Truck Prices as a Financial Discussion

[polarbear]

If that's so, how come the car companies (Ford a couple years earlier) are in financial ruin?

It's a complicated answer, but has nothing to do with profits from full-size pickup/SUV sales. Without those product lines, the financial ruin would have just come sooner.

Cliffs Notes: domestic car companies spent billions designing products that didn't generate a dime's worth of profit. They spent billions buying other manufacturers that generated even larger losses. Back in the 90's, when all the car makers were flush with cash, they made some incredibly stupid decisions. That includes the Europeans- Daimler Benz flushed $8 billion down the toilet with their Chrysler purchase, for example.

On a side note: is anyone aware that Toyota and Honda are the only two Asian manufacturers that haven't gone bust? Nissan got taken over by Renault, Subaru by GM (later sold to Toyota), Mazda by Ford, Mitsubishi's on life support (Japanese Government), Hyundai and KIA merged by the Korean Government, which kept them out of the BK courts, Daewoo bought by GM (another brilliant decision)... there's a theme here.

 

[LEB Ben]

Apples to apples buddy. Not "top of the line" to "top of the line". Phoney benchmark.

Ryan

Fair enough and I can accept that flaw in my argument.

I see the parallel....I thought one of the comparisons was normal cars and some trucks increased at a certain rate and a certain truck today (top of the line was used and I understand and agree with the whole tech issue) increased at a significantly higher rate.....my understanding is (and I believe Ben's as well) that the large difference isn't all in the tech advances, so the additional price increases go to profit margins and/or greed. So in the F18 exampled you had some other planes rolling off today with the new F18 that is significantly lower and it has similar tech advances and legal costs, etc.

Right...

If that's so, how come the car companies (Ford a couple years earlier) are in financial ruin?

Poor handling of money would be my guess.




Bottom line fellas...I'm not saying I'm not 100% wrong. However, it was also said my stance is partially/entirely emotionally charged, yet I've been the only to post anything that resembles data or figures. I suppose it will take a little more than assumptions, theories or opinions to sway my stance at this point. Plain and simple, from the little bit of data I posted, truck prices are growing faster than income, doesn't matter top of the line or bottom barrel (we have already established a bottom rung 150 will run 20-25k, which would damn near buy top run 15 years ago).

 

[taxreliever]

Yeah, I'd like to see that chart......I can also say that mathematically, it isn't sustainable....here's the math I did on a top of the line truck 10 years ago using "consumer guide automotive". In 2000, the top of the line F150 (harley davidson and all the goodies) was $26,250.....based on historical inflation numbers, today that exact amount would be equivalent to $32,000. The best F150 (also a HD) I could come up with for 2011 on the Ford website (I gave you an extra year's worth of inflation here) was $47,995. So, assuming the F150 went up with all the other makes at the same or close to the same rate, what we're asking is, then why would X company be going from $26k to $65k when everyone else is going from $26k to $47k?

 

[LEB Ben]

Not only that Ken...but is the 2011 150 $15,000 (after your adjustment) better/more truck/have that much more engineering than the 2000. I don't think so, personally. I realize there are expenses, and making money is what's so great about this country...but to me it just seems like in the last 10-15 years, people are getting raped blindly on truck prices.

 

[taxreliever]

Not only that Ken...but is the 2011 150 $15,000 (after your adjustment) better/more truck/have that much more engineering than the 2000. I don't think so, personally. I realize there are expenses, and making money is what's so great about this country...but to me it just seems like in the last 10-15 years, people are getting raped blindly on truck prices.

Yeah, I agree.......I think like the housing bubble, something is worth what people are willing to pay for it....it just isn't sustainable over the long run. If people keep buying these trucks for the MSRP's or close to it, why wouldn't they keep selling them for that? Problem is, it drives up prices from others.....healthy competition is supposed to keep these parameters from getting out of hand.....if other car makes made a similar truck for $10k less, they'd go out of business. The problem is car mfgr's continued to take losses on certain vehicles and had other profitable lines make up for it to keep their claim on the market and hope that the truck craze will come back and give them their crazy profits again.....that's basically an investment in the future sales of it. No different than walmart or riteaid taking a 5 year loss on everything in the store to put every small shop out of business, then slowly jack the rates up to profitability.

 

[taxreliever]

Not only that Ken...but is the 2011 150 $15,000 (after your adjustment) better/more truck/have that much more engineering than the 2000. I don't think so, personally. I realize there are expenses, and making money is what's so great about this country...but to me it just seems like in the last 10-15 years, people are getting raped blindly on truck prices.

The difference in tech changed dramatically in the 80's and up, but I believe the curve slowed dramatically from then until even today....I drove in my brother-in-laws 2010 Ford Focus ($26k THAT INCLUDES INTEREST-freakin insane) and his amenities are no different than my 1997 Ford Mustang....the only things he has that I don't have in my wife's Mustang is Satellite Radio and GPS. Everything else, including the technology in the engine (pretty simple actually, there's no super charger or turbo or special injectors or anything) is pretty much the same and there is a 13 year time span between the vehicles.

 

[mrxlh]

I see the parallel....I thought one of the comparisons was normal cars and some trucks increased at a certain rate and a certain truck today (top of the line was used and I understand and agree with the whole tech issue) increased at a significantly higher rate.....my understanding is (and I believe Ben's as well) that the large difference isn't all in the tech advances, so the additional price increases go to profit margins and/or greed. So in the F18 exampled you had some other planes rolling off today with the new F18 that is significantly lower and it has similar tech advances and legal costs, etc.

Well, believe what you want to believe, but the old taurus fell victim to plain old supply and demand. Ford chitted them things out by the butt load, therefore they were really cheap and did not hold any market value what soever. I believe my next statement has already been covered. Your truck retains far more value used then the majority of the passenger car segment as well as diesel alone when smaller business look for used with mid miles on them. You might as well be using the same arguement with gold, why does it keep going up? Supply and demand, and there is only so much of it. Gold is far more valuable than it was in 1968, yet it has had no technical advances. Food for thought, simple economics.

 

[mrxlh]

One thing that you guys are forgetting to realize is profit margins across the segment. Profit margin may be (is in fact) quite lower on a focus vs. a superduty. They have to sell in mass to make decent returns on the focus. The superduty they make decent profits selling to a few who can afford them. No one here seems to remember when diesel was $4.25 a gallon that you could not give a diesel away. I do, its when I bought my dually. Factory incentives, rebates and the final push was almost below x-plan plus incentives. Plus Ford is still trying to recoup some of the losses from the 6.0 and 6.4 that they were unable to through International.
One last point, you guys have not mentioned the rate that "new car" or "sticker loss" has risen since 1968, probably double if not triple. Drive it off the lot, now what's it worth? Call it greed, call it profit, call it what ever you want, bottom line is this. If you don't like the price, don't buy it.

 

[mrxlh]

Erine, you never did answer what the standard % under sticker that trucks went for when you were in the biz. I still don't think we have ironed out that a 65K sticker truck is more like 52K.

 

[mrxlh]

1st example built a top of the line SD F350 DRW at 64,570. Just local incentives -$3500 brings it down to $61,070 sticker. Sticker on my 08 was $54k and change. However my 08 does not have near what I put on the 2011. If I build the 2011 exactly like my 08 it comes out to $57,665. Sync was not available in 08 so there would be a deduction there of about $500, and the 6.7 is over a grand more than the 6.4 was. So compairing a 3 year newer truck apples to apples it only went up less than a grand. Now is that due to the truck costing more or my dollar being worth less? Either way, entire new motor, entire new interior package less than a grand to upgrade doesn't seem like greed to me.

 

[FordF-SuperDuty]

Hey Brad, how much did you pay for your '97 F-150?

 

[FordF-SuperDuty]

I'm going to try to get some hard answers from Ford's website in the late 90's and early 2000's via the wayback machine. I'll post my results when i get them.

 

[LEB Ben]

One thing that you guys are forgetting to realize is profit margins across the segment. Profit margin may be (is in fact) quite lower on a focus vs. a superduty. They have to sell in mass to make decent returns on the focus. The superduty they make decent profits selling to a few who can afford them.

That's basically the basis of of my whole stance, so that sentiment is not lost on me. My question is how much is too much profit before they start losing sales.

No one here seems to remember when diesel was $4.25 a gallon that you could not give a diesel away. I do, its when I bought my dually. Factory incentives, rebates and the final push was almost below x-plan plus incentives.

Again...that's actually been one of my key arguments for the collapse of the truck market this entire discussion. Figure high initial cost, plus high cost of ownership=a select few can actually afford to own.

Call it greed, call it profit, call it what ever you want, bottom line is this. If you don't like the price, don't buy it.

Agreed 100%.

 

[Ridgerunner]

Ben aren't you suppose to be out with your lady friend????

 

[LEB Ben]

She got out of work late...or I left early...

 

[torkum]

Guys I want to say this thread is one of the best discussions I have read in a forum in a long time. With that said I do agree with most comments and see the reality of whats ahead.
I have been repairing F150s exclusively [95%] for the last 10yrs and there is one thing that I'm concerned about for the future of the F150- reflashing and programing! As of the 99 up models there are a number of systems that have to be flashed to the specific truck according to that trucks PCM code when a module is replaced. For example the PATS, GEM, RCM, ect. and the Motorcraft website holds the key to these software programs [the program is downloaded from there]. My question is will Ford maintain this service 15-20 yrs from now for the 2001 model or who will they hand the keys over too, say CarQuest for example. Who will continue to keep the programmers updated for those years? Hope we don't turn into a Mad Max movie looking for software to program our 30yr. old trucks!

 

[LEB Ben]

^^^Great point. Being the conspiracy theorist I am, I'd say the stuff phases out or gets astronomically expensive (making it cheaper to buy new, which is already at a premium) in an effort to force people in to new vehicles, to keep themselves in business.

 

[taxreliever]

^^^Great point. Being the conspiracy theorist I am, I'd say the stuff phases out or gets astronomically expensive (making it cheaper to buy new, which is already at a premium) in an effort to force people in to new vehicles, to keep themselves in business.

That would be my guess as well.....it's what they do with software and computers these days.....why not extend that to vehicles if it's going to give them something more profitable with a new one on the production line.

I plan to have my dent (and future dents) running 30 years from now.....so I guess I won't have to worry about that.

 

[taxreliever]

Well, believe what you want to believe, but the old taurus fell victim to plain old supply and demand. Ford chitted them things out by the butt load, therefore they were really cheap and did not hold any market value what soever. I believe my next statement has already been covered. Your truck retains far more value used then the majority of the passenger car segment as well as diesel alone when smaller business look for used with mid miles on them. You might as well be using the same arguement with gold, why does it keep going up? Supply and demand, and there is only so much of it. Gold is far more valuable than it was in 1968, yet it has had no technical advances. Food for thought, simple economics.

Interesting.......

One thing that you guys are forgetting to realize is profit margins across the segment. Profit margin may be (is in fact) quite lower on a focus vs. a superduty. They have to sell in mass to make decent returns on the focus. The superduty they make decent profits selling to a few who can afford them. No one here seems to remember when diesel was $4.25 a gallon that you could not give a diesel away. I do, its when I bought my dually. Factory incentives, rebates and the final push was almost below x-plan plus incentives. Plus Ford is still trying to recoup some of the losses from the 6.0 and 6.4 that they were unable to through International.
One last point, you guys have not mentioned the rate that "new car" or "sticker loss" has risen since 1968, probably double if not triple. Drive it off the lot, now what's it worth? Call it greed, call it profit, call it what ever you want, bottom line is this. If you don't like the price, don't buy it.

Lester.....my brother-in-law got a Ford Focus last year and financed it over 6 years at at total price of $26k.....oh damn.... It was over 20k sticker price.....don't tell me they squeaked out a profit on that baby!!! I rode in it....sounds like a lawn mower at 50 mph and I feel ever bump....BUT OH WAIT, IT HAS XM RADIO AND AN IPOD STATION, not to mention steering wheel radio controls....

 

[polarbear]

Erine, you never did answer what the standard % under sticker that trucks went for when you were in the biz. I still don't think we have ironed out that a 65K sticker truck is more like 52K.

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.