Who’s buying these overpriced JT’s?

[MPMB]

Frankly, the American people don't have to stop doing anything that they really want to when it comes to spending their money. I've had people ask me how much I have in my Rubicon and in the build, and I tell them that they were not a party to the expense, so it's none of their business. My wife and I spent the bulk or our lives setting the standard we now enjoy.... we earned it, and we bought it.

Not sure you understand what I was getting at. It's not about people knowing how much you spend, or if one has the means to spend.

Also caveat - I live in an economically-insulated region, the PNW. We have agricultural, manufacturing and high-tech industries. Our region already has higher costs than many parts of the US.

I don't think many people have the money they think they have, and the inflated prices will either make people paying for vehicles they can't afford (which will have other economic repercussions), or the auto industry will get hit hard financially.

The chip shortage created a shortage of supply, which increases price. In 12-18 months when chip shortage has been eliminated, dealers aren't going to reduce prices to the time prior to the chip shortage. They can't. They bought all these used cars at inflated prices and they have to make their money on them.

It's a parts shortage based on a labor shortage (lockdown). It's not like manufacturers are out of anything (like land, which is finite) that can't be built. It's a short-term hiccup in production. It's not like a forest fire destroyed the lumber supply and it's going to take 30 years to produce another lumber harvest. It's not like all the tire manufacturer plants burned down and it'll take 30 months to rebuild.

Those used car prices are gone now; for a car only a year or two old people are going to pay closer to retail than the usual $5k or more off new. Someone who traded in their car for $45k when they bought it for $42k, the next person who buys it will likely be buying it for closer to $50k. And think ahead 7 years (I think that's the average people keep vehicles). Everyone is going to lose that inflated value on a trade-in or when they sell because the chip shortage will have abated by then.

Because people don't wait (a person is smart, people are dumb), they'll buy something that really is above market value because of a singular market variable - similar to the "hot" Christmas toy people just *have* to buy. But we know vehicles aren't a $50 toy being sold for $300+ on ebay. And that's why I think more and more people are going to be taking longer loans out - 7 and 8 year loans instead of the more common/traditional 4-5 year loans.

And I wouldn't be surprised if there will be a lot of negative equity in future loans.

Is this scenario for all of us? No. But I know a fair amount of people who are going to be in a financial pinch if they have to buy a new or fairly new car to replace another. And I don't believe people are going to "downgrade" to a vehicle they can afford. Few people are going to not buy the Traverse and get the Trailblazer.

One of the cars we're looking at is the VW Atlas CrossSport. Last year I found some base level models listed at $27k-$30k. Our basic requirements are heated seats and a sunroof. I found lots under $35k. Now? Almost all of them in a 500 mile range are over the original MSRP. $42.5k with 43,000 miles. You can actually buy a new one cheaper than a used one. Kia Sorento is just as much as the Kia Telluride.

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[Tonyb89]

All jt’s are overpriced to begin with. You can buy a full size four door pickup for the same price as these little trucks. I belive the reason why anyone is stil buying is becuase of what dealers are willing to pay for trade ins. I have a 2016 ram 3500 crew cab 6.4L and the dealer offered to give me more then what i paid for my truck four years ago when it had 45,000 less miles. Eventually i will get into a gladiator cause i do like them but its a hard 50k to swallow for a small truck and i dont see the truck market getting any cheaper

 

[Zsis]

I just bought my JT a couple weeks ago. Have wanted one for a long time. I could have bought my Willys for around $40K a year or so ago and did not. Price went up to $47K. My F150 had about 110K miles. Bought new in 2016 with the extended warranty and maintenance package for $34K out the door. Almost 6 years later and with 110K miles, they gave me $30K for my trade value. Also had a 2010 JK with about 100K miles as well. We bought that about 2 year ago for $8K. They gave me $10.5K for trade value. For those trade values, I could not say no. I pulled money from the bank to pay off the remaining owed. So although the new JT was higher than it should be, I was very comfortable making the deal with the amounts they gave me for trades. I still walked away with a brand new vehicle and still no payments.

 

[Gatorac]

I recently bought a car from Carvana. VW Golf R. It went very smooth. They gave me $3k more for my trade in than I paid for it 90 days earlier. And I paid $5k over sticker for that. (Civic Type R). So the higher price of the car I bought was basically a wash. The traditional dealer model makes me sick. You see an advertised price but ultimately you have no idea what it's really going to cost until you go to the dealer and do the dick dance with some dirtbag. At Carvana the price was clear and up front. The trade in was clear and up front. Click button to buy. Car dropped off at my house and the trade in picked up. I had the title within a week after the 7 day return window ended. Every rep I spoke on the phone with at Carvana was polite and upbeat. They stayed on the phone with you as long as it took to make sure everything was in order. I never once felt like they needed to get off the phone with me as soon as possible to talk with someone else.

After driving the first car I got from Carvana for a few days, I decided I didn't want it. Picked out another one and they came and swapped it out. Not hassles. If I had bought the CTR from Carvana instead of a dealer, we would have likely returned that. We both hated the CTR.

 

[869 KPH]

Maybe my logic was bad. Maybe some of you people with a lot of financial experience can chime in. I did the Gupton 7 percent below incoice. I also did a 7 year term... hear me out. My reasoning was i can always pay it off by adding extra to my payment when i can afford to. And if times are rough my payment will be lower than a 4 or 5 year term. Also basically i am able to use other peoples money and hang on to my actual money. So for at worst an extra 4 thousand dollars in interest, i got to get what i want, for 5 grand down plus taxes and hang on to all the money i have saved instead of sinking it into a huge down payment and a 4 year term. Was there something i missed in my reasoning? I mean i could of put down a lot more out of my savings and had a shorter term but it didnt make sense to me.

Don't let Dave Ramsey hear you, but this might be construed as financial literacy. I'll be doing a little of both sides just because it will make me feel better to put more down, so I think I'll probably do half-down and then half-financed for the longest term offered.

As for used car prices, I have no idea what's going on any more. When I really decided my next car was going to be a Jeep back in about 2014 or so, I remember thinking it would 'only' take around 30-35K to get in to a nice late-model one. We all know how that has turned out. I seriously wanted to be 'smart' about it and buy a used JT, but the prices are just nonsensical. Why pay the same or more for something that's used?

 

[PyrPatriot]

Same type of people who are giving Royce record sales
https://www.theguardian.com/busines...ce-covid-has-spurred-record-sales-of-our-cars

 

[saintpauljeff]

can't speak to the success of the Carvana business model, but I do like using them as leverage for trade-in valuation; just bought a MY2021 JTR off the lot on Dec 3rd and they essentially met the Carvana marketplace value for my MY2020 JTS Max Tow, and I was able to buy a new JT for a discount (61k MSRP which I bought for 53.5k)

 

[Initial-Jeep]

So you feel like my logic is not so bad? Because the other day i over heard a conversation in the barber shop about how stupid people like me are and if you cant put down 20 to 30 percent on a vehicle and pay it off in 3 or 4 years you cant afford it. I did not agree but didnt say anything just listened.

That argument makes the least sense; it's wholly inconsistent: either one buys (heh) into financing or one claims that financing a depreciating asset means one cannot afford it and shouldn't buy it at all. Those arbitrary percentages are meaningless rationalizations. Americans are generally bad with economics.

Context matters and there are really two questions that need answering:
1. Feasibility check: Is this potentially a bad idea in that it can cause problems (thinking, judging, quantitative, objective)
2. Personal priorities: Is this worth it to me/us? (feeling, perceiving, qualitative, subjective)

As far as dealers, et al. go: it's like they've never heard of "the Internet" and think obfuscation and pressure tactics will somehow work over e-mail. My willingness to drive several states away to get what I want at a price I want with minimal effort on the dealer's part means they just lost a lot of business and wasted their time.

 

[ShrimpHappens]

Don't let Dave Ramsey hear you, but this might be construed as financial literacy.

That argument makes the least sense; it's wholly inconsistent:

Exactly. These are the mantras of people who are stuck in the 80's or 90's financially, when getting a mortgage at 12% was a STEAL.

 

[MPMB]

can't speak to the success of the Carvana business model, but I do like using them as leverage for trade-in valuation; just bought a MY2021 JTR off the lot on Dec 3rd and they essentially met the Carvana marketplace value for my MY2020 JTS Max Tow, and I was able to buy a new JT for a discount (61k MSRP which I bought for 53.5k)

Yup. I sold one vehicle to Carmax because they gave me the most money without travelling 3 hours. When we traded in our Q3 for the JT, I had printouts of 3 offers from online retailers. Dealer offered $100 less than the highest offer.

Don't let Dave Ramsey hear you, but this might be construed as financial literacy. I'll be doing a little of both sides just because it will make me feel better to put more down, so I think I'll probably do half-down and then half-financed for the longest term offered.

As for used car prices, I have no idea what's going on any more. When I really decided my next car was going to be a Jeep back in about 2014 or so, I remember thinking it would 'only' take around 30-35K to get in to a nice late-model one. We all know how that has turned out. I seriously wanted to be 'smart' about it and buy a used JT, but the prices are just nonsensical. Why pay the same or more for something that's used?

Obviously many of our situations are different, but yes, if you can get a low interest (and the rare 0%), length of term isn't a huge deal. My parents drove home in a 2001 2500HD one night because they got 0% - not what they were looking at buying. Term length is a bigger deal for someone who gets a 10-12% loan. And these people tend to look at monthly payments, so they go for the 84-mo loans. So their $25k loan ends up being $32k instead of $28k (example figures, I didn't do the math). If only they taught stuff like that in school, instead of the likely intimate relationship between Melville and Hawthorne.

When you look at $30/mo here, $25/mo here, all that starts to add up. Also, in WA we have sales tax, and autos are included, so slap another 10% for the thieves in the capital. Some people forget to account for that, so when they come with a down payment, they're just covering the tax, and the car value doesn't change.

The amount of $ you put down should be enough to cover the "drive off the lot" depreciation. That way if worst case scenario happens, you won't be screwed. Nothing wrong with putting down more. Could that chunk of money be better off stuck in an investment? Maybe. Max out your 401k/IRA contributions? People who always want their money to work will balk at a large down payment. But when you do the math, you're likely not giving up a lot. You can make coffee at home and "earn" that $500 back in a few months.

Everyone needs to evaluate their personal cash flow. Ultimately what everyone says is just advice, good or bad.

 

[MPMB]

Exactly. These are the mantras of people who are stuck in the 80's or 90's financially, when getting a mortgage at 12% was a STEAL.

In the 70s, my parents barely qualified for a mortgage for their second (selling first & moving) house. With my dad having 15 years at an aircraft manufacturer and perfect credit (there really wasn't any back then compared to today, apparently).

 

[PrisonMike]

There are good deals out there! I just bought my New JT Rubicon(MSRP $67,295) for a couple thousand below sticker over the phone in SC. It was an easy transaction. It just wasn’t the color I wanted but I do love black and considering the slim pickings all over the country in the diesel I felt fortunate to make that deal by the end of the year to qualify for the tax deduction in 2021. The used Jeep gladiator price were outrageous.

 

[DAVECS1]

Why does everyone assume, these are financed? Also why should kids in school learn about interest on loans. They learn about interest, and they can apply it anywhere, like interest gathered on invested monies.

Don't get me started on insurance, ugggh.

Math works across the board, just need to teach application.

 

[balakachai]

So you feel like my logic is not so bad? Because the other day i over heard a conversation in the barber shop about how stupid people like me are and if you cant put down 20 to 30 percent on a vehicle and pay it off in 3 or 4 years you cant afford it. I did not agree but didnt say anything just listened.

There are 2 aspects to consider:
1. What's the interest rate? For example, if the interest rate on the financing is 5% and you're able to invest your cash at >5% then there is no sense in paying off early (you want the *longest* term possible); in other words, the car finance company is loaning you money to invest and you pocket the difference!
2. What's the cash outflow as % of your earnings? This is a matter of preference and pretty much a lot of behavioral finance hinges on it - how do people value liquidity. If you want to keep cash outflow low (and there's a good reason you might want to - flexibility, liquidity, etc.) then you want to stretch out the term - but it will cost you (and that's what we call the interest rate - it is essentially the price at which you exchange cash flows - the longer the term/the riskier you are as a customer, the higher the price paid).
So, you need to do *both* steps 1 and 2 - not just 2 (which is what appears from your initial statement). Same applies for any kind of financing. Home mortgages work on the same principle, just larger numbers involved.

 

[MPMB]

Why does everyone assume, these are financed? Also why should kids in school learn about interest on loans. They learn about interest, and they can apply it anywhere, like interest gathered on invested monies.

Don't get me started on insurance, ugggh.

Math works across the board, just need to teach application.

Considering before COVID roughly 85% of new car purchases were through loans, its a fair assumption that many - not all - financed car purchases. Since COVID, it's hovering just above 80%. Roughly 1/2 of used car purchases are through a loan.

I'm sure there's a fair amount of people who sold their home in California or New York and bought a nicer home in Texas or North Carolina for half the price and bought a Raptor and an X25 (or whatever the hot new boat is) with their home sale proceeds.

I'm interested to see the breakdown on what $ range cars are purchased vs. financed. I'm thinking high end/uber luxury cars are purchased more than financed, as are entry-level cars. And do these numbers include fleet purchase/lease for business and gov't?

Not all schools are teaching the same thing. I took an elective in high school that taught us the formula for calculating a mortgage, and we learned how much goes to pay interest vs. principal. Not everyone took that class, maybe 60 kids out of ~1000. Not everyone has parents that can teach their kid that, either. Teaching comparative math helps, too. 3 for $10 or 2 for $6. Who cares what speed the train is heading away from Susan.

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