Welcome To The Island Of Misfit Luxury Imports...
If you're looking for a photograph to illustrate how our economy has changed over the past few months, take a look at this. No, that's not a parking lot in a town where everyone has the same taste. It's the Port of Long Beach, where "thousands of cars worth tens of millions of dollars are being warehoused," unwanted by the dealers who used to sell them. They're imports -- Mercedes-Benz, Toyota, and Nissan orphans.
And its not just cars that are piling up. The port usually exports recycled paper. They send it to China where it is turned back into the boxes that you rip open during the holidays to reveal all sorts of consumer products. TVs, toys, video games. Whatever. But the demand is slowing. The paper is piling up...
Long Beach is an important port, particularly for the West. It is where imported products arrive and filter through the tributary of trucks, trains and retailers into the hands of consumers. But now, products are just sitting.
“We’re supposed to move things, not store them,” Mr. Wong said.
The NYT says this phenomenon is nothing new for Detroit -- American cars are housed at the Michigan's state fairgrounds and at its airports.
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You'd think we would be seeing better deals on cars. If demand is so low and supply is so high, why are the sticker prices staying the same? Offering a discount on an already overpriced item isn't going to fix everything. They need to lower their starting price.
Dammit, you beat me to the comment.
As supply is much higher than demand, doesn't basic high school economics state that you lower price to get the two equal? Bring them below "employee pricing" and start pricing them to SELL.
maybe because every house in america doesn't need 10 cars and a hummer. i think there are some people who are scrimping as well as people getting smarter about their money. one thing that always baffles me is how many clothing stores exist. does each consumer need THAT many tshirts and tank tops?
I really think something positive is going to come out of this in terms of people's spending habits for the long run.
@HFC: And obviously they're worried about their profits and paychecks or they wouldn't be asking for free money when loan options are ALREADY available to them, and they're ignoring them.
As much as I'd love to get a steal on a nice luxury car, I'm just now paying off my very first car and its pretty much financially ruined me just taking on this loan. The extra money after its paid off will help. A LOT.
@HFC: How many people actually need a new car in a given year, though? Especially folks who bought a car with longevity built in.
I mean, if you get a new or gently used car, you should be able to expect to get about 10 years out of it. (Our household has a '96 Camry and an '01 Protegé; my parents have an '01 Nissan pickup truck and an '02 Kia minivan.) None of us would be looking to replace those cars for at least another 2-3 years.
So if everyone was out buying everything for the last five years, it seems to me that there would be a huge percentage of households where new car would be a want, not a need, and far too expensive for just a "want." Even with reduced prices. If the five-year-old car works fine, do you really need to go get a Beemer? Even a cheap one?
@HFC: This really kind of reminds me of the Fed's tactics, when the economy goes sour, of lowering interest rates. We've seen practically every company offer 0% financing in the hopes that everyone will just buy the cars and move on, knowing they won't have to pay interest.
When it gets down to it, I suspect it's because dealerships (the ones not owned by the car companies themselves) are reluctant to part with cars for less money than they spent getting them. I don't have any stats on what kind of margins they sell them at to back this up, though. Eventually, they're gonna be starving for cash more than they're gonna starve for the simple profit, and they'll have to sell them, like you said, at much cheaper prices... Eventually...
@HFC:
Poor management is one part of it, but there's also a bit of shell-shock; conditions deteriorated VERY rapidly in America.
Pfft. I started putting feelers out for a minivan, and the USED Honda Odysseys are going for around 22k when Kelley Blue Book says they are supposed to be 12-16k.
@qcgallus: This works, to a point. The business model of companies like Pets.com was "We'll sell at a loss and make it up in volume." If you reduce the price below your costs, you go out of business.
If you can't reduce your costs as your prices are forced down, you go out of business. Unless you can convince someone to give you $25 billion.
Well I'm wondering, what would cost more: to house the cars at the port of entry (and state fairgrounds), or to price them just barely above the cost of manufacture?
@Oranges w/ Cheese: That seems to be precisely the reason that people aren't buying cars right now. I, for one, would *love* to get a new car (or anything with less than 200K miles), but am intimidated by the current pricing, even as low as it is. If prices for a Ford Focus, for example, went to $9,000 or so, I would get a loan in a heartbeat.
Imports are still overpriced for what the market is. However, that could be due to the strong Yen, which makes exports from Japan more expensive.
Any BMW 128s? Manual transmission only.
NJ has lots like this near Port Newark. They are usually full of cars. In fact, that's what I thought this was a picture of with the Pulaski Skyway or another bridge in the background.
@Jesse: A strong Yen shouldn't be effecting the prices of USED Hondas. The perceived high fuel economy of Hondas might, however.
@qcgallus:
Have you looked at Honda Fits? I'm a huge Honda fan so take the with a grain of salt. but the Fits are not that bad price wise. I just had a my old car die (1996 Honda prelude) and bought a Honda CRV. did my research and was able to get a screaming deal. Honda financing was having a good loan program as well.
@Jesse: That might be true in the new market. But Fist-o already said he was looking for used.
My guess is the dealers are under the mistaken impression that as long as it doesn't say Ford, GM, or Chrysler anywhere on it that it's still a sellers market. which is for the most part true with used imports that are on the miserly side of the fuel economy spectrum.
@qcgallus: Yar. I took over the loan for my car about 2 years ago, and though the montly payment isn't all that bad, the money could be better spent elsewhere - especially now. So to expedite the situation I basically liquidated my savings account to get it down to 3 more payments. When that's over and done with, I hope to not have to buy a car for several more years. I'll keep "paying" the payment back into the savings account and hopefully have a decent stash by this time next year.
I swear... I'm never going to be able to afford a house either >_<
My family's newest car has 85K and needs work that we're not willing to put into it, so we're reluctantly placing our toe in the market for a new/used minivan.
We havne't had a car payment in seven years and my wife and I are absolutely loathing the idea of buying a new or even new/used vehicle in these times, but what can you do? You gotta have good reliable transportation for your spouse/children, and it does us no long term good to buy something that doesn't meet our needs or to put tons of money in a vehicle that will keep on needing more and more$$$ to keep going and will still be that old vehicle.
Sigh.
It just got to a point of no return and crashed - people kept fueling up their SUV's well into $3 gas so they kept pushing. Looks like $4 was the breaking point. Everyone sold off their SUV's for cheaper smaller cars and now they're sitting on them.
Its the car companies fault for EXPECTING consumers to buy a new car every 2 years. Normally those are on Lease, which is really really profitable for them, but no one can get credit right now and no one wants to pay the inflated lease payments when they can own for half as much.
@TheRedSeven: but... if you are hurting to badly for money that you feel you have to beg for it, don't you try to liquidate whatever you may have which is sellable, even if that means you do it below cost? Raising funds in an emergency situation, when you have millions of dollars of unsold inventory, may mean taking a loss so you can forestall and perhaps avoid collapse.
@Cruc: 85k is not that much. We just put $1600 into our used Hyundai with 88k. If you have paid it off already, then consider the repairs to be a discounted payment that if you bought a new car would be WAY more, and for a lot longer.
Are you really certain that your car will need more work in the future, or just justifying really wanting a new car?
@qcgallus:
Yours is a good question.I believe that a lot of the hangup is with the dealers. Sharpie salesmen,confusing (and deceptive) financing and peek-a-boo fees certainly give me pause about buying a car in this environment.It's much more comforting to make a major purchase like a car when you are reasonably certain that you are not being screwed six ways from Sunday.That could have something to do with the relative strength of Toyota,Honda and ,to a lesser extent Nissan's ,sales over the last few months. The whole cat and mouse game that dealers play is just a huge turnoff for me. The way that cars are sold is old,inefficient and in many cases ,shameful.
There is a cyclical nature to the behavior of consumers. It has been studied both here and abroad. When people are psychologically convinced that they are living during High Times, they have a need for luxury goods, and to show others their wealth. Think Victorian England, and Pre Bubble Japan, as well as US recently,
Now we seem to be entering a period where people are convinced that we will be poorer and live less well. The Mercedes that used to display your success, now displays your poor judgment. In the past frugal was cheap, now it is becoming clever.
The longer this malaise lasts the harder it becomes to mass retail luxury goods.
You don't see big discounts, because it could cannibalize the luxury brand recognition that the manufacturer has worked so hard to cultivate. But eventually even that changes.
Patience, Patience, in all things patience.
@MrEvil: I talked down my price $3000 from the dealership on my used Odyssey. Did it on the phone and it worked really well.
If they want, I'd be willing to store one of those cars for them at my place, no charge! All I ask is to be able to put a few miles on it while they're trying to arrange for a buyer.
Being from Michigan, I grew up seeing huge parking lots full of brand new cars straight off the line. It never seemed weird to me.
@lowlight69: I have looked at the Honda FIT, and I like what I see. For a while I was leaning towards a new FIT, but my credit is horrible (thank you school loans/low [read: no] paycheck) and my credit union probably would not provide financing. I am still looking at them, though. Manual all the way! Plus Honda has the one thing I value the most in a car: trust. My '87 325i, while I love it, will fail to start in the winter.
Personally I'm hoping to score a deal on a hybrid around Christmastime. Auto companies are hurting, gas is down under $2/gallon. And my 25-gallon tank pickup truck is having transmission issues which may cost more to fix than it's worth.
I hate car shopping.
@lowlight69: Are you kidding? The Fit is by far the most expensive of the subcompact market, and since they're selling so well (still), Honda wont discount them. You pretty much can't get one for less than 15k, which is Ford Focus territory. I'm not saying it's not worth it, the Fit is a great car and holds its value incredibly well, it's pretty much just the opposite of what qcgallus talking about.
@TheRedSeven: But isn't it more economical to get something, even if it's below cost, for existing inventory? Or are there tax breaks and corporate deals that make it not the dealer's problem?
@Cruc: Ask yourself this, which would cost more, the repairs for a year on the car you have, or a years worth of payments on a new/used car?
With all that surplus, I'm guessing manufacturers will be offering more incentives/rebates. And they'll probably be offering some decent leasing promotions. This will be a good time to buy a car. Well, for people who have been financially responsible that is. :-)
Let's see: 1998 Old Sillouette, 90K (not 85...I'm geezing). Needs intake gasket as it's beginning to seep antifreeze (known GM issue on this engine, but they never did a recall on it the bastages). Needs front calipers and breaks-again. needs rear shocks (has special air adjusted shocks...not inexpensive.) We spent close to 1K last summer for master cylinder/ABS computer replacement alone.
Among other little things such as electrical gremlins that come and go, and it's not getting any more reliable or younger either.
We could spend 3-4K on this stuff (and I do do as much as I can).
Or, I could call it even, get what I can for it and put that amount into a newer more reliable van.
My car (a 95 Maxima) has 180K, so I understand long term use and how to get there.
We're jsut not going to get there with this van, and it doesn't make long term financial or mental health sense to try methinks.
C-
@nataku83:
Yeah, I've been keeping my eye on the fit. There is nothing that is really as sporty, economical, and nicely made with that many options on the market. The Mazda 3 comes close, but is more expensive (hatchback). Hell,I'd love to get a used fit, but dealers are selling THOSE for 16-18k, even with 20k miles on them!
Too bad Ford/Chevy/GM doesn't offer *anything* remotely similar to the Mazda3/Fit, or I'd give them a chance. A pos AVEO isn't going to cut the mustard.
@HFC: Actually, you are seeing deals, however, many consumers can't get loans to buy the cars. Just this past weekend I bought a BMW at invoice and 0.9% financing.
To sustain the number of autos sold in 2007 would necessitate continuing to give loans to people with less than stellar credit. And, that is not going to happen. Thus, a contraction of tthe automobile industry is a given.
I'm kinda wondering where the market will go. Right now a lot of companies are doing rebates, red tags, employee pricing and most are doing 0% financing (although only 36 months which is weird). But most of the deals are nothing special compared to what we've seen over the past year or 2.
If the financial markets keep going down, it will be harder to get good financing in the future, but you might be able to get more cash back or get cars around or below invoice.
Whatever you do, dont take a picture of those cars. Toyota might get pissed at you for it!
@HFC: I have to agree with everyone else. I just got rid of my 94 Camry when the Transmission and Engine died and now I have a 2001 Hyundai Sonata that should atleast last me another 5 - 7 Years.
Why would a Mercedes be shipped thru the Port of Long Beach, wouldn't an East Coast port be closer to the source ?
@B: The perception is correct, but you're wrong on the first point (in theory, I don't know if that's what is happening). The Yen affects new prices and used prices are just new - X. For Honda, X is a much smaller number than Chevy (that's where perceived quality and fuel economy come in).
This is why people who bought a Chevy before they intro'd employee pricing will be screwed when they try to sell.
@EtoilePB: Hey I got a used 2002 BMW 525i for 10k and it is nicer than anything new I could buy for 10k. Plus Inline 6cyl run forever. :0
Yeah, this shouldn't be a surprise. Even without a falling economy and people cutting back spending. The car companies have been pushing for this result for years, maybe decades, or perhaps from the beginning.
I've always wondered at the insane number of car ads on TV. You practically can't get through a single prime-time commercial block without seeing at least one car ad, and it's more likely you'll see two or more. I remember a few times of sitting through a commercial block of nothing but car commercials! All of the hit shows we've watched were heavily sponsored by a car company (i.e. 24 - Ford, Heroes - Nissan, etc).
Also, both the manufacturer and dealer commercials give off an infomercial vibe. Unlike medication commercials, they seem to represent each car as exactly the one you've been looking for all this time. It's never, "trust in Toyota" or "make your next car a Toyota;" it's "come on in to Bill McPressure's Toyota today" or "Toyota now offering 0% financing, act now." It's just as high-pressure as furniture ads.
Listen guys, consumers and businessmen alike, these are things that should not and will not be bought often. Once you get your demographic's worth of people into a new, reliable car, you've killed your customer base, if there ever was one to begin with. When your business model is to sell large purchases in volume, volume that has to be on-hand, then even a small change in spending habits or consumer values is going to murder you. And these changes are inevitable.
Once they figure out and perfect the practice of selling cars online, then this model will work. This implosion of car sales may at least cut out some of those damned commercials. I haven't seen a Ford one in a long time.
@Cruc: Man, I hear ya. My wife and I just got rid of our 2002 Ford Explorer after our warranty expired. I was holding my breath waiting for the tranny to fail spectacularly (as these 2002s are known to do) and we decided that we could either get rid of it or wait for a shitstorm to the tune of about $5k. So we put it up for sale, after saving our money for about 8 or 9 months. Fortunately the market for used SUVs and trucks in SE Idaho isn't as dead as the rest of the nation. In the two weeks it was parked waiting to be sold, the AC quit working, and the two rear windows stopped functioning. I count myself lucky that I crawled out from under this thing before it really decided to crap out on me, and am enjoying my 2009 Accord immensely. Oh, and I got a killer deal on it, too.
@floraposte: Too far below cost is not worth it though. It would be like a PS3 selling for $75. Sure you got a good deal, but the seller is out several hundred dollars and it may have been better for him to just hold on to the darned thing until demand goes up.
Once things get moving again, I can imagine an excited Tattoo shouting, "Le Train! Le Train!"