By on September 21, 2012

The good old days of late summer 2009.

It was a great time to buy a new car. Monthly new car sales in North America had plummeted to under 10 million units.  Access to financing seemed to be near impossible for a lot of consumers. Brands were orphaned. Leasing collapsed. Banks were picky. The future was uncertain and… raw materials were cheap.

It was a good time to buy new at a deep, deep discount.  Has that time passed?

What got me thinking about this was a late model car I was using for my auction travels. A popular car. One that sells like hotcakes. Yet it looks like nearly every interior component within it has been parts binned, deconteted and cheaped out to epic proportions.

It offered good fuel economy, a nice radio display, and several hundred pounds of plastics that were in varying forms. Could the car get any cheaper and remain marketable?

I had my doubts. From the wafer fin door panels. To the glossy, Tonka like display of the center dashboard. It reeked of cheap to the point where an hour inside of it felt like a petrochemical bath.

As I went to that evening sale, I thought,  “I wonder if this material is cheaper to buy than cardboard boxes?” It was an honest question because everybody uses this cheap stuff. From the mightiest of manufacturers to the most irrelevant of niche players. The hollowness of material quality and feel for anything 20k or under seems to be an epidemic of cheap these days.

Yet everything costs more. Reconsider those MSRP’s for a moment. There was a time not to long ago when a $13,000 Yaris, Versa, Cobalt, Aveo, Rio, and PT Cruiser were publicized on a paperish pulp we used to know as a newspaper. Remember those?

Now a few of these names, along with their far more marketable descendants are venturing hard towards the $20,000 mark. There a few discounts. Maybe even a rebate or two.  But the hard march to the next big round number seems to be the new tune of 2012. A loaded Camry can now retail for well over $30k. The Lexus LS400h can now cost nearly $100k.  We’re talking two decent foreclosed houses in the ex-urbs here folks!

This brings the TTAC readers to our question for today. Have we passed the peak of cheap? Are we bound to a new world of car buying where commuter cars only feel cheap and the ‘nip and tuck’ of cost containment has run the course?

What says you?

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23 Comments on “Question Of The Day: Have We Passed The Peak Of Cheap?...”


  • avatar
    el scotto

    No, all the major car companies are seeking Total World Domination. I’m afraid “we ain’t seen nuthin yet” as far as cheapness and economization goes.

  • avatar

    The real inflation is much greater than the official lies that various news outlets publish. So it’s probably just that.

    • 0 avatar
      redmondjp

      Bingo!

      With QE3.0, now with Unlimited Dollars, we are now monetizing our own debt (google it if you don’t know what this means as it directly affects YOUR net worth).

      Got physical assets? A few ounces of gold will buy you a good used car these days.

    • 0 avatar
      jacob_coulter

      Of all the economic problems we’re facing, I think the hidden inflation that’s going on is the most disturbing. The official government numbers are a joke, what I now pay at the grocery store or to fill up my tank is eye-popping.

      You’re going to see material costs soar over the coming years as Central banks around the world have tried to print their way into prosperity. We have yet to feel the real brunt of it yet.

  • avatar
    krhodes1

    The reality is no one really wants a new cheap penalty box anymore. Cheap cars are used cars. Why on earth would you buy a $10-12K new car when you can get a couple year old, still under warranty, much nicer car for the same money that will last just as long?

    So given this, the cheapest cars are moving upmarket. Technically the Cruze is a direct replacement for the Cavalier then Cobalt line, but it is massively more expensive both at MSRP and actual transaction prices. It is also a massively better and nicer car.

    • 0 avatar
      icemilkcoffee

      Yup. That’s the truth. You could still buy a barebones Nissan Versa for less than $11,000. But nobody wants that type of barebones car with roll up windows anymore. People want to have bluetooth & iphone plugs, etc.

  • avatar
    NormSV650

    GM is making the most money on small cars sales?

  • avatar
    racer-esq.

    Average new car prices really don’t indicate anything. There are too many potential causes.

    Maybe average prices are increasing because more people are buying used cars instead of
    cheap new cars.

    Maybe average prices are increasing because lending is getting stupid again.

    ” There was a time not to long ago when a $13,000 Yaris, Versa, Cobalt, Aveo, Rio, and PT
    Cruiser were publicized on a paperish pulp we used to know as a newspaper.”

    Those deals still exist.

    http://www.cars.com/for-sale/searchresults.action?sf1Dir=ASC&rd=100000&zc=10001&prcId=28847&prcId=28846&prcId=28845&PMmt=13-0-0&stkTypId=28880&sf2Dir=ASC&sf1Nm=price&sf2Nm=location&rpp=50&feedSegId=28705&searchSource=GN_BREADCRUMB&crSrtFlds=stkTypId-feedSegId-prcId&pgId=2102

  • avatar
    Pch101

    Over the next twelve months or so, everyone will be fighting for US market share, which should mean discounts galore. If you want a new car, this is the time to buy it.

  • avatar
    Glenn Mercer

    In my view this is just an artifact of a maturing product. After a century or so of development and improvement, cars have gotten reliable and durable enough that consumers have segmented it into new cars (say, $20,000 and up) and used cars (say, under $20,000), with certified pre-owned (“nused”) blurring the gap between the two. As long as a Toyota dealer can sell a new Fireboggle for $30,000, a CPO version for $20,000, and a beat-up older one for $10,000, she or he has the market covered. And from Toyota’s point of view the CPO model in particular is a great way to capture customers who can’t ante up the $30,000 for the new Fireboggle, without spending a cent on product development. Why introduce a cheapo new Firebogglette, for $20,000, which will cost $500,000,000 in product development and tooling, and will cheapen the Fireboggle brand, when I can just move CPOs? The OEM and the dealer will still get the parts & service revenue (the majority of dealer income anyway, and spare parts profits are 40% or more of most OEMs’ profits as well). And it may no longer make sense to even TRY to compete at the $10,000 level, when we’ve got 250,000,000 used cars on the road to compete with. By the way, I think this last point is what is delaying the Chinese entry to the USA (along with little details like emissions and crash and quality and cost): is there really a market for a brand-new Chinese “Great March of the East” or whatever, for $12,000, with a limited dealer network and no brand, when I can get a clean used Civic for the same price? What would the Chinese have to do to lure buyers? If Hyundai, despite its INCREDIBLE improvements, still has to hang a 10-year warranty out there, would GMotE have to offer 20 years? Okay, I think I rambled off the point. To answer the question, yes, I think the era of “cheap” new cars is over because “cheap” used cars have filled the gap. Cars are now like houses: you got bucks, build a new one; you ain’t got bucks, you buy used.

    • 0 avatar
      racer-esq.

      “Cars are now like houses: you got bucks, build a new one; you ain’t got bucks, you buy used.”

      Where I live the poorest people buy new houses, and the wealthiest people buy the oldest used houses.

      • 0 avatar
        CJinSD

        I used to live in Palm Beach. The poorest people bought old houses for $14 million. The wealthiest people bought old houses for $14 million and then immediately tore them down and built new ones in their places. Mind you this wasn’t completely true. The poorest people were really just live-in help.

      • 0 avatar
        racer-esq.

        Yeah, that is common by me also, but it still starts with buying a used house. And then there are the gut-rehab “restomods” – to continue this completely inapplicable analogy.

  • avatar
    JMII

    The new “cheap” is just $20K, kind of like the new normal for gas is $4 a gallon. I bought a loaded VW Passat back in 2000 and it was $24K. Same purchase today would be atleast $30K.

    I think the real difference is buying a 10 year old used car today still gets you plenty of modern safety features, but buying a 10 year old car back in 2000 got you almost nothing. Thus I think VALUE is way up, it just takes more coin to get in the game. They days of buying cheap, striped out rides is over. Today’s base model/trim cars contain A/C, automatic tranny, power windows, remote entry, cruise control, MP3 audio and so on. Is there a single car sold today with manual windows? The race to the bottom is a losers game… and the auto manufactures are starting to figure this out.

    For reference I remember back in the mid 80s the cheapest vehicle you could get was a basic pickup: manual tranny, manual windows, power nothing – today no such creature is available, heck pickups are most expensive thing on the lot!

    • 0 avatar
      kvndoom

      Sakes alive! Only Mazda has a truck… for just fifty-seven, ninety five!

      (my mind is poisoned with 80′s jingles that I cannot forget)

    • 0 avatar
      Mzdaspd304

      Well my 04 mazda 3 at the time you could get a stripo version. We are talking manual locks, windows, seats, mirrors, no cruise, A/C was actually an option. You did however at a minimum got a basic CD player but couldn’t play burnt CD’s, 5spd with steelies.

      I’m pretty sure you can still get a ’12 mazda 3 with no power seats manual windows and locks.

  • avatar
    Mullholland

    Yes, anticipate high prices.
    The bogus inflation numbers as mentioned above are part of the issue. But the big lesson that most manufacturers have learned from the recent unpleasantness (GM ChryCo fakeruptcy) is to control inventory at all costs. That’s why there are fewer and fewer inventory driven discounts that, in the past, were created by miscalculation of demand, mismanagement of the production process or the irrational chasing after some silly sales title.
    Here’s what everybody is trying to do now and going forward. LEASE your lowest price units. Hold out for a hefty profit as you actively try to move SALES of units that drive higher profits. Then bring back (because your retained control) of your lease returns and sell them as CPO’s with a corporate kiss and a promise (inspection and very limited warranty). Then when the car is nearly used up it will appear as a beater used car on Craigslist for sale at your crosstown “Buy- here-pay-here” lot.
    This scenario is a win-win for the manufacturers and its local dealers. First, the manufacturer doesn’t have to spend enormous sums of money to design, engineer and build a cheap car as market forces (depreciation) and wear-and-tear automatically create that consumer option. Secondly, and best of all, the dealer gets to take a profit each of the three times he sells a vehicle using this “inventory control” system.
    What about the buyer/owner/lessee? Well they don’t really benefit so much. I guess the best benefit for “drivers” to play along with this system is that at every stage of the vehicles life cycle the buyer pays an accurate price for the value of the unit. The leasers get and pay a premium for the benefit of having a new car. The CPO buyer pays less but gets the benefit of manufacturer’s inspection and warranty. And the beater phase buyer gets a cheap car. Everybody pays more! Everybody wins!

  • avatar
    bauerjw

    I continue to be very happy with my 2012 Kia Soul. It’s by far the cheapest car I’ve bought over the past 15 years but somehow the best equipped. I’m astounded by what my $17k got me. Maybe I found one of the few great values out there.

    Elsewhere in the world, I watch my ice cream containers getting smaller while the price keeps getting bigger.

  • avatar
    Brawndo

    No. They are cheaper than ever. http://www.thetruthaboutcars.com/2011/08/chart-of-the-day-the-toyota-camry-index/

  • avatar
    b787

    About those cardboard boxes…one of Toyota’s European plants recently stated that they use reusable plastic boxes for components, which are then returned to suppliers and reused.

  • avatar
    George B

    Yes. We have significant inflation and it takes more dollars each cycle to buy the next car. Car manufacturers have been trying to simultaneously squeeze cost out of cars while increasing the list of standard accessories. Went too far in the cost reduction and now prices have to rise to buy decent quality interior plastic and parts that last longer than just the warranty period.

    We’ve become like Bowerbirds, using borrowed money to buy big shiny stuff to impress. It used to be possible to impress other people with luxury features. Now Hyundai checks the boxes for features that used to be only available from luxury brands. Consumers have reacted by putting more emphasis on brand, making BMW, Audi, and Mercedes the entry level for making a luxury impression. A house needs 20ft high ceilings at the front entrance. Takes something exotic like Ferrari or Bentley plus an exclusive zip code to break through the borrowed money entry level luxury clutter. Really sucks to be Lincoln right now, neither cheap nor luxury.

  • avatar
    wsn

    Sorry, but this kind of statistic means sh*t.

    It’s very easy to offer an explaination, like “more trucks are being sold and trucks are more expensive than cars.”

    A better way of doing it would be to concentrate only one segment and one model. Like for Toyota, use only Camry LE’s transaction price for the entire span of one model cycle.

    • 0 avatar
      Steven Lang

      A case of a single model would have virtually no significance; especially if you use MSRP to measure real inflation.

      The key metric is purchase price. I can try to sell a Saab for $37k MSRP. But if they are only going for $22k out the door, then that’s the real market.


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