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What is amazing to me considering these numbers is that there are enough people buying new cars every year to keep all these car manufacturers around. I'm a pre
by mevile 10y ago
What is amazing to me considering these numbers is that there are enough people buying new cars every year to keep all these car manufacturers around. I'm a pretty decently employed individual, doing better than most my family and I've only bought one new car ten years ago for $15K a Mazda 3. Who are all these people buying new cars all the time?
- cbg0 10y agoI think most people are actually leasing and getting a new car when the lease is up.
- flamtap 10y agoThey're not hard to find. Many people just lease a new vehicle every four or five years.
- kayoone 10y agoWhich is essentially burning money. It's funny because the people who usually can't afford a new car, will think they can afford it when leasing, while in the end they spend the exact same amount of money (even more since the leasing corp usually wants to make money too).
- dougmany 10y agoI have looked at it a few times and the lease payments are pretty well correlated with the expected depreciation over that time period. Cars loose a lot of value in the first three years. If you plan to sell the car after three years, leases are not that bad.
- timcederman 10y agoWhy is it essentially burning money? Usually leases offer very competitive financial incentives, and are structured so you're paying off the depreciation of the car at an extremely low interest rate. Another way to look at it is you're getting a well priced new car that has a guaranteed buy back price in 3 years, all without putting down any capital (or a small amount).
- Johnny555 10y agoBecause leasing companies make a profit... they know exactly how much a car depreciates and they make sure you pay for that depreciation plus profit for the leasing company. There are some tax advantages with leases that some people can take advantage of, but for most people, leasing is not going to save them money but it does provide a convenient way to always have a new car.
- Cookingboy 10y agoMany manufacturers operate their own lease. For BMW, you are likely to come out ahead than purchasing the car and selling it yourself after 3 years. Their residual value for lease is artificially high. For Maserati, some of their models actually carry a negative money factor, so you are being PAID to lease. You can lease an $80k Ghibli for $600/month for 3 years, that's way less depreciation than if you bought and sold the car after 3 years.
- nitrogen 10y agoDoes that depreciation estimate include the up-front payment of 5-7k?
- Cookingboy 10y agoYes, overall cost of course. BMW only usually only does about $3k downpayment anyway.
- timcederman 10y agoI've done the analysis, and while there are some bad leasing deals out there that represent what you are probably thinking of, the very best ones offer incredible value for money (e.g. https://news.ycombinator.com/item?id=12475939 https://news.ycombinator.com/item?id=12475939).
- vkou 10y agoLiving in a state that charges 6-10% sales tax on selling your car is an incredible reason to lease. (As you only end up paying tax on what you leased for, instead of the purchase price). Assuming you want to keep driving new cars, that is.
- prostoalex 10y ago> Which is essentially burning money. There's an assumption there about getting higher residual value on a used vehicle than what the dealer has in the lease paperwork. The marketplace for used cars (before Beepi and Shift) is hardly efficient, and you might extract optimal price if you're willing to drive to multiple used-car dealerships or meet random people off Craigslist at random hours to accommodate test drives. Some people would rather not deal with that, hence leasing that provides a guarantee a used vehicle will be accepted at pre-negotiated residual value.
- phkahler 10y ago>> Who are all these people buying new cars all the time? I'm not sure where you're from, but this is Hacker News, so I'll just ask - Who are all these people who can afford to live in California? ;-) It's all relative. Remember, the annual new car market is the number of cars on the road divided by the life of a car. This accounts for the sale of used cars as well.
- maxerickson 10y agoI think it's a lot of money to spend on a vehicle, but if you look at leasing, lots of vehicles are less than $5000 a year, which is an easier number to wrap your mind around if you figure many of the people paying it aren't super focused on saving.
- esalman 10y agoI used to think the same. We bought a new car 3 years ago with a financing which we still need to pay for 3 more years. However, we had to spend nearly $1000 on a new set of tires and alignment recently, and now I'm thinking it is better to get another brand new car as soon as we get a deal from the manufacturer or the dealer.
- kayoone 10y agoWhy would that be better ? Deprecation of new cars in the first 3 years is crazy high, they loose 50% value in that time. Buying a new car every 3 years is one of the worst thing s you can do financially.
- massysett 10y agoBoring midsize cars do not depreciate nearly this much. A $22,000 Honda Accord depreciates only $10,500 over five years. Besides, they depreciate this much because those first years of car ownership are worth the most. The car is under warranty and is most trouble-free during the early years. People pay that much for the first years of car ownership because they get more utility from newer cars, not because they are suckers.
- ssharp 10y agoA lot of cars coming off lease these days that are two or three years old get certified by the dealer, which gives an extended warranty for the person buying the used car. That's a nice little bonus where you buy the car when it starts hitting linear depreciation and you still have a decent warranty.
- btian 10y agoI buy a new car every 2 years or so because it makes me happy. Money sitting in the bank earning no interest doesn't make me happy.
- buerkle 10y agoWhy is spending money on a new car better than $1000 on new tires? That's about three months worth of payments vs years of payments on a car.
- deleted 10y ago[deleted]
- mwfunk 10y agoPurely anecdotal, but my wild-assed guess is that most middle class Americans spend $20-30k on one every 4-5 years. Some people are enthusiasts and will spend more than that on the same timetable, and some people are extra frugal and will spend less, less often. People with families will probably spend a little more for a minivan or SUV, which will skew it higher. Students (or people in their 20s in the early phases of their careers) will spend less, balancing out the minivan purchasers. Totally guessing though.
- joezydeco 10y agomost middle class Americans spend $20-30k on one every 4-5 years As long as most middle class American don't total their cars at the end of 4-5 years, I'd say they probably get 1/2 of that value back as trade-in. I'd wager it's more like 8-15k every 4 to 5 years in installments of $300/mo for those staying in a perpetual mode of making car payments.
- jwatte 10y agoAfter five years, you get more like a quarter to a third in trade in. For sports cars, you lose half just by driving it off the dealer lot... And that is assuming you aren't leasing, which a lot of people do. No trade in value there.
- Cookingboy 10y agoThere is not a single sports car that you would get hit with a 50% depreciation just for driving off the lot. For leasing, you aren't paying for the full cost of the car either, in fact, depends on the company you could actually come out ahead when compared to purchasing.
- joezydeco 10y agoNo trade-in, but you're only paying the depreciation and not the full value of the car either. I've had friends lease recent model cars on 3year/12K terms and get about 60% residual value on their term sheet. I think 1/4 to 1/3 is an extreme case, unless you're choosing really crappy manufacturers that are known to fall in value quickly
- PascLeRasc 10y agoYou might have just happened to pick an amazingly well-aging car. My friend has a 2006 Mazda3 as well and it runs incredibly well, and it still looks like new cars. It's one of those cars you never feel like you need to upgrade from.
- linkregister 10y agoI'm going to do some cocktail napkin math and see if it makes any sense. The total amount of new vehicles sold in the U.S. in 2015 was 17.5 million [1]. Since the average is $33666, we can assume half are above, and half are below that price. In reality, there are far fewer than half above that price, since an outsized sale price pushes that average up. Half of 17.5 million is 8.75 million. The U.S. Census estimates the 2015 population was 323,995,528 [2], with 116,211,092 households [3]. With every household replacing their car every five years or so (total guess), that leaves us 23.2 million households that should have been buying a car in 2015. That means that about 37.7% of the eligible U.S. households bought a car worth over $33666. That is bizarre enough that it leads me to believe there is a serious fault in my methodology or it just so happened that car sales were abnormally high in 2015 due to an enormous rise in consumer confidence. Either way, I'm more confused now than when I started scribbling on my metaphorical cocktail napkin. [1] https://www.google.com/search?q=site%3Awsj.com+U.S.+Car+Sales+Set+Record+in+2015 https://www.google.com/search?q=site%3Awsj.com+U.S.+Car+Sale... [2] https://www.census.gov/popclock/ https://www.census.gov/popclock/ [3] https://www.census.gov/quickfacts/ https://www.census.gov/quickfacts/
- rjsw 10y agoDoes your 17.5 million include cars owned by rental companies. I guess some will be taxis too.
- linkregister 10y agoMaybe? It's total car sales, this is cocktail napkin math. Wouldn't the amount owned by taxis and rental companies have to be absorbed by the U.S. population anyway? If anything it takes away the amount of eligible households, making the issue even stranger. This is because utilization of rental cars is going to be lower than purchased cars.
- cloudsymphony 10y agoWithout looking up the stats, my guess is that this number includes leases. Which artificially inflates the number for "new car sales". Not only that but manufactures have been offering insane financing 72 months .9% apr. Which brings down the cost to own for people who probably shouldn't be buying a new car. Car manufactures remind me more of financial companies then car companies.
- ryandrake 10y agoI know a few people who buy new cars, but they're very well-off and can afford it. I bought a new car once in my life (when I was young and dumb and my first paycheck made me think I was some kind of millionaire), but realized my mistake and ended up selling it pretty much right away. Now it's purely used from here on out.
- jdmichal 10y agoOr, buy a new car and expect to own it for a decade or more. It's just as economically viable. And to some the knowledge that you are the single owner and have taken excellent care of it is valuable. (As opposed to the unknowns of a used car.)
- baddox 10y agoThink of it this way. It sounds like you're surprised by the number of new cars being purchased, but presumably you're not surprised that people are constantly buying used cars. And yet, roughly every used car that's purchased corresponds to a new car being purchased, unless you're expecting total car ownership to decline.
- fps 10y agoThe lifespan of the average car sold today is significantly longer than in the past. A new car can be sold as a used car several times before it ends up being recycled. I don't think it follows that there is a 1:1 ratio of used to new car sales. http://press.ihs.com/press-release/automotive/average-age-light-vehicles-us-rises-slightly-2015-115-years-ihs-reports http://press.ihs.com/press-release/automotive/average-age-li...
- IanDrake 10y agoThere are a lot of factors at work here. How much do you drive? What kind of vehicle do you want? How long do you plan on keeping the car? Etc... Here's one case: I just bought a new Tundra a couple months ago (cash because I don't like debt). I could have saved $5K (15%) and gotten one 3 years old with 40K miles on it. That's the problem with some models. The resale value is SO good that the value proposition for buying used is almost nil. Since my trade-in Tundra was 10 years old with 178K miles, let's assume that's the life of the new vehicle too. I don't think saving 15% to buy a vehicle that's 20% through its life span is a good deal.
- cpursley 10y agoShould have kept it :) I bought my Tacoma with 178k miles on the clock. I just surpassed 280k with no major repairs.
- IanDrake 10y agoI would have love to keep it. But the repair bill was 8k which still didn't fix some things like the rust in the truck bed. With unlimited resources you can keep anything on the road. But 8k is about 25% the cost of a new truck, so you'd have to be bonkers to put that much into something that old.
- pilom 10y ago"Since my trade-in Tundra was 10 years old with 178K miles, let's assume that's the life of the new vehicle too." That's a terribly faulty assumption. The average age of all cars on the road in the US is 11 years old. Yes that is mean not median, but even the median is likely to be >8 years old. Your 10 year old truck probably was at the midpoint of it's life.
- IanDrake 10y ago> That's a terribly faulty assumption. The average age of all cars on the road in the US is 11 years old. No, my assumption is fine. Oddly, yours is flawed. My assumption doesn't use national averages that include southern states and non-coastal states where cars last forever. In my unique living conditions, my assumption is fine. Again, there are more factors at work here. The trucks practical life was over, not because it couldn't be repaired, but because it didn't make sense. When a repair bill becomes greater than the value of the car, you stop repairing it.
- anthonybsd 10y agoLeases drive these numbers up. I get a new lease every 3 years and on paper it would look like a new car purchase every 3 years.
- btian 10y agoI buy a car every ~2 years because I like technology. Driving a Tesla Model S now, and looking forward to the company releasing self-driving software before I upgrade to the new version.
- fegu 10y agoThey are the old. Median age of brand-new-car-buyers are over 50 in several countries.
- Spooky23 10y agoThe average consumer is awash in debt. The guy next to me just bought some truck for around $40k with a 72mo loan. His wife leases some BMW 3 series, and can't drive on the weekend. They eyeroll at my 2002 Honda, and I eyeroll at their $1000/mo payments.
- fma 10y agoNot just households buy cars...companies, fleet vehicles, rental car companies. People lease cars and need to get a new car every 3-5 years. Also, I'd like to think your average developer is more financially literate/savvy than your average American. Otherwise, the housing crash wouldn't have happened. You know, people with no money buying expensive houses. People carrying credit card balance and rolling them over. Those people exist, and they are many.
- HeyLaughingBoy 10y agoI'd like to think your average developer is more financially literate/savvy than your average American You may like to think so, but I have seen absolutely no evidence of that...
- tn13 10y agoBack of envelope math. Out of 330M people even if 5% of population is buying a new car in the given year that is whooping 15M cars per year. USA sells around 17M cars year +-2M. One simple proxy to arrive at the 5% figure is the number of people in 16-19 age group where they might get parent's old car and the parent might buy a new one. That population is around 20M in USA. Of course I have not accounted for taxi fleets, car rental fleets, corporate purchases etc. In fact go to think of it 17M cars per year does look like a very low number.
- prostoalex 10y agoAvailability of cheap credit combined with dealer incentives (an offer like 0% for 72 months is not that rare nowadays) moves the conversation from "can you afford a $40,000 car?" to "can you afford a $556 monthly payment?" To top it off, when you're financing, used car loans are rarely as attractive as manufacturer/dealer incentives - BankRate says they average about 3% annually nowadays, so an 18% mark-up to the value of the used vehicle over the 6-year ownership period.