
Discounted Cars Benefit Buyers, but May Spell Trouble for Industry - hvo
https://www.nytimes.com/2017/05/11/automobiles/wheels/car-dealers-discounts-price-cuts.html?ref=business
======
shiftpgdn
Manufacturers need to get a clue that dealers are poison to their industry.
Every time we've bought a new car in my family the experience has been a
nightmare because of all the games the dealers play. The only new car I have
any interest in buying today is a Tesla because their sales model is low
stress and can be done from my office.

I will drink a toast to the day the last auto dealership goes out of business.

~~~
dtnewman
Recent car lessee here. Like most people, I'm not in a position to buy a
Tesla, but I agree that I can't stand the games the others play. I recently
leased a 2017 Hyundai Sonata. I go in telling them exactly what I want (base
model, no money down, 12k miles/year). They come back with an offer for
something like $290 month + $1300 down (so effectively $326/month over 36
months). After some very tough negotiating, I got it down to $200/month with
nothing down except registration (~$400 for registration, so effectively
~$211/month all-in).

It's outrageous to me that the initial price they give bears no resemblance to
reality. But I'm sure they do it because there are some people who just don't
like negotiating and will pay it. Or they might even tell them "I'm gonna do
you a big favor and knock $25/month off so that you remain a loyal customer"
and then the customer comes away actually feeling like they got a deal even
though they were actually ripped off.

In the old days (WAY before my time), you might have negotiated for everything
(say eggs in a grocery store) so I wouldn't have had an issue with negotiating
for cars. But seeing as cars are one of the only remaining things that you can
negotiate on price, the dealerships take advantage of the fact that people
today just aren't used to negotiating and therefore aren't very good at it.

If there were a car brand with affordable cars that didn't play these games,
I'd buy from them happily.

~~~
galdosdi
> If there were a car brand with affordable cars that didn't play these games,
> I'd buy from them happily.

No you wouldn't. You've already lost the affordable game by insisting on new
cars. New car dealerships get away with this crap because their customer base
is already not very price-rational. It doesn't matter whether they're
discounting you $1000 or $3000 when you've already foregone $10,000 or more in
exchange for the abstract feeling of newness. If you don't want to play price
games, just get on craigslist, look for a car at a price you like, go check it
out and have your mechanic inspect it, then don't negotiate, just pay the
price. Or whatever, you can even be sloppy and get screwed by a private party
and still probably end up way ahead compared to the stealership's prices.

New cars are a luxury product and it's very strange to see people discussing
them as if they're anything else. Luxury products always have wacky economics,
since their value is so untied to fundamentals.

~~~
dtnewman
> No you wouldn't.

Yes, I think I would. Or at least that a lot of others would. I understand
that used cars are a better deal, but I've already decided that I want the
"luxury" of a new car. But within that framework, I still want the best price,
just as many others do. It's not illogical to say "I want a new car and I want
to pay as little as possible for it without negotiating". In my case, I bought
a used car before my current one and it turned out to be a dud. Let's say that
you place a premium on having a car that doesn't break down frequently. With a
leased car, I'm paying for that luxury. I understand that I can come out ahead
with used cars, but I don't want to deal with the hassle of taking it to a
mechanic, the possibility of things breaking when the car is out of warranty,
and yes, not having the latest features. And as much as people hate
negotiating for new cars, negotiating for used cars is even worse.

~~~
galdosdi
You're mistakenly legitimitizing the idea that there is some tangible "luxury"
available from a truly new car (as opposed to a late model one, a year or two
old, in impeccable condition and perhaps some aftermarket accessories).

However, that is a scam idea with no basis in the physical world, invented and
maintained by those with a vested interest. Therefore, all a brand new car (as
opposed to a good 1 year old car) gets you is a vague feeling of newness and
false ideas in your head that the probability of failure is lower. As smart as
you think you are, by buying into it you've already bought into their system.
They're already selling you a bag of air, and already got you to agree that
this has some value, so they have a lot of leverage on the price, since
there's no objective way to value something that is useless except because
people can be tricked into wanting it.

------
tyingq
I believe at least part of this is better quality cars that last longer. The
1980s started an era of crap cars that were junk after 100k miles. That's
improved, over time, and not equally across all makes and models.

But, we finally seem to be at a point where there are fewer reasons to get rid
of a 10 year old car.

Edit: some corraborating figures: [http://news.ihsmarkit.com/press-
release/automotive/vehicles-...](http://news.ihsmarkit.com/press-
release/automotive/vehicles-getting-older-average-age-light-cars-and-trucks-
us-rises-again-201)

~~~
devoply
Most American cars fail after 10 years and look quite beaten up. Japanese cars
used to last 20-30 years but I think Toyota and Honda are the only brands that
have kept up this reputation, and even then not all that well.

All this has to do with the fact that people don't have money to upgrade to
the latest lease.

~~~
Baeocystin
My 1979 Honda CVCC is going as strong as ever. I swapped the
engine/transmission out once, but the engine was still running fine, I just
wanted the 5-speed. A cheap repaint in 2013, and AFAIC it's good for another
20.

[https://www.reddit.com/r/Honda/comments/1q9tww/just_finished...](https://www.reddit.com/r/Honda/comments/1q9tww/just_finished_rebuilding_my_1979_honda_cvcc_pics/)

~~~
function_seven
Wow. I'm impressed. There's something about completely ordinary old cars that
look so pristine after a few decades. I saw a Datsun B210 the other day that
was similarly cared for and it impresses me more than most classic muscle
cars. Everyone expects a '68 Camaro to look awesome; nobody expects the same
from a '79 Honda.

~~~
Baeocystin
Thanks! And you're right. Many years ago, I used to feel a little silly about
maintaining what was essentially an inexpensive economy car. But it was the
first car I bought with my own money in college (for the princely sum of $500
in 1992), and I just really enjoy driving it around town. It's so small I can
park anywhere, and it gets 30-40 MPG.

And nowadays, it gets lots of positive comments. Turns out the muscle
car/classic car guys like seeing the old stuff no matter what it is.

~~~
hkmurakami
Wow that car looks really really nice, with a stylish flat. It really tells me
that the owner loves him/her/it :)

------
bkjelden
So the tl;dr of this article is that lower prices are good for consumers, but
manufacturers cannot sustain selling below cost (what a surprise).

I wonder what is driving demand lower. Has supply simply finally caught up to
pent-up demand from the crisis? Is some other expenditure (housing,
healthcare) sucking up discretionary spending that would otherwise go towards
new cars? Is this a leading indicator of a drop in consumer
confidence/spending that more traditional indicators haven't picked up on yet?
Are people driving fewer miles (I don't know the exact numbers off-hand, but I
believe the data doesn't support this)? Are longer-lasting cars hurting new
car sales?

~~~
hueving
It seems the last sentence rings true for me an my social circle. I have a 15
year old car that costs me almost nothing because it's paid for and worth so
little that I only carry liability insurance.

Sure, I could get an awesome new car, but there is absolutely no rational
economic reason to do so.

Other than missing lane assist and adaptive cruise, I see no useful features
that have emerged in cars for nearly 20 years.

Electric cars are about it, but the environmental impact of effectively
throwing away a perfectly good car to get a new electric car defeats the
purpose.

~~~
Arizhel
>Other than missing lane assist and adaptive cruise, I see no useful features
that have emerged in cars for nearly 20 years.

You're forgetting fuel economy and crashworthiness. Fuel economy has improved
greatly in the last 20 years; I drive a car that 20 years ago with this much
power and weight would probably have gotten less than 30mpg on the highway,
this one gets 40. Of course, gas prices are low so you might not care about
this. But crash protection has also gotten far better in the last 15-20 years.
You can walk away from a crash in a modern car that would have maimed or
killed you in your 15yo one (even for a car of the same rough size).

>Electric cars are about it, but the environmental impact of effectively
throwing away a perfectly good car to get a new electric car defeats the
purpose.

Wrong. You're not "throwing away a perfectly good car", you're reselling that
car on the used market to someone else, and in the end (assuming the market
doesn't expand) this results eventually in some really old POS car somewhere
being junked, which is good because it's pouring out emissions and wasting
fuel. More people buying new cars increases the supply of newer cars on the
used market, which helps push the oldest and crappiest cars out of usage. Of
course, there's limits to this, but the point is: don't feel bad about getting
rid of a "perfectly good car"; it's going to continue getting used, just not
by you, and theoretically results in another car that really isn't "perfectly
good" getting finally retired.

The thing that really sucks here is that, in some states at least, you're
highly penalized for buying a new or newer car because of personal property
taxes. They should just eliminate these taxes for all but luxury vehicles
maybe, to encourage people to buy newer cars to improve safety and emissions.
There's already a disincentive in higher insurance rates; we don't need to add
to that with pointless taxes.

~~~
jwong_
There was fuel economic cars 15-20 years ago, if you've forgotten. My car is
17 years old and gets 35 mpg mixed city/highway.

Some got even more (civic HX).

~~~
Arizhel
The Civic HX would be illegal to sell now because it won't meet crash safety
standards. That's the point: you can get a car now that weighs quite a bit
more than that HX, performs far better in a crash, has significantly lower
emissions, has much more passenger space, and _still_ gets the same fuel
economy roughly (i.e. a larger/heavier class of car is getting the same
economy as an econocar that's now too small and unsafe to be sold).

------
brohoolio
There was a real slowdown in car sales during the Great Recession. That
shortage and the ripple effects are finally coming to an end.

Manufacturers are cranking out too many cars for the US market.

------
sjg007
"Automakers have also turned more heavily to leasing, and longer loans of 72
or 84 months, which keep the customer’s monthly payment affordable."

This is how they will make money. You have to lower credit scores but extend
the payment. That justifies the higher price on average.

Still... I guess it is not enough. And the people that take advantage of this
at 0% keep the car longer..

~~~
bsder
Leasing is an absolutely horrible deal nowadays.

Almost every lease includes something along the lines of "we expect this car
to be worth $X at the end of lease term, and, if it's not, we charge you for
it".

At that point, why lease? The leasing payments are a significant chunk of the
loan payments anyway.

You're better off just buying a used car.

~~~
LoSboccacc
Used car market is pretty great if you have weeks available to find a good one
that has been used well and maintained properly.

Anectodal as it might be I drive a stupid unreliable car from 2004... that has
been going faultless twelve years in my hands.

Luck is also involved, but some research into engine tech and model build
quality goes a long way in restricting the research and it's way better than
those statistic collecting websites that don't account, for example, years of
mehanical abuse that some brand gets more than other because of the segment
they appeal.

~~~
ianai
What's your information source for those sorts of specifics?

~~~
LoSboccacc
I'm kind of a petrolhead, but a friendly mechanic can give you the right tip
if you feed him enough info about what needs you have. you need to be flexible
tho, some good model are ugly or may not fit your personal style

------
broknbottle
it's because of the experience these dealerships offer. I was in the market
for a car, I just moved to DMV area from Michigan. I've had nothing but
terrible experiences. I ended up just putting the money into repairing my
current 8 year old car.

------
sxates
Over 400,000 Tesla Model 3 reservation holders who are putting off their next
car purchase until the car is out - and industry expecting a ~300k decline in
sales this year. Coincidence? I have to imagine 400k people committed to a car
coming out in the next year is a bunch of people who might otherwise be in the
market staying on the sidelines. I'm certainly one of them.

------
dsfyu404ed
This entire comments section is like reading a news article and realizing the
journalist is running on nothing but conjecture and stereotypes.

------
elchief
Keeping my 140k mi Subaru alive til I can get my hands on a Tesla 3 v 1.1

~~~
Kluny
I can't afford a Tesla so I'm buying their stock instead :)

------
rootsudo
So, start of a recession? Is housing next?

------
hourislate
Millions of good vehicles were taken off the road after the 2008 fiasco
(program to trade in). This left the used car market decimated. You could
practically buy a new car for the price of a used car since there was no used
inventory to speak of. Leasing was also hit very hard.

What we are seeing now is the used car and leasing markets recover back to
where they were pre 2008. This has created some much needed competition in the
Auto market.

Vehicles are lasting longer these days. In the 80's most vehicles already had
rust on them from the factory (inside doors, pillars, etc). Since the very
late 80's they started waxing and using galvanized metals. Engine tolerances
were improved along with Fluid technology (Oil, Coolants, Grease, etc).

My advice is never buy new. Buy something either coming off lease or something
about 5 + years old. If it is a Toyota there is still at least 10 years left
in the vehicle. Honda's quality over the last 5 years has really suffered in
my opinion. German cars should only be leased, stay away from used German cars
unless you have a lot of money or can repair them yourself. Korean cars are
throwaways after a few years. If you're someone who keeps a car for a long
time make sure you do a lot of research because these days a lot of newer
models have some serious problems like DI and CVT Transmissions that will cost
more to fix or replace in a few years than the vehicle is worth.

~~~
mikeyouse
There's no evidence for anything in your first paragraph.. I know it was a
popular conspiracy theory on the auto forums but it doesn't remotely pass the
sniff test.. Cash for clunkers only turned in 690k cars, not 'millions' and
they had to get terrible mileage to qualify in the first place so the list of
trade-in was almost entirely 90s era SUVs. In any case, in the preceding 15
years there were something like 200 million vehicles sold in the US. Removing
under half a percent of those couldn't possibly have had a half-decade impact
on the used car market.

