Would you be willing to pay extra for options such as power windows, door locks, cruise control, AC and an automatic transmission? Of course, you already do. Because you have no choice – assuming you choose to buy a new vehicle.
Before about 25 years ago, it was not uncommon for these features to be optional in modestly priced vehicles. Now they are standard equipment in all vehicles and for just that reason there is no longer such a thing as a modesty priced vehicle. There isn’t one available with a starting price under $20,000 and if you want a new truck, the starting price for a mid-sized one is well over $30,000.
This latter is particularly interesting because before about 25 years ago, trucks were less expensive than cars. They came standard with just the absolutely necessaries – i.e., an engine, transmission, brakes and tires. The rest was available, if you wanted to pay extra and could afford to do so. Some did, others didn’t. The wonderful thing was you could choose to pay for what you needed but were not (effectively) forced to pay for everything else.
Fast-forward to the present. You can’t choose not to pay extra for such things as power windows, locks, cruise control, AC and (with a very small handful of lingering exceptions) an automatic transmission. Even the Corvette is now automatic-only, as is true of nine-point-nine out of ten performance cars.
Well, what happened?
Attitudes changed. Not everyone’s, of course. But enough to change things, as is always the case when it comes to change (for good and bad). The change that happened was that a sufficiency of Americans got comfortable with living beyond their means and this has had the unfortunate effect of dragging the rest of us along for the ride. The 3-4 year new car loan that cost about $300 per month went to 5-6 years and more than $600 per month (in some cases, a lot more than $600 per month). This happened because it became possible. In the past, loans were shorter because most people – enough people to make it the norm – were not able to pay more than “x” dollars per month for a car. That is of course still true today but it is also true that it is deceptive because it is not the same thing. Doubling the payment period from 3-4 to 5-6 (or longer) in order to keep the monthly payment manageable is a way of hiding the cost of the thing that is financed. It is a way of deluding the debtor into believing that he is more affluent than he is by making it possible for him to play the owner of things he doesn’t actually own.
The person who owns his vehicle has an asset. The person who is making payments has a liability. But the person who proudly peacocks around in a $50,000 vehicle (this is the average price paid for a new vehicle as of now) seems more affluent than the person who drives his modest, but paid-for old vehicle. And seems appears to be more important to many Americans than being.
What happened to make this happen was a confluence of pernicious synergies, including of course the endless payment plan (just about) that has become the new normal. The car industry has been complicit; several of the major labels have their own financing divisions and they make more money there than they do in the showroom. There is more profit to be had selling a mark a car that is loaded than one that is stripped. As a personal example, a college buddy of mine bought a brand-new F-150 pickup in 1989, shortly after we got out of college. He didn’t have much money and so couldn’t afford to spend it. All he wanted was a basic truck he could use to start his roofing business. So he bought a base work truck, which back then meant a manual transmission, manual roll-up windows, manual door locks, manual 4WD and no AC. The upside was the truck cost him less than $10,000 back then – which works out to about $25,000 in today’s increasingly worthless money.
But it bought him a full-size truck with 4WD.
The least expensive 2WD iteration of the 2025 Ford F-150 stickers for $37,450. Part of the reason for the $12k-plus bump is that the ’25 comes standard with an automatic, AC, LED headlights, keyless entry, a digital instrument panel, cruise control and – of course – power windows. All nice to have – if you happen to have the additional $12k-plus it costs to buy the ’25.
Most don’t. Certainly not over the course of 3-4 years. So they finance it for several more years. This is great for the vehicle manufacturers on several levels, the obvious one being they make more money per vehicle sold and then more (again) on the financing. They subtler way they make more money is by standardizing what used to be optional features. It costs less, for instance, to make AC and power windows standard in every vehicle than to make some with and others without. It is also a great way to upsell everyone without them even realizing they have been upsold since all that’s available is already loaded. In the past, the salesman had to sell the buyer on options such as AC and power windows. Now it’s a given he’ll buy them.
Rather, that he will finance them.
Thus, here we are. Everything is loaded, even what are now styled entry level cars. Economy cars no longer exist – and that’s why nothing’s affordable anymore. The base price of ’25 VW ID Buzz I reviewed recently is $60k. The old Microbus of the ’70s cost about a third of that when it was new. It didn’t have all the luxuries the ID Buzz has because when the Microbus was new, most people knew they couldn’t afford luxuries. Now they think they can.
Or did.
Which brings up an interesting aspect of this; i.e., the lag time built into things. Americans – a sufficiency of them – got used to living beyond their means and have been able to do so for quite a long time. But that time appears to be coming to an end, if it hasn’t already.
You can almost hear the music waning and people beginning to realize it’s time to grab a chair before they’re left without a place to sit.
This article was originally published on Eric Peters Autos.