Proping up prices.

 

I’m in the market for a new car. Problem is I’m not only picky and cheap but I hate car shopping. I dislike car salesman, dealerships, the entire experience. Since before it hit the showrooms I have been interested in the Shelby Mustang GT500.

Before the car came out Ford promised to build them to demand, that is to make as many as people wanted so that the dealers could not jack up the price based on a much lower volume of vehicles than buyers. Ford then changed and put them on dealer allocation. That is dealers would get a certain number of GT500s based on their sales volume and that’s it. There would be no going into a dealership and ordering it just the way I wanted it because the dealers would option theirs out in such a way to maximize their profit. This was a big minus because I really wanted to order one stripe delete. I don’t like them. I wanted a more understated car. I don’t need nor want the attention. Even worse it meant there would be much fewer cars than buyers.

When the cars hit the show room dealers started selling them at 15 – 20 thousand over sticker. Over the years this has declined to 5-15K over sticker. But you say Ford is having problems, prices should be down now? No. One local Ford dealer that is up front about their over-sticker price is still asking 5 grand over  sticker. Another which does not put that price on the window has had the same cars on their lot for months now. Business is bad, but they still don’t come down in price. I still do not buy.

I’ve been waiting for the crash for a long time now. I knew the bust would come in housing and everywhere else. I ended up buying housing because I just could not wait any longer, but I did it in such a way to minimize my exposure to the bust and so far so good. But I could hold out on cars. I have the ability to keep the cars I have going forever if I need to. I expect the bust to bring down the prices. I did not expect government bailouts to keep high prices continuing.

Without the bailouts the local dealers would need to clear these cars off their lots. With bailouts, with artifically low interest rates, they can leave the cars sit there until they find someone willing to pay the inflated price. I drove by the dealership today, the one they have in a more understated color that I could probably live with has been there since before I first noticed it in late October. They move it around every so often, but there it still sits. I stopped in once before the snow fell and asked if they were still selling them for over sticker, sure enough, they were. More GT500s and other Fords marketed as instant collectables and sold for over sticker have joined it. At last count they had 6 such cars just sitting there. In a real bust this would be impossible. The interest on such inventory alone would be killing them. But with the bailouts and federal reserve monetary policy they can afford to have the cars sit there until they get their price.

This little experience of my own shows me why government action extends and deepens depressions. Those of us who waited for the bust are the ones with the money to spend. We aren’t going to spend until prices are acceptable to us. The government works to keep prices high, but the people who bought at high prices are broke, over-extended, and so forth. They might want to spend but they aren’t capable of spending any more. They expended their resources and the resources they could borrow in the boom. All that’s available is what those of us who saved durring the boom have. The only way to get things going is to cater to savers, to cater to the patient buyers, not the reckless ones. But government and the Federal Reserve keep acting to keep prices higher than what will get a saver to part with his money and buy.

I’ll continue waiting to buy a new car until the cars I want, if it’s the GT500 or one of the others (which haven’t come down in price either as far as I can tell) is being sold for a price I am willing to pay for it. As will the rest of the people who have money to spend in this bust. The government can get out of the way and let prices fall and business can get going again or it can stay in the way and keep the pause button pressed.

 

One thought on “Proping up prices.

  1. I have been looking at a 2008 Lexus IS 350 since august. My local dealer has 3 in the color options package. They won’t negotiate on price so the cars just sit there for months on end. By the time they are ready to get rid of the 2008′s the 2010′s will be out.

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