If you’ve been looking to buy a new vehicle lately, you may have noticed that they’re getting more and more expensive by the day.
So why has this happened?
Is it just that salespeople are trying to make more money off of you, or is there something else at play? Take a look with Beck’s Auto Center at why vehicles have been so expensive to buy lately, so you can be prepared to purchase your next ride!
Part 1: Auto Makers are Making More Profits Than Ever
Though auto manufacturers are making more profits, they aren’t making more vehicles. This year alone, GM expects to make anywhere from 9.6 – 11.2 billion dollars in profit. In fact, American automakers are now earning more money per vehicle than any other time since before World War II.
However, there’s a problem: these companies aren’t selling many vehicles. In fact, auto sales have been steadily declining for years and are now at their lowest point since 1992! This means scarcity is continuing to drive up prices, making used vehicles sell at nearly new vehicle prices.
Part 2: Demand for New Cars Continues to Rise
Americans have been flocking to dealerships and buying new cars in an effort to replace older vehicles that they simply can’t afford to repair any longer. Unfortunately, as demand continues to increase, it’s causing prices for these new vehicles—which are already high—to skyrocket even higher. In fact, prices for used cars are also going up because people are spending so much money on new cars.
It’s a vicious cycle of rising costs: As more people buy new cars, fewer people sell their old ones, which means there are fewer options for buyers looking to purchase a pre-owned vehicle. And with fewer options available at lower prices, consumers end up paying more for their used car than they would if there were more choices available at lower prices.
Part 3: Auto Loans Continue to be Easy to Get
Rising demand for autos has led auto lenders to relax underwriting requirements and offer car loans with terms of up to 7 years. As a result, subprime borrowers are coming back into the market for cars—and are finding it easier than ever before to get financing.
Banks aren’t as worried about being repaid as they were in 2008, says Craig Kennison, an analyst at Barclays Capital. They have more capital on hand and less risk in their portfolios than they did then. The banks are in much better shape today, he says. They don’t need to make these loans. But if you can fund them cheaply and sell them off at a profit later on, why not? It is just another asset class for them to invest in.
Part 4: Rising Input Costs are Adding Up
You might think that prices would be falling in today’s oversupplied market, but instead they are going up. This is because a number of factors have increased vehicle input costs: rising wages and raw material prices, currency fluctuations and increased environmental standards. If you have considered buying a new car lately, you may have noticed that prices are higher than you had expected.
Part 5: Other Factors Drive Prices Higher
Cars aren’t just more expensive because automakers have been taking advantage of new tariffs and using that increased revenue for investments in areas like autonomous driving, electrification, connected services and AI.
The number of cars sold has also dropped off sharply as buyers have shifted from sedans and SUVs to crossovers, which are less expensive. At the same time, some types of metal (like aluminum) used in vehicles have gotten more expensive while other metal costs have stayed relatively stable or gone down. All these factors contribute to rising prices—and they all look likely to continue.
Repairing Your New or Used Vehicle
Whether you purchase a new or used vehicle during this economy, you need an auto repair shop you can trust in case of any issues!
Beck’s Auto Center has been in business since 1972, providing excellent service to our customers! Read about their experiences here, and feel free to schedule a repair or tuneup!