Bibliography of Articles Regarding Vehicle Affordability Concerns

Citation URL Points Raised

Laing, Keith. “Car-loan http://www.detroitn  “Concern about potential inflation in the U.S. economy has sparked concern that auto-loan
Rates Expected to Rise.” ews.com/story/busin interest rates could spike at a time when domestic car sales have already been sluggish.
The Detroit News. ess/autos/2018/02/1  “The Fed already has telegraphed it is likely to raise that rate at least two times this year
February 19, 2018. 9/car-loan-rates- — possibly four. And further increases could trickle down to car buyers as carmakers find
expected- they can no longer subsidize ultra-low loan terms.
rise/110613552/  “In the 12 months leading up to January, the average interest rate for a 60-month new-car
loan was relatively stable, rising from 4.35 percent to 4.51 percent, according to
Statista.com.
 “Industry analysts said a bigger spike in interest rates could cause car buyers to stretch
new-car loans to six, even seven years. Or they could opt for smaller vehicles, which
automakers often try to prevent by offering financial incentives for larger, more expensive
cars. Or they could buy used or delay buying a car altogether.
 “[Jeffrey Jackson, Michigan State University Federal Credit Union] said higher interest
rates change the behavior of some car buyers who finance their automobiles, noting that
his bank offers loans that last as long as seven years.
 “The U.S. Consumer Financial Protection Bureau has warned in recent months that the
number of auto loans that last six years — and the amount of money that has been
borrowed — has increased in recent years. That increases the risk of potential defaults.
Already, 4.1 percent of auto loans had balances that were 90 or more days delinquent at
the end of December, according to the Federal Reserve Bank Of New York. That’s up
from 3.8 percent from December 2016.”
Henry, Jim. “Rising https://www.forbes.  “Payments are rising – and likely hurting non-luxury demand at the margin.
Interest Rates Are a com/sites/jimhenry/  “Borrowers with lower credit scores are feeling the effect of higher [interest] rates.
Headwind for 2018 Auto 2018/02/22/rising-  “…interest rates on auto loans are up about 30 basis points, or 0.3 percentage points, from
Sales.” Forbes. February interest-rates-are-a- a year ago.
22, 2018. headwind-for-2018-  “…customers are offsetting higher rates and higher sticker prices by taking out longer
auto- loans.
sales/#6051bc7f242  “…the average 60-month, new-auto loan had an interest rate of 4.51 percent in the fourth
b quarter [of 2017], up from 4.05 percent a year earlier.
 “For the third quarter of 2017...the average new-vehicle loan term was 69 months.
 “…customers are taking out longer-term loans, and agreeing to pay a greater amount of
interest over the life of a loan, to try and hold down monthly payments.”
LeBeau, Phil. https://www.cnbc.co  “…the average new vehicle loan hit a record high $31,099, while the average loan for a
“Americans Borrow m/2018/03/01/ameri used auto climbed to a record of $19,589.
 Bibliography of Articles Regarding Vehicle Affordability Concerns

Citation URL Points Raised

Record Amounts for Auto cans-borrow-record-  “I think we’re certainly at a point where affordability is a question, said Melinda
Loans Even As Interest amounts-for-autos- Zabritski, Experian’s senior director of automotive finance solutions. When you look at
Rates Rise.” CNBC. even-as-interest- how much income you need to support that payment, it certainly is higher than your
March 2, 2018. rates-rise.html average individual income. [Internal quotation marks removed.]
 “In the fourth quarter [of 2017], the average monthly payment for a new vehicle hit an all-
time high of $515, while the average used auto loan payment hit a record of $371 per
month.
 “On average, Americans are extending a new car loans [sic] over 69 months, according to
Experien.
 “The…average used vehicle loan has a term of just over 64 months.
 “Consumers are stretching out their loans because prices paid for new vehicles has
climbed more than 10 percent over the last five years.
 “In February [2018], the average interest rate for new financed vehicles was 5.2 percent,
up from 4.9 percent a year ago and 4.4 percent five years ago.”
O’brien, Sarah. “New- https://www.cnbc.co  “A combination of higher auto prices, longer loans and climbing interest rates means a
Car Shoppers: Brace m/2018/04/18/new- buyer who finances their purchase could pay about $6,500 more than they would have
Yourselves for Higher car-shoppers-face- five years ago, according to research from Edmunds.com.
Costs.” CNBC. April 18, higher-costs-from-  “The average price paid for a new car reached $34,623 in March, according to Edmunds.
2018. auto-prices-loan- Five years ago, that number was $31,078.
rates.html  “Rising interest rates make borrowing more expensive. Last month, interest rates on new-
car loans stood at 5.7 percent, up from 4.4 percent in March 2013.
 “…as prices have risen, consumers have been financing larger balances: An average
$31,020, compared with $26,533 five years ago.
 “The average auto loan length is now 69.5 months compared with 65.7 months in March
2013.
 “Part of the reason that costs have climbed is consumers' continuing preference for larger
vehicles like SUVs and pickup trucks, which come with higher prices.
 “Added technology and safety features included in new models push prices up further.
 “For consumers with poor credit, the financing cost shifts are especially pronounced. A
buyer who finances about $31,000 and pays 11.4 percent in interest for a 69.5-month loan
would end up shelling out $11,501 in interest charges. That's $6,027 more than at 5.7
percent.
 Bibliography of Articles Regarding Vehicle Affordability Concerns

Citation URL Points Raised

Robinet, Michael. https://www.sae.org  “Near-term profitability vs. long-term viability – suppliers must have both. And for
“Supplier Eye: /news/magazines/au many, bearing the cost of developing new technologies… without driving higher cost into
Variability, risk and the tomotive- the vehicle and threatening affordability, has become a precarious balance.
value stream.” engineering/  “The pace of technological change within the mobility industry drives several new
Automotive Engineering. consideration.
March 2018.  “Chasing the latest trend that’s outside the norm needs careful consideration. If the shift
is a ‘one and done’ (not repeated for the next program) the impact on the entire ecosystem
is extensive.
 “Abandoned capital and processes, severed supplier relationships, training/skills
efficiency, requirement for long-term service and a host of other issues arise.
 “For example, shifting closures from mild steel to aluminum impacts stamping, design,
safety, scrappage, overall system cost and downstream collision, as well as joining and
painting requirements.
 “Possibly the most significant consideration is orphaned technologies.
 “One cannot underestimate the need for a majority of the industry to eventually move in
the same technology direction (either product or process) to increase scale for all
involved.
 “…some companies are starting to face a near-term cost problem. Rising interest rates
make capital more expensive. Shifting currencies, increasing wage inflation and hikes in
critical commodity prices are external and beyond the industry’s control.
 “Commodity prices bottomed in Q1 2016 – since then they have risen more than 80% to
today.
 “Looking ahead, the need to comply with global emissions regulations and the inclusion
of more electronic content in vehicles will have cost ramifications.
 “Higher risk commodities are entering the supply chain.
 “The lack of clarity of how commodity and regulatory-driven costs will impact future
profitability is further clouded by the impact of raising vehicle prices to cover these costs.
 “Understanding the variability and risk being embedded into the value stream may be just
as important as the introduction of any new technology.
LaReau, Jamie. “Pickups https://www.freep.c  The prices people are paying for pickups have steadily risen over the past decade
are pricing out the om/story/money/car pushing the trucks further and further out of reach for average consumers.
average new vehicle s/2018/10/04/pickup  Edmunds' data shows, through September, the average transaction price for a full-
buyer.” Detroit Free -truck-prices- size pickup is $48,377, a 48-percent boost from 10 years ago and a 19-percent hike from
Press. October 4, 2018. vehicles/145558800 2013 for the same period.
2/
 Bibliography of Articles Regarding Vehicle Affordability Concerns

Citation URL Points Raised

 "A 48-percent increase in price is the highest price increase for that time period out
of all vehicle categories," said Ivan Drury, senior analyst at Edmunds. "Even at $45,000, it
prices a lot of people out."
 According to data from Kelley Blue Book, in September 2013, the average
transaction price for a full-size pickup was $41,680. This September, it was $48,369.
 Most buyers expect to pay $26,699 for a new midsize pickup, Cox data show…But,
the average transaction price through August 2018 is actually $33,275.
 Similarly, the expected price of a full-size pickup is $38,529, but the average
transaction price for the year through August is $47,987.
 Last month, the average transaction price for the Ford F-series was $46,591. The
Chevrolet Silverado was $42,162 and the Ram came in at $42,484, according to J.D. Power's
Power Information Network data. Those figures include 2018 and 2019 model-year pickups.
 Even on the more basic pickup models, the surge in prices over the years is driven by
added bells and whistles to the trucks as well as consumers increasingly using them as family
vehicles instead of strictly for work. Low gasoline prices help drive demand for pickups,
supporting higher pickup prices, analysts said.
 Taking a look at the median purchase price rather than the average purchase price,
the numbers land a little differently, although still climb higher. The median purchase price
for a pickup nine years ago was $31,000. It rose to $37,000 in 2013. Today, it is $43,000,
said Alexander Edwards, president of consultancy Strategic Vision in San Diego.
 Meanwhile, the median household income of the truck buyer also has been on the
rise, Edwards said. Through August, that metric is $100,305 a year compared with the
median household income of ta general new vehicle buyer at $95,355, he said. But in 2009,
the median household income for general new car buyers was $83,516 versus median
household income of pickup buyers, which was $76,660, he said. The U.S. Census Bureau
puts the median household income in the United States at about $59,000.
 Car dealer Charlie Gilchrist, owner of Gilchrist Automotive in the Dallas-Fort Worth
area, worries that pickups will soon be unaffordable to many of his customers.
Evarts, Eric. “Electric https://www.greenca  A new report by AlixPartners, a worldwide business consulting firm, shows the transition
cars are clean, but can rreports.com/news/1 to electric cars is coming at a steep cost to automakers.
they be profitable? New 119167_electric-  The company pegs the cost of building new electric cars at almost $9,000 more than
report casts doubt.” cars-are-clean-but- conventional cars, and plug-in hybrids at an additional $5,700.
can-they-be-  Worldwide, the report says, established and startup automakers are spending $255 billion
profitable-new- to develop more than 200 new electric models that are expected to hit the market by 2022.
report-casts-doubt
 Bibliography of Articles Regarding Vehicle Affordability Concerns

Citation URL Points Raised

 Many of these will be low-volume models that will not make a significant dent in the
development costs for new powertrains, the report says.
 Further, the number of new models is likely to exceed customer demand, the report says,
meaning that intense competition among these new electric cars may force automakers to
sell them at a discount.
 AlixPartners forecasts that by 2030, electric cars will make up 20 percent of the U.S.
market,
 In a consumer survey conducted as part of the study, AlixPartners found that 22.5 percent
of Americans say they plan for their next car purchase to have plug-in capability.
 AlixPartners reports that commodity costs are up 70 percent the last year compared with
2015, at $884 per car, a six-year high.
 “Industry players are sort of caught between a rock and a hard place," said Shiv
Shivaraman, co-head of AlixPartners' American automotive and industrial practice. "If
they don’t participate in some way in the ‘new-mobility’ revolution that’s coming, they
stand to lose out on what might be the biggest thing ever in this industry. If they do
participate, as so many are, they have the chance of benefiting from first-mover
advantages, but they also face the possibility of going broke in the process."
Laing, Keith. “Auto https://www.detroitn  Car buyers who already are reeling from high sticker prices are finding it harder to afford
consumers feel pinch as ews.com/story/busin new vehicles as interest rates continue to rise.
interest rates rise.” The ess/autos/2018/10/1  The average annual percentage rate for a new-car loan was 5.8 percent last month, up a
Detroit News. October 1/auto-consumers- full percentage point from September 2017.
11, 2018. feel-pinch-interest-  The last time the average interest rate for a car loan was above 6 percent was January
rates- 2009.
rise/1578864002/  "It's a major concern for us," said Wes Lutz, the president of Extreme Dodge Chrysler
Jeep Ram in Jackson, who also serves as chairman for the National Automobile Dealers
Association. Lutz said rising interest rates — combined with rising vehicle prices — are
beginning to hurt new-car sales. Sales were off 7 percent last month nationwide.
 Making matters potentially worse, financing incentives from carmakers are becoming
hard to find. Only 5.6 percent of vehicles purchased in September were financed
with zero-percent loans, compared to 10.1 percent last year.
 "Late-model used cars are becoming attractive to people," said Lutz, who spoke to
automotive journalists in Detroit this week. "And that should be concerning for everyone,
because the new vehicles are more fuel-efficient, they’re safer, and the goal is to get those
vehicles on the road and eliminate the old vehicles. If we price these vehicles out of the
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Citation URL Points Raised

reach of most consumers, we’re not doing ourselves any good with pollution or gas
mileage or safety."
 The average price of a new vehicle hit $35,742 in September, up $687 from the same
month a year ago, according to Kelley Blue Book. Tariffs on imported cars under
consideration by the Trump administration could drive that higher.
 Jonathan Smoke, chief economist at Cox Automotive, said car buyers likely will be
squeezed further in 2019, noting that the Fed has raised interest rates multiple times in the
past two years — and with the possibility that the Trump administration could move
forward with its tariff proposal.
 "Consumers need transportation, but there are limits to what they can afford," Smoke said.
"By necessity, the higher rates are forcing consumers toward vehicles that will deliver the
payment that works. As a result, the new-vehicle market is challenged by affordability.
And ironically, the most affordable and most popular vehicles are imported and face the
threat of new tariffs which will drive their prices higher.”