Truck Prices as a Financial Discussion

[polarbear]

One thing that hasn't been discussed in this thread is how much state and federal safety, emissions, and fuel mileage standards have impacted the price of new cars/trucks. Let's hit the high points:

1. Computerized engine drivetrain controls, and all the related hardware to run with them. How much? Thousands- don't even care to guess.

2. ABS, Stability Control with related sensors, Air Bags and related sensors, Active Seat Belts, radial tires with speed and safety ratings, yada yada. I'm not sure $10K would even cover the total bill.

3. All the weight saving technology to save fuel, along with the exotic materials used. Then there's built-in federal mileage penalties that just get added into the price of a new full-size truck or SUV (CAFE averages). More thousands.

All these costs are indirect- they don't get added into the window sticker, but represent, quite literally, a huge chunk of that base sticker price.

 

[LEB Ben]

^^^Got that Ernie...but it's not like all that technology is relegated to just one vehicle and they have to come up with different systems for every single vehicle out there. Those systems have been known to be adaptable and used in other vehicles in the line. So those costs and expenses should be spread across. Still...your guess is as good as mine as to what those actual numbers are though.



Interesting tidbit along Lester's question. My father and I got in to this discussion over the weekend and he told me his father (40 year Ford man) had always told him actual manufacturing cost of any given vehicle was typically 25-50% of final SALE price.

 

[FordF-SuperDuty]

The big three did ultimately discover that huge discounts just translate into huge losses

The pinnacle of that IMO was the employee pricing deal that swept that market in 05/06 , you could get 10K off a 50,000 dollar car.

 

[mrxlh]

I was trying to side-step that one, because the whole mark-down story has changed quite dramatially in the past couple of years. What you are saying was true- back when volume at all costs was the Detroit marketing theme. The big three did ultimately discover that huge discounts just translate into huge losses, so they've learned to adjust the production numbers rather than the discounts to stabilize inventory numbers. Bottom line, a $65K sticker translates into about a $8000 net discount (after all rebates) today. It was quite a bit more a few years ago.

Dealer margins did shrink over the years. Back in '78 I bought a new Chebbie K10 pickup with just about everything on it you could hang on one. Sticker was somewhere in the mid 8's, net out the door somewhere in the low 6's. Years later, a $30K sticker Suburban (early 90's) went out the door for just under $20. Think of the percentages then vs. now.

It was not my intention to put you on the spot Ern, more simply I knew you have/had the most knowledge on the subject. Thanks

 

[O'Rattlecan]

Myth busted.

Using window stickers from actual trucks, this data was compiled. I have two sets of data mingling in this chart. Those denoted as 4x4 are luxury level trim packages and 4x4 setups.

Equipment doesn't add much to the cost? My sizable rear end disagrees.

You have to go back over 40 years before you see any significant reduction in inflation adjusted dollars.

The rest of the trucks are 2wd trucks who are comparably equipped (as close as you can get over a 40 year life span). Mid-engine options, regular cabs, long beds, 2wd. Various options are different due to the passing of eons between models and equipment that didn't exist before.

Just absorb the data. The real data.

Exponential 'bubble'..... ha. Don't make me laugh.

Ryan

 

[polarbear]

^^^Got that Ernie...but it's not like all that technology is relegated to just one vehicle and they have to come up with different systems for every single vehicle out there. Those systems have been known to be adaptable and used in other vehicles in the line. So those costs and expenses should be spread across. Still...your guess is as good as mine as to what those actual numbers are though.



Interesting tidbit along Lester's question. My father and I got in to this discussion over the weekend and he told me his father (40 year Ford man) had always told him actual manufacturing cost of any given vehicle was typically 25-50% of final SALE price.

True. Consider this- back in the early 90's, we sold GEO Metro's like ice cream on a Sunday afternoon. $4995 a pop, brand new, out the door. We sold base S10's the same way, but they were more money. $5995 a pop. Both have just about doubled as base model ad-leaders today.

re: Lester's question. I was under the impression he was asking what type of discount to expect from the dealer, not the spread from production costs to retail.

 

[polarbear]

Myth busted.

Using window stickers from actual trucks, this data was compiled. I have two sets of data mingling in this chart. Those denoted as 4x4 are luxury level trim packages and 4x4 setups.

Equipment doesn't add much to the cost? My sizable rear end disagrees.

You have to go back over 40 years before you see any significant reduction in inflation adjusted dollars.

The rest of the trucks are 2wd trucks who are comparably equipped (as close as you can get over a 40 year life span). Mid-engine options, regular cabs, long beds, 2wd. Various options are different due to the passing of eons between models and equipment that didn't exist before.

Just absorb the data. The real data.

Exponential 'bubble'..... ha. Don't make me laugh.

Ryan

Fascinating data set. Takes me back a bit- dad bought a new S-Class Mercedes in 1967 for about $4500, delivered in Europe. That car stickered for close to $7000 stateside- which was just about what a loaded up Cadillac stickered for back then. Seems cheap- until you look at what the dollar bought in 1967. In inflation-adjusted money, that was one helluva expensive car.

 

[O'Rattlecan]

When you look at what could buy a house in those days, it puts it into perspective.

And like we said earlier in the thread, that old 1968 didn't include power steering, air bags, air conditioning, etc. The towing capacity was thousands of pounds less, there was no emissions control, the truck weighed significantly less, and it was all steel - not like the new high priced aluminum machines.

Earlier in the thread there was talk of a $26,000 Harley Davidson edition f150. I about belly-laughed at that one when I heard about a relatively basic XLT 4x4 stickering at $30,300. Dream on!

Ryan

 

[FordF-SuperDuty]

Earlier in the thread there was talk of a $26,000 Harley Davidson edition f150. I about belly-laughed at that one when I heard about a relatively basic XLT 4x4 stickering at $30,300. Dream on!

 

[taxreliever]

When you look at what could buy a house in those days, it puts it into perspective.

And like we said earlier in the thread, that old 1968 didn't include power steering, air bags, air conditioning, etc. The towing capacity was thousands of pounds less, there was no emissions control, the truck weighed significantly less, and it was all steel - not like the new high priced aluminum machines.

Earlier in the thread there was talk of a $26,000 Harley Davidson edition f150. I about belly-laughed at that one when I heard about a relatively basic XLT 4x4 stickering at $30,300. Dream on!

Ryan

If you read the post carefully, that Harley Davidson F150 for $26k was the MSRP in 2000! Over 10 years ago.

 

[LEB Ben]

Ryan...I see your data...but I don't really see the merit in your charts. You said the 4x4's denoted were top trip level...but 1999 was the last year you analyzed that segment, and it's holding true to what I've been arguing all along. By your own submission of data, 40k would walk you out the door with a loaded truck...12 years later, that number is 25k more. How is that not exponential. If that was a stock, you woulda made a 62.5% return over a decade.



My argument was never so much that 'could you get truck prices/options to align', as much as it was the shift in pricing segment, which even your data shows. Price of bottom barrel trucks today are waaaaay higher than bottom barrel trucks then, and same fro top of the line. I'm not saying options don't play a role in that, but it does play a role in what the median income can afford.

 

[LEB Ben]

When you look at what could buy a house in those days, it puts it into perspective.

And like we said earlier in the thread, that old 1968 didn't include power steering, air bags, air conditioning, etc. The towing capacity was thousands of pounds less, there was no emissions control, the truck weighed significantly less, and it was all steel - not like the new high priced aluminum machines.Ryan

I understand that, but reaching back to my manufacturing experience, for lack of a better term, those should be 'one time costs' (excluding revisions, updates, etc...until the next 'new thing'). At one point in time, I built dies to stamp body/interior panels for Thomas Built Buses. Initial cost for the very first die was $35k. Each subsequent die and parts made with that die got cheaper and cheaper because I had a template with the previous dies and panels, not to mention there wasn't near as much 'engineering' costs because I had that info. So with tha little bit of info I have, I think it's absolutely absurd to think that the 'technology' spread across the fleet of applicable vehicles and the total number of those vehicles sold and the lifespan of that technology is justifiable. It's not. They're taking folks to the cleaners because they can and people are willing to pay those prices. Nothing wrong with that, that's what's great about this country. I just think it goes a little deeper than chalking up current prices to technological advancements. Sure trucks were cheaper back in the day, but they still had a return, and what's to say the manufacturers don't want the same return (percentage) as they've always gotten. A 25% return on a truck that cost $1500 to build is alot less coin out of the consumers pocket than a 25% on a truck that cost 25k to build.

 

[O'Rattlecan]

I don't know if you're more concerned about winning the argument or looking at the real data. Don't tear down the chart because you don't like the results. I used real benchmarks, not 'Top of the Line". Use logic like that in a dissertation and see if they give you the PhD.

I'll repeat myself since you weren't comfortable with the results but:
The comparable 4x2 pickups across 78-present barely diviated from the inflation adjusted dollar.
The 4x4 packages with XLT or Lariat show consistently more cost over more than 3 decades.
You have to go back over 40 years to see a significant reduction in price.
If I wasn't at work I'd add another row for you that would equip comparably to all the XLT or Lariat 4x4's and show you what it costs.
After this analysis it is clear that equipment does cost. Which is why today's "top of the line" bogus benchmark looks higher in cost - this stuff didn't exist 20-30 years ago.

Don't reject the chart because you don't like the data. That is an argumentative fallacy.

Ryan

 

[O'Rattlecan]

I understand that, but reaching back to my manufacturing experience, for lack of a better term, those should be 'one time costs' (excluding revisions, updates, etc...until the next 'new thing'). At one point in time, I built dies to stamp body/interior panels for Thomas Built Buses. Initial cost for the very first die was $35k. Each subsequent die and parts made with that die got cheaper and cheaper because I had a template with the previous dies and panels, not to mention there wasn't near as much 'engineering' costs because I had that info. So with tha little bit of info I have, I think it's absolutely absurd to think that the 'technology' spread across the fleet of applicable vehicles and the total number of those vehicles sold and the lifespan of that technology is justifiable. It's not. They're taking folks to the cleaners because they can and people are willing to pay those prices. Nothing wrong with that, that's what's great about this country. I just think it goes a little deeper than chalking up current prices to technological advancements. Sure trucks were cheaper back in the day, but they still had a return, and what's to say the manufacturers don't want the same return (percentage) as they've always gotten.

I think what you're looking for is "diminishing marginal costs" when talking about mass production. Yeah they've been doing that since the early 20th century and before.

So let's get serious. Because we're not there yet.

What do you think it costs to smog a modern motor?

What is aluminum price by pound?

What does an airbag cost to produce?

What is the total cost of all computer controlled systems?

What is the average lifespan of a 197x pickup truck?

What was the said truck's fuel efficiency?

Ryan

 

[O'Rattlecan]

If you read the post carefully, that Harley Davidson F150 for $26k was the MSRP in 2000! Over 10 years ago.

The 1999 truck listed above is a standard issue XLT supercab 4x4 f150. The sticker was 30,300.

I'm putting up the flag.



Ryan

 

[LEB Ben]

I don't know if you're more concerned about winning the argument or looking at the real data. Don't tear down the chart because you don't like the results. I used real benchmarks, not 'Top of the Line". Use logic like that in a dissertation and see if they give you the PhD.

I'll repeat myself since you weren't comfortable with the results but:
The comparable 4x2 pickups across 78-present barely diviated from the inflation adjusted dollar.
The 4x4 packages with XLT or Lariat show consistently more cost over more than 3 decades.
You have to go back over 40 years to see a significant reduction in price.
If I wasn't at work I'd add another row for you that would equip comparably to all the XLT or Lariat 4x4's and show you what it costs.
After this analysis it is clear that equipment does cost. Which is why today's "top of the line" bogus benchmark looks higher in cost - this stuff didn't exist 20-30 years ago.

Don't reject the chart because you don't like the data. That is an argumentative fallacy.

Ryan

It's not that I don't like the data...you yourself said the 4x4's on your chart were top of the trim. Your data, however, stopped after '99. I think we;ve already established the fact that sticker of a top rig in 2011 will be 60K+. The number YOU pulled for 99 was just shy of 40k adjusted. Care to explain that 20k+ difference?

I didn't say I didn't like the chart, the chart is nice and pretty, and contains some good data. I just don't think it's applicable to my argument or as an opposition to my argument. Find a bottom level sticker price from 68 and compare it to 2011, find a top of the line sticker price and compare it to 2011. The pricing scale has slid. I acknowledge the advancements as being a contributor to the increases, but that doesn't mean the demographic or prices haven't shifted further up the scale.

I think what you're looking for is "diminishing marginal costs" when talking about mass production. Yeah they've been doing that since the early 20th century and before.

So let's get serious. Because we're not there yet.

What do you think it costs to smog a modern motor?

What is aluminum price by pound?

What does an airbag cost to produce?

What is the total cost of all computer controlled systems?

What is the average lifespan of a 197x pickup truck?

What was the said truck's fuel efficiency?

Ryan

I'll let you do the research on that...but I don't believe it's enough to justify the prices. Sure it adds cost, but the manufacturers are gonna want the same returns. Just because it costs them more to make something, doesn't mean they're going to want to give up profits. Your argument is basically saying they are. You know as well as I do, that's bad business practice if you have folks willing to pay full price. Which brings me to one of my original qestions, where is that breaking point that folks will no longer be willing to pay those prices?

 

[O'Rattlecan]

I think we;ve already established the fact that sticker of a top rig in 2011 will be 60K+.

I didn't say I didn't like the chart, the chart is nice and pretty, and contains some good data. I just don't think it's applicable to my argument or as an opposition to my argument.


I'll let you do the research on that...but I don't believe it's enough to justify the prices. Sure it adds cost, but the manufacturers are gonna want the same returns.

1. I am challenging that 'established' fact that you're claiming. I want you to list the options including the heated leather seats, the ultra-modern diesel motor, the payload, the cab size, the navigation and on board computers with voice recognition, the rear view cameras, etc. I want this to be so painfully clearly defined that you yourself realize that it's not an apples to apples comparison.

2. Returns are done on a percentage basis by almost every company in almost every industry. I'm not sure what that sentence actually means. Investors look at company operating expenses and operating income to determine company health. They look at ROE, ROA, P/E. They don't look at the trucks or go carts or toothpicks that the company produces except to the extent to make sure the products are quality and ensure the company will continue to make sales on a good product.

You need to put up dude because nothing you say has shaken out to quanitfy correctly.

Ryan

 

[LEB Ben]

1) Sure, I'll say it, the trucks aren't apples to apples. That said, regardless of advancements, the median income is growing slower than the increase of truck prices. I don't know what's so difficult to understand about that.


2) You're nuts if you don't think someone is looking to see how much money Ford is making per vehicle produced. Hell...Ernie has even discussed losses and gains on vehicles in this very thread. I don't get what's so difficult about that either.

 

[O'Rattlecan]

1) Sure, I'll say it, the trucks aren't apples to apples. That said, regardless of advancements, the median income is growing slower than the increase of truck prices. I don't know what's so difficult to understand about that.


2) You're nuts if you don't think someone is looking to see how much money Ford is making per vehicle produced. Hell...Ernie has even discussed losses and gains on vehicles in this very thread. I don't get what's so difficult about that either.

Thank you. You have ceded your argument about your benchmark. It is faulty by it's very nature and we've cleared that up.

There's nothing difficult about it. Of course somebody has that benchmark in a spreadsheet up in Michigan. Ask an investor if he cares about which vehicle has a margin of 8% and which one has a margin of 3%. Internal accounting deals with that to maximize profits but it's again totally irrelevent to your 'gouge the customers' attitude. Besides, I totally refuted the argument about price gouging. And trust me - if they were gouging, it would be reflected in the stock price, net income, and dividends being issued. Reality trumps an imaginary 'truck bubble'.

Ryan

 

[bromebe]

it's all based
on demographics
and popularity

and Aliens!
they knows we be fools over our Trucks
gim me truck, got to have it .... here's my wallet!

uh.. that was the wide side of Ralph Nador!