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Nobody else has said it so I guess I will. The reason the US car industry does not want a $25k car is that the financing opportunities are crap for a car of th

Nobody else has said it so I guess I will. The reason the US car industry does not want a $25k car is that the financing opportunities are crap for a car of this low cost. In the same way that airlines exist to offer you a miles based credit card, the US car dealerships survive by offering you a loan for the car. Or perhaps, a car to go with your structured finance opportunity.

haskellandchill 1y ago
proud owner of a financed 2024 manual nissan versa here :) but yeah the dealership made almost no money and I put down a deposit when it was a couple months from coming in at a location far from where I live. it's a $20k car though.
- droopyEyelids 1y ago
  There was a finance charge on your loan that was probably around $1k so that's 5% the dealer made right there instantly for no work
BLKNSLVR 1y ago
Could this be stated as perverse incentives as a result of attempts to differentiate from cookie-cutter-identical competitors? Whereby the profit shifts from the product itself to the differentiating value-add.
SoftTalker 1y ago
Buy the best used car you can afford for cash and forget all that dealership nonsense
- financypants 1y ago
  The small and quasi-loophole to getting a good used car deal is buying a hail damage car. I genuinely don't understand why cars were made to have shiny paint. Cars drive on dirty roads with insects and pebbles abound. Paint doesn't matter. Car washes are crazy, except to abait rust
  - leakycap 1y ago
    The issue you'll face is when you go to sell it – any noticeable hail damage means you are getting 1/2 the resale value if you can even find an interested buyer.
    - bigstrat2003 1y ago
      Ideally you should be driving the car until the wheels fall off anyways. Faffing about selling cars and buying newer ones is a waste of money.
      - dagw 1y ago
        Driving a car until the wheels fall off generally doesn't make financial sense. Keeping an old car on the road gets really expensive unless you have the space, time and skills to do all the work yourself. Then there is the opportunity cost of not having access to your car for days/weeks at a time while it is being repaired. Finally you have the stress of not being quite sure if your car will start when you turn the key or get you where you want to go. From both an economic and quality of life point of view, you are better driving your car until it starts to get slightly unreliable and then quickly trade it in for a slightly newer used car. Buy a 5-10 year old car, drive it for 5-10 years, then trade it in for a 5-10 years old car is probably pretty close to an optimal strategy.
        leakycap 1y ago
        Same with technology. If you aren't rich, selling around the time the next model comes out is actually a great way to avoid paying full price for your modern tech. With Apple stuff, waiting more than 1-2 cycles means you've missed the ability to recoup most of your costs AND you got to use an old device for an extra year... yay?
        lotsofpulp 1y ago
        More like extra 2 or 3 years, so yes, yay. Consumption is consumption, you don't get things for free. If the phone only lasted 1 more year, then the resale price of the phone would reflect that. Either the collective market of buyers lacks the information to evaluate this (doubt), or you got lucky finding the one buyer willing to overpay. You also always pay full price, because when you buy a new phone (or anything), you always have the option to buy the used or keep using the old one. Cost is opportunity cost, which is defined as your choice minus your second best choice.
- thayne 1y ago
  Unfortunately, the decrease in supply of budget cars hurts people buying used cars as well for two reasons: 1. With less people able to afford new cars it increases demand for used cars, which pushes up the price 2. There will be less budget cars that eventually end up in the used car market, and the increased price of new cars will trickle through to used cars
- dyauspitr 1y ago
  It depends. It doesn’t make sense to not get a car you can afford for 0% interest. I could have outright paid for my current vehicle but over the 3 years at 0% interest I earn 6% to make a few thousand over the lifetime of the loan.
  - namdnay 1y ago
    > It doesn’t make sense to not get a car you can afford for 0% interest. The loan might be 0% interest, but you're still using that loan to pay way too much money for a depreciating asset.
    - tshaddox 1y ago
      I assume the comment you quoted means “a car you could afford to pay cash for, but will instead invent the total cost while making payments on the 0% interest loan.”
      - namdnay 1y ago
        I think the problem here is "you can afford" vs "you can pay for" if you're willing to spend the time and effort doing interest rate arbitrage for a few hundred dollars, maybe you can pay for a certain car, but i'm really not sure you should be
        dyauspitr 1y ago
        It’s more than a few hundred. On my current vehicle- $60k, 0% interest for 72 months I make $10,000 over the lifetime of the loan at 6%.
socalgal2 1y ago
unless there's illegal collusion, someone will see a market opporunity and step in to fill it. That said, a quick search for new cars under $25k: Chevrolet Trax $20.5k, Nissan Versa $17.2k, Hyundai Venue $20.5k, Kia Soul $20.5k, and Nissan Kicks $22k. Other options include the Toyota Corolla $22.3k, Hyundai Elantra $22.1k, and Volkswagen Jetta $22.5k I think maybe the article is BS?
- AngryData 1y ago
  There is market opportunity, China has found it, but the US won't allow them to be imported because it undercuts everyone else so thoroughly. The US automotive market is extremely far from being a free and open market. You can't just build a car to a set of standards and automatically be allowed to sell them, there are substantial legal and political barriers that cost tons of money to overcome, which doesn't make financial sense to anyone with that amount of money to just sell low margin vehicles.
- Glyptodon 1y ago
  I strongly agree with a generalization of the article - that cars have increased in price relative to their quality and value to the point that it's nationally problematic. There's a whole pile of cars that have gone from sub $20k to the high $20ks and above. Most of the cars you list will also have essentially non-optional packages, delivery charges, and more costs rolled into their price. At the same time it's not easy to find used cars that don't cost nearly as much as new cars unless they're pretty old and high mileage. And it seems clear there's no rational reason that cars should subject to a higher rate of inflation than any other good. It seems very clear that somehow the market is broken. Whether it's because new competition is impossible because only the established can achieve the necessary economies of scale, protectionist regulation,the dealership model, or something else, it's pretty clear something is broken. Just like with much of the rest of things in the US and maybe the world.
  - heresie-dabord 1y ago
    > somehow the market is broken The market has changed and we are judging it with the old values. https://www.investopedia.com/articles/pf/12/auto-industry.asp https://www.investopedia.com/articles/pf/12/auto-industry.as...
remus 1y ago
It was a funny experience going to buy a used car with my partner a few years ago. Being a little naive I'd assumed being a cash buyer was a plus as they'd guarantee a quick sale, but as soon as the salesman realised he wasn't going to be signing a finance deal you could see him lose interest entirely. kinda funny to think they're in the business of selling loans rather than cars.
- Spivak 1y ago
  Or if you come with your own financing. I usually talk to the "finance guy" at the dealership because (so I've been told) they sometimes run promotions and can give you a rate better than your bank but lord heavens I've never seen it. They once offered me more than double the rate of my bank and for 2.5 times the term length. I'm sure that $150/mo or whatever payment for the rest of our life is attractive to someone but I just laughed. They really don't like people who are looking to minimize total interest paid.
  - 0xffff2 1y ago
    When I bought my latest car ~2 years ago, the dealer's rate was something like half a percent higher than my banks. On a 3 year loan and with the $1000 kickback for taking the dealer financing, it ended up being marginally cheaper to take their loan.
snarf21 1y ago
This is exactly true. Dealership profit centers are loan origination and extended warranty origination. Parts/Service is designed to pay the bills. (Source: My dad has been selling new cars for 40+ years) (This is kinda like the Costco model where they aim to break even on all sales with profit only being the membership fees).

haskellandchill 1y ago

proud owner of a financed 2024 manual nissan versa here :) but yeah the dealership made almost no money and I put down a deposit when it was a couple months from coming in at a location far from where I live. it's a $20k car though.

droopyEyelids 1y ago
There was a finance charge on your loan that was probably around $1k so that's 5% the dealer made right there instantly for no work

BLKNSLVR 1y ago

Could this be stated as perverse incentives as a result of attempts to differentiate from cookie-cutter-identical competitors? Whereby the profit shifts from the product itself to the differentiating value-add.

SoftTalker 1y ago

Buy the best used car you can afford for cash and forget all that dealership nonsense

financypants 1y ago
The small and quasi-loophole to getting a good used car deal is buying a hail damage car. I genuinely don't understand why cars were made to have shiny paint. Cars drive on dirty roads with insects and pebbles abound. Paint doesn't matter. Car washes are crazy, except to abait rust
- leakycap 1y ago
  The issue you'll face is when you go to sell it – any noticeable hail damage means you are getting 1/2 the resale value if you can even find an interested buyer.
  - bigstrat2003 1y ago
    Ideally you should be driving the car until the wheels fall off anyways. Faffing about selling cars and buying newer ones is a waste of money.
    - dagw 1y ago
      Driving a car until the wheels fall off generally doesn't make financial sense. Keeping an old car on the road gets really expensive unless you have the space, time and skills to do all the work yourself. Then there is the opportunity cost of not having access to your car for days/weeks at a time while it is being repaired. Finally you have the stress of not being quite sure if your car will start when you turn the key or get you where you want to go. From both an economic and quality of life point of view, you are better driving your car until it starts to get slightly unreliable and then quickly trade it in for a slightly newer used car. Buy a 5-10 year old car, drive it for 5-10 years, then trade it in for a 5-10 years old car is probably pretty close to an optimal strategy.
      - leakycap 1y ago
        Same with technology. If you aren't rich, selling around the time the next model comes out is actually a great way to avoid paying full price for your modern tech. With Apple stuff, waiting more than 1-2 cycles means you've missed the ability to recoup most of your costs AND you got to use an old device for an extra year... yay?
        lotsofpulp 1y ago
        More like extra 2 or 3 years, so yes, yay. Consumption is consumption, you don't get things for free. If the phone only lasted 1 more year, then the resale price of the phone would reflect that. Either the collective market of buyers lacks the information to evaluate this (doubt), or you got lucky finding the one buyer willing to overpay. You also always pay full price, because when you buy a new phone (or anything), you always have the option to buy the used or keep using the old one. Cost is opportunity cost, which is defined as your choice minus your second best choice.
thayne 1y ago
Unfortunately, the decrease in supply of budget cars hurts people buying used cars as well for two reasons: 1. With less people able to afford new cars it increases demand for used cars, which pushes up the price 2. There will be less budget cars that eventually end up in the used car market, and the increased price of new cars will trickle through to used cars
dyauspitr 1y ago
It depends. It doesn’t make sense to not get a car you can afford for 0% interest. I could have outright paid for my current vehicle but over the 3 years at 0% interest I earn 6% to make a few thousand over the lifetime of the loan.
- namdnay 1y ago
  > It doesn’t make sense to not get a car you can afford for 0% interest. The loan might be 0% interest, but you're still using that loan to pay way too much money for a depreciating asset.
  - tshaddox 1y ago
    I assume the comment you quoted means “a car you could afford to pay cash for, but will instead invent the total cost while making payments on the 0% interest loan.”
    - namdnay 1y ago
      I think the problem here is "you can afford" vs "you can pay for" if you're willing to spend the time and effort doing interest rate arbitrage for a few hundred dollars, maybe you can pay for a certain car, but i'm really not sure you should be
      - dyauspitr 1y ago
        It’s more than a few hundred. On my current vehicle- $60k, 0% interest for 72 months I make $10,000 over the lifetime of the loan at 6%.

socalgal2 1y ago

unless there's illegal collusion, someone will see a market opporunity and step in to fill it. That said, a quick search for new cars under $25k: Chevrolet Trax $20.5k, Nissan Versa $17.2k, Hyundai Venue $20.5k, Kia Soul $20.5k, and Nissan Kicks $22k. Other options include the Toyota Corolla $22.3k, Hyundai Elantra $22.1k, and Volkswagen Jetta $22.5k I think maybe the article is BS?

AngryData 1y ago
There is market opportunity, China has found it, but the US won't allow them to be imported because it undercuts everyone else so thoroughly. The US automotive market is extremely far from being a free and open market. You can't just build a car to a set of standards and automatically be allowed to sell them, there are substantial legal and political barriers that cost tons of money to overcome, which doesn't make financial sense to anyone with that amount of money to just sell low margin vehicles.
Glyptodon 1y ago
I strongly agree with a generalization of the article - that cars have increased in price relative to their quality and value to the point that it's nationally problematic. There's a whole pile of cars that have gone from sub $20k to the high $20ks and above. Most of the cars you list will also have essentially non-optional packages, delivery charges, and more costs rolled into their price. At the same time it's not easy to find used cars that don't cost nearly as much as new cars unless they're pretty old and high mileage. And it seems clear there's no rational reason that cars should subject to a higher rate of inflation than any other good. It seems very clear that somehow the market is broken. Whether it's because new competition is impossible because only the established can achieve the necessary economies of scale, protectionist regulation,the dealership model, or something else, it's pretty clear something is broken. Just like with much of the rest of things in the US and maybe the world.
- heresie-dabord 1y ago
  > somehow the market is broken The market has changed and we are judging it with the old values. https://www.investopedia.com/articles/pf/12/auto-industry.asp https://www.investopedia.com/articles/pf/12/auto-industry.as...

remus 1y ago

It was a funny experience going to buy a used car with my partner a few years ago. Being a little naive I'd assumed being a cash buyer was a plus as they'd guarantee a quick sale, but as soon as the salesman realised he wasn't going to be signing a finance deal you could see him lose interest entirely. kinda funny to think they're in the business of selling loans rather than cars.

Spivak 1y ago
Or if you come with your own financing. I usually talk to the "finance guy" at the dealership because (so I've been told) they sometimes run promotions and can give you a rate better than your bank but lord heavens I've never seen it. They once offered me more than double the rate of my bank and for 2.5 times the term length. I'm sure that $150/mo or whatever payment for the rest of our life is attractive to someone but I just laughed. They really don't like people who are looking to minimize total interest paid.
- 0xffff2 1y ago
  When I bought my latest car ~2 years ago, the dealer's rate was something like half a percent higher than my banks. On a 3 year loan and with the $1000 kickback for taking the dealer financing, it ended up being marginally cheaper to take their loan.

snarf21 1y ago

This is exactly true. Dealership profit centers are loan origination and extended warranty origination. Parts/Service is designed to pay the bills. (Source: My dad has been selling new cars for 40+ years) (This is kinda like the Costco model where they aim to break even on all sales with profit only being the membership fees).