Whale Watching – High Truck Prices
We Know It When We See It
Legal scholars may recognize those words from the written opinion of Supreme Court Justice Potter Stewart, likely with input from his clerk Alan Novak, in the 1964 case Jacobellis v. Ohio. Stewart asserted he could not define obscenity but would know it when he saw it—both Stewart and Novak had served in the Armed Forces. And for a current, more relevant definition, an automobile dealer has now gone on record as calling fullsize pickup prices obscene.
New Hampshire dealer Chris Weiss isn’t calling out a single brand here—he sells both Chevrolet and Ram—but his assessment is accurate. Relatively speaking, New Hampshire is in good shape, ranked as a Top 10 richest state, and only six states fare better on unemployment and only four have more annual per capita income (the highest by far is not a state, it’s Washington, DC). And yet, he still thinks pickup prices are absurd.
According to Edmunds.com, the actual paid price of full-size pickups went up 37 percent from 2004 to 2014, the greatest growth in any of the major vehicle segments and a far bigger increase than cost-of living and inflation indices. In the last 25 years they’ve more than doubled, outpacing most housing markets. That makes the average pickup transaction price about $10,000 more than the overall vehicle market average.
Today, I configured top-trim 1/2-tons in basic colors, no bed accessories, side steps, 22s, or floor mats. They should have a red carpet at these tabs, with some options, no accessories and no incentives, the average was $55,990. Only one domestic was less than $60,000. Like the gun-toting cowboy in Used Cars said, “That’s just too high.”
The steel is cheap—just a couple hundred extra for a long bed. Four-wheel drive ranged from $2,700 on the Titan (the few options notably less expensive than competitors’) to $3,520. Given I can buy a far-superior front axle and transfer case for $2,500 more, that doesn’t seem a great parts discount for the volume they sell and it probably adds no more than 30 seconds in the assembly process. These fancy 1/2-tons don’t use the base engine as standard, but an engine upgrade ranged from $400 to $3,120, with Ram’s diesel just $625 more than GM’s 6.2L gas.
Of course 1/2-tons have added amenities and safety systems, both required and requested (“demanded” if you ask a truck-maker), now that they’ve become large cars. Tow ratings keep going up and payloads are up for many, but does that justify the cost? Unfortunately there is no escape, since fullsize utes have similarly inordinate prices.
True, a Suburban has more expensive suspension, larger fuel tank, an extra row of power-fold seats, power tailgate, more glass and ventilation, rear wipe/wash, larger airbags, and HID headlamps, but it’s $12,000 more than a pickup. Furthermore, a steel eight-seat Expedition EL with lower tow and fuel economy ratings than an aluminum F-150 is $5,000 more.
Vans don’t fare much better. I quite liked the last Transit I drove (diesel HR LWB EL dually) but that shipping container with wheels, brakes, power, two seats, and AC was above the $50,000 mark. So is a similar Sprinter container.
Credit whatever you want for these big-buck truck sales: Utility, construction and energy business, $3/gallon gas, etc. And leasing: The number of pickups leased rather than bought increased by four times between 2010 and 2014.
The most succinct definition of leasing I’ve heard came from a car-company leasing director: Drive what you want for x months and at the end you have what you began with--nothing. But leasing is being used as a way to show a $55,000 pickup is affordable by providing lower monthly payments, and that’s why the manufacturers are subsidizing it. Consider that, with no negotiation and well qualified buyer status, today I could lease a 2WD V6 mid-level or a high-end 4WD pickup and—this the key if—if the “purchase at lease-end for price agreed upon at signing” matched projected residual value, I could buy it at the 39-month lease end for less total outlay than if I paid cash for MSRP less incentives. Taxes and fees could swing the advantage to either plan depending on your state’s registration policies and your accounting methods, but regardless of how you do it new pickups remain silly expensive.
That tells me people succumb to the marketing and want a second car that can tow a trailer they don’t have, and the manufacturers want to move these things at not-quite-all costs. It all reminds me of how people went upside down with 84-month loans and got carried away with their housing equity. Those aren’t good memories, and hopefully the manufacturers and the lenders make this work realistically.