Counterintuitively, is now the *best* time to buy a new car?

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CletusCaddy
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Counterintuitively, is now the *best* time to buy a new car?

Post by CletusCaddy »

We all know it’s a crazy time to own a car. Depreciation for many models has virtually stopped, even reversed.

I have two thoughts about this state of affairs.

1. When supply chain issues finally resolve, do we expect used cars to immediately plummet in value, making up for these two years of non-depreciation in an instant? Or do we expect the depreciation curve to restart gradually from where it stopped? In the latter case, everyone who has owned a car during this time will have had a free pass on two years of ownership. I think this latter case is more likely.

2. And if I am right about the depreciation curve restarting gradually, then for anyone who needs an additional car, wouldn’t it be better for them to buy that car now, as opposed to waiting for the market to get back to normal? They would benefit from a paused depreciation curve for as long as it lasts.
Last edited by CletusCaddy on Wed Jan 19, 2022 5:08 pm, edited 1 time in total.
rockstar
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Re: Car depreciation expectations

Post by rockstar »

I'd keep up with Manheim posts.

https://publish.manheim.com/en/services ... index.html

There is a call on the 7th that would probably be pretty informative.

No idea how long this is going to take to unwind. But you'll find a lot of used car dealers holding too expensive inventory. Eventually, they'll either send it back to auction and take a loss or cut prices. This isn't going to happen fast.
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CletusCaddy
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by CletusCaddy »

Bump. Seems to be lots of folks on the board asking questions about whether to buy new cars right now or wait. Here is a different perspective on the question.

Yes, the cost of entry into a new car is higher right now. But the most expensive cost of a new car is depreciation, not cost of capital. And depreciation is close to nil right now.
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riverant
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by riverant »

CletusCaddy wrote: Wed Jan 19, 2022 5:09 pm Bump. Seems to be lots of folks on the board asking questions about whether to buy new cars right now or wait. Here is a different perspective on the question.

Yes, the cost of entry into a new car is higher right now. But the most expensive cost of a new car is depreciation, not cost of capital. And depreciation is close to nil right now.
Used car prices isn’t really supply chains, it’s chips. Right now car inventories are down to 40k nationwide, which figure is a few months of demand. New car production is super constrained by chips. If chips were suddenly not an issue, new car production would have to massively over produce to return inventories to normal levels. As it is, the chip shortage likely won’t resolve on 2022 or even 2023 (at least not fully), so I don’t see a short term price correction being possible barring some sort of large recession. Manheim looks to project a 3% correction by YE and another 5% In 2023. This is after the 70% increase since pre covid.

However I’d agree. After never once considering a new car, I’d now probably only consider a new vehicle if I needed a car. There is no financial benefit to used cars and I’m not sure when that situation will reverse. I suspect that we have such a hole in 2021-2022 model years, we’ll be feeling this situation for the next decade.
randomguy
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by randomguy »

CletusCaddy wrote: Wed Jan 19, 2022 5:09 pm Bump. Seems to be lots of folks on the board asking questions about whether to buy new cars right now or wait. Here is a different perspective on the question.

Yes, the cost of entry into a new car is higher right now. But the most expensive cost of a new car is depreciation, not cost of capital. And depreciation is close to nil right now.
The thing is you don't care about current depreciation rates. You care about them when you go to sell. It seems likely in say 10 years when you go to sell this will all be a memory and that we will be back to normal curves. By overpaying now (i.e. paying say MSRP instead of 10% below), you will end up losing that money. See all the hot cars that had dealer mark ups for the first couple years when they were hot but then plummet after the initial market was saturated.

How long it will take for everything to resolve is a guessing game. But as soon ass I can buy a car for 10% below MSRP off the lot. Nobody is going to be buying a 3 year old version for 10% below MSRP. The used car would need to be 30%+ to find buyers. Now this probably isn't going to be some sharp correction but more one that happens over a year or two.

Obviously if you need a car, you need a car. Buying new might make more sense. Overpaying by 10% is better than overpaying by 20%....
calwatch
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by calwatch »

The other thing is, isn't there price compression on cars? So the lower end cars and the family sedans are more expensive than normal while luxury cars and higher end trims cost around the same as they always did. So the impact on the market may not be the same overall. I am considering using my Ford X Plan shareholder bonus to buy either a Maverick hybrid or Mustang Mach-E EV. The salve is that, although I am paying a decent amount for a new car, no one is getting it much cheaper since it is impossible to negotiate a deal. I also can order the car that I want and be in line with everyone else rather than trying to decide whether a different color or trim is worth the savings if that's not what I really want.
59Gibson
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by 59Gibson »

Buying new really is the only BH option right now, unless you're digging into 15 yr old vehs. And the prices are "reasonable"on many vehicles considering all the issues right now, not least of which is big time inflation. I'm considering an Outback and it's right at MSRP.
bob60014
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by bob60014 »

I'm just glad I bought new in early 2020 before the sh** hit the fan.
Carguy85
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by Carguy85 »

bob60014 wrote: Wed Jan 19, 2022 8:30 pm I'm just glad I bought new in early 2020 before the sh** hit the fan.
Bought the exact Crewmax tundra I was looking for right off the transporter for $40k new in mid 2020. The dealer has a new similarly optioned crewmax now for $55k !! One of the smarter moves I’ve made out of pure dumb luck.
idc
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by idc »

Depending on circumstances and preferences, this might be a good time to buy a new Tesla and not any other type of car - new or used.

Tesla bucks the trends in so many ways. Prices are very transparent and they don't seem to be affected by chip supply issues, but rather by high demand for the cars. This creates a situation where you get a predictable price, predictable delivery time (if you don't want the cheapest model) and they are holding the value really well.

Any other new decent car you want to buy (ICE or EV) you face the problem of either paying handsomely over sticker, and/or waiting unpredictable times for delivery. Buying used does not save you any money. And with demand for EVs continuing to grow, Teslas will maintain their value for quite a few years, when compared to other cars. There is no way to tell when and how the chip supply issues will abate, but there is likely to be high volatility in car prices and depreciation over the next few years. It feels Tesla is less likely to be affected by those factors.

Full disclosure, I own a Model 3 and lease an Audi Q5 PHEV. Love both cars, and love to have the option to purchase my Q5 lease when it expires in a year. I considered buying a Rav4 PHEV before I bought the Tesla, but it just did not make sense in so many ways.
finite_difference
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by finite_difference »

TJat wrote: Wed Jan 19, 2022 6:23 pm
CletusCaddy wrote: Wed Jan 19, 2022 5:09 pm Bump. Seems to be lots of folks on the board asking questions about whether to buy new cars right now or wait. Here is a different perspective on the question.

Yes, the cost of entry into a new car is higher right now. But the most expensive cost of a new car is depreciation, not cost of capital. And depreciation is close to nil right now.
Used car prices isn’t really supply chains, it’s chips. Right now car inventories are down to 40k nationwide, which figure is a few months of demand. New car production is super constrained by chips. If chips were suddenly not an issue, new car production would have to massively over produce to return inventories to normal levels. As it is, the chip shortage likely won’t resolve on 2022 or even 2023 (at least not fully), so I don’t see a short term price correction being possible barring some sort of large recession. Manheim looks to project a 3% correction by YE and another 5% In 2023. This is after the 70% increase since pre covid.

However I’d agree. After never once considering a new car, I’d now probably only consider a new vehicle if I needed a car. There is no financial benefit to used cars and I’m not sure when that situation will reverse. I suspect that we have such a hole in 2021-2022 model years, we’ll be feeling this situation for the next decade.
Car inventories of 40k nationwide is a few months of demand? That’s more like one day’s worth of demand.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh
randomguy
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by randomguy »

idc wrote: Wed Jan 19, 2022 11:20 pm Depending on circumstances and preferences, this might be a good time to buy a new Tesla and not any other type of car - new or used.

Tesla bucks the trends in so many ways. Prices are very transparent and they don't seem to be affected by chip supply issues, but rather by high demand for the cars. This creates a situation where you get a predictable price, predictable delivery time (if you don't want the cheapest model) and they are holding the value really well.

Any other new decent car you want to buy (ICE or EV) you face the problem of either paying handsomely over sticker, and/or waiting unpredictable times for delivery. Buying used does not save you any money. And with demand for EVs continuing to grow, Teslas will maintain their value for quite a few years, when compared to other cars. There is no way to tell when and how the chip supply issues will abate, but there is likely to be high volatility in car prices and depreciation over the next few years. It feels Tesla is less likely to be affected by those factors.

Full disclosure, I own a Model 3 and lease an Audi Q5 PHEV. Love both cars, and love to have the option to purchase my Q5 lease when it expires in a year. I considered buying a Rav4 PHEV before I bought the Tesla, but it just did not make sense in so many ways.
A model 3 was a 37k car at the start of 2021. Today Tesla is selling it for 45k. You aren't going to find many other brands that have jacked up the prices that much. Paying Tesla mark up versus dealer markup just changes who gets the cash. If the model 3 is a 37k car in 3 years, the people paying 45k today will have some pretty bad depreciation..
Novice2020
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by Novice2020 »

idc wrote: Wed Jan 19, 2022 11:20 pm Depending on circumstances and preferences, this might be a good time to buy a new Tesla and not any other type of car - new or used.

Tesla bucks the trends in so many ways. Prices are very transparent and they don't seem to be affected by chip supply issues, but rather by high demand for the cars. This creates a situation where you get a predictable price, predictable delivery time (if you don't want the cheapest model) and they are holding the value really well.

Any other new decent car you want to buy (ICE or EV) you face the problem of either paying handsomely over sticker, and/or waiting unpredictable times for delivery. Buying used does not save you any money. And with demand for EVs continuing to grow, Teslas will maintain their value for quite a few years, when compared to other cars. There is no way to tell when and how the chip supply issues will abate, but there is likely to be high volatility in car prices and depreciation over the next few years. It feels Tesla is less likely to be affected by those factors.

Full disclosure, I own a Model 3 and lease an Audi Q5 PHEV. Love both cars, and love to have the option to purchase my Q5 lease when it expires in a year. I considered buying a Rav4 PHEV before I bought the Tesla, but it just did not make sense in so many ways.
Which car do you prefer more, the model 3 or the Audi Q5? Could you elaborate on some of the pros and cons of each?
finite_difference
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by finite_difference »

randomguy wrote: Wed Jan 19, 2022 11:40 pm
idc wrote: Wed Jan 19, 2022 11:20 pm Depending on circumstances and preferences, this might be a good time to buy a new Tesla and not any other type of car - new or used.

Tesla bucks the trends in so many ways. Prices are very transparent and they don't seem to be affected by chip supply issues, but rather by high demand for the cars. This creates a situation where you get a predictable price, predictable delivery time (if you don't want the cheapest model) and they are holding the value really well.

Any other new decent car you want to buy (ICE or EV) you face the problem of either paying handsomely over sticker, and/or waiting unpredictable times for delivery. Buying used does not save you any money. And with demand for EVs continuing to grow, Teslas will maintain their value for quite a few years, when compared to other cars. There is no way to tell when and how the chip supply issues will abate, but there is likely to be high volatility in car prices and depreciation over the next few years. It feels Tesla is less likely to be affected by those factors.

Full disclosure, I own a Model 3 and lease an Audi Q5 PHEV. Love both cars, and love to have the option to purchase my Q5 lease when it expires in a year. I considered buying a Rav4 PHEV before I bought the Tesla, but it just did not make sense in so many ways.
A model 3 was a 37k car at the start of 2021. Today Tesla is selling it for 45k. You aren't going to find many other brands that have jacked up the prices that much. Paying Tesla mark up versus dealer markup just changes who gets the cash. If the model 3 is a 37k car in 3 years, the people paying 45k today will have some pretty bad depreciation..
It’s not the same car though. The latest version has 30% more range.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh
idc
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by idc »

randomguy wrote: Wed Jan 19, 2022 11:40 pm A model 3 was a 37k car at the start of 2021. Today Tesla is selling it for 45k. You aren't going to find many other brands that have jacked up the prices that much. Paying Tesla mark up versus dealer markup just changes who gets the cash. If the model 3 is a 37k car in 3 years, the people paying 45k today will have some pretty bad depreciation..
True in terms of getting the cash now, I did mention price transparency, and never have to deal with any of the slimy finance people. Teslas tend to have better depreciation and you still get a predictable delivery time. They might not be for everyone, have their own shortcomings, but I am so glad they are pushing the car industry to change for the better.

In terms of the Q5 vs Tesla @Novice2020:

I like the interior and fit and finish for Q5 and power delivery (faster than the SQ5). For local commute I am almost always electric and I have the flexibility to travel long distance comfortably and without any planning for charging. The high tech package feels like the stone age though. None of the remote functionality ever works, the only high tech thing I am using is the Carplay integration and the entire UI on the screen and everything feels puny and antiquated. If you lose one key, it is easily $600 to replace plus months of waiting for it. Just atrocious, I bought Apple tags just to make sure I can recover the keys should I lose them.

Tesla is ages ahead in so many ways. The fastest and most nimble car I ever owned (and I did own a BMW M2). In fact, I rarely use it in the standard/perf mode cause it causes me motion sickness due to instant torque, which I never had in an ICE. The remote functionality is flawless. You don't need a key to enter the car and the integration with the phone is literally real time. The car gets better with every monthly release and the super charger network allows for long distance travel works with minimal planning. It will take everybody else many years to replicate. The car is comfortable (not as good as Audi though) and reliability is good, service costs minimal. The minimalist style has grown on me, but it is not for everybody and there are things you can't simply get, like ventilated seats, sunroof, etc. Nothing major, but will turn some people off.

I tried charging the Q5 on long trips and it was hopeless. Far fewer locations, far fewer stalls available in each location, with few DC fast charging points (not needed for Q5 though) and you are very likely to not be able to charge because one of these will be true: all stalls are occupied, the stalls that are not occupied don't work or the infrastructure that is needed to pay is not working or you are not yet registered for it. With Tesla you always have multiple stalls available, you simply navigate to it, plug it in and it always works, no need for credit cards, etc.

For local trips I almost always take the Tesla. I prefer it even for ski trips to the local resorts since I have AWD and winter tires and the fact that you can reliably turn on heating remotely 15 minutes before you get to the car, which never worked for the Q5. For longer trips, with many people in and/or lots to cary then I take the Q5.

If you have access to charging at home and can afford two vehicles this combination is a sweet spot. If I were to have a single vehicle at this point I could easily live with either a Tesla or a newer generation/longer range PHEV like Lexus NX/Rav4/BMW X5, etc. There are pros and cons to both and it is great to have choices like that. I hope Tesla will get better in terms of more comfort features, the other manufacturers will get their tech much better and finally I do hope the whole DC charging infrastructure gets and order of magnitude better than it is right now.
Valuethinker
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by Valuethinker »

CletusCaddy wrote: Thu Dec 30, 2021 12:40 pm We all know it’s a crazy time to own a car. Depreciation for many models has virtually stopped, even reversed.

I have two thoughts about this state of affairs.

1. When supply chain issues finally resolve, do we expect used cars to immediately plummet in value, making up for these two years of non-depreciation in an instant? Or do we expect the depreciation curve to restart gradually from where it stopped? In the latter case, everyone who has owned a car during this time will have had a free pass on two years of ownership. I think this latter case is more likely.

2. And if I am right about the depreciation curve restarting gradually, then for anyone who needs an additional car, wouldn’t it be better for them to buy that car now, as opposed to waiting for the market to get back to normal? They would benefit from a paused depreciation curve for as long as it lasts.
It will normalise. That is, new cars will be sold at a discount & used cars will reflect that discount. Fleet sales, an important component of 1-2 year old used cars, will return to the market, driving the prices downwards on used cars.

However this will take 2-3 years ie time to normalise new car market PLUS 1-2 years to fill the used car market again.

so

1. I don't know about "free pass". Depreciation is still depreciation? As used car prices fall, there is a fall in resale value.

2. New cars are expensive because of depreciation in value. You can't escape that-- even right now. In future years you will get better models (more safety features etc, and the transition to EVs has begun, although it will take a long time in USA compared to some other countries).

I have a suspicion that given sharply rising oil prices, it will be the more gas guzzling SUVs & pickups which will depreciate the most.

The rise in US used car prices has been unprecedented (I saw +27%?). Enough to actually move the CPI index. I think there will be a degree of mean reversion -- albeit not back to the original state for some time.
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by hvaclorax »

My perception is that the prices will not go down. The 5+% inflation will not lead to deflation rather we’ll see prices go up from the new baseline. From where we are, 5% now till this settles out then 2-3% hopefully when the situation returns to normal. I assume normal will come along sooner or later.
Respectfully HVAC
randomguy
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by randomguy »

hvaclorax wrote: Tue Jan 25, 2022 11:12 pm My perception is that the prices will not go down. The 5+% inflation will not lead to deflation rather we’ll see prices go up from the new baseline. From where we are, 5% now till this settles out then 2-3% hopefully when the situation returns to normal. I assume normal will come along sooner or later.
Respectfully HVAC
I expect that at some point we will resolve the supply chain issues and some makers will get aggressive with production numbers to take advantage of the inflated prices. And then we get a glut and prices plummet. That cycle seems to happen consistently with ever product that is has supply issues. You might not see big differences in MSRPs (those are going to be sticky) but instead of paying 3k over MSRP, you will be paying 3k under it.
Valuethinker
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by Valuethinker »

randomguy wrote: Tue Jan 25, 2022 11:44 pm
hvaclorax wrote: Tue Jan 25, 2022 11:12 pm My perception is that the prices will not go down. The 5+% inflation will not lead to deflation rather we’ll see prices go up from the new baseline. From where we are, 5% now till this settles out then 2-3% hopefully when the situation returns to normal. I assume normal will come along sooner or later.
Respectfully HVAC
I expect that at some point we will resolve the supply chain issues and some makers will get aggressive with production numbers to take advantage of the inflated prices. And then we get a glut and prices plummet. That cycle seems to happen consistently with ever product that is has supply issues. You might not see big differences in MSRPs (those are going to be sticky) but instead of paying 3k over MSRP, you will be paying 3k under it.
Some manufacturers are signalling more normal supply in H2 2022 I believe.

I think this is a 2023 story, with the used car market not sorting itself out before then, and probably after.

I believe Toyota is talking shortages of some models as much as 4 years out (new Landcruisers).
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SmallCityDave
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by SmallCityDave »

There's a good chance that used car prices will plummet when inventory comes online BUT what about inflation?

In 2020 we bought a new car but shortly thereafter I questioned if we need 2 vehicles (especially new) so we sold it to Carmax, in the last 18 months we've gone through a number of cars making money along the way. Last month we bought the least expensive of the bunch it's 10+ years old and has just under 100k miles it's perfect for our needs and in the end it will cost us "nothing" out of pocket.

Counterintuitively now was a good time for us to buy.
JackoC
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by JackoC »

finite_difference wrote: Wed Jan 19, 2022 11:35 pm
TJat wrote: Wed Jan 19, 2022 6:23 pm
CletusCaddy wrote: Wed Jan 19, 2022 5:09 pm Bump. Seems to be lots of folks on the board asking questions about whether to buy new cars right now or wait. Here is a different perspective on the question.
Yes, the cost of entry into a new car is higher right now. But the most expensive cost of a new car is depreciation, not cost of capital. And depreciation is close to nil right now.
Right now car inventories are down to 40k nationwide, which figure is a few months of demand.
Car inventories of 40k nationwide is a few months of demand? That’s more like one day’s worth of demand.
Yeah, most recent numbers of FRED graphs of inventory and total sales, November were 40k inventory 13mil annual sales rate, a little over a day. But if you count all sales as that graph does (includes fleet etc) the normal inventory in recent years has still generally been <1 month (in 2016 inventory was a relatively usual 1mil with sales rate around 18 mil, inventories have been declining since then).
https://fred.stlouisfed.org/series/AUINSA
https://fred.stlouisfed.org/series/TOTALSA

There are still a whole lot of cars being sold, supply is not radically reduced in % terms overall. But like every other such situation the key is elasticity of demand. Simplistically modeling car buying as 'you get 10% discount on MSRP' normally, it would stay around 10% discount if even a not huge number of marginal buyers dropped out at only 8% discount; then maybe you'd have 9% discount when production dropped from 18mil to 13mil/yr. But obviously there are more buyers tolerant of less discount than that so 18>13mil/yr supply pushed typical price to MSRP+. Of course in real world discounts to MSRP varied widely before this: some hot cars were MSRP+, heck some people paid MSRP on regular not very hot cars, and they vary now (a dealer quoted me MSRP+14% yesterday on a Lexus IS 500 F Sport Performance Premium; most of the few IS 500's at dealers up to now are the limited production [500 units] 'Launch Edition' where dealers want up to +30-40%, I've heard, apparently extending somewhat to the 'regular' Premium of which there are even fewer around, so far, I'll wait and see).

I don't think the consumer car market is perfectly efficient (or even as close as something like the stock market) but still broad side of barn 'you get what you pay for'. There are people who really need a car now. I think they will probably (again very roughly speaking) get what they pay for. I don't need the IS 500 right now, in fact it comes on summer tires so I would not drive it much here in the NY area till spring anyway (I won't bother getting a winter wheel/tire set like I had with my BMW M2 I sold already, the car and the extra wheel set to two different people :happy I found I hardly drove that car in the winter anyway). So I don't think I'd get good value jumping on a high price now. Although my crystal ball is cloudy on whether the situation will get better any time soon.
randomguy
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by randomguy »

SmallCityDave wrote: Wed Jan 26, 2022 9:07 am There's a good chance that used car prices will plummet when inventory comes online BUT what about inflation?

In 2020 we bought a new car but shortly thereafter I questioned if we need 2 vehicles (especially new) so we sold it to Carmax, in the last 18 months we've gone through a number of cars making money along the way. Last month we bought the least expensive of the bunch it's 10+ years old and has just under 100k miles it's perfect for our needs and in the end it will cost us "nothing" out of pocket.

Counterintuitively now was a good time for us to buy.
Inflation is being driven more by car prices than car prices driven by inflation. Car prices are over 20% versus the 5-6% for inflation over that time period. For prices to stay permanently up (in real dollars), you would need some reason of why all the manufactures cost of business has gone up or why none of them are willing to accept the old margins to expand sales. In 2019 something like 17 million cars were sold. In 2021 that number was 15 million. RIght sales are limited by production. If dealers had another million cars, they could sell them. To me it seems incredibly unlikely that the demand will not be met by increased production since my understanding is the production lines aren't running at full capacity. They don't need to build factories/tooling that can take years. They need chips/redesign parts to use new chips.
sandan
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by sandan »

randomguy wrote: Wed Jan 26, 2022 9:48 am
Inflation is being driven more by car prices than car prices driven by inflation. Car prices are over 20% versus the 5-6% for inflation over that time period. For prices to stay permanently up (in real dollars), you would need some reason of why all the manufactures cost of business has gone up or why none of them are willing to accept the old margins to expand sales. In 2019 something like 17 million cars were sold. In 2021 that number was 15 million. RIght sales are limited by production. If dealers had another million cars, they could sell them. To me it seems incredibly unlikely that the demand will not be met by increased production since my understanding is the production lines aren't running at full capacity. They don't need to build factories/tooling that can take years. They need chips/redesign parts to use new chips.
I thought factories are retooling and/or closing for electric cars and the chip shortage has been a convenient excuse. The new EPA mpg mandates help support this hypothesis.
stoptothink
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by stoptothink »

Carguy85 wrote: Wed Jan 19, 2022 9:09 pm
bob60014 wrote: Wed Jan 19, 2022 8:30 pm I'm just glad I bought new in early 2020 before the sh** hit the fan.
Bought the exact Crewmax tundra I was looking for right off the transporter for $40k new in mid 2020. The dealer has a new similarly optioned crewmax now for $55k !! One of the smarter moves I’ve made out of pure dumb luck.
We ordered a Ford Maverick hybrid June of last year, when we had no need for a new vehicle for at least another year. It checked all the boxes and I had a hard time believing Ford wouldn't significantly raise the price in another year. Well, my intuition was correct; 7 months later and we're still waiting (expected delivery late April - early May), but if we ordered today we'd be waiting at the very least until fall and Ford already announced a price hike for '23 models. And, if we were able to luckily find one sitting at a dealership, we'd be paying at least $5k markup (on a $24k truck). Annoying waiting 10 months for a vehicle you ordered, but we timed it well.
Cycle
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by Cycle »

I needed to get a minivan due to growing family, also my partner demanded a backup camera.

Considered a brand new van. Ended up trading in a 10 year old Honda CR-V for a 9 yo Odyssey with 20k less miles. The odyssey is much nicer, with leather seats and much more functional than a small SUV. This cost me $4000 out of pocket.

The new van would have tied up $35k of cash, which at 8% is $2800 a year plus we have to get collision insurance, so like $4000 PER YEAR :shock: No brainer to do the trade in instead.

We drive about 8k miles a year (mainly road trips and urgent care) so this will last us another decade or so. If you choose to drive at all, the best way to save money on cars is to drive less. I'm nearly 40 and my partner and i have sunk less than 30k net into cars (after trade in / sales).

As a bonus you can find snow tires for cheap on older vehicles. Got nearly new michillin snow tires on wheels for $400 total. :beer

Depending on your mileage, used still may be the way to go
Never look back unless you are planning to go that way
phxjcc
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by phxjcc »

randomguy wrote: Wed Jan 19, 2022 6:46 pm
CletusCaddy wrote: Wed Jan 19, 2022 5:09 pm Bump. Seems to be lots of folks on the board asking questions about whether to buy new cars right now or wait. Here is a different perspective on the question.

Yes, the cost of entry into a new car is higher right now. But the most expensive cost of a new car is depreciation, not cost of capital. And depreciation is close to nil right now.
The thing is you don't care about current depreciation rates. You care about them when you go to sell. It seems likely in say 10 years when you go to sell this will all be a memory and that we will be back to normal curves. By overpaying now (i.e. paying say MSRP instead of 10% below), you will end up losing that money. See all the hot cars that had dealer mark ups for the first couple years when they were hot but then plummet after the initial market was saturated.

How long it will take for everything to resolve is a guessing game. But as soon ass I can buy a car for 10% below MSRP off the lot. Nobody is going to be buying a 3 year old version for 10% below MSRP. The used car would need to be 30%+ to find buyers. Now this probably isn't going to be some sharp correction but more one that happens over a year or two.

Obviously if you need a car, you need a car. Buying new might make more sense. Overpaying by 10% is better than overpaying by 20%....
Exactly right.

A perfect example is the latest “shiney-new-thing” that some people feel they must have now. Currently Bronco, Corvette, and Maverick prices are inflated above any sustainable levels. Their money, their choices—-but they are going to take a big hit when they sell. Remember when the Boss 302 Laguna Seca was the hot item? “Investors” bought them and stashed them away…great idea…7ntil the Shelby 350 came out and killed the prices on those.

Alternatively, however, the entire supply chain may be permanently disrupted and remodeled to include more of a JIT model….the manufacturers will make cars Just In Time from here forward. No more red exterior with red interior “rental car specials” just to keep the factory running. Subaru’s executives have all but said this recently…that they are happy with this business model. Less inventory is driving profits and reducing costs…why would anyone in the business want to go back to the old model?

The more interesting thing is what happens to the business during a recession…in 2009 they were putting “cash on the hood” for anyone to buy anything. If there is no demand and no inventory…will the UAW contract allow for factories to be furloughed?

I don’t think so.

If you are in the median price point of the market and need it—or just want it and can afford the hit, just buy it. Life is not a spreadsheet.
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by Valuethinker »

sandan wrote: Wed Jan 26, 2022 9:52 am
randomguy wrote: Wed Jan 26, 2022 9:48 am
Inflation is being driven more by car prices than car prices driven by inflation. Car prices are over 20% versus the 5-6% for inflation over that time period. For prices to stay permanently up (in real dollars), you would need some reason of why all the manufactures cost of business has gone up or why none of them are willing to accept the old margins to expand sales. In 2019 something like 17 million cars were sold. In 2021 that number was 15 million. RIght sales are limited by production. If dealers had another million cars, they could sell them. To me it seems incredibly unlikely that the demand will not be met by increased production since my understanding is the production lines aren't running at full capacity. They don't need to build factories/tooling that can take years. They need chips/redesign parts to use new chips.
I thought factories are retooling and/or closing for electric cars and the chip shortage has been a convenient excuse. The new EPA mpg mandates help support this hypothesis.
1. I don't imagine, particularly in USA, that a lot of factories are closing & retooling for EVs. Europe? Maybe. Japan? No. China? Not really (they probably have massive surplus capacity as they do in most things).

2. chip shortage is not a convenient excuse. It's a reality. And it will take time to overcome. One part was soaring demand for consumer electronics during the lockdown diverted manufacturing capacity aka "fabs". Also the car industry is all Just in Time and so they didn't have any stockpiles. After a terrible 2020 demand picked up in 2021 but not enough chips.

Some progress on the bottlenecks has been reported, but I suspect it will be (at least) 2023 before they are resolved.

3. Tier 1, 2, 3 parts suppliers all disrupted eg by Covid shutdowns in some Chinese cities. The components that go into the components.

4. there is a global crisis in shipping containers. Too many tied up at too many ports, waiting to be moved, with long delays before the truckers move them. That compounds problems with parts and car supply in USA.
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by surfinagin »

Forced to shop this mkt after our car was totaled by an at-fault driver-
Low miles per yr, therefore initially shopped 2-4yr old cars with max 40K miles.
Gave up after shopping a few different used models and finding nothing reasonable. Prices were crazy -forced to look at new cars instead.
No local dealer had the Nissan Sentra SV we decided on -got lucky finding it at a hi-volume dealer 100mi away.
Called that hi-volume dealer to confirm their website was correct regarding no Sentras in stock -was told they just offloaded a shipment.
Had to grab one right then, being without a car and feeling lucky that I timed my call the day a shipment arrived.
Sentras go for MSRP around here. Got this Sentra for approx $100 below MSRP. Still waiting for dealer go receive MSO so we can pick it up.
Paying near MSRP stinks, but better than paying in the price range for used 2020-21 Sentras that runs from what I paid new up to $3K more.
It's crazy.

Regarding the chip shortage, and mfrs directing chips to more expensive cars-
Correct to assume they are selling just enough high-MPG cars to meet MPG mandates? One dealer said they get Sentra shipments every 2-3mos.
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by stoptothink »

stoptothink wrote: Wed Jan 26, 2022 10:54 am
Carguy85 wrote: Wed Jan 19, 2022 9:09 pm
bob60014 wrote: Wed Jan 19, 2022 8:30 pm I'm just glad I bought new in early 2020 before the sh** hit the fan.
Bought the exact Crewmax tundra I was looking for right off the transporter for $40k new in mid 2020. The dealer has a new similarly optioned crewmax now for $55k !! One of the smarter moves I’ve made out of pure dumb luck.
We ordered a Ford Maverick hybrid June of last year, when we had no need for a new vehicle for at least another year. It checked all the boxes and I had a hard time believing Ford wouldn't significantly raise the price in another year. Well, my intuition was correct; 7 months later and we're still waiting (expected delivery late April - early May), but if we ordered today we'd be waiting at the very least until fall and Ford already announced a price hike for '23 models. And, if we were able to luckily find one sitting at a dealership, we'd be paying at least $5k markup (on a $24k truck). Annoying waiting 10 months for a vehicle you ordered, but we timed it well.
...and we got notification this morning that our build date has been pushed back to March 28th (from March 7th). At this point we'll be fortunate to get our truck a full year after we ordered.
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by tim1999 »

The Ford dealer nearest my home now has a $5,000 "market adjustment" sticker on every single new vehicle on the lot. It does include nitrogen filled tires lol :shock:
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by sureshoe »

Corrected typo: Financially, it is always to buy a depreciating asset later than sooner.

The only reason to expedite a car purchase today is if you believe the car will actually appreciate while you hold it (and not be offset by a corresponding depreciation).

This car stuff feels a lot like day-trading and short memories. Cars have had a huge run-up in prices. There is very little reason to believe that will continue - rather the market has adjusted as prices increased on new supply.

But, if it's your opinion a $50k new car will be worth $55k next year, have at it. Post the purchase and let's track the ROI.
Last edited by sureshoe on Fri Jan 28, 2022 7:25 am, edited 1 time in total.
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by squirm »

If the fed gets their way (this fed has never dealt with this much inflation, so it should be interesting) then you might want to consider selling you car now while the going is good.
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by Valuethinker »

sureshoe wrote: Thu Jan 27, 2022 11:40 am Financially, it is always to buy a depreciating asset sooner than later.
Other way? The longer you hold off, the further out the pain is. If you can keep your car running for another 2 years, then buy the Honda that you keep for another 10 years, then that's 12 years and only buying one car. As opposed to buying one car now. This is how my father lived his adult life - a new car every 10 years-- I think the Honda Accord (his 3rd) was about 10 years old when he died.

Exception is during periods of very fast technical change. You can wind up w a very obsolescent car. In the USA, I don't think it's going to hurt you much. In the UK, in 10 years, they will basically only be selling EVs. By 2040s you are going to have to plan ahead if you need a tank of gas, because many of the gas stations will have closed.

(it depends on what they decide to do with Heavy Goods Vehicles. Right now, batteries are not an option. They may be hydrogen fuel cell powered, or electricity in the roads or ? But until that happens, there will have to be diesel pumps).
The only reason to expedite a car purchase today is if you believe the car will actually appreciate while you hold it (and not be offset by a corresponding depreciation).

This car stuff feels a lot like day-trading and short memories. Cars have had a huge run-up in prices. There is very little reason to believe that will continue - rather the market has adjusted as prices increased on new supply.
Actually precisely the point. There is a shortage of supply, and it's global. Figure I heard was about 8m cars they wanted to produce, but could not.

Supply has not risen to meet the resurgence of demand post the Covid lockdowns of 2020 (in almost all countries).
But, if it's your opinion a $50k new car will be worth $55k next year, have at it. Post the purchase and let's track the ROI.
An odd situation, if it does occur. I don't think it will. But its likely the supply situation will take until late 2023 to resolve itself fully. Then perhaps 2024-5 before used car prices drop back down to "normal" levels of depreciation.
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by Valuethinker »

squirm wrote: Thu Jan 27, 2022 11:55 am If the fed gets their way (this fed has never dealt with this much inflation, so it should be interesting) then you might want to consider selling you car now while the going is good.
The Fed in the 70s & first half of 80s dealt with inflation, sometimes much higher inflation.

Most of us are hoping that it will not be a "Volker solution" because that was a terrible time. Interest rates at 21%, mortgages at 13% etc. Britain had 3m unemployed at one point (even at peak of Covid, less than 1m unemployed this time).

Monetary policy is a pretty blunt edged instrument - works by reducing demand. Given what we are seeing is a series of (global) supply chain problems - shortages of shipping containers, computer chips etc - you would need a lot of economic cooling before that had a significant dampening effect on say used car prices.
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by sunny_socal »

Agree, it's a great time to buy a new car. Used car prices are inflated, the usual BH advice does not apply.

Just get what you want. Expect to wait a few months for your order to be filled. (Well unless you're buying American, they are in stock :wink: )
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by jabberwockOG »

Traditionally the best times to buy a car are (in order) - end on month, end of quarter, end of year.

Car dealers are sales organizations. Every sales organizations tracks and sets sales goals by the calendar. Their motivation to sell (and therefore discount) is at its highest at an very end of every goal tracking period (month, quarter, year). Another motivating factor is that every vehicle in stock is on floor plan meaning that they are paying monthly interest on it. Every month it sits unsold means another interest payment is due.

The current manufacturing/import shortage has changed supply of all cars so selling prices have gone way up. Apparently people are either desperate or foolish enough to pay thousands over MSRP to buy a car so it may be a long time before car transactions are once again negotiable in the buyer's favor.
Last edited by jabberwockOG on Fri Jan 28, 2022 8:17 am, edited 1 time in total.
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by stoptothink »

jabberwockOG wrote: Fri Jan 28, 2022 6:51 am Traditionally the best times to buy a car are (in order) - end on month, end of quarter, end of year.

Car dealers are sales organizations. Every sales organizations tracks and sets sales goals by the calendar. Their motivation to sell (and therefore discount) is at its highest at an very end of every goal tracking period (month, quarter, year). Another motivating factor is that every vehicle in stock is on floor plan meaning that they are paying monthly interest on it. Every month it sits unsold means another interest payment is due.

The current manufacturing/import shortage has changed supply of all cars so selling prices have gone way up. Apparently people are either desperate or foolish enough to pay thousands over MSRP to buy a car so it maybe a long time before car transactions are once again negotiable in the buyer's favor.
Yep, we bought our current car at the tale end of the year, with a new model coming the next fall and on the tale of a manufacturer's scandal (Dieselgate). I think the MSRP on our jetta was ~$22k, we got it for <$14K OTD (think it was like $13,700). The thing about now is the uncertainty; nobody really knows when the supply chain issues will get fixed and there is some evidence that it may change the car industry moving forward. If you may need a car in the next 2yrs, it may not be a bad idea to order now.
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by sureshoe »

Valuethinker wrote: Fri Jan 28, 2022 4:17 am
sureshoe wrote: Thu Jan 27, 2022 11:40 am Financially, it is always to buy a depreciating asset sooner than later.
Other way? The longer you hold off, the further out the pain is. If you can keep your car running for another 2 years, then buy the Honda that you keep for another 10 years, then that's 12 years and only buying one car. As opposed to buying one car now. This is how my father lived his adult life - a new car every 10 years-- I think the Honda Accord (his 3rd) was about 10 years old when he died.
Oops, yes that was a typo - which probably threw off the tone of the rest of the post. Fixed in original.
And of course, here's the numbers: Sell a $10k car today, buying a $40k car, you're taking the depreciation hit on the $40k instead of $10k. In 2 years, maybe the $10k is down to $7-$8k. That $40k car is easily down to $30-$34k. And like you said, if there is a tech change/etc, maybe it makes sense and the value of the car dramatically falls off (like a DVD player after Blu Ray... or Blu Ray after streaming).
Valuethinker wrote: Fri Jan 28, 2022 4:17 am
The only reason to expedite a car purchase today is if you believe the car will actually appreciate while you hold it (and not be offset by a corresponding depreciation).

This car stuff feels a lot like day-trading and short memories. Cars have had a huge run-up in prices. There is very little reason to believe that will continue - rather the market has adjusted as prices increased on new supply.
Actually precisely the point. There is a shortage of supply, and it's global. Figure I heard was about 8m cars they wanted to produce, but could not.
Supply has not risen to meet the resurgence of demand post the Covid lockdowns of 2020 (in almost all countries).
Yep, that was the point.
Valuethinker wrote: Fri Jan 28, 2022 4:17 am
But, if it's your opinion a $50k new car will be worth $55k next year, have at it. Post the purchase and let's track the ROI.
An odd situation, if it does occur. I don't think it will. But its likely the supply situation will take until late 2023 to resolve itself fully. Then perhaps 2024-5 before used car prices drop back down to "normal" levels of depreciation.
Again, yep :)
Funny how that one typo hosed the context of the whole post.

The real point here - like TSLA or bitcoin or whatever... buying AFTER the price run up doesn't mean you'll be participating in a future run-up. My gut is telling me we're going to see a sharper than expected downturn because prices are over adjusting. Literally last night I got an unsolicited offer to buy my car. There is a bit of panic buying now.
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by squirm »

Valuethinker wrote: Fri Jan 28, 2022 4:20 am
squirm wrote: Thu Jan 27, 2022 11:55 am If the fed gets their way (this fed has never dealt with this much inflation, so it should be interesting) then you might want to consider selling you car now while the going is good.
The Fed in the 70s & first half of 80s dealt with inflation, sometimes much higher inflation.

Most of us are hoping that it will not be a "Volker solution" because that was a terrible time. Interest rates at 21%, mortgages at 13% etc. Britain had 3m unemployed at one point (even at peak of Covid, less than 1m unemployed this time).

Monetary policy is a pretty blunt edged instrument - works by reducing demand. Given what we are seeing is a series of (global) supply chain problems - shortages of shipping containers, computer chips etc - you would need a lot of economic cooling before that had a significant dampening effect on say used car prices.
Fed policy is what drove the car market nuts, new policy direction is needed to fix it along with many other markets. Most of the board members were pretty young during those high inflation times, they've never had to deal with it as a group. This is new to them.

This is OT anyways.
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by mrmass »

This is just opinion but a few more months of a falling market will certainly pucker many people and their spending. IMO less will be buying cars.
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by Doc7 »

sureshoe wrote: Thu Jan 27, 2022 11:40 am Corrected typo: Financially, it is always to buy a depreciating asset later than sooner.

The only reason to expedite a car purchase today is if you believe the car will actually appreciate while you hold it (and not be offset by a corresponding depreciation).

This car stuff feels a lot like day-trading and short memories. Cars have had a huge run-up in prices. There is very little reason to believe that will continue - rather the market has adjusted as prices increased on new supply.

But, if it's your opinion a $50k new car will be worth $55k next year, have at it. Post the purchase and let's track the ROI.

Still a typo. It is always what? It is always better? or It is always worse?
I am bitter. I sold my 2005 truck for $1800 in January of 2020. I am now about to go into a 3rd fall hunting season with no truck.
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by Jack FFR1846 »

So a couple comments here.

Chips are not the only thing in short supply. I work for a chip company who supplies autos (if you have apple car play in your car, you absolutely have one of our chips in it) and we've had regular updates. Back when the auto companies were cancelling all their orders, it wasn't just for chips. Sure, we know that this resulted in fabs going to skeleton crews and one shift. But other suppliers were equally affected. Plastic suppliers found new customers and of course, auto companies are the worst customers for specs and profits so when a plastic supplier who built dashboards got a contract to make M&M bags, when the auto companies came back and said "We have customers, we need 5 times the volume and we need it now", the plastic maker said "M&M has given us a 10 year contract. I'm sure someone else will make your dashboard. Have a nice day".

On the chip side, auto makers have deleted some options. So your pickup may no longer have heated seat options or adaptive cruise control or tow camera because those take microprocessors. Ford has a nice reaction which is to go to the public and let them know that they can save $1000 or $1500 by ordering exactly what they want. Why did Ford do this? Because when they build a Bronco, they don't want it sitting on a dealer lot and not getting sold. They want that pile of chips and plastic and wire and rubber going to the final customer right now. Ironically, this is the Tesla model. Get an order, then build a vehicle. It isn't necessarily new. I ordered my Jeep in 2014 and got exactly what I wanted and I did it to avoid paying $3500 for essentially power windows, locks and keyless entry.

Prices are NOT going to come down. The tsunami in Japan in 2011 put a number of car factories under water and required cleanup and a lot of work to get up and running again. I know from the Subaru factory that supply of cars like the WRX and STi went to zero and dealers raised prices. Used cars went up. Before 2011, I could have bought a 2002 WRX in great condition (because I was looking) for $4500 all day long. Today, the same car for $6500 with double the miles is a bargain. Even before Covid, those prices never fell. So I would expect that since new cars aren't feeding the market, we're still having cars totaled in accidents and old cars being junked. So the total in the market is likely dropping. I will agree that some cars will remain in service because replacement car costs have gone up so much. I'm repairing where in the past I would have replaced my 13 Crosstrek with 155k miles on it. I just put a new set of tires on it plus $2400 in repairs. The car is worth $2800 to Car Max. But a replacement is another $10k+ and since I'd be buying another Crosstrek, I would expect it will have the requirement for wheel bearings and possibly CV axles which I just did on my car. Anyways, there are plenty of people who would have said no to the repairs I just did and traded the car and paid the extra for a high priced replacement.

Another thing car makers are doing.....Subaru introduced a completely new BRZ for 2022 and there are a small number of new cars here now. Subaru has stopped orders of this car. So if you wanted one (I planned to buy one.....or a Porsche 718 Cayman GT4), there won't be one available for some undetermined time. Just one way to eliminate supply problems.

If you need a new car, buy it now. At MSRP. It won't be cheaper if you wait.
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by sureshoe »

Doc7 wrote: Fri Jan 28, 2022 9:04 am
sureshoe wrote: Thu Jan 27, 2022 11:40 am Corrected typo: Financially, it is always to buy a depreciating asset later than sooner.

The only reason to expedite a car purchase today is if you believe the car will actually appreciate while you hold it (and not be offset by a corresponding depreciation).

This car stuff feels a lot like day-trading and short memories. Cars have had a huge run-up in prices. There is very little reason to believe that will continue - rather the market has adjusted as prices increased on new supply.

But, if it's your opinion a $50k new car will be worth $55k next year, have at it. Post the purchase and let's track the ROI.

Still a typo. It is always what? It is always better? or It is always worse?
I am bitter. I sold my 2005 truck for $1800 in January of 2020. I am now about to go into a 3rd fall hunting season with no truck.
Not a typo.

Read the rest of the post. 2020-2021 is an aberration. Cars are a depreciating asset (hard stop).

In any normal market, had you sold your $1800 truck and bought a $25k replacement, you would have done much better financially. Nobody could predict mass supply shortages (people were predicting the opposite - car prices fall through the floor).

Could there be another mass disruption - sure. But realistically, cars bought today will depreciate, and the longer you can forego a purchase, the better off you will be.
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by Doc7 »

sureshoe wrote: Fri Jan 28, 2022 9:31 am
Doc7 wrote: Fri Jan 28, 2022 9:04 am
sureshoe wrote: Thu Jan 27, 2022 11:40 am Corrected typo: Financially, it is always to buy a depreciating asset later than sooner.

The only reason to expedite a car purchase today is if you believe the car will actually appreciate while you hold it (and not be offset by a corresponding depreciation).

This car stuff feels a lot like day-trading and short memories. Cars have had a huge run-up in prices. There is very little reason to believe that will continue - rather the market has adjusted as prices increased on new supply.

But, if it's your opinion a $50k new car will be worth $55k next year, have at it. Post the purchase and let's track the ROI.

Still a typo. It is always what? It is always better? or It is always worse?
I am bitter. I sold my 2005 truck for $1800 in January of 2020. I am now about to go into a 3rd fall hunting season with no truck.
Not a typo.

Read the rest of the post. 2020-2021 is an aberration. Cars are a depreciating asset (hard stop).

In any normal market, had you sold your $1800 truck and bought a $25k replacement, you would have done much better financially. Nobody could predict mass supply shortages (people were predicting the opposite - car prices fall through the floor).

Could there be another mass disruption - sure. But realistically, cars bought today will depreciate, and the longer you can forego a purchase, the better off you will be.
I still think it is a typo. You wrote:
"Financially, it is always to buy a depreciating asset later than sooner."

It is always..... What? It is always "___________". Is it always better, or is it always worse? There is a word missing between "Always" and "to".

Forgive me if this is intentional, and when you say it isn't a typo, you mean your post is tongue-in-cheek and there is no "Always" anything. If that is the case it just went over my head.
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Re: Counterintuitively, is now the *best* time to buy a new car?

Post by smitcat »

sureshoe wrote: Fri Jan 28, 2022 9:31 am
Doc7 wrote: Fri Jan 28, 2022 9:04 am
sureshoe wrote: Thu Jan 27, 2022 11:40 am Corrected typo: Financially, it is always to buy a depreciating asset later than sooner.

The only reason to expedite a car purchase today is if you believe the car will actually appreciate while you hold it (and not be offset by a corresponding depreciation).

This car stuff feels a lot like day-trading and short memories. Cars have had a huge run-up in prices. There is very little reason to believe that will continue - rather the market has adjusted as prices increased on new supply.

But, if it's your opinion a $50k new car will be worth $55k next year, have at it. Post the purchase and let's track the ROI.

Still a typo. It is always what? It is always better? or It is always worse?
I am bitter. I sold my 2005 truck for $1800 in January of 2020. I am now about to go into a 3rd fall hunting season with no truck.
Not a typo.

Read the rest of the post. 2020-2021 is an aberration. Cars are a depreciating asset (hard stop).

In any normal market, had you sold your $1800 truck and bought a $25k replacement, you would have done much better financially. Nobody could predict mass supply shortages (people were predicting the opposite - car prices fall through the floor).

Could there be another mass disruption - sure. But realistically, cars bought today will depreciate, and the longer you can forego a purchase, the better off you will be.
If you are into cars/trucks the past 3-4 years has been a great time to buy and sell.
sureshoe
Posts: 2165
Joined: Tue Jan 15, 2019 3:26 pm

Re: Counterintuitively, is now the *best* time to buy a new car?

Post by sureshoe »

Doc7 wrote: Fri Jan 28, 2022 10:05 am
sureshoe wrote: Fri Jan 28, 2022 9:31 am
Doc7 wrote: Fri Jan 28, 2022 9:04 am
sureshoe wrote: Thu Jan 27, 2022 11:40 am Corrected typo: Financially, it is always to buy a depreciating asset later than sooner.

The only reason to expedite a car purchase today is if you believe the car will actually appreciate while you hold it (and not be offset by a corresponding depreciation).

This car stuff feels a lot like day-trading and short memories. Cars have had a huge run-up in prices. There is very little reason to believe that will continue - rather the market has adjusted as prices increased on new supply.

But, if it's your opinion a $50k new car will be worth $55k next year, have at it. Post the purchase and let's track the ROI.

Still a typo. It is always what? It is always better? or It is always worse?
I am bitter. I sold my 2005 truck for $1800 in January of 2020. I am now about to go into a 3rd fall hunting season with no truck.
Not a typo.

Read the rest of the post. 2020-2021 is an aberration. Cars are a depreciating asset (hard stop).

In any normal market, had you sold your $1800 truck and bought a $25k replacement, you would have done much better financially. Nobody could predict mass supply shortages (people were predicting the opposite - car prices fall through the floor).

Could there be another mass disruption - sure. But realistically, cars bought today will depreciate, and the longer you can forego a purchase, the better off you will be.
I still think it is a typo. You wrote:
"Financially, it is always to buy a depreciating asset later than sooner."

It is always..... What? It is always "___________". Is it always better, or is it always worse? There is a word missing between "Always" and "to".

Forgive me if this is intentional, and when you say it isn't a typo, you mean your post is tongue-in-cheek and there is no "Always" anything. If that is the case it just went over my head.
It is always better financially to delay the purchase of a depreciating asset. (hard stop, again)
It is always better financially to purchase an appreciating asset as soon as possible.

This is a mathematical law, not my opinion.
This also encapsulates the decision from secondary impact (well I walk to work and broke my leg, so I lost money on hospital bills).

If I know an asset is going to depreciate annually by 10% a year, I will always be better off delaying a purchase.
I have a $5k asset and I want to replace it with a $50k asset which both depreciate annually by 10%. 1 year later I have lost $500 with the $5k car, and 1 year later, I would have lost $5k on the other. This is simple, clear math.

All the noise around vehicles is because there was an anomaly in the market where a depreciating asset temporarily appreciated. If you believe cars will continue to appreciate in values (from today, not last year), then you should buy a car as fast as possible - because you will become wealthier. However, there is no reason to believe cars bought on 1/28/2022 will appreciate over the next 1-2 years in the same manner they appreciated during 2020 and 2021.
Doc7
Posts: 1122
Joined: Fri Aug 24, 2007 12:55 pm

Re: Counterintuitively, is now the *best* time to buy a new car?

Post by Doc7 »

sureshoe wrote: Fri Jan 28, 2022 10:27 am
Doc7 wrote: Fri Jan 28, 2022 10:05 am
sureshoe wrote: Fri Jan 28, 2022 9:31 am
Doc7 wrote: Fri Jan 28, 2022 9:04 am
sureshoe wrote: Thu Jan 27, 2022 11:40 am Corrected typo: Financially, it is always to buy a depreciating asset later than sooner.

The only reason to expedite a car purchase today is if you believe the car will actually appreciate while you hold it (and not be offset by a corresponding depreciation).

This car stuff feels a lot like day-trading and short memories. Cars have had a huge run-up in prices. There is very little reason to believe that will continue - rather the market has adjusted as prices increased on new supply.

But, if it's your opinion a $50k new car will be worth $55k next year, have at it. Post the purchase and let's track the ROI.

Still a typo. It is always what? It is always better? or It is always worse?
I am bitter. I sold my 2005 truck for $1800 in January of 2020. I am now about to go into a 3rd fall hunting season with no truck.
Not a typo.

Read the rest of the post. 2020-2021 is an aberration. Cars are a depreciating asset (hard stop).

In any normal market, had you sold your $1800 truck and bought a $25k replacement, you would have done much better financially. Nobody could predict mass supply shortages (people were predicting the opposite - car prices fall through the floor).

Could there be another mass disruption - sure. But realistically, cars bought today will depreciate, and the longer you can forego a purchase, the better off you will be.
I still think it is a typo. You wrote:
"Financially, it is always to buy a depreciating asset later than sooner."

It is always..... What? It is always "___________". Is it always better, or is it always worse? There is a word missing between "Always" and "to".

Forgive me if this is intentional, and when you say it isn't a typo, you mean your post is tongue-in-cheek and there is no "Always" anything. If that is the case it just went over my head.
It is always better financially to delay the purchase of a depreciating asset. (hard stop, again)
It is always better financially to purchase an appreciating asset as soon as possible.

This is a mathematical law, not my opinion.
This also encapsulates the decision from secondary impact (well I walk to work and broke my leg, so I lost money on hospital bills).

If I know an asset is going to depreciate annually by 10% a year, I will always be better off delaying a purchase.
I have a $5k asset and I want to replace it with a $50k asset which both depreciate annually by 10%. 1 year later I have lost $500 with the $5k car, and 1 year later, I would have lost $5k on the other. This is simple, clear math.

All the noise around vehicles is because there was an anomaly in the market where a depreciating asset temporarily appreciated. If you believe cars will continue to appreciate in values (from today, not last year), then you should buy a car as fast as possible - because you will become wealthier. However, there is no reason to believe cars bought on 1/28/2022 will appreciate over the next 1-2 years in the same manner they appreciated during 2020 and 2021.
Thank you, i think you should edit your edited typo to clarify, based on your clarification above.

Changing this sentence:
"Financially, it is always to buy a depreciating asset later than sooner."

to this sentence:
"Financially, it is always better to buy a depreciating asset later than sooner."
Last edited by Doc7 on Fri Jan 28, 2022 10:36 am, edited 1 time in total.
sureshoe
Posts: 2165
Joined: Tue Jan 15, 2019 3:26 pm

Re: Counterintuitively, is now the *best* time to buy a new car?

Post by sureshoe »

smitcat wrote: Fri Jan 28, 2022 10:13 am
sureshoe wrote: Fri Jan 28, 2022 9:31 am
Doc7 wrote: Fri Jan 28, 2022 9:04 am
sureshoe wrote: Thu Jan 27, 2022 11:40 am Corrected typo: Financially, it is always to buy a depreciating asset later than sooner.

The only reason to expedite a car purchase today is if you believe the car will actually appreciate while you hold it (and not be offset by a corresponding depreciation).

This car stuff feels a lot like day-trading and short memories. Cars have had a huge run-up in prices. There is very little reason to believe that will continue - rather the market has adjusted as prices increased on new supply.

But, if it's your opinion a $50k new car will be worth $55k next year, have at it. Post the purchase and let's track the ROI.

Still a typo. It is always what? It is always better? or It is always worse?
I am bitter. I sold my 2005 truck for $1800 in January of 2020. I am now about to go into a 3rd fall hunting season with no truck.
Not a typo.

Read the rest of the post. 2020-2021 is an aberration. Cars are a depreciating asset (hard stop).

In any normal market, had you sold your $1800 truck and bought a $25k replacement, you would have done much better financially. Nobody could predict mass supply shortages (people were predicting the opposite - car prices fall through the floor).

Could there be another mass disruption - sure. But realistically, cars bought today will depreciate, and the longer you can forego a purchase, the better off you will be.
If you are into cars/trucks the past 3-4 years has been a great time to buy and sell.
As I wrote above, this is an anomaly. Covid has broken prices, but there is no reason to think this is going to continue.

If you believe you can flip cars for a profit, I'd love to see that experiment.

I know there are lease hackers, tax credits, etc. but much of this I see is very anecdotal. I'd like to see some of these actual buy/sells for a profit.
smitcat
Posts: 13300
Joined: Mon Nov 07, 2016 9:51 am

Re: Counterintuitively, is now the *best* time to buy a new car?

Post by smitcat »

sureshoe wrote: Fri Jan 28, 2022 10:35 am
smitcat wrote: Fri Jan 28, 2022 10:13 am
sureshoe wrote: Fri Jan 28, 2022 9:31 am
Doc7 wrote: Fri Jan 28, 2022 9:04 am
sureshoe wrote: Thu Jan 27, 2022 11:40 am Corrected typo: Financially, it is always to buy a depreciating asset later than sooner.

The only reason to expedite a car purchase today is if you believe the car will actually appreciate while you hold it (and not be offset by a corresponding depreciation).

This car stuff feels a lot like day-trading and short memories. Cars have had a huge run-up in prices. There is very little reason to believe that will continue - rather the market has adjusted as prices increased on new supply.

But, if it's your opinion a $50k new car will be worth $55k next year, have at it. Post the purchase and let's track the ROI.

Still a typo. It is always what? It is always better? or It is always worse?
I am bitter. I sold my 2005 truck for $1800 in January of 2020. I am now about to go into a 3rd fall hunting season with no truck.
Not a typo.

Read the rest of the post. 2020-2021 is an aberration. Cars are a depreciating asset (hard stop).

In any normal market, had you sold your $1800 truck and bought a $25k replacement, you would have done much better financially. Nobody could predict mass supply shortages (people were predicting the opposite - car prices fall through the floor).

Could there be another mass disruption - sure. But realistically, cars bought today will depreciate, and the longer you can forego a purchase, the better off you will be.
If you are into cars/trucks the past 3-4 years has been a great time to buy and sell.
As I wrote above, this is an anomaly. Covid has broken prices, but there is no reason to think this is going to continue.

If you believe you can flip cars for a profit, I'd love to see that experiment.

I know there are lease hackers, tax credits, etc. but much of this I see is very anecdotal. I'd like to see some of these actual buy/sells for a profit.
Have been enjoying cars and trucks for a while now but do not consider it flipping. Pickup trucks, sports cars and SUV's are the ones we have bought and sold. If you are a car guy and enjoy the cars and trucks and wish to drive a few now is a good time.
lws
Posts: 831
Joined: Tue Apr 25, 2017 6:12 pm

Re: Counterintuitively, is now the *best* time to buy a new car?

Post by lws »

Yes. Now is the best time to buy a new car if you really need one and can afford it.
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