'Employee Pricing Now' - What effect on trade-in value later?

[kostby]

Suddenly 'Employee Pricing for Everyone' is moving thousands of new vehicles off dealer lots and into the hand of consumers.The auto market might have survived 30 days (the original GM-only plan-thru 07/04/05) of price-cutting without a major hiccup, but now that GM, Ford, and Daimler-Chrysler are ALL doing it on most models, what's the effect going to be:1) In the coming months and years, when all the 'Employee Price' buyers and leasers are ready to trade?2) Right now, on the resale/replacement value for everyone who bought an '05 BEFORE 'employee pricing' took effect.I look forward to reading your reactions!

[Reynoma]

Quote, originally posted by kostby »Suddenly 'Employee Pricing for Everyone' is moving thousands of new vehicles off dealer lots and into the hand of consumers.The auto market might have survived 30 days (the original GM-only plan-thru 07/04/05) of price-cutting without a major hiccup, but now that GM, Ford, and Daimler-Chrysler are ALL doing it on most models, what's the effect going to be:1) In the coming months and years, when all the 'Employee Price' buyers and leasers are ready to trade?2) Right now, on the resale/replacement value for everyone who bought an '05 BEFORE 'employee pricing' took effect.I look forward to reading your reactions!You raise some very valid points. It is effecting the price of used cars now (according to Automotive News, used car prices dropped 2.3% from May to June). Also, with employee pricing (also read in Automotve News) dealers are not able to give people as much for their trades.The thing I'm most curious about is when they try to take the employee pricing away. I think people (who can put two and two together) will do some reasearch now to find out what the employee price is for a car that they want. Then, when they are ready to buy and the program is no longer in effect, they can use that price as their "starting point".

[ShadowRuleZ]

It'll be in the crapper; not like resale value off a new car was ever any good anyways.

[jake75]

Used car prices are affected by what "actual" new car prices are at the same time. Therefore, for someone trading in a late model used car what they gain via employee pricing is in large measure lost in the reduced value of their trade-in. However, the fact that you bought a new car on the cheap does not affect what its trade-in will be 3 years down the road. If the industry recovers and new cars are selling at normal prices, then your used car value will be "normal". Looking at the trade-in vs. dealer prices for used cars on kbb or edmunds reveals quite a spread, and most dealers give you less than these reported numbers. IMO, all things considered, buying a used car at a dealer is rarely a good financial decision. A friend of mine who buys used has a dealer who buys a car to his specifications for him at the auction, adding a $500 fee. On a late model used car that can result in $2,000 off dealer lot prices.

[GMJAP]

Quote, originally posted by jake75 »Used car prices are affected by what "actual" new car prices are at the same time. Therefore, for someone trading in a late model used car what they gain via employee pricing is in large measure lost in the reduced value of their trade-in. However, the fact that you bought a new car on the cheap does not affect what its trade-in will be 3 years down the road. If the industry recovers and new cars are selling at normal prices, then your used car value will be "normal". Looking at the trade-in vs. dealer prices for used cars on kbb or edmunds reveals quite a spread, and most dealers give you less than these reported numbers. IMO, all things considered, buying a used car at a dealer is rarely a good financial decision. A friend of mine who buys used has a dealer who buys a car to his specifications for him at the auction, adding a $500 fee. On a late model used car that can result in $2,000 off dealer lot prices. I think jake75 has got it- that used car prices will be affected by prices of new cars at the time they are sold.In the meantime, I believe it has devalued my 05, though I don't intend to sell it soon anyway. Later, however, it shouldn't change the relative resale values of 05's bought before/after. (Of course those who paid less in the first place will be better off)

[vibebob]

I don't see how the auto makers will be able to sell vehicles for thier "normal" pricing again. and as others have said, the price reductions have hurt used vehicle prices.

[AKLGT]

well being that i just traded in my 03 pontiac vibe gt, pretty much loaded with a lot of extras, including leather, heated seat, etc, back in April, i can say that even before the employee discount sale, resale value of MOST domestic cars SUCK! that's why the imports proudly say how they retain resale value and overall satisfaction because the car manufacturer isn't screwing them over as soon as they leave the lot. granted, you will always lose value once the car becomes "used" but at what rate compared to most domestics? even after talking the dealership into giving me $1000 more for my trade (with busted lower grill, tags due, and busted windshield), i was still $4600 UNDER at the 1.9% financing i received 2 yrs prior. That's a total of $7800 plus interest i paid in payments. i still had to fork over the remainder $4600 i was under because my car had depreciated by 50% in 2 yrs!!!! before i had the vibe, i had a 2001 toyota Tundra that depreciated only $2500 in 2 yrs, not $11,000!!!! This is why i will never go back to ANY domestic new vehicle, even if essentially made by one of the imports. this would be fine and dandy if i kept my vehicle longer than 2 yrs, but as of yet, i have never owned one more than just over 2 yrs. With my job, warranty and reliable is a KEY factor. once that warranty is gone and the miles are piled on, it's time to get rid of that car and get the next. so, for people like me, the LOW LOW prices screw us over. and what's worse, is in a year or so when we trade phil's vibe for an awd car WITH POWER (most likely a subaru), we'll get raped on that trade too, especially since it's also a canadian vehicle in the US. why would anyone want to buy used with miles when they can get NEW for the same price or sometimes LESS!

[iDahoVibe]

Quote, originally posted by trdvibe »...resale value of MOST domestic cars SUCK!...and Mitsubishis! Who's gonna buy a used one when you can get a new one for 0% financing or no payments for a year. I got a lot more money for a two year old Corolla that had been in an accident than I got for a two year old Galant (and I traded in the Galant two years after the Corolla.)

[ColonelPanic]

No need to hold back, tell us how you really feel! Anyway, my $0.02... Resale on anything sucks. A car isn't much of an investment... The less you pay for it initially, the less it's going to be worth in the end.

[jake75]

Quote, originally posted by trdvibe »well being that i just traded in my 03 pontiac vibe gt, pretty much loaded with a lot of extras, including leather, heated seat, etc, back in April, i can say that even before the employee discount sale, resale value of MOST domestic cars SUCK! that's why the imports proudly say how they retain resale value and overall satisfaction because the car manufacturer isn't screwing them over as soon as they leave the lot. granted, you will always lose value once the car becomes "used" but at what rate compared to most domestics? even after talking the dealership into giving me $1000 more for my trade (with busted lower grill, tags due, and busted windshield), i was still $4600 UNDER at the 1.9% financing i received 2 yrs prior. That's a total of $7800 plus interest i paid in payments. i still had to fork over the remainder $4600 i was under because my car had depreciated by 50% in 2 yrs!!!! before i had the vibe, i had a 2001 toyota Tundra that depreciated only $2500 in 2 yrs, not $11,000!!!! This is why i will never go back to ANY domestic new vehicle, even if essentially made by one of the imports. this would be fine and dandy if i kept my vehicle longer than 2 yrs, but as of yet, i have never owned one more than just over 2 yrs. With my job, warranty and reliable is a KEY factor. once that warranty is gone and the miles are piled on, it's time to get rid of that car and get the next. so, for people like me, the LOW LOW prices screw us over. and what's worse, is in a year or so when we trade phil's vibe for an awd car WITH POWER (most likely a subaru), we'll get raped on that trade too, especially since it's also a canadian vehicle in the US. why would anyone want to buy used with miles when they can get NEW for the same price or sometimes LESS! If you paid $7,800 plus interest, and were $4,600 under water, and that is 50%, that means you originally paid $24,800. Ouch! I suspect that some of these "extras" are worth a whole lot less to a used car buyer than a new car buyer. I saw a new 2005 Based with AT & Power Package recently advertised for about $15,900 plus tax. [My similar 2003 was bought for $13,650 plus tax.] I think these will do a lot better as a % of msrp at trade-in time. Another thing is miles - 45,000 miles at 25 cents is $11,250. Yet another is condition - sounds like your's was a bit on the rough side. So perhaps you didn't do so bad. In the late 90's I twice traded basic Voyager Minivans every 24 months for about $5,000. Hard to dive a new car for any less than $210 a month. Then I bought a 2001 PT Cruiser at full MSRP and got 50% back at 38-1/2 months - still only $245 a month. Used Hondas and Toyotas do get a premium. I'm not sure that extends to Subarus. Let us know in 2-3 years when you trade that in.

[AKLGT]

actually i paid just over $22,500 for the vibe GT. I did purchase Gap insurance and supposed to be getting a credit back for that soon too. I believe the car was $22K, no tax here. nothing down, no trade, etc. 72 mos @1.9% financing for $324/mo pmts. keep in mind, i'm talking about the GT which has a higher MSRP than the base to begin with. as for Subaru's, here they are PRIME dollar! from my research so far, they seem to depreciate about $2000/yr depending on how many miles. you can buy a 15 yr old subaru awd for $2000 still! it's insane. anywhere else and you'd be lucky to get $500! lol. and i'm not supposed to trade/sell the new subie for a long time.. thus the extended warranty. (i'm trying to be hopeful here plus I already promised Phil the next new car in a year or two.)

[jake75]

I understand everything is more expensive in Alaska (except taxes) so transportation would be no exception. Had a brother in law that lived there many years ago - driving that "highway" (actually a stone road from what I hear) back to the states would do a Hummer in. I read there is a NE state (NH or ME maybe) where Suburu also has an incredible following. Explain to us how that GAP insurance works in your situation. I've heard about it covering a "gap" in case of totalling a car, but not just a under water situation when trading it in.

[03VibeGT6Spd]

Quote, originally posted by trdvibe »actually i paid just over $22,500 for the vibe GT. I did purchase Gap insurance and supposed to be getting a credit back for that soon too. I believe the car was $22K, no tax here. nothing down, no trade, etc. 72 mos @1.9% financing for $324/mo pmts. keep in mind, i'm talking about the GT which has a higher MSRP than the base to begin with. Hope,Please Don't take offense But 72 months, Your buying a car not a house.My father always told me if you can pay it off in 36 months you can afford it.At your low 1.9% interest rate you were paying about $35 a month in interest.Your lucky you could even roll that much into the new car, without have to do a 72 month lease.I Know for a fact you are stuck in your new car now, you can forget about trading it in 2 years down the road.I laugh at a friend who bought a $45k truck @60 months.

[binary]

Quote, originally posted by 03VibeGT6Spd »I laugh at a friend who bought a $45k truck @60 months.Thats actually pretty good for the genral public's purchasing habits...I see a lot of Avalache's driving around - I would bet they have 72 month loans - the banks LOVE them.Sure, you're payments are lower - now you can afford a tank of gas weekly.

[jake75]

What's that saying? "Walk a mile in my shoes." I have not had to borrow money to buy a car for almost 20 years but I truly think things are more difficult for the average worker today than they were 20 years ago. On the plus side, new cars are cheaper relative to wages, of higher quality and last longer today than 20 years ago. On the minus side wage growth is stagnant, job security low, and just about everything else is more expensive. That said, it seems a lot of people are buying based on want more than need. Safe reliable transportation is a need and there are a lot of decent new cars to meet that need for a whole lot less than $20,000. I truly am astounded at the people who buy an expensive gas hog SUV financed over 72 months when a Honda Civic would serve their "need". Of course if you live in Alaska a 2 wheel drive Civic is probably not a good choice, and I'm under the impression that the average wage isn Alaska compensates for some of the added expenses of living there. Lackof an income tax or sales tax is going to save the averge Alaskan at least a couple thousand a year. I hear Alaskans also get an annual oil royalty payment too - a negative tax so to speak.

[ColonelPanic]

Quote, originally posted by 03VibeGT6Spd »Please Don't take offense But 72 months, Your buying a car not a house.I hate to break the news to you, but there are plenty of people out there who really don't have much of a choice but to finance out to 72 months... While walking into the dealer with a big wad of cash is all fine and dandy, most of us can't do it.I guess we could all stop eating so we can put money aside for the new car fund eh? In my case, that's about the only thing I can eliminate from my budget! At the end of the month, there really isn't squat left.

[jake75]

In keeping with the original topic, here is part of an article in today's WStJ. "Dealers say the price cuts are wreaking havoc in the used-car market. John Hawkins, Pres of Great Metro Auto Group based in Montclair, CA, said used-car values are falling because of the large volume of late-model used cars hitting dealer inventory as trade-ins. He said some used-car shoppers are being enticed into the new-car market because of the low employee prices. Customers who recently have bought Detroit models also are taking a hit as the values of their cars drop." So the supply of used cars is up, and the demand for used cars is down. Prices are set by supply and demand so guess what? Used car prices are lower.To those who think that haggling over price is not possible with these "employee prices" the article says that "employee pricing poses a risk to margins, because, in effect, the factories are setting MAXIMUM prices and taking away nearly all of the margin between invioice prices and sticker prices. To make money, Chrysler dealers are trying to hit volume targets set by the auto maker, That has made competition between dealers unusually vigorous. It's put us in the position to be overly aggressive to get those numbers said Tom Barenboim, owner of Clark Chrysler-Jeep of Methuen, MA." Barenboim also said he expected the employee pricing deals to be extended to Labor Day.

[jake75]

Interesting flyer received in the mail today from Bobby Layman Pontiac - Lancaster, OH.Neither purchase numbers or lease numbers make any sense to me.PURCHASE: '05 Vibe MSRP $19.025, Employee Disc -1,987Employee Price $17,038; No mention of any rebateLEASE: 48 month GMAC Lease based on cap cost of $17,038.40$2,003.69 due on delivery, $219 a month x 4836,000 miles (that's only 750 a month)Residual $8,751.50Flyer featured the 2005 Grad Prix - "Unbelievable but true - you save 1/3 off MSRP". The numbers were MSRP $24,060 - 3,612 employee discount, - $5,000 rebate, net of $16,448. DO DA MATH! 1/3 off MSRP would be $16,040.