Discounted Cars Benefit Buyers, but May Spell Trouble for Industry

What's stressful is when they start playing games with all the levers. If you're fortunate enough to not be in the position to maybe have to play those games, you basically hold the cards.

I was a huge fan of truecar until I did the experience, and now I'm hugely disappointed. I felt like the experience hid information and shepherded me to a dealer to let it take advantage of me; I saved some time and hassle, but I spent more money in the process and at the end, wasn't all that happy. YMMV, so check out the tool (directly or via AAA or Costco etc.), but be realistic over what it can do: it makes money from the dealers, not you, so be aware of biases.

I haven't tried non-online services (personal negotiators, etc.) so can't speak to those.

http://www.npr.org/sections/money/2013/02/12/171814201/episo...

Doesn't mean the particular piece of regulation is helpful nowadays, but also doesn't immediately mean it isn't.

It's purely the end-game of capitalism - if not constrained, it will subvert political systems to install it's cronies, capture regulatory agencies and buy legislation.

A government that doesn't regulate money's interaction with politics will end up representing only capital-owners.

We're paying $170 month for hers ($0 down except for registration which was 280 since we transferred from another car).

I'm only putting this here as a baseline for others to use. I didn't sign an NDA on what I'm paying ;) It's easy to get ripped off in this game, so it's good to know what others are paying. I hope this helps someone. And I'd be curious to know if you got a lower price!

Now, car companies could lower the sticker price of the vehicle as time goes on. A model that has been around for 5 years and will likely be refreshed in 1-2 years could just have money taken off the sticker. But then when they introduce the new model, there's sticker shock at how much more it is. There's also the perception issue that Volkswagen wouldn't want the Golf to be seen as below a competing vehicle just because it's slightly older - and then when the new model comes out people think it's overpriced because it's now "the same price as the competitor that has always been more expensive".

For most car companies, they're making cars on spec - the idea that if they make it, someone will buy it. If a company has excess inventory at the end of a year, they need to move it. It's a depreciating asset and if no one will buy it for $20k, they need to offer a discount. But that discount often isn't permanent. It's an issue of inventory that might be temporary. They'll even advertise "for $x thousand off!", but they don't want to change the sticker because they want to sell for that price when they don't have an inventory glut.

Likewise, sometimes consumers go off a brand or model. Car companies have scandals and need to discount things to win consumers back. Sometimes they miscalculate what consumers want and the vehicles still have utility, but they aren't what a lot of people want and have to discount them.

Sometimes you make a car that's in the same class as other vehicles, but it's an inferior version. You want your next model to be as good as the competitor so you don't want to lower the sticker and permanently put it in people's consciousness that you make an inferior vehicle to your competitor, but you need to sell these crappier cars. You'll even put it in ads that your discount exists many times.

Tesla doesn't have any of these problems. Their supply is more limited than their demand so they never have excess inventory. Given that they don't have competitors in their space, you're never left thinking, "the Tesla Model S was created in 2012, but this NewElectricCo Model Y was just created in 2017 and I'm getting the new awesome model that no one has and looks new and has the best stuff!"

If Tesla becomes a mass-market company with competitors, they'll face many of these same issues. If Tesla has 5 competitors providing much the same vehicles (in the way that an Audi A4, BMW 3 Series, and Mercedes C-Class are much the same vehicle) and they're building enough units to meet demand, they'll likely have to discount too.

If Tesla builds 100k units and consumers have only bought 70k by December, well, they're going to have to push the 30k units left over with discounts. If Tesla has a Model S from 2012 competing in 2020 against a brand-new NewElectricCo vehicle, they're going to have to discount to push their vehicle. At some point, Tesla is likely to produce a model that is considered not as good as a competitor and they'll have to discount it a bit until the next version comes out.

Tesla is in a great position right now because it has way more demand than supply, but if Tesla is actually looking to change the world, that's going to change.

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A few closing thoughts: First, GM did experiment with no-haggle pricing. Their Saturn brand had that as a staple of their business. There's something cool about the idea, but when you're trading in a vehicle, you still need to haggle over the trade-in cost. So, any benefit to the non-sleaze of the new car's price can be lost on the trade-in (though you could sell it yourself if you wanted that hassle). Second, this also happens with a lot of products, not through negotiation, but through discounts. When the Galaxy S8 came out, it was new and shiny and there was excess demand and not going to be great discounts. Come January 2018, you'll likely to be able to pick up a discounted phone. The Galaxy S9 won't be out yet, but they'll be looking to clear out inventory and the S8 might look more dated against phones that have come out since making it less attractive at list price.

Now, it's still often a set, non-haggle price. So maybe you would have no problem if Tesla said, "we're offering $8k off all 2017 Model S vehicles" and everyone was getting the same thing. But companies are going to have to manage their inventory, model cycle, consumer preferences, and competitive alternatives. Tesla will have to do that as well. And some of that will be local. Maybe Tesla has some excess units in Florida nearing the end of the year while having sold out in California. It might make more sense for them to try and move the inventory in Florida with a discount. It costs money to move vehicles. Sometimes it makes sense to try and hit a certain critical mass in a market to get word-of-mouth. Maybe you're at risk of losing employees if you're constantly taking inventory away from them.

There's definitely a lot of sleaze in the industry, but Tesla likely won't be able to be a single, stable price forever as they ramp up to meet demand and gain competitors. They'll have to provide discounts - though they might provide up-front, non-sleazy, no-haggle discounts.

Made negotiations easy. You basically know the lowest the dealers will go.

Dealer loyalty is not something you have so they have no incentive to make you want to come back: you probably won't anyway. If you a a buyer for a large company (ie a fleet of plumbers) you will find your dealer is more responsive. Not only does it get the large sale today, but he knows you will be back next year for more if he treats you well because there are advantages to having all one make of vehicle in a fleet.

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.

You could get 200k miles on my 90 Ford mustang manual. Auto tranny would always bust 40-50k miles on that era Mustang though. Repairs were simply less expensive in that early car computer era. I actually knew how the whole computer system worked. Difference in th 6502 and modern assembly. Yet, cars don't need much more than a 6502 for most things. Oh well.

https://www.reddit.com/r/Honda/comments/1q9tww/just_finished...

1. A lot of folks still find leasing cars to be a bad money decision due to restrictions on miles, messes that families make, and never actually owning the car.

2. I truly think this is more that many don't have the money to properly care for the car. I've seen folks that do all the maintenance and fix problems as they arrive. 500,000 miles (800,000km) later, their cars are still running, though they look worse for wear.

Meanwhile whatever godforsaken toxic chemical Mercedes Benz was putting in their paints in the 70s and 80s seems to have left those cars impervious to dulling and fading.

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.

If I could find a warehouse filled with mint vehicles from, say, 1985, when bodywork was heavy guage steel, and computers were few and far between...

http://www.iihs.org/iihs/topics/t/automation-and-crash-avoid...

This just seems like a cycle. The traditional car industry is in a slump. Defaults will happen. All normal.

So if you own a car manufacturer what do you do? :)

I read somewhere that car loans are some of the safest secured loans for lenders. People will skimp on food, rent, and everything else before they default on their car.

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.

Leases have a "residual value" which is what they expect the car to be worth at the end of the lease, assuming it was kept in good running condition.

They can charge you for excess mileage, extreme wear and tear, and faulty/lack of maintenance - but all of these have been true for a long time.

My parents have leased several cars and in each case they were over by a few thousand miles. They paid the 10 or 15 cents per mile penalty ($150-300) and washed their hands of the car when they were done. Then the leasing company sent a truck to pick it up.

Some things to consider:

When we were pricing out the options, the higher end model actually worked out with lower payments because the residual value (price they think it will be at end of lease) was higher for the higher end car.

It is a good way to "try" a vehicle/brand and if it turns out to not be super reliable/has issues or you just don't like it but can deal with it for 2-3 years, then you are done and walk away.

If you are looking long term - buying a used car is the better option. Financing a used car means monthly payments and if you are looking at things from a monthly cash flow perspective, leasing can be cheaper monthly - but pay more long term. Usually the rates for auto loans are much cheaper than credit cards so if you have CC debt, leasing can get you a lower monthly than buying and you can put the extra money per month towards debt.