Why Americans are bummed out about the economy
Why Americans are bummed out about the economy
Because grocery bills and rent prices are unlikely to return to where they were just a few short years ago, the psychological scars from the war on inflation will linger, write Dana M. Peterson and Erik Lundh.
US consumers remain unimpressed with this progress, however, because they remember what they were paying for things pre-pandemic. Used car prices are 34% higher, food prices are 26% higher and rent prices are 22% higher than in January 2020, according to our calculations using PCE data.
While these are some of the more extreme examples of recent price increases, the average basket of goods and services that most Americans buy in any given month is 17% more expensive than four years ago.
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Used car prices are 34% higher
My understanding is that that is specifically due to chip shortages in the auto industry during COVID-19. New car production fell off, so used cars acted as a partial substitute, which drove up used car prices.
There’s also the disconnect of what is being made by manufacturers versus what many people want. An overpriced and massive luxury SUV has never appealed to me, yet that is basically the primary vehicle being made. I could buy a new car if I wanted to, all 3 of mine are paid off but there isn’t a single new car being made that I want to drive more than my 2017 Ford Focus. If it was totaled tomorrow I would absolutely pay a premium to get it replaced rather than buy something new. When supply is low prices come up and used cars are a commodity that is desirable to many and not available from current manufacturers. 5000 lb EVs just do not appeal to me in any way.
Car companies have done the math, and the higher profit margins are worth the reduced sales. They're going for the rich market.
And dealers have done the same math. Inventory is based on the highest spec they think they can force onto someone coming in for a mid tier vehicle. You want an F-150 with a regular or super cab? Too bad, that $40k truck simply doesn’t exist. Your options are a $65k SuperCrew(R) on the PLATINUM, which is marked up another $15k because there’s only one and 4 other people want it more than the $83k Limited, (also with a SUPERCREW cab). Meanwhile 2004 Rangers with 200k miles are solid gold on marketplace because you literally can’t buy them anymore.
Everyone will say “they make what sells” but that’s bullshit. They spend millions to market and convince people they need the largest vehicle they can get away with producing. “Oh, you’re having your first kid? If you don’t have 14” of ground clearance and a 3rd row you won’t be able to survive.” A 2009 Jetta is just fine for a small family. If you need cargo space, they make a wagon. Just make fucking cars again.
Sounds like I'll be keeping my 2008 Toyota alive until the end of time then
Everyone will say “they make what sells” but that’s bullshit. They spend millions to market and convince people they need the largest vehicle they can get away with producing.
I guess it could be rephrased to "they make what they can sell".
Definitely, meanwhile I guess I’m only buying used cars for the foreseeable future.
Too bad, that $40k truck simply doesn’t exist. Your options are a $65k
Light trucks in the US are subject to a 25% import tariff. That drives up their sticker price relative to other vehicles.
https://en.wikipedia.org/wiki/Chicken_tax
The Chicken Tax is a 25 percent tariff on light trucks (and originally on potato starch, dextrin, and brandy) imposed in 1964 by the United States under President Lyndon B. Johnson in response to tariffs placed by France and West Germany on importation of U.S. chicken.[1] The period from 1961 to 1964[2] of tensions and negotiations surrounding the issue was known as the "Chicken War", taking place at the height of Cold War politics.[3]
But I don't get this:
Meanwhile 2004 Rangers with 200k miles are solid gold on marketplace because you literally can’t buy them anymore.
It's not something that I've followed, but according to WP, it looks like Ford restarted production of the Ranger in 2019.
https://en.wikipedia.org/wiki/Ford_Ranger_(Americas)
That's apparently as a larger vehicle than it had been, albeit smaller than the F-150, but they also apparently started making a small pickup, the Maverick, as of 2022:
https://en.wikipedia.org/wiki/Ford_Maverick_(2022)
If that meets what you're looking for and you haven't looked at the market in the last five years since those two vehicles came onto the market, Ford might be doing what you're wanting them to do.
Fwiw, the new ranger is basically the same size as the old f150. The maverick would be closer in size to the 04 ranger, but they don't make anything other than crew cab for those.
Small imported trucks are subject to the chicken tax, they could still be produced domestically without the penalty. Unfortunately manufacturers refuse to make them. The new Maverick is virtually the exact same size as the F-150 was when they discontinued the Ranger the last time around and the new Ranger is even bigger. Everything has grown immensely in size and price.
The chip shortage is the auto industry own fault. Historically auto manufactures used older prosses nodes (40nm) as it was cheap and widely available however that node they are on is now outdated to the point where there's not that many fabs manufacturing that size of chips anymore.
To make things worse the silicon industry moved to a larger wafer design which would require the auto industry to invest in new hardware to support the larger wafer and redesign/validate the ICs for the smaller node all of which requires spending money they won't see a return in for a significant amount of time.
Manufacturers also cut production in march of 2020, stating that it was for worker safety. However, I believe it was because they figured sales would plummet if the pandemic was very bad. I assume their projections for death were much higher than in actuality. With COVID mainly affecting older people they did lose a large amount of new vehicle buyers as older people are much more likely to buy a new vehicle. When they shut down production, it had hysteretic effects down the supply chain due to jit (just in time) manufacturing. Without orders, may suppliers also had to cut production of vehicle parts, especially chip manufacturers, which are mainly in China. When vehicle production started back up, suppliers had to also catch up with demand.
And I'm sure the sources of this explanation are the very car companies who jacked up their prices.