Everyone talks about the weather, but no one does anything about it. Sometimes it feels like that’s what’s happening with vehicle affordability. It’s the beginning of a new year, so we’re getting a lot of data about 2023, and yeah, cars are expensive. So expensive. It’s getting better, maybe, at the same time that it’s getting worse.
Welcome to The Morning Dump, our daily feature where we look at the car news and try to paint a larger picture for you. Anyone can tell you the sales numbers, and we’ll do that, but we’ll also try to tell you what it means.
Yesterday, we learned that BYD edged out Tesla for electric car deliveries at the end of last year. Today, it’s Kia and Hyundai reporting good news.
We’ll end the dump on a weird rumor about Chinese automaker HiPhi, because rumors are fun.
17.9% Of Monthly Car Payments Are $1,000 Or More
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The nature of inflation and modern economies is that, over time, many things will get more expensive. Gone are the days when you could get a movie, popcorn, and a candy bar for a quarter.
In theory, wages also rise along with prices and complex goods get relatively less expensive. Back when a movie cost $0.10 a computer cost, not adjusted for inflation, almost half a million dollars.
Cars seem to be resisting this trend. A base Mustang GT in 1965 cost, inflation-adjusted, about $28,000. Today it’s about $41,000.
Cars, however, are faster, safer, more comfortable, and loaded with technology. That 1965 Mustang looks great, but it would get smoked by a modern Mustang and would crumple like a can of Pabst in an accident with an F-150.
So, that’s part of why, in Q4 of 2024, approximately 17.9% of new-vehicle monthly car payments were at or above $1,000. That’s up from 17.5% in Q3 and way up from the 15.7% share in Q4 of 2022, according to Edmunds. There’s a little more to it than that. Trimflation plays a role, of course, as automakers have added more and more features and reduced the inventory of entry-level vehicles (though that’s improving).
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Interest rates are up. According to the same Edmunds analysis, the average APR on new vehicles climbed to 7.4%, up from 6.5% in Q4 of 2022, but flat since Q3 of 2023. The average new car payment is now $739 a month for a 67.8-month term with a down payment of $7,074.
Cars are more expensive, interest rates are high, and the inventory of affordable vehicles has been restricted. Additionally, the lack of available used cars and off-lease used cars is down, making used cars still quite expensive, which puts pressure on new car prices.
The final factor is, of course, the existence of very wealthy people in the United States.
92.5% of equities are held by the top 10% wealthiest Americans. A record high concentration. pic.twitter.com/YhGQC0j0cL
— Lyn Alden (@LynAldenContact) January 1, 2024
The share of $1,000+ car payments usually goes up in Q4 as very wealthy people can do the thing most of us can’t, which is buy someone a car as a Christmas or Hannukah present.
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Is the news all terrible? Not quite.
“On the surface, car financing appears to be following the harsh trend line of the past few years, with average monthly payments and down payments reaching all-time highs for new vehicles,” said Jessica Caldwell, Edmunds’ head of insights. “But there are some very encouraging signs as we kick off 2024 when considering the makeup of deals in the latter half of Q4 2023. Incentives are slowly coming back as inventory improves. Most consumers are looking for low APRs with longer loan terms, so the growth in those loans is helpful to lure consumers who have been sitting out due to adverse financing and pricing conditions.”
That’s good news and the Edmunds analysis showed that 0% APR loans were available for longer terms, which means that they’re not just limited to shorter loan periods.
Kia Sets Sales Records, With Cheaper Cars Performing Best
The first bit of news from Kia that’s worth noting is, of course, that it set a sales record of 782,451 vehicles, up 13% year-over-year. Kia is killing it. The cars are great. Even without tax credits for sales, Kia’s EVs and hybrids were up 41% year-over-year.
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But here’s the fun thing. If you look at Kia’s best-selling SUVs/Crossovers they generally sell better the cheaper they are.
Ok, well, first a big caveat. The exceptional Kia Carnival was extremely delayed during the pandemic and those vehicles are finally coming to the market and sales of the Carnival were up 93%. This thing rules. I just put 2,000 miles on one and it’s fantastic. A review will hopefully come this week.
Putting that aside, let’s take the crossover lineup from cheapest to most expensive:
- Kia Seltos ($24,390) up 17%
- Kia Niro ($26,840) up 25%
- Kia Sportage ($27,090) up 12%
- Kia Telluride ($35,990) up 11%
Notice a trend? Generally, there’s more action at the bottom of the lineup. Some of this might be due to availability and vehicle age (the Niro was recently redesigned), but it just goes to show how much demand there is these days for affordable cars.
Hyundai Is Also Having A Good Time
Hyundai, the sister company of Kia, also had a great month/quarter/year, posting an annual increase of 11% over 2022 to a whopping 801,195 models. We’ll see how that compares with everyone else, but Hyundai and Kia are moving up in the market.
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Gone are the cheap and fun Hyundai Veloster and Hyundai Accent, so the most affordable Hyundais are now the Elantra and Hyundai Venue. And no surprise, over the year the Elantra saw a 14% increase in sales (though down in Q4 and the Venue was up only up 3%).
Hyundai’s still reasonable crossover, the Hyundai Kona, was also up dramatically this year by 24%, though by volume, it was the Hyundai Tucson that had the biggest impact on total sales. In total, the Tucson was up 20%, meaning more than 209,000 of them were sold last year.
Hyundai and Kia are in the sweet spot of offering cars that look and feel premium but can still be purchased at a relatively reasonable price.
What’s Up With HiPhi?
Here’s a tweet from contributor/Chinese car watcher Tycho de Fiejter that caught our attention this morning:
HiPhi in trouble in China?
HiPhi is our favorite new Chinese EV brand. They made totally mad cars with mad lights, mad doors, and madder dashboards. I went to two of their shops in the summer, and stayed for hours checking it all out.
Perhaps it was all a tad too mad for the… pic.twitter.com/2BYwADc91k
— Tycho de Feijter (@TychodeFeijter) January 3, 2024
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I’ve been watching HiPhi as well and it seemed like the automaker was starting to consistently sell cars so this is a bit of a surprise. More on this as we learn what’s going on, since it’s just at the rumor stage.
What I’m Listening To As I Write This
Apple TV+ is out with a new series based on Edith Wharton’s posthumously published novel “The Buccaneers” and the soundtrack is killer. Here’s Warpaint’s Emily Kokal and Miya Folick covering “North American Scum”
The Big Question
What was your most recent car payment? Mine was $500 a month at 1.9% for 48 months.
Top graphic image: Saturday Night Live/YouTube
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