Car dealers have been polled for the fourth-quarter Cox Automotive Dealer Sentiment Index (CADSI) and they’re still incredibly optimistic, despite losing some of their earlier confidence that new-vehicle sales would be relatively healthy.
The dealer optimism – especially among franchised entities – seems to be wholly tied to profitability here. New vehicle sales dropped in 2019 and absolutely cratered in 2020 due to the nation’s response to the pandemic. In spite of there being plenty of talking heads in the news media telling you not to stress about the economy, inflation has created pricing increases across the board and automobiles are at the tippy top of that list. With inventories remaining relatively lean due to production slowdowns, staggering dealer markups have become the norm. Basically, stores just seem happy that they can charge more per car while they’re in short supply. But they’re also starting to have concerns about the long-term viability of the market and are are feeling the pinch of rising operating costs.
Subaru is upping the starting prices of the redesigned 2020 Outback crossover and Legacy sedan by a rather modest amount. The automaker was even confident enough to list the hikes in its own press release, when the industry standard is to simply announce the new MSRP and hope nobody bothers to check what last year’s model went for.
The 2020 Outback will start at $27,655 while the Legacy will begin at $23,645. According to Subaru, that’s an increase of $300 and $200, respectively — though the actual difference over last year’s models is a few bucks higher. Just negotiate a full tank of gas or a handful of air fresheners at the dealership if you feel you’re being slighted.
Ever since the end of the recession, new car prices have crept up steadily while used vehicle values remained comparably low. In fact, compact cars actually became less expensive between 2013 and 2017 as the crossover craze left a glut of small, economical vehicles that could be purchased for little more than a smile.
Unfortunately, the tide is turning. A sudden influx of end-of-lease vehicles was supposed to continue suppressing used vehicle prices for 2018. However, things have not played out that way. Despite there being so many gently used vehicles saturating dealer lots, average used-vehicle prices reached $20,153 in the second quarter of this year — making it the first time the market has ever broken the $20K threshold. According to research firm Edmunds, the 3.3-percent increase over 2017’s second quarter was also a record.