Agreed, but that is an irrelevant conclusion. You just made a general comment that “Inflation has increased prices on everything more than wages have increased”. I wanted to point out that, over the past 12 months, that is not the case.
Of course they care, whether they know it or not. What do you think auto lenders base their rates on?
Agreed, but that’s another irrelevant conclusion. I was simply responding to your comment about interest rates being at “levels I haven’t seen since the 1980s”.
You said “Credit card balances have risen, savings have decreased and people are tapping their IRAs for emergencies.” This discussion is about more than just car loans. Consumers only have a finite amount of income and/or assets and rising interest rates affect consumer’s overall financial position. You don’t think high mortgage and credit card rates impact how much, or if, they can borrow for a new or used car?
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I did not put a timespan on this. We are both correct in our statements as the data shows. I think it is relevant. Reference the consumer confidence data as evidence of that.
Ask 10 people what the Fed rate is and how it effects anything. You might find one that knows nor cares. If auto lenders based their rates directly on the fed rate why don’t auto loan rates mirror the fed rates? The fed rate has added 1% for the last year while auto loan rates have increased 3 to 3.5%?
And so I misremembered mortgage loan rates from the 90s, sorry, mea culpa. I did not argue that point…I agreed with you.
Of course I DO think this affects whether or not people can and will buy new cars. Read my posts again, that is exactly the point I was making.
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I think we are into the gouge and get away with it era.
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I think there’s a bit of confirmation bias in your numbers. Let’s go with the federal reserve numbers since, IMO, that’s as good a source as you’ll get. The last time the fed published rates on auto loans was August, so I’m comparing auto loan rates to the fed rate from August 2022 to August 2023:
Fed funds rate increased 3.00% (2.33 to 5.33%)
48-month auto loan rate increased 2.78% (5.52 to 8.30%)
60-month auto loan rate increased 2.38% (5.50 to 7.88%)
72-month auto loan rate increased 2.51% (5.61 to 8.12%)
https://fred.stlouisfed.org/series/FEDFUNDS
https://fred.stlouisfed.org/series/TERMCBAUTO48NS
https://fred.stlouisfed.org/series/RIFLPBCIANM60NM
https://fred.stlouisfed.org/series/RIFLPBCIANM72NM
I will go out on a limb and say that’s close enough for auto loan rates to be considered as mirroring the fed funds rate.
Fair points on everything else. I acquiesce.
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Is the economy the main cause of the projected downturn in new car sales for 2024?
Good points pro & con made above. I’d guess to the extent the economy is actually to blame, it’s more that folks are thinking the economy is going to get worse in 2024, so are planning ahead by cutting discretionary spending now. Unemployment is the big factor, but it remains low by historical standards. Potential car buyers must thinking unemployment is going to go higher.
New car prices and the cost (& time-consuming hassle) of diagnosis & repair is an important factor affecting the new-car buying decision too, imo.
A new car I can do without. I am more worried about the price of cheeseburgers.
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Interesting discussion on Macro Economics (Inflation, Fed Funds rates, etc.) but the conclusions start to fall apart when you get to the Micro Economics level of vehicle sales.
Have we already forgotten the Pandemic Chip Shortage which crushed the supply of new vehicles and the manufacturers decisions to allocate the limited supply of chips to the high end models, both resulting in higher prices?
While there has been some sticker price increases, today I’m seeing significant increases in production, increases in dealer stock and the beginnings of Manufacturer’s Rebates and Below Market financing, i,e discounting. Adding to that is the increase in borrowing rates, which decrease consumer demand but also increase the dealers Floor Planning costs giving dealers additional incentive to move their inventory.
While I don’t see a short term return to pre-pandemic consumers buying at Dealer’s Cost, I do see a return to more rational pricing if only because manufacturers have immense fixed costs in design, tooling and setup that they need to spread over a large amount of vehicle sales to make a profit.
Put another way, if it cost $10 million to set up a pickup truck line I’ve got to spread those costs over all my vehicle sales and while sales of $80,000 blinged out pickups may be quite profitable, at that price it’s it’s a limited market.
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