The hybrid ticking time bomb

[Isaac Zachary]

Originally Posted by Ecky

As you note, the market is in chaos right now. 5 year old vehicles will not remain more expensive than their new counterparts. The correct response is to either 1) buy new now, or 2) wait until used vehicles return to a sensible value.

I think the correct response is (basically the same)

1. Keep your current car as long as possible, saving what would be a car payment. When you can no longer save, that is, it costs more to keep the car running than to make payments on a new car, then sell the car and use it as a down payment.
   1. IF used car prices are down by then, consider a used car.
   2. IF not, then buy a new car with the money saved as a down payment. There is no guarantee that used car prices will ever go down.
2. Or sell the car now and use the money for a down payment.
3. Or figure out how not to own a car.

[redpoint5]

Sounds right.

I'd add

4. Or increase income
5. Sell extra vehicles and items of value that are no longer used.

[Ecky]

Originally Posted by Isaac Zachary

I think the correct response is (basically the same)

1. Keep your current car as long as possible, saving what would be a car payment. When you can no longer save, that is, it costs more to keep the car running than to make payments on a new car, then sell the car and use it as a down payment.
   1. IF used car prices are down by then, consider a used car.
   2. IF not, then buy a new car with the money saved as a down payment. There is no guarantee that used car prices will ever go down.
2. Or sell the car now and use the money for a down payment.
3. Or figure out how not to own a car.

I'm inclined to believe the used car market will self-correct. I see it being disrupted by a few things, all of which are temporary:
1) A disruption in the supply chain, due to an unprecedented international crisis.
2) An artificial and temporary influx of highly liquid spending power.
3) An expectation that prices of all items will rise, due to reasons 1 and 2, further raising demand.

But yes, I agree that it's a good time to hold onto what you have.

[Ecky]

Originally Posted by Isaac Zachary

[*]Or figure out how not to own a car.[/list]

I just moved somewhere, where car ownership is completely optional. I don't imagine most people have that flexibility or that the US (especially away from the coasts) is going to change any time soon.

[redpoint5]

I'm about 50/50 on which way I think things will head in the next 3 years...

The recession will mean less demand for new cars, so new cars will become available and dealerships won't be able to charge over MSRP for them (and manufacturers will offer rebates).

...but, in a recession, people hold onto their vehicles longer and used car inventory gets tighter, driving prices up.

Probably 10% of the 30% increase in used car prices is gobbled up by inflation and will never return to previous levels. That might leave a 20% reduction in prices on the table. I would expect no more reduction than that.

[JSH]

Originally Posted by Isaac Zachary

I was adding the additional cost for a NEW Corolla of some $3,500 more to the MSRP for the hybrid version vs the non-hybrid version. $3,300-$3,500 means it would be $200 more to own the hybrid from new to warranty.

I'll look at used prices for the sake of comparison, but the last time I looked a 5-year-old used Toyota hybrid cost just as much as a brand new one, because covid.

Ah. Well that explains it. You were looking at Corollas and I was looking at Camrys. The Corolla also has a bigger hybrid price increase. It is only $2,135 for the Camry.

I also somehow missed a bunch of posts.


The current used car market is not normal nor is it sustainable. Once new car inventories return nobody is going to pay new car prices for a 5 year old car. People are willing to pay new car prices for a used car today because a new car either has a months-long wait, a $5,000 - $10,000 mark-up, or both.


I second the opinion to never consider a VW. I've had two Jetta wagons.

The 2003 made sense because at the time you couldn't do better than the 50 mpg highway offered by the TDI in a family car and we were driving 30K miles a year. That was also back when diesel was less than regular gas. It was a financially great move but also a bit of a headache to fix things that shouldn't break on a car that is less than 10 years old.

I took a risk on my 2014 Jetta Wagon TDI because my wife really wanted one when we replaced the 2003 but we went with the Prius instead based on cost. When VW was offering barely used dieselgate cars at 50% of new prices with a 10 year warranty we decided to take the risk. Turns out VWs are still money pits that break and the VW warranty has more value as toilet paper. The current crazy market let me get out of that car with little lost when we basically swapped it even up for an Acura TSX wagon. (Which has a comically dated "technology package")

[JSH]

Originally Posted by redpoint5

I'm about 50/50 on which way I think things will head in the next 3 years...

The recession will mean less demand for new cars, so new cars will become available and dealerships won't be able to charge over MSRP for them (and manufacturers will offer rebates).

...but, in a recession, people hold onto their vehicles longer and used car inventory gets tighter, driving prices up.

Probably 10% of the 30% increase in used car prices is gobbled up by inflation and will never return to previous levels. That might leave a 20% reduction in prices on the table. I would expect no more reduction than that.

I completely agree that the inflation will stick around. A 2023 dollar is going to be worth significantly less than a 2020 dollar and that won't change. I do expect the spread between new and used vehicle to return to normal though and new car prices to return to MSRP minus as opposed to MSRP being the starting bid on a new car.

As mentioned before my wife and I are looking to retire and travel. We wanted to work through a recession and then retire on the upswing. We thought that was going to be 2020 but the recession ended up only lasting a few months due to the massive response. (Which I believe was due to 2020 being an election year) Maybe the next one will be more normal.

[Isaac Zachary]

Originally Posted by JSH

Ah. Well that explains it. You were looking at Corollas and I was looking at Camrys. The Corolla also has a bigger hybrid price increase. It is only $2,135 for the Camry.

For only $690 more, I would go for the Prius Prime over the Camry Hybrid. It also might have state and federal incentives.

[JSH]

Originally Posted by Isaac Zachary

For only $690 more, I would go for the Prius Prime over the Camry Hybrid. It also might have state and federal incentives.

As would I but I'm one of those weirdos that won't buy the inferior body style that is a sedan.

That said - for those with adult size rear seat passengers the Camry has 10% more passenger room. The Prius has more cargo room and that useful hatch that makes it superior to a sedan but inferior to a wagon or a crossover as we now call wagons.

For $1500 more than a Camry Hybrid I would buy a RAV4 Hybrid. I like the idea of a 40 mpg crossover. Even better would be a Ford Maverick Hybrid AWD for $30K or less.

The Prius Prime no longer qualifies for Federal incentives.

[Isaac Zachary]

Options as of 2022, fuel and payment per month for base model based on $4.50 per gallon average and 5 year loan with $10,000 trade-in on Avalon:

• Mitsubishi Mirage = $266 per month
• Chevy Spark = $270 per month
• Nissan Versa = $332 per month
• Ford Maverik = $402 per month
• VW Jetta = $405 per month
• Corolla non-hybrid = $412 per month
• Corolla Hybrid = $412 per month
• Prius Prime = $450 per month half fuel, half electricity
• Camry Hybrid = $492 per month
• Prius Prime = $501 per month 100% fuel
• RAV4 Prime = $709 per month half fuel, half electricity

This list doesn't include insurance, maintenance, repairs or taxes other than initial taxes. It also does not include resale value, as who knows what that will be in 5 years. Just fuel and car payment.

I also didn't figure in destination charges or other dealer fees or markups, so probably some $25 more each per month for that. Without the trade in or any sort of down payment it's right at $200 more per month. So perhaps a more accurate comparison would be:

• Mitsubishi Mirage = $491 per month
• Chevy Spark = $495 per month
• Nissan Versa = $557 per month
• Ford Maverik = $627 per month
• VW Jetta = $630 per month
• Corolla non-hybrid = $637 per month
• Corolla Hybrid = $637 per month
• Prius Prime = $675 per month half fuel, half electricity
• Camry Hybrid = $717 per month
• Prius Prime = $726 per month 100% fuel
• RAV4 Prime = $934 per month half fuel, half electricity

*The Chevy Spark is being discontinued.