Part of Carmageddon, But Consumers Demand It
The average age of passenger cars and trucks on the road in the US ticked up again in 2019, to another record of 11.8 years, IHS Markit reported today.
When I entered the car business in 1985, the average age had just ticked up to 7.8 years, and the industry was fretting over it and thought the trend would have to reverse, and customers would soon come out of hiding and massively replace those old clunkers with new vehicles, and everyone would sell more and make more. But those industry hopes for a sustained reversal of the trend of the rising average age have been bitterly disappointed:
This rising average age is largely driven by vehicles lasting longer – an unintended consequence of relentless improvements in overall quality, forced upon automakers by finicky customers in an ultra-competitive market where automakers struggle to stay alive. To make it in the US, they have to constantly improve their products, and stragglers that can’t compete are left unceremoniously by the wayside. US consumers are brutal.
This unintended consequence of rising overall quality contributes to the dreadful industry problem: The US, despite constant population growth, is a horribly mature auto market.
In 1999, so 20 years ago, new vehicle sales reached a record of 16.9 million units. This record was broken in 2000, with 17.3 million units. Then sales tapered off. By 2007, they’d dropped to 16.1 million units. Then the Financial Crisis hit, GM and Chrysler went bankrupt, Ford almost did, and peak-to-trough, sales plunged 40% to 10.4 million units by 2009.
The recovery has been steep, and in 2015, finally the old record of the year 2000 was broken, but barely with 17.48 million units, and in 2016, the industry eked out another record of 17.55 million units. And that was it. Sales have fizzled since then. So far in 2019, the data indicates that sales are likely to fall below 17 million units, according to my own estimates, bringing the industry right back where it had been 20 years ago in 1999:
Yet, given the longer average age of the vehicles on the road across the entire fleet, even stagnating sales produce a rising number of vehicles in operation. So it’s not that Americans as a whole have fewer cars – far from it: They have more cars, and those cars are on average older.
The number of vehicles in operation (VIO) in 2019 rose by 5.9 million units from 2018, to a new record of 278.3 million vehicles, according to IHS Markit. In other words, during the 12-month period, about 17 million new vehicles were added to the national fleet; and about 11 million units were removed from the fleet, either by being sent to the salvage yard or by being exported to other countries.
What you see in the chart above is the future supply for the used vehicle market. Used vehicle sales will likely come in just under 40 million units this year – so about 2.3 times the sales volume of new vehicle sales.
The fact that the average age of the vehicles in operation is rising doesn’t mean that all people hang on to their cars longer. On the contrary.
Sure, we drive a car we bought new 12 years ago; it’s in great shape, looks good, the six-figure odometer reading is just a blip, and we’re going to hang on to it because there is no reason to get rid of it. We know other people on the same program. Millions of Americans do that.
But other people have two-year or three-year leases, and this is a booming business. More and more people lease. And when the lease ends, their old vehicle is returned to the leasing company, which owns the vehicle, and which then sells it at auction, where a dealer buys it and then sells it as a used vehicle to a retail customer. These vehicles are only two or three years old, and often in mint condition.
Then there is the huge fleet or rental cars of about 2.2 million vehicles that are turned over every couple of years or so to enter the used-vehicle market, much of it via auctions held around the country.
In addition, there are corporate and government fleets that get turned over at different intervals, and those units end up on the used vehicle market.
So the rising average age doesn’t mean that Americans drive the same vehicle for a longer period of time – though they can, and many do – but that there is a strong market and demand for good older vehicles, and people buy them and drive them for a few more years.
But it is an issue for automakers. They could sell a lot more vehicles – and I mean a whole bunch more – if their vehicles on average reached the end of their life after eight years. But our finicky consumers don’t go for this program anymore. Quality is one of the factors that decides whether an automaker is going to make it or whether it will die.
What’s left for automakers to do to increase revenues in this environment of two decades of stagnating unit sales? A three-pronged industry strategy has emerged: Shift customers to more expensive vehicles, such as from cars to trucks and SUVs; load the vehicles with more goodies each year, such as driving-assist features; and jack up the prices pure and simple.
And automakers have been doing it across the board, which has the effect that for many Americans, new vehicles have become too expensive, and they stopped buying them, which puts further downward pressure on unit sales. But Wall Street, which keeps pushing automakers to go further and further upscale – because that’s where the money is – hasn’t figured this out yet.
Here are six charts on the used-vehicle market, plus my “Chart of Carmageddon” for new vehicles. Read... Used-Car Wholesale Prices Surge, Retail Volume Drops. New Cars Sink Deeper into Carmageddon
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The more doodads the more things can go wrong. Plus hugely more expensive to repair . I just saw a ford Pu commercial with I think four different settings for off road driving. Sure I can see that 75k truck stump jumping. I will keep my 2000 tundra that plowed through 30 plus inches of snow like a beast. Best 8500 I spent on a vehicle five years ago
Wolfey needs to factor in a very important piece of the Puzzle. Massive Global Overcapacity in the Entire Auto Industry… Everyone is trying to export to everyone else! Obviously, this cannot work… (Think Musical Chairs). Now, add to this.. the Auto industry provides much of the industrial capacity for war production (if and when needed) and you have some very interesting challenges.
I was really surprised to see the odd American car on the highway in Japan in the mid-90s. “Who in the world would drive one of those things here, in the land of Honda and Toyota?” I thought.
Yeah and your’s is a Toyota. There is a difference, Ford, GM, and Dodge are not in the same league of longevity. The real Fords and Chevys (the 1940s and 1950s) are still on the roads of Cuba—-let’s see if us Americans can make our present cars that long. haha.
Those Cuban Fords and Chevys have new engines etc. so i wouldn’t say that those cars are still on the road if the whole undercarrage is from a Lada
I own a 2001 GMC Sierra, just under 300k miles and it runs great. Also own a 2004 Ford Excursion (6.0 diesel) and while it had some problems during the warranty period, replacement parts have held up great now at 320k miles. I only use Mobil1 synthetic and drive my vehicles pretty hard. I bought myself a two-year GMC Sierra and will give the ’01 to my 16 year old to learn in. The quality is there, friend, if you do your regular maintenance.
People are keeping, and seeking older vehicles BECAUSE THEY DON’T HAVE SCREENS, instead relying on knobs, buttons and simpler controls.
If you have a vehicle with simple controls, you don’t know how lucky you still are compared to a mobile video game to control everything. Plus, newer vehicles have recorders that measure speed, braking etc. Right there in the vehicle contract it says that police can access this data with a reader. Then there’s GPS, that follows you and who knows who records that.
I love my back up camera though.
Decentralised Inventory Parking
Developements in the strategy of car sales are indeed dynamic and interesting.
It appears that the problem of increasingly high prices of cars are outsourced to leasing companies, most of which are in fact subsidiaries of the respective car makers. These leddors are stuck with yields that, at least in parts are shockingly low and in the worst segment clearly negative. Had the leasing fee ithroughout the 90’s and 00’s ranged from 0.9-1.5%/month (of car retail sales value), then today you may find offers which come as low as 0.25%. This annual 3% ‘yield’ contraditcts the depreciation in value, which on average will be no less than 15% for the first 1st and 2nd years and no less than 10% for the 3rd year. So if this car is returned to the leasing company, say 3 years later and with a negative yield, it will again be dumped on some car dealer to simply get rid of it. The gap between yield and write off, which is realised on the sale to a used car dealership, amounts to negative gain on such a scale, that we must consider leasing companies the bad banks of the auto industry.
There is no sustainable leasing below 1% and any offer substantially lower is nothing short of spreading inventory on as many parking lots as possible.
I myself was seriously tempted to take an offer and lease a multi purpose van for less than €60/month for 3 years with no down payment. I had just returned from a 12 day trip to southern France and payed almost €600 for a rental car, including excess mileage. The mpv leasing offer would have payed for itself (excluding insurance, tax, licensing and service) in half a month with 50 more weeks of potential benefit of that year alone. Even a very occasional operation would have made sense economically. I would have provided a singular parking lot for inventory, was it not for my rigorous resistance to any form of debt.
Jaguar-Land Rover (JLR) has taken the proverbial beating on leasing, so much these days they will require a hefty down payment, as high as 40% of full retail price on some forms of leasing, and monthly leasing on the bottom-of-the-line Evoque starts at €700/month for 36 months (with a minimum €7,000 down payment).
JLR is literally swimming in returned leases: a simple “dealers only” search on a single website returned 156 used Evoque in a 50km range from my position. Nobody wants those things, so they sit in dealers’ yards or get shuffled among used car dealerships looking for a buyer. Perhaps breaking them up for parts is the most sensible option, but these days labor is getting expensive, even in former Corporate Paradise Romania.
Next up are VAG (especially the Audi and Skoda brands), Volvo and to a lesser extent Toyota.
That happened to Ford in the 90s. They were the first company to aggressively market leasing new vehicles at very low rates with zero down. Problem was, so many customers took them up on their low rate offers that Ford was drowning in lease returns they couldn’t move. Why couldn’t they move them? Because as long as they were offering cheap leases, it cost more per month to finance a two year old vehicle over five years than it did to lease a new one. By the late 1990s, people were measuring affordability by the monthly instead of by actual vehicle price. So leasing new for two years at $275 per month looked way better than financing a 2 year old vehicle over five years for $290. By 1999, Ford was asking for $2500 – $4000 down on the same lease rates and terms that were going for zero down the year before.
I remember it well because I leases two vehicles in a row – an Escort in 1995 and a Ranger in 1997. But when the lease was up on the Ranger in 1999, there were no more cheap zero down leases to be had. Ford wanted at least $2500 down for the same monthly rate. I ended up buying a new Chev Cavalier.
Ford’s used inventory had become so huge by that point that they resorted to offering leases on lease returns. My brother leased a 2 year old Mustang lease return for 36 months for about $240/mo.
The main difference is Ford’s financial position in the 90’s was if not exactly rock solid at least tenable.
JLR is bleeding cash all over the place: FY 2018 saw the Indian-owned group lose a massive £3.6 billion and recently Fitch downgraded their title to B+, meaning “highly speculative”, meaning a risk of default is if not likely at least very possible.
As JLR is scrambling to put the spilled milk back inside the jug, others have picked up the slack by offering dirt cheap leases.
Volvo has 2.9% yearly interest on leasing, which applies to both new and pre-owned vehicles. Toyota offers “no money down” leases on some models. But they all pale compared to VAG, which offers ridiculously cheap leases: under 1% yearly interest is common even on 24 months leases, which is crazy if you ask me.
VAG has massive overcapacity and expects a massive bailout from the German government in form of massive tax breaks and incentives for their (far from ready) electric cars. This is after being caught redhanded in one of the worst scandals the automotive industry has ever seen and basically getting away with it instead of being pilloried and pelted with rotten vegetables. In short they are back at their old arrogance-driven reckless behavior.
The Australian and British defenders of Singapore had a similar attitude. Until reality hit them in the face.
Bob Prechter, Two Jaguars…
Yeah a friend of mine was at a disused airfield in middle England last week – covered in handed-back lease vehicles.
Lots of shiny cars, rented for three years then handed back to sit dusused, only ever to be owned by finance companies – more fake prosperity predicated on cheap debt.
It’s funny what you say about the leasing market. We recently returned a Nissan Leaf, and I inquired about a new lease, and the bottom line was that instead of paying $2500 up front, we’d have to pay $5000, and the lease was more expensive as well, from $145 a month to $200+ per month. I asked the dealer about this, and he told me that Nissan was literally swimming in leased Leaf.
Everyone had the same thought over the last few years. Battery tech is going to get better, why bother buying a Leaf when you can lease it cheap. The result is that now, Nissan owns a whole bunch of used Leaf that no one really wants. It is quite ugly.
Throw in the debacle with Nissan/Renault alliance and the FCA merger effort, things are going to be ugly for Nissan in the long run. Lease deals for 3 years always struck me as a poor way for any company to try to recoup the cost of a car, and then if that lease is returned, it gets to become a used car and compete with new cars for sale.
Just a back of the envelope. I leased my Leaf (SE) with a $2500 downpay; and paid about $145 over 36 months. Let’s assume $150 because I don’t want to do the math, that comes out to less than $8000 over three years to Nissan. Sure, they got the $7500 Federal tax credit, and whatever resale value they can get out of the used Leaf. But essentially, they were able to make $15.5K out of the first customer. If they can’t pawn the Leaf off on someone, the margins might be quite low at the end of the day.
By the way, MC01, I hope you get around to doing an article regarding the the 737Max, the NMA, and Boeing’s total nightmare at the Paris Air Show. I thought their only saving grace was IAG putting LOI for 200 units.
The true debacle for Nissan is the absurd sale of AESC to Envision Group of China. Yes, somebody actually thought selling the second largest EV/hybrid battery manufacturer in the world to a direct competitor was a great idea.
Nissan has been on a downward spiral since they were left without a powerful bank backing them up: all their three patrons (Fuji Bank, DKB and Industrial Bank of Japan) came out with broken bones from the 80’s Bubble Economy and would have gone insolvent if not for the Japanese government’s determination to avoid such a “nightmare scenario”.
These three bankrupt banks were eventually merged into Mizuho, which unlike Sumitomo Bank has always proven to be either uninterested or too weak to back its old clients.
Regarding your request: there was no “nightmare scenario” at the Paris Air Show. Both Airbus and Boeing came away with $35 billion in new orders (at book value). But there were some ominous albeit expected signs for all parts involved.
And regarding the MAX: I will refrain to write anything on the matter until there’s something more tangible than gossip. American Airlines has given a tentative date for putting the MAX back in “limited service” at September 9, the week after Labor Day, but that’s probably wishful thinking on their part as they are the company most affected by this grounding.
Agree the high costs to buying a new vehicle is why I will never ever be able to afford a new one.
It is used or no vehicle.
You forgot the fourth prong: hit the service business hard. By getting customers back in the dealer for standard services like oil changes and 15k mile checkups, you reinforce you’re a trusted business partner and they wont defect to the 3rd parties. You cant just rely on sales of new vehicles anymore even though many old school dealers are stuck on that notion. It doesn’t even make sense given they’re making, what, 2% margin on new car sales? Yes used is up around 15% but service is double or triple. Get in the service business.
No worries WES. THE Neoliberal Ferengi, which includes all the WallSreet GoldenMen in their high towers, as well as the City-State on the Potomic, will, via their chicanery and grift, have us all down to owning push carts ! .. living in an earthly, garbage strewn ‘Elysium-like’ paradise. What’s not to love … !
Indeed! I can have some savings in a Mason jar or a vehicle with a motor on it, not both.
I could actually consider owning a motor scooter where I am now, as I’ve got (just barely) room to park it inside the warehouse (it’d disappear if left outside). But even a 50cc would utterly kill my finances.
As it is, I might get 5 years out of a $300 bike, that’s not so bad.
Use Uber black and Uber Select, nice cars, nice drivers, cheap. Who needs to own a car in the 21st century? Oh thats right…. I live in a megacity of 20 million, where any product and service can be delivered to my door for virtually no cost. I love civilization.
Interesting. I lived in a large megalopolis and also just a large city. Both extremely expensive places to live. Wages did not compensate for the much higher cost of living. I like the city of 350,000 I live in now – MUCH higher quality of life. But even here I can’t afford a house much less a condo (which is what exactly?). Enjoy your mega city while you’re young, they appeal to 30 somethings. Unless you are in the 1%, when you have kids or hit 45 or so on your own, you will probably be tired of it I predict.
Baby boomers drive less as they age and retire. Millennials can’t afford cars, so their driving habits are nil. A lot of teenagers are not getting their licenses when they turn 16 like we did. They wait a while.
Obviously where you live things are much different than here in Denver’s suburbs, where the average Millennial owns a car even if they didn’t finish high school.
Our 25 year-old owns a 2011 Lexus while his wife owns a Subaru. Our 27 year-old owns a 2013 Chevy Trailblazer and his girlfriend drives a Chevy Tahoe. Only our eldest finished college, and he owns several cars, including an Avalon, a Chevy drag-race car, and a nice 4WD full size truck, plus a 650 cc motorcycle, plus a nice $400K suburban house, plus a 27-foot travel trailer, and is married with 3 kids already. He is a bank manager.
They were born and raised middle-class in the suburbs, and all three of them drive a whole lot more than my wife and I drive these days.
Obviously most Millennials can afford to own cars at-least here in suburban Metro-Denver. The cost of living within 5 miles of downtown Denver is close to double the cost of living here on the suburban fringe plus the central city has a much higher crime rate. Downtown Denver has been called a playground for rich people, and our middle and outer suburbs are where the majority of the middle-class lives here.
My own belief says that the cost of living, fine dining, nightclubs, or even just attending events near downtown has risen so high that many suburban residents are increasing staying home, working in the suburbs rather than in the city, and patronizing local businesses where prices are a lot lower than in downtown, which is helping reduce miles driven too. Here lots of Millennials have moved back to the suburbs once they marry and have kids.
Here in Metro-Denver 71% of all job commuting is either suburb to suburb or within suburbs while only 29% of employment commuting involves the central city, which is odd in that Denver was able to annex quite a distance from downtown on 3 sides of the city up to more than 20 miles from downtown, in-fact DIA Airport is in Denver, not a suburb.
Despite what you may have heard a 65% majority of Millennials live in our suburbs here, despite 3 major universities downtown and 2 more just a few miles from downtown, both in Denver. Downtown Denver can be a lot of fun but if you come do bring your gold card or several and we will help you spend them right up to the hilt too.
It’s not just that cars are lasting longer. Consumers are more financially literate these days. They see the depreciation hitting them hard in the early years of ownership. So one way to overcome that is to spread it out as long as possible. I’ve heard the expression “drive it into the ground” many times.
Another way to avoid the smashing loss by depreciation, is to buy a used car that has already had its gigantic drops in value. An older car suffers from further depreciation only gently.
However, I think that once cars get above 200,000 kms, they do drop extra value instantly.
I was recently warned of a disturbing trend developing in the Community Sourced Transportation App environment. Individuals finance a new car 144 months. Proceed to drive it 24/7 among 2 or 3 drivers for a couple years and a quarter million miles. Maintain mileage hacked down to thirty thousand. Then dump it on an unsuspecting victim that can’t tell the difference.
Fine quality information and knowledge shared on wolfstreet.com
Even if ads get plastered all over the page I will continue reading compulsively.
Compared to the 70’s or 80’s that is a LOT of kilometers (what 125k miles?). Back then a car with 100,000 miles was a rusty piece of total junk where I grew up.
Hondas and Toyotas – and probably many others now, will easily last 300 to 400k with regular maintenance. I think that’s the most economical way to run a car overall.
But Wall Street, which keeps pushing automakers to go further and further upscale – because that’s where the money is – hasn’t figured this out yet.
Somebody should send them on an excursion to Bang & Olufsen (B&O).
B&O went and killed their entire consumer market by going “Upscale Luxury Market” with a HiFi+TV combo starting around 75 kEUR …
In former times, regular people would buy B&O while young starting at 1-2 kEUR, then work their way up the “status chain”. When the ‘beginners path’ into the brand became impossible, people of course bought other brands and then they learned that Everyone makes not only decent HiFi system, but, even tolerable designs too.
B&O was abandoned by the crowds and in return they sold maybe 2-3000 High End things to some Saudi sheiks.
They have had a comeback with their ‘digital devices’ – headphones and bluetooth speakers. But competition is hard and they are not really going anywhere further than they are now, I think.
Funny you should mention B&O, a real status brand here in the states back when I was a kid in the 70’s and 80’s. They have almost zero presence in the U.S. now, but I was just in Grand Cayman last week and was with my wife at a nice retail/business/residential development called Camana Bay where B&O had a retail store. Saw the HiFi-TV combo you mentioned along with an almost $100,000 pair of speakers. Cheapest thing in there were the headphones and ear buds and even those were probably overpriced for the performance. Much like Bose here in the U.S. (although Bose is still much cheaper) B&O makes overpriced equipment for rich people who want to impress people because the sound quality can easily be bettered by stuff costing multiple times less money. And if you want to spend $100,000 on a stereo there are plenty of companies out there that make stuff that would eat B&O’s lunch.
I recognized the B&O brand when you mentioned it, but couldn’t remember from where. It’s the speaker brand in my laptop.
OOOOH !! I’m impressed
Fajensen, I reckon that is how our societies have steadily and increasingly been shaping up for at least the past forty years or so (as energy productivity has declined and debts have increased as an offset mechanism to hide the real decline in our average life quality).
The middle class is getting squeezed as capital flows to the top as a natural response to increasing debt. So you either sell low margin, mass market cheap stuff to the few disciplined proles you can find, or you sell more and more expensive stuff to the increasingly price indiscriminate higher echelons and the large swathes of wannabes with ever increasing credit lines.
And since most people currently have pretty easy access to relatively vast amounts of credit, everyone is targeting the top end, whilst the cheaper stuff gets sniffed at by everyone. Household debt here across the Skagerak from B&O has become humungous, and so far appears non relenting in its growth, to the extent that even the authorities appear to be getting quite nervous about it. Not enough for them to really do anything about it, though, of course…
Yup I bought a new car last Monday. I was the only customer. The sales guys were twiddling their thumbs. They should have stayed in bed.
To anyone buying a car. Go in on the last day of the month, late in the day.
Only deal with the sales manager who wants to boost sales numbers for the month just ending.
We bought a car on Christmas Eve before the dealership closed for a long weekend. All the salesmen had already left. And did we get a deal.
If you have a good trade in, check equivalents on Craigslist. Check with the sellers of cars a week later via email, ask them what they sold it for.
That’s the approximate value of your trade in.
After you whittle the sales manager down as low as you can, he will test drive your trade in and low ball it.
“OK”, you say.
As he is finalizing the whittled down price of your new car and is about to subtract the price he offered on your trade in, “change your mind,” and tell him to add the price of the trade in to your bottom line.
You can then sell your trade in for at least twice the amount he offered you in cash.
Another option which I have used is to find the car on the lot you’re interested in, write down the inventory number (usually on the window), and then take that number to the fleet sales manager.
You’ll get the fleet price.
I’m lucky, in that I don’t need to own a car, so I don’t.
with the cost of maintaining a newer car so high i would rather own a older car and afford a repair then a monthly payment. I dont wantt too get another FF car/truck so i will wait till electric is in my price range used.
the 1999 F150 will have too do for another 5 years then.
Would have commented sooner but we were away in our 1981 Westfalia….visiting daughter down Island. This vehicle is maintained like new and drives like new. It is tight. It does not burn one drop of Amsoil synthetic 15-50.
From car and driver regarding new VW model: “The most basic California starts at around $51,000, and the fully loaded version I tested would be closer to $80,000 using a direct currency conversion from euro to dollar. Throw in a pessimistic assessment of import costs and you’re looking at a van that might cost over $100,000 in the U.S.”
With our new engine, new top, and maintained cabinets in new condition + the new gas heater and new 10 ply rubber, I have $30,000 Cdn invested in the ’81. I could sell it for 35K US$ (a good 10K US $ profit after restoration). But, we are keeping it. I plan on new paint this spring because I don’t really like the classic flat yellow for that year. Old is wonderful; no screens, no computers, and no hassles.
This week I was thinking of changing cars from a 2018 Camry SE with 7800 miles for a 2019 RAV 4 XLE Hybrid. With a mint car trade in where I can get an additional savings ~ $1700 sales tax reduction (NYC) and shopping hard for a discount, buying the 2019 RAV 4 for cash, I would still come out laying out an additional ~$13,000 all in for this trade. Even if I sold the 2018 myself and reduced the charge to ~ $11,000, I thought this was way too expensive for this kind of upgrade.
I do have a choice to buy/trade to a 2019 CRV EX AWD for many thousands less and considering this. Toyota’s pricing for its new RAV is way out of line and not worth it to me with my limited mileage use. Wolf is 100% on the money with his analysis of the problems in the market. It is very self defeating. I was also the only person in the dealership for the time I spent there and the test ride ~2 hrs.
“I do have a choice to buy/trade to a 2019 CRV EX AWD for many thousands less and considering this.“
I wouldn’t touch a Honda with the 1.5 motor until Honda figures out the 1.5’s oil contamination problems. Honda claims they can fix it with new engine management software.
Do your own oil changes at intervals of 10k miles or less and you might be fine.
Alex. The 10,000 mile oil change interval is from manufacturers because the want you to buy a new car in 5-7 years. Sure the synthetic oils will not break down but, that oil gets dirty and leaves film on your sensors wears parts faster. Soon you will have oil leaks which over time get larger in volume.
My advice is to change your no more than 5,000 miles or 6 months which ever comes first. Also change the filter or you leave dirty oil in the engine, if you want to keep an engine running good. I always use Castrol conventional oil (4 quarts) and one quart of Castrol’s Syntec their synthetic oil to keep the engine seals in good condition. It worked for my 2002 Lincoln LS and after 13 years of owning it and had no problems at 100,000 miles when I sold it privately. Today customer has 130,000 miles on it and still no engine problems other than changing coils by me and the customer I sold it to. These coils are trapped below the valve covers and are exposed to engine heat which destroys them.
Greeeeeat. Let’s fix insufficiently-tight piston rings with…Software!
It’s a sad day when “oil consumption” is repaired via a techno patch.
“This week I was thinking of changing cars from a 2018 Camry SE with 7800 miles”
Why on earth would someone want to trade in a reliable one year old Toyota with 7,800 miles on it?
As we all know the depreciation is in the first two years.
Scotty Kilmer (You Tube) will tell you they are good for 250,000 plus miles.
Something that I have noticed among my Baby Boomer retiring clients is that they are not interested in status (showing off) any more, don’t enjoy driving anymore (congestion, anxious of penalties, bad state of the roads).
You’re going to take a huge hit on depreciation, trading in a new car after one year.
I just got into a 2019 Camry from a 2012. Both are incredible cars compared to what was around in the 90’s. The 19 wasn’t that much more than the 12 (exact same model and options) but it seemed like I was getting more. Better mpg, more power, way more safety, and I really love the aggressive styling. Now that I’ve put about 5 k on it, here are my thoughts. First, the safety features basically allow you to use your phone more. I don’t participate in this but the front collision detection and braking work very well and are overly sensitive. Everything is lighter weight, possible for econ but most likely for cost savings. Last, infotainment was a huge step back. Way less sound quality and fancy graphics are now accompanied by lag between button pushes. The Japanese cannot seem to figure out these interfaces, but still better than my wife’s Kia (atrocious).
I guess my point is maybe we have reached peak auto luxury? I had the initial perception that my new Camry was an upgrade but the reality is it gets 2 mpg more mileage and that’s about it.
I certainly hope you are speaking from a passenger point of view, because when I get behind the wheel,my mind is focused on driving and avoiding other drivers playing with their SEGA consoles.
If you really want to “enjoy” truly awful sound/stereo quality, drive a new 2019 Lexus ES.
Audio is reminiscent of cars from the 70s/80s with the old standard radio and 2 small 3″ speakers in the dash (you don’t hear any sound coming from the rear).
Audio quality keeps declining as cars get newer and fancier. Don’t know if this is by design or accident.
I’m a contractor, been in business 20+ years, and done very well in good times and bad. We have 3 trucks 2005, 2011, 2003. All are maintained well with low miles, and stripped down by purpose. I see quite a few competitors driving around in these $70k pickup trucks, and cringe thinking about the truck payments…I don’t know how they make money!
Well written and well said, Mr. Richter.
Some had to lease vehicles after bankruptcy. They could not get new car loans.
I bought a new 2015 Chevy at a year end sale. I shopped online to get a better deal. Had to drive 50 miles to get it. When he told me it was not available at that price, I showed him a printout of the online offer. He honored the offer. It has tinted windows, a backup camera and five airbags. They got me back by low balling the trade in.
The newer cars have much better rust protection. My first car was a 68 VW Bug with rotting fenders and a $99 paint job to hide the rust. It cost a fortune in repairs. I switched to new cars when I was able.
Leasing will eventually tail off as prices rise and the rollover of extra miles and other charges from lease to lease bite. Maybe 3 leases and you’re out.
Just replaced a 2006 ML500 AWD with 215k miles on it with a *mint* condition 2012 ML350 4matic with 25k miles on it for $25k. $65k-$70k new.
Bought the ’06 in ’10 for $35k, with about 35k miles on it.
Think about that for a second.
It’s crazy. Could we afford a new GLE? Yes. But why? I’m getting a way better car than the ’06, and a quality\feature set comparable to a 2019 GLE, at a radically lower initial cost.
Further, having owned four M-Classes I know exactly what I’m getting and I have a great non-dealership mechanic, certified MD\Audi\BMW\Porsche, who has a large clientele and specializes in keeping “aged” cars on the road.
No wonder Daimler is having issues moving new metal.
I have a 2003 Nissan Xterra. I’ve never needed to find a great mechanic.
I did have the timing belt replaced at the dealership and the mechanic there told be be sure and come back in 100,000 miles.
Congrats, you completely missed the point.
I asked my about the ML series and he asked me if I knew what the ML stood for. To a mechanic ML = Mother Lode.
Nice joke, but hardly true. Unless you have the Bluetec.
I drive a 2012 Nissan Altima 2.5S, currently with 120,000 km on it. Just yesterday morning I was marveling at how it rides and drives like new. The only repairs I’ve ever needed were rear shock replacement and of course brake pads/rotors. I’m the second owner (I bought it with 49k on the odometer in late 2013), and Nissan isn’t exactly known for its quality these days. Yet I have zero desire or need to spend money on a replacement.
Back when I was a kid (70s and 80s), my parents would by used vehicles, maybe 3-4 years old, drive them another 3-4 years, and then those vehicles were done. And we lived in a rural area, so there were no hard city or rush hour miles. Vehicles just didn’t last that long. The exception was a 1983 Plymouth Reliant (a K car of all things) which was purchased 3 years old in 1986 and was still being driven in 1993. The suspension was shot but the engine just kept running. As for safety, we are light years ahead of where we were in the 80s.
Vehicles have escaped – thus far – the planned obselesence that seems to be the norm for appliances. Everything else is going in the opposite direction. Several people in my family had fridges and freezers more than 5 decades old – find a new fridge today that will last even half that long. Maybe vehicle manufacturers hope that by loading ever more electronic gadgetry into their new builds, they will ultimately achieve what appliance makers did a long time ago, and people will have to replace their vehicles more frequently again. But they haven’t managed that trick yet.
I have noticed some ridiculously long maintenance cycles. Like recommended 24k oil changes. That appeals to broke indebted car buyers who can barely afford their monthly payment, let alone regular maintenance (you’ll save money on oil changes compared to our competitors!) But I suspect the manufacturers know that whatever wear and tear caused by dirty oil likely won’t show up until after the warranty is up. It’s their own effort to sneak in some planned obselesence through the back door.
My son, who recently outfitted his rental units with new appliances, is going nuts trying to replace most of them almost at once, after 5 years.
Our household experience has been the same.
Appliances made in Germany by Miele may be the answer for us – they are alleged to last twenty years or more in Europe. We’ll see – we’ve recently bought a washer and a dishwasher from them.
They cost about 30% more than the leading U.S. (Chinese?) brands.
Yah, we just replaced a fridge that couldn’t be more than 8 years old. Fortunately I rent so it was my landlords expense. The 6 hear old front load washer is also making a tonne of noise so that’s probably the next to go.
Appliances are very inexpensive now compared to previous decades when adjusted for inflation. Each market (appliances vs vehicles) has its own issues.
5-10 years on an appliance is avg. now. But you are paying about half as much as you did 30 years ago. Plus the energy efficiency is much better.
For laundry washers a dryer Speed Queen is the way to go. They mostly make machines for laundromats but they have a consumer line which is basically their promachines with a different label. They are not cheap but their reliability exceeds all others.They have taken the throne from Maytag that went to crap once it was bought by whirlpool. I know all this because I am in charge of the laundry units in our condo bldg.
Bosch are usually OK too. The key to good appliances is to know the many names of Whirlpool and never, ever, buy anything from them.
Whirlpool are the Monsanto of appliances!!!!
Yep. The “Kenmore” washing machine in my basement is a Whirlpool.
Speed Queen is US made and ‘basic’ as a washer/dryer can be, but you can still get them and I bet they last at least 20 years. No fancy electronics or lights. Think 1980 style. Look into it!
You have to be careful buying Speed Queen washers. They have the desirable basic models with the old style relays that come with a 3 year warranty.
The have new models that use digital controls, come with a 7 year warranty, and you DON’T want one of them.
Laundromats use the commercial equivalent of the basic model.
30% more for Miele sounds like a hell of a deal.
As I read your comment RD, I glanced over at our $249 dollar electric range from the appliance repair shop. We bought it to replace the modern digital crap, that crapped out. Analogue baby, just turn that potentiometer.
Read Consumer Reports buying guides. They are usually available at your library. Sometimes online in good libraries.
Check their reliability ratings on appliances AND cars, they are based on detailed testing in their own laboratories and track.
I never buy anything without checking Consumer Reports. They have excellent “most reliable used car ratings” and “Worst used car ratings.”
Oil, especially synthetic oil, is very much different than it was 30 years ago.
Synthetic oil alone increases your autos MPG by 2%+.
My new Mustang came with ‘oil changes for life,’ every 5 months or 5K miles (whichever comes first). Given I only drive it about 500 miles/mo. my oil should remain pretty clean. Yes, that gets me into the dealership 2-3 times a year, but so far they haven’t tried to upsell me on tire air rotation or muffler bearings.
Even still, I would have done my own oil changes, as I’ve done my whole life, but disposing of 10 qts. of dirty oil and a filter responsibly is difficult in my town.
I have a modicum of auto-repair skills and I use them to keep my cars going. I only buy used domestics — I have no affection or loyalty to any one brand — because they’re cheap to buy second-hand, they’re reliable, and cheap to repair (thank you RockAuto.com!). I have no issues with the Japanese brands, all very good, but cost too much to buy second-hand and are more expensive to fix. Wouldn’t touch anything German (from experience: nightmares to fix, very costly parts). To me a car is all about transportation, not an extension of my personality, ego, or social class. I currently drive a 2003 GMC Envoy with 160K miles. Going strong!
Price inflation for low end pick pick ups in the 1990’s to 2019……. Isuzu pick up called Isuzu “pup” (tin can truck in pickup world – think Chevy Chevette and Ford Festiva in in a pick up model) for $3000 used (plus or minus $8000 new) in 1997. I bought this truck used – excellent value for the buck……Next pick up was a 2002 Ford Ranger (simple cab – not an extended cab) bought used for $8,000 (pretty close to bare bones for features). Looked at new vehicles at this time and Ranger went for plus or minus $12,000.
Looked at small pickups in 2015. Zero pickups with a simple cab were being manufactured (extended cab was the smallest offered). Plus or minus $16,000 for pickups with limited options. Currently drive a 2015 Toyota bought new for plus or minus $22,000 with taxes. Will try to drive this pickup into the ground. Would have bought a truck with AC and am/fm/cd player with a simple cab. Used late model pickups hold their value, for the most part.
Truck manufacturers cannot get big enough profit margins on the old low end model pickups. I like and am comfortable with small pickups. To much household income used to obtain a vehicle, in my opinion.
Note: Napa Auto Parts distribution center in Minneapolis had ten to fifteen simple cab (not extended cab) pickups in their fleet in the late 1990’s. I wish they would manufacture a base model pick up like they did in the 90’s.
Would this considered a form of “collusion” in the truck manufacturing industry?
Ram makes plenty of regular cab pickup trucks. They call them the ‘Tradesman’. Mostly in white, though.
Are the Ram pickups a small pickup? Not really. Low end low budget trucks are a thing of the past.
I accompanied a young acquaintance on their first car buy very recently. The kid (late 20s) has probably a 130-140 IQ and yet was totally unprepared for the experience.
After a couple hours of back and forth a deal was finally struck and my comrade had a look of fatigue and also relief. That’s when the fun level got kicked up a notch. At that point, I stepped away to take a phone call. In the 10-15 minutes I was away, the F&I guy was well on his way to making some serious bank. I helped unwind most of it and if looks could kill, I would surely be dead.
Anyone who operates primarily based on emotions, doesn’t do research and can’t do basic math on the fly is in for some expensive lessons.
Welcome to the Car Business- The coin is Made in Finance an Insurance (Industry Nickname – “Rust, Dust, and Lust” for a Reason!!!) Then the Service Department makes significant Coin… then the Use Car Department makes another nice Coin!! New Car Department is often the loss leader, to draw you in… Who ever dickers on the Repair Bill…
Find a different dealership to do business with. I bought a new car late last year, and went in prepared to do battle with aggressive salespeople and the FI upsell. Instead, the sale was relaxed with no hard sell. I think they low-balled me a little on my trade-in, but gave ground elsewhere. A handshake deal was struck, and I came back after the car was prepped and handed the FI a check for the full amount, expecting them to do a credit check “in case ‘something’ was wrong with the check.” No credit check, chatted with the FI guy for a while, signed the papers and picked up the car.
CalBob, Agreed. Lots of different approaches now. I bought my current car in 2013 via a 5 -10 minute telephone call and the guy delivered the car 300 miles to my door. Paperwork was minimal and done on my kitchen table. It was exactly what I wanted was the only one I could find on the east coast that wasn’t loaded with electronics. It was a fair deal and buying the car bare boned saved saved me about $10k, but I suspect I could have gotten it for less if I had worked harder.
I’m not sure why anyone would go to a car dealership. I bought my first car from a used dealer and was sure some type of crime must have been done to me because I was inexperienced. Have never been back. Strictly purchase from private parties now.
As my 1998 Honda accord with 263,000 miles just had the transmission go bad, I am in a piece of crap back up 1994 Toyota Hilux truck with 140,000. Now the search begins for a replacement. In the past two decades I have stuck to Toyotas and Hondas because they seemed a lot better quality than US brands.
In my case I went to dealership and saw the prices of the new trucks, not sure if they were to high because of fancy add on’s or what the deal was. I shopped for quite awhile and found a great vehicle that would hold its value after the purchase. After spending a little more money to fix up a few problems I have a truck that will last a long time, hold or gain value, and have reasonable upkeep. I bought a brand new Prius in 2010, within 3 years it was losing 1 qt of oil every 1000 miles which isn’t enough for the warranty to kick in, and the value had dropped a ton when I drove it off the lot. It doesn’t take an economist to figure out which deal is better. I also save a lot on insurance.
I can buy a new Chevy pickup for @$65000. It will lose half it’s cost in depreciation in 4-5 years (and yet the used auto sales guys will resell it at 80% of original price). Or, I can do $10000 in maintenance and upgrades to my 30+ year old Chevy pickup and sell it in 4-5 years for what I have into it easily. The old truck is cheaper to insure, and license, to the point where the lesser gas mileage is actually paid for.
It no longer makes sense to buy new.
The manufacturers (and the UAW) have to come to the realization that the number of sales is finite, and actually going to decrease unless they can reach newer markets (of which those that exist cannot afford $65000 vehicles).
Been a car guy for long but treat car like appliances
Just bought a kia suv msrp at 38k from 27k..
Really impressed with the quality and value for money
Cherry on the top is 100k miles warranty
What I see in the comments is something I am seeing in retailing in general, sustainability is becoming important. When I was growing up only poor people bought second hand, not anymore. I see a huge increase in reselling of luxury brands, of all types, clothing, shoes, handbags, watches. Even in the fashion world, women are thinking about the resale value of items they buy. The young especially have embraced sustainability as a green initiative, even when they can afford new.
Maybe the real problem is that the auto industry has peaked and needs to shrink to survive. Now there’s a controversial concept.
Exactly. I showed my son a site that sells used IT equipment because he needed a laptop for work.
He got a Lenovo 440, i5, 8 GB RAM, 240 GB HDD, with Win 10 PRO, for 250 EUR. This is for a business laptop with metal casing that will survive going in the checked luggage. There is a year warranty on the thing also.
The used stuff is so good at the moment that one would be a swine to buy new!
Yep corporate laptops, sold off after 2-3 years in service, you can get a hell of a lot of computer for a couple hundred bucks.
Just curious, what is the site that can sell corporate IT equipment? Did you end up having to reinstall all the software afterwards?
eBay. Lots of guys wipe & resell Corp stuff on there!
I have a crew cab 2007 Chevy Diesel p/u with ~126k miles on it. At the rate I drive it, it may well be the last vehicle I own since it should run over 300k miles. I don’t care if it’s old.
Just replaced the wife’s 2004 vehicle that had 155k miles and a fading rear end with a 2005 car with 80k miles. That could be the last car she ever owns. If and when it goes she can just drive my truck.
Yeah the new tech is incredible, but I’m no longer enamored of ‘shiny new things’ as we approach our 60’s. It’s cheaper to insure the old ones, they still look pretty good given car designs are and have been mostly generic for decades now. Plus I don’t have to concern myself with batteries that blow up or vehicles that ‘spy’ on us.
I bought a couple of similar Lenovo laptops – T430s – for ~$200, not the metal case, but still business level.
Hah! T430’s — I got a few myself! All used, all Win 7.
Used the same at work so
I knew they were solid
Yep, windows 7
Seems like the projected limited lifetime of the lithium auto batteries (EVs) would put a more predictable end-of-life on new and future vehicles…?
I continue to drive my 2002 Jeep Grand Cherokee Laredo, purchased as a decommissioned rental in 2004. So, it is 17 years old now and runs well. Fans and fan assemblies have seemed to be the weakness in this Jeep vintage. I put on low mileage per year, and keep up on maintenance and repairs; and as of now am planning to drive it to destruction.
There was a time when looking forward to acquiring a new vehicle was a pleasant daydream, but now the idea of a new vehicle outfitted with the black box, and whatever is included in the new vehicle’s oversight package, is just dark thoughts.
I will always think of you as a car guy, Wolf (LOL), so appreciate that this post is informed and thoughtful. Thx
Last year, I tried to buy a “smaller” pickup and looked at the GM Canyon and Colorado models. These are the downsized pickups these days and are as big as the 1995 Chev. Silverado pickup I had a decade ago. I went to three dealerships trying to by the 4 cylinder, manual trans, extended cab model that listed for $28,000 (base), and with options about $32,000.
Not one dealer had anything like this in stock and also would not try to locate one for me. I waited 3 months and no deals. All they wanted to sell me were the $40K + small pickups.
I gave up and found and bought a 1998 F150 Lariat Edition full size pickup with 47,000 original miles on it for $5000. This used, but mint condition one, will last me at least 10 more years.
So much for those small pickup!
I’ve emailed both Barra and Ford’s CEO directly, giving them 2 legal alternatives to the financing fraud, they could move all they want at full sticker, neither even responded, so screw them.
I have always worked at home so my vehicle is very low miles, a 1996 Camry wagon. It runs, pretty much, like the day it was new. Always garage kept, it looks new also.
In 23 years the engine, trans, and ac have not been touched outside of fluid changes and a leaky valve cover gasket. The valve cover gasket does not affect the engine. Most people just let it leak, but I am particular.
Parts are relatively cheap and plentiful and aside from some painful logistics under the hood, mostly related to the back three cylinders, it is easy to work on. This was a car produced when Japanese engineering was at it’s uncomplicated finest.
I dare say you are not going to get 23 years out of a new one. The new design and engineering are assuring that. Only dealers can work on them and every repair is 1K or more. They are programming obsolescence at an increasing rapid rate and the electronics help guarantee it.
The greatest competition for various auto makers is not the next auto maker. It is the autos that the same or similar auto maker has made in years past.
Likewise, the greatest competition for Yellow Equipment manufacturers, such as CAT, especially, is not the other equipment manufacturers, it is the long supply of affordable CAT legacy equipment, which are more affordable as there are aftermarket parts from around the world for these machines.
Where are the futures of these companies headed? Their sales trajectory is not going to increase much until some of the new manufacturers are liquidated.
All horribly overvalued? Read any reviews of the 2019 Honda Civic Si?
Obviously, Meant for post below
Every type of new vehicle is horribly over priced. What little value for consumers there is is in used cars/trucks. There’s a cost nexus between government regs and manufacturers raising prices attempting offsetting/chasing diminishing profits due to diminishing sales.
Great article Wolf.
Question: is there data that shows average number of miles on register autos?
Do you think such a graph would have the same shape/ arc as the average number years?
I have a 1985 Dodge crew-cab which I bought at government auction in 2008 for 700 dollars, it was shipped to me for 900 dollars and total was 1,600 dollars. It only had 53000 miles on it and I was informed that the FAA slated all vehicles for replacement at 50000 miles. I am driving that truck still today, it has horrible gas mileage, but it is very dependable, also should add that this vehicle was built without AC and has manual windows and seats, but everything works.
I’m 70 and retired, it’s likely that I’ve bought my last vehicles. We’re fortunate not to live in an area where rust eats up our cars early and I’ve always maintained them fairly meticulously. Since retirement we don’t rack of the miles as before and we’ve decided that whatever breaks we’ll just fix and keep going. A couple of years ago I had the engine replaced in my pick-up, $2400.00 way cheaper than a new truck and no debt. Makes no sense to spend $50,000 on a vehicle that’s driven less than 5000 miles a year. This old baby boomer is out of the car market.
Auto makers can’t expect to keep on adding more and more cars to a world where there are already too many cars occupying the roadway.
My daughter and I got stuck in traffic last year in Paris, France and our car didn’t move for 30 minutes- took us two hours to get from Sacre Cœur to Sain’t Denis. I can’t imagine adding even one more car to that market. Even where I live-Portland OR- is a traffic nightmare between 4 and 7pm weekdays.
I’m incredulous that the reason fewer or a leveling off of new cars are sold is because of rising quality- diesels are, by far, better cars that last much longer, imo. Those built with a timing chain as opposed to belt tend to last longer, IMO, and taking really good care of it (regular oil changes, higher octane fuel, regular inspections) definitely matters.
Why on earth would a tourist drive a car in Paris? Look in the mirror – you are the source of the problem. There’s a metro station every 500m in Paris.
Uh…Diesel engine cars are dead, both in Europe and the U.S. In the U.S. market only pickup trucks are available with a diesel. Prices of a Ford Powerstroke or Chev/GMC can easily top $60-75K or more. Here in Texas you see a lot of bubbas wheelin’ them around, but rarely for work.
I bought a private sale used acura rsx with just over 50k kilometers on it for $7250 Canadian 3 years ago. With $1400 from my old civic that means it cost me $5850 cash for a very good used car. Had some minor dents repaired and a few small maintenance things. Just putting new tires on now (they still have a lot of tread but are very hard due to age and the ride is rough because of that). I could sell it now for what I’ve put into it I’m sure.
Why buy a new car? I don’t need the ego hit and hate all the electronic crap on cars now anyways. I understand 2008 or so is the year they went over the top with electronics. Maybe I’ll look for a used 2008 or so car with low mileage in 4 or 5 years. I hear Kia’s are good used vehicles. Maybe it will be an even better overall financial proposition then? I won’t be shedding any tears for the car companies, especially the corporate welfare cases.
Great thread w/ good info.
I’m casually looking for another Honda Civic, used. My 2004 has 150K and is only using a tiny bit more oil.
I don’t want one that records my speed/braking. Anyone know what year that started?
It’s the Osborne effect people are waiting for the new better fastest safer cars that will be out in Mass next year: