chinese culture has been around a lot longer so I’m open to the idea that their approach could be more effective. But if you make policy expecting them to be honest, your policy will fail. You just need to make policy against game theory without making moral assumptions.
It's the safety regulations and tariffs that have been keeping them out so far. And it might be tough to sell them in enough volume to make it worthwhile for a US market redesign. While a lot of people ask for cheap subcompacts in the US, they have traditionally struggled to sell.
I wish I did not have to point it out to 77.3 million American voters, but the entire point of tariffs, their only mode of operation, is to raise domestic prices.
> I wish I did not have to point it out ... the entire point of tariffs... is to raise domestic prices.
Trump has to point this out not you. Instead he promised this:
“Starting on day one, we will end inflation and make America affordable again, to bring down the prices of all goods.” NBC Montana, Trump Rally in Bozeman
Less than zero. Car prices are dropping relative to other goods, though they've been mostly flat (in the sense of "inflating at the general rate") since 2010 or so.
As always, just go to FRED to ask these questions. This graph charts the ratio of the "New Vehicles" CPI value to the "All Items" CPI:
That's the salesman's way of saying that other goods (like gas and now electricity) have been getting more expensive faster than cars.
If you put 2 and 2 together, driving is getting considerably more expensive driven by more expensive cars and fuel, which one is rising faster is immaterial, inflation is the original problem but a used car salesman will find a way to use it to prove it doesn't exist.
> driving is getting considerably more expensive driven by more expensive cars and fuel
I'm at a loss. I literally showed you a graph showing that cars were getting cheaper over time. Do you not believe it, or maybe misunderstand what inflation is? You can chart new car price vs. median income too, it shows the same shape.
Fuel's a little more complicated. It's gone up in the last decade, but was going down in the 60's through 90's (not least because cars were getting more efficient). There was a trough in the late 90's.
> The graph shows only that cars are getting more expensive over time just not as mush as gas.
Gas isn't on the chart. It's showing the ratio between the auto segment of CPI (how expensive "a car" is) to the broader CPI metric (how expensive everything else is, on average). And it's going down.
I strongly suggest you think harder on the subject and study the chart (and FRED more generally) a bit.
> Inflation is a tax imposed by one group on another.
Does person A have a home? Then A, 100%. Regular citizens can get non-inflation-indexed, heavily-government-subsidized loans at leverage ratios[1] institutional investors could never dream of. And that's a better inflation hedge than almost anything. The home value inflates but your mortgage payments stay the same for decades.
The inability of people, even otherwise smart HN commenters, to reason about how inflation works has been really shocking to me.
[1] Literally 5x their net worth, or "20% down" in the local jargon
I do, yes. A quick google shows 65% of US households are occupant-owned (with most of those being mortgaged, though I'm too lazy to do a full accounting). I think the point about "regular" people and inflation is apt and I stand by it.
I have a strong suspicion that you aren't actually making an economic point.
Maybe but either way, person A CANNOT set the price of anything because a house is not a productive asset, it does NOT produce anything that you can attach a new price to. The rich asset owners can, they can drive prices up and gain from both ends of the inflation scam.
> The home value inflates but your mortgage payments stay the same for decades.
Literally untrue for variable mortgages that are now the rule. More importantly, it's absolutely irrelevant at any scale for the reasons cited above and because inflating house prices don't protect from inflation - you pay a huge tax on housing for just being there, which isn't the case for the rich asset owners. Sales taxes are separate.
Then if the house goes up in price and you sell it, old and depreciated, you will have to buy another one at an inflated price, or go homeless, or live in an moldy old hose again that'll cost you a lot more for medical bills.
> The inability of people, even otherwise smart HN commenters, to reason about how inflation been really shocking to me.
The inability of people, who otherwise think themselves smart at economics, to reason about anything has never been shocking to me, it goes way back in history. Their "reasoning" amounts only to lame gaslighting attempts and they can never get out of that mode of thinking.
You never mentioned anything about the income curves by decile - inflation is a redistribution tool, it results in increasing income inequality which we observe. I gave you the explanation for that correlation.
> Literally untrue for variable mortgages that are now the rule.
This is incorrect. 92% of US mortgages are fixed-rate [1].
> Then if the house goes up in price and you sell it, old and depreciated,
How can a house go up in price and become depreciated? If your home value goes up and you need to make repairs to it, you can take out a loan on the surplus value of your home also known as a reverse mortgage.
> You never mentioned anything about the income curves by decile - inflation is a redistribution tool, it results in increasing income inequality which we observe. I gave you the explanation for that correlation.
Yes this is largely because lower income deciles tend to hold more cash than assets [2] and inflation affects the purchasing power of cash directly while asset prices are "secured" by the value of the asset itself. Because the richer tend to hold more in assets they eat less impact with inflation.
Now that home ownership rates are so low among folks younger than 40, a big source of inflation-decoupled assets is unavailable. Though there's a greater question around whether it's even possible for homes to both appreciate and be affordable at the same time.
Honestly this discussion could use more sources and less pontificating.
> Yes this is largely because lower income deciles tend to hold more cash than assets
That's true, but it's important to point out that this is because the bottom of the income curve simply doesn't have meaningful assets at all. So what they have tends to be cash, and subject to inflation. But they don't have much, so the impact is very low. Their wages, however, do inflate along with the rest of the market.
And that's a problem that there's no wealth accumulation available to the bottom of the income curve! But it's not remotely a problem with monetary policy and "fixing inflation" isn't going to do anything for these people.
And in particular, trying to characterize inflation as a "tax" on them is voodoo nonsense.
> Honestly this discussion could use more sources and less pontificating.
That's absolutely true, it's nice to have. Maybe one day we'll have participants from the circle of people who are in positions to make meaningful decisions, hopefully that would be motivating enough for me to do better.
Circular, since transportation and energy which includes motor fuels combine into the 2nd-largest component of the consumer price index, after shelter.
Not everyone has that luxury due to commitments and priorities and not everyone enjoys or even thrives living in the city so I'm not sure what value this adds.
I always find it interesting how smug people who live in the city and/or have little experience in rural America can be about these kinds of topics.
>I always find it interesting how smug people who live in the city and/or have little experience in rural America can be about these kinds of topics.
Allow me to be extra smug then. I live in a small town with an Amtrak station. It was hard work finding this place, but well worth it to me. It means I never have to drive an automobile again. That makes me happy.
This. I was fortunate to be able to have the choice to leave, but it wasn’t always this way. I often reflect on what it was like to have constant dread of the next auto repair I would have to pay for.
