When trucks are advertised at $10,000 over MSRP, what does MSRP even mean? Now throwing shade on my fancy-schmancy proprietary index.
By Wolf Richter for WOLF STREET.
Every year around this time, I update the proprietary “WOLF STREET F-150 XLT and Camry LE Price Index” with the new model-year MSRPs, base version no add-ons and without destination and delivery charges, for a view of the actual price increases of the bestselling truck and car in the US going back to 1990, and I compare that to the CPI for new vehicles, which is very amusing.
By October usually, Ford comes out with the final pricing for the F-150 XLT. Toyota normally releases final prices for the Camry LE by early November.
The 2022 Camry LE is now starting to get built with an ETA in November. But Ford’s production, which was massively hit by the semiconductor shortage, is a huge mess.
Ford is still building the 2021 model year F-150 XLT, with a very large number of models still in the order bank, due to the semiconductor shortage that crushed production during the year.
A dealer with Ford and Toyota franchises told me that some 2021 F-150 XLTs that were allocated nearly a year ago are still in his order bank, and show up as likely to be built. But he can now also see window stickers for some more loaded 2022 F-series, but not the F-150 XLT.
Back in June, Ford still said that production of the 2022 F-150 was scheduled to start at the Dearborn Truck Plant on November 15th, and at the Kansas City Assembly Plant on December 6th.
“To be honest, Ford’s vehicle visibility and locator information is junk at this point because of the extended production and logistics issues,” the dealer said.
Ford is still allowing you to spec out a 2021 model-year F-150 XLT on its website. But you cannot spec out a 2022 F-150 XLT yet.
On the other hand, the 2022 Lightening EV truck, the 2022 Super Duty, and the 2022 Maverick are now being built.
Ford still hasn’t released final pricing for the 2022 F-150 XLT, though prices have emerged in form of leaks that have not been confirmed. I will use those leaked MSRPs for the time being. If final prices are different, I will update the index.
On the other hand, Camry LE models are starting to show up in the pipeline. The dealer said his first 2022 Camry LE had an ETAs later in November. He has no new sedans on the lot at all, and he said the Camry will sell before it gets there.
“While Toyota has production and logistics issues, they pale in comparison to Ford’s,” the dealer said.
When I started doing the WOLF STREET F-150 XLT and Camry LE price index, I never thought I would run into this kind of mess.
MSRP is suddenly no longer the top. It’s the bottom.
In terms of pricing, my index relies on the MSRP per model. In the past, there were always manufacturers’ incentives and rebates, and dealer discounts, and practically no one ever paid MSRP for these vehicles. Nearly everyone paid a lot less.
Now the opposite is the case. Automakers have slashed their incentives and rebates. And dealers, instead of giving discounts, are selling at MSRP, or are adding thousands of dollars as “addendum” or whatever, to MSRP.
Instead of advertising discounts, dealers are advertising these addendums. For example, a Bay Area Ford dealer advertises the 2022 Maverick SuperCrew with an MSRP of $23,775 and an addendum of $3,245, for a total advertised price of $27,020. This is 13.6% over MSRP. And it’s on order, not on the lot.
The same dealer has a 2022 Ford F-150 SuperCrew Cab V-6 on order, with an MSRP of $57,500. The dealer slapped an addendum of $10,595 on this truck, bringing the advertised price of $67,995, or 18% over MSRP. It’s not on the lot yet, and there is not even an image of the truck yet on the dealer’s website.
This is the craziest situation I have ever seen.
The MSRP of the 2022 Camry LE, without destination and delivery charges, rose just 1% from the 2021 model, to roughly $25,295, according to the dealer and Toyota data.
The MSRP of the 2022 F-150 XLT without destination and delivery charges, according to preliminary data floating around out there, rose less than 2% to $36,050.
But wait… Most dealers are no longer discounting from the MSRP. They’re selling near MSRP or above MSRP across most of their product. And they can.
That customers are jostling for position to pay those prices is the craziest situation I have ever seen in the car business. Sales volume in units at dealers and automakers has plunged due to the shortages, but they are making huge per-vehicle gross profits of historic proportions.
What’s bizarre is that customers let them, and by letting they, they’re encouraging them. Vehicles are the ultimate discretionary product. Most people can drive what they already have for another year or two. They did this during the Great Recession and caused the industry to collapse. But enough people are eager to pay those prices to keep the this going.
This crazy pricing is now throwing shade on my fancy-schmancy index.
The index is based on the idea that discounts are there every year, and on average, they’re similar in percentage terms, and so they canceled out for year-over-year comparisons. While nearly no one paid MSRP, it was a good indicator of the magnitude of price increases from year to year.
Now we have these crazy addendums. So who knows what customers will finally pay for a 2022 F-150 XLT on average? MSRP +$5,000 instead of MSRP -$3,000 as they might have in the past? This would mark a price increase of $8,000! And it wouldn’t show up in my index!
But the Consumer Price Index started to pick up the addendums.
The CPI for new vehicles, released by the Bureau of Labor Statistics, has started to pick up some of these addendums. For October, the CPI for new vehicles jumped by nearly 10% year-over-year, even as the 2022 MSRPs have barely moved.
The chart below shows the MSRP for each model year of the F-150 XLT (purple, left scale), and the Camry LE (red, left scale), and the Consumer Price Index for New Vehicles (green, right scale).
The CPI for new vehicles is somewhat absurd, thanks to aggressive hedonic quality adjustments by the BLS. As a result of these adjustments, the CPI for new vehicles last year was about flat with 1997, and it’s only the 10% spike this year that moved the CPI for new vehicles out of that range (here’s my discussion about hedonic quality adjustments to new vehicle CPI):
Since 1990, the F-150 XLT price has soared by 178% and the Camry LE price 73%, while the CPI for new vehicles has risen just 33%, thanks to these hedonic quality adjustments.
This relationship over the years between soaring truck prices and slower-rising car prices goes across the industry. Pickups, SUVs, and compact SUVs – included in “trucks” – have been red hot for years, while sedan sales have plunged starting in 2014. GM, Ford, and FCA have now abandoned the sedan market altogether, and Tesla and foreign automakers are fighting over the scraps.
Sales of “trucks” – pickup trucks, SUVs, compact SUVs, and vans – rose to 839,200 units in October. Sales of “cars” (sedans and muscle cars) dropped to 207,100 units, the lowest in many decades except for the lockdown freeze in April 2020. This long-term discrepancy in demand between “trucks” and “cars” explains the difference in price growth over the years, and it explains why automakers love to build “trucks” – because they can charge a lot more for them and make a lot more money on them – and why GM, Ford, and FCA thought, possibly in error, that they would be better off bailing out of the sedan market altogether:
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