Yahoo Autos Buying Used Is Now The 'New Normal' As New Car Prices Rise 21 Percent In Five Years
Good morning! It’s Tuesday, November 5, 2024, and this is The Morning Shift, your daily roundup of the top automotive headlines from around the world, in one place. Here are the important stories you need to know.
1st Gear: Americans Are Getting Priced Out Of New Cars
We might not agree on who should be given the keys to the White House, what flavor of Pop Tart is superior or which Arctic Monkeys album is the best, but I’m sure we’re all united in the knowledge that everything is getting more and more expensive. Now, the true cost of rising car prices has become clear as more and more Americans are opting to buy used rather than new when it comes time to replace their wheels.
The average price of a new car here in America rose by 21 percent over the past five years, reports Bloomberg, and this is pushing more and more people to buy used. Prices for new cars now average $48,205 here in the U.S. and monthly payments for buyers average $767, up 17 percent from four years ago.
The rising costs are pushing “lifelong new car buyers” to head to the used section, adds Bloomberg. In fact, the site reports that “ridiculous” prices on new cars are putting buyers off and making purchasing used the “new normal,” Bloomberg reports:
The pandemic supply shortages that drove sticker prices skyward are in the rearview mirror, but the cost of a new set of wheels continues to climb. The average price of a new car this year is $48,205, up 21% from five years ago, according to researcher Cox Automotive Inc. And growing frustration over auto affordability is yet another “kitchen table” economy concern that’s bound to be running through the minds of American voters as they head to the polls.
Sticker shock is increasingly scaring off many would-be buyers. A recent survey by automotive researcher Edmunds.com found that almost half of American car shoppers expect to pay $35,000 or less for a new car. That makes sense because the average trade-in is six years old, which means those buyers last purchased a new car back when the average price was in the mid-30s. When they return to the showroom and discover they’ll have to pay almost $50,000, they’re walking away. The Edmunds survey found that 73% of consumers are holding off on buying a new car because of the cost.
“The prices are just shocking people,” says Jessica Caldwell, head of insights for Edmunds. “They’re like, ‘How come buying the same car costs $300 more a month?’”
The rising cost of new car ownership means that one in six Americans now make monthly car payments of more than $1,000. The boost in prices has been blamed on everything from more features being packed into new cars to automakers’ quest for higher profit margins.
As you’d expect, the price rise is hitting normal car buyers hardest. Consumers who make below $16,000 per year are now completely priced out of buying a new car, while those earning between $16,000 and $41,000 account for just six percent of new car sales in the U.S.
In contrast, those earning more than $265,000 per year account for 55 percent of new car buyers, up from 40 percent in 2020.
2nd Gear: Toyota Posts First Profit Drop In Two Years
Car prices might be rising, but that doesn’t mean the world’s automakers are diving into in piles of coins like Scrooge McDuck. Instead, brands from Ford to Aston Martin have all warned about falling deliveries and profits in recent months. Now, Toyota has become the latest to issue a profit warning, marking the first time in two years that profits have fallen for the world’s largest automaker.
The Japanese company is expected to post a drop in income when it reports its latest financial results later this week, reports Reuters. The drop comes as Toyota reported a four percent drop in global sales compared with 2023:
The world’s largest automaker is nonetheless expected to deliver almost $8 billion in quarterly operating profit, benefiting as drivers in several major markets opt instead for petrol-battery hybrids, which typically command higher profit margins than standard petrol cars.
Still, recent sales and production figures have indicated a modest slowdown for Toyota. It faced a delivery suspension of two models in the United States and, like global rivals, is dealing with fierce competition in China, the world’s biggest auto market and one where demand for EVs has not cooled.
The Japanese automaker is expected to report a 14% year-on-year operating profit decline in July-September, to 1.2 trillion yen ($7.9 billion), according to the average of nine analyst estimates in an LSEG poll.
As well as falling sales and profits, Toyota’s output for the year dropped by around seven percent so far in 2024. The cut in production comes as the automaker was forced to pause production on some models earlier this year over an emission scandal that swept Japan.
Toyota also backtracked and delayed some of its electric vehicle targets through the year as it retains its focus on hybrid models rather than expanding its offering of fully-electric models.
3rd Gear: Boeing Strike Ends With 38 Percent Pay Rise
The not good, very bad year for American plane maker Boeing may be about to turn around after the company agreed a deal with striking workers that will see them return to work after a seven-week walkout.
Boeing workers first walked off the job back in September when 30,000 members of the International Association of Machinists and Aerospace Workers union voted in favor of industrial action. A deal has finally been reached between the union and the 737 maker, meaning workers may be back on the factory floor as early as November 12, reports the BBC:
Boeing workers have voted to accept the aviation giant’s latest pay offer, ending a damaging seven-week-long walkout.
Under the new contract, they will get a 38% pay rise over the next four years.
Striking workers can start returning to their jobs as early as Wednesday, or as late as 12 November, the International Association of Machinists and Aerospace Workers (IAM) union says.
The walkout by around 30,000 Boeing workers started on 13 September, leading to a dramatic slowdown at the plane maker’s factories and deepening a crisis at the company.
IAM said 59% of striking workers voted in favour of the new deal, which also includes a one-off $12,000 (£9,300) bonus, as well as changes to workers’ retirement plans.
“Through this victory and the strike that made it possible, IAM members have taken a stand for respect and fair wages in the workplace,” union leader Jon Holden said.
Workers initially called for a 40 percent pay rise and rejected two earlier contract offers from Boeing while they held out for a better deal. Now, they have secured a 38 percent raise over four years, as well as a bump in 401(k) contributions and a commitment to keep manufacturing in Seattle for years to come.
4th Gear: NHTSA Ends Probe Into 411,000 Faulty Fords
Ford has led the way in automotive recalls in recent years, with the Blue Oval being forced to issue recalls on everything from cop cars to pickup trucks this year alone. Now, a huge probe into engine issues on certain Ford models has finally come to an end.
The National Highway Traffic Safety Administration launched an inquiry into 411,000 Ford cars that were having issues with a loss of power, reports Reuters. After recalls and various fixes from the American automaker, the inquiry has now come to an end:
In July 2022, the U.S. auto safety regulator opened its investigation into Ford Bronco vehicles equipped with 2.7L EcoBoost engines over concerns of a faulty valvetrain.
The probe was expanded later to include other models including the Ford Edge, F-150, Explorer and Lincoln Aviator and Nautilus vehicles with 2.7L or 3.0L EcoBoost engines from the 2021 and 2022 model years.
Under normal driving conditions and without warning, vehicles may lose power and be unable to restart due to a faulty valve. NHTSA said it had 1,066 unique vehicle reports of the issue.
The inquiry led to a recall of 90,000 Ford cars that were found to have faulty valves installed in their engines, which the Mustang maker fixed in impacted models. The automaker also altered the materials used to manufacture affected parts from November 2021 on wards.
NHTSA now reports that following the fix, reports of power losses in Ford cars have dropped dramatically.
