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It is officially safe to declare; used car prices are finally going down. Finally, we’re seeing a clear trend emerge in used car prices. Now is the time to sell a car (as we’ve seen five weeks in a row of used car price declines and trade-in values will likely drop over the coming weeks), and patience is still required if you’re looking to buy a used car (wait a few more weeks, we expect prices to decline even more).
Thanks to data from Black Book, Cox Automotive, financial institutions, and the experiences of our community, we now have enough data to feel confident in saying that used car prices are going down, and that they will continue to fall. For car buyers, patience is more important than ever. If you’re in the market to buy a car, wait a few more weeks for a better deal.
Let’s dig into what’s happening in the market, and how you can time your sale or purchase.
Five Weeks of Declines: Used Car Prices Are Going Down
In 2021 we witnessed the unthinkable; used car values appreciated more than 40%. During the first quarter of 2022, we saw used car prices drop nearly 5% on the wholesale markets. By the time spring rolled around, we experienced another increase in wholesale used car prices, canceling out those previous declines.
As we settle into summer, we’ve now seen five consecutive weeks of overall market softening. For the first time since the pandemic lows of 2020, used car prices are going down across all market segments.
Used crossover, SUV, van and truck prices the week of July 26, 2022. Source: Black Book
We track weekly wholesale used vehicle prices to provide you with granular market insights that will empower you to make an informed decision if you’re in the market to buy or sell. The past several weeks have brought a much-needed reprieve from month after month of record high used car prices. Notably, wholesale price declines are accelerating. Just last week, used car prices declined by -0.47%. Half of one percent may not cause alarm to some, but remember that this is across just seven days.
When we look at cumulative used car price decreases, the picture becomes more clear. These are the overall used car market price trends from the past five weeks of Black Book’s Market Insights:
-0.02% the week of June 28
-0.15% the week of July 5
-0.35% the week of July 12
-0.45% the week of July 19
-0.47% the week of July 26
That folks, is a trend. Since late June, wholesale used car prices have declined by 1.42% from all-time highs. Now that the trend is clear, our attention turns to how wholesale price declines will translate into lower used car prices for the consumer.
As we’ve heard from members of our community, used car deals can be had. Negotiating on used cars is more feasible now than before because dealers no longer have the option to simply sell a car at the auction for a profit. With wholesale prices dropping and interest rates rising, dealers are once again negotiating on used car prices.
Consumers can leverage this information (plus the likely increase in used car supply thanks to repossessions, and rising interest rates increasing dealer costs) to negotiate a more fair used car deal. Deal School 2.0 is a great free resource if you’re thinking about buying a used car anytime soon and want to save time and money.
Here’s How We Expect Wholesale Price Declines to Impact Retail Prices
Sadly, we don’t expect retail used car prices to plummet tomorrow. There remains a severe shortage of new cars as automakers continue to grapple with the semiconductor chip shortage, the lingering effects of international COVID shutdowns, and now the war in Ukraine. Still, there’s some good news if you’re looking to buy, and a new sense of urgency if you’re considering selling.
Buyers: Patience Will Save You Money
Used car prices are going down on wholesale markets, and now we’re anticipating a decline at the retail level. However, patience will be key. Buyers who are able to wait 60 to 90 days are very likely to save money versus buying today. It would not be out of the question to see used car prices decline 5% to 10% in just a few month’s time. This is because retail prices lag wholesale prices, plus there are a few other factors (covered below) that are impacting our forecast.
Sellers: Time Is of the Essence!
The past 18 months have been the exception to the rule. Normally, vehicles are depreciating assets. They lose value over time, and that keeps used car prices more affordable. We think days are numbered for ‘car flippers’ who buy and sell for a profit weeks or months later. Used car prices are on an accelerating downward trend, and this means that your car is likely to be worth less one month into the future.
Trade-in values are going to decline, too. Dealers have been shelling out surplus cash for trade-ins over the past year. More often than not, when you trade in a vehicle, the dealer will sell it at auction. We’re seeing wholesale auction prices decline in real time, therefore dealers will be trying to stay ahead of the downward trend by offering sellers less for their trade-in.
If you’re considering selling a vehicle, our advice would be to sell it as soon as possible. Those who wait are very likely to sell for substantially less given the current market trends.
Factors That Will Also Impact Pricing
Auto Loan Defaults and Repossessions
America’s $1.3 TRILLION in auto loan debt is on the minds of financial institutions. They are aware that they just spent the past year and a half financing vehicles at greatly inflated prices, and that the bottom may fall out at any time. If this indeed is the bubble bursting, the looming threat of auto repossessions will make banks and credit unions very nervous.
If a consumer stops making payments and the repo man pays a visit, the bank will be left with an asset that is depreciating rapidly. Auto loan defaults are increasing, but remain below pre-pandemic levels. As of Q1 2022, about 4% of auto loans were 90 days past due. However, subprime borrowers are more likely to default according to the latest data. In March, 8.5% of subprime borrowers defaulted on their car loans, according to Equifax. We have heard from our community members that upcoming Q2 data from financial institutions will show 10%+ delinquency rates for subprime borrowers. We’re watching this closely.
As more repo vehicles make it to the retail market we expect used car prices to continue to soften.
Interest Rates
U.S. Federal Reserve interest rates 2000-2022. Source: The Federal Reserve
The Federal Reserve has publicly stated that it intends to continue hiking interest rates until inflation is under control. The cost of borrowing money will increase in 2022, and possibly into 2023. Car buyers in the market for higher priced vehicles will feel the effects of higher interest rates most. A 6% interest rate will result in about $6,000 in total interest paid for a $40,000 loan over 60 months, but just $2,400 for a $15,000 loan over the same term.
Just as consumers are feeling the effects of higher interest rates, dealers are too. The cost to finance dealership inventory (you read that correctly, car dealers don’t pay cash for their cars, they finance them just like you and me) is also going up.
When floorplan expenses go up, dealers are more incentivized to sell cars that have been sitting on their lot longer. This is why when you search for cars on CarEdge’s car search we show you the days on the lot. The longer a car has been sitting, the more it is costing that dealership in interest payments. As interest rates rise, dealers will be motivated to sell used cars that are sitting on their lot.
CarEdge’s Take
Now is the time to sell a car, and better deals are just around the corner for buyers. At the wholesale level, used car prices have dropped by 1.42% month-over-month, and price declines are accelerating. Across all segments, prices paid for used cars were down roughly half a percent in just seven days last week. We now have the confidence (backed by five weeks of data) to call this a downward trend. Sellers are more likely to get more money for their car if they sell sooner rather than later.
We haven’t seen the effects of declining wholesale prices on retail car prices yet, but we will soon. Retail prices won’t fall off an immediate cliff, but declines will be gradual. For those who can wait two to three months, used car prices are very likely going down, and better deals will finally make it to the sales floor.
What have you seen in your area? Share a comment with us below!
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Is all the talk of inflation giving car dealers and automakers an excuse to raise car prices even further? While that would be pure speculation, we do know that a new vehicle now costs more than ever before. New data from Cox Automotive/Moody’s Analytics reveals that just a few weeks after a previous record high was reached, new car prices have forced monthly auto payments to new heights. How high will new car prices climb? Is this simply a new normal that we have to accept? Here’s what the data tell us.
New Vehicle Affordability Declines on Low Inventory
The new report from Cox Automotive and Moody’s Analytics is disheartening to say the least. Today’s out-of-control car prices can be summarized by one statistic: In June, the estimated number of weeks of median income needed to purchase the average new vehicle was up 17% from last year. Median incomes have risen slightly, but rising new car prices have far outpaced income.
The Cox Automotive/Moody’s Analytics Vehicle Affordability Index is driven by the consumer’s vehicle transaction prices, the income of the consumer, amount financed by the consumer, and the interest rate provided by the lender. The result is a value that represents the number of weeks of the median household income in America that would be needed to buy the average new vehicle.
The number of median weeks of income needed to purchase the average new vehicle in June increased to 42.2 weeks from 41.5 weeks in May. This is an all-time high that reflects the predicament that consumers needing a car find themselves in. From May to June 2022, median income grew 0.3% at the same time that new car transaction prices increased 1.6%.
Cox Automotive/Moody’s Analytics Vehicle Affordability Index June 2022
The estimated average monthly payment increased 2.2% to $730, which is a new record high. A new car monthly payment now costs as much as rent in many parts of the country. We’re seeing more and more car payments over $1,000 a month.
Gone are the days of zero percent financing. As the Federal Reserve continues to raise interest rates to combat inflation, borrowing money becomes more expensive for everyone from the banks to the consumer. From May to June of 2022, the average auto interest rate increased another 8 basis points.
Higher interest rates affect luxury car buyers and those who put little money down the most. A 6% interest rate will result in about $6,000 in total interest paid for a $40,000 loan over 60 months, but just $2,400 for a $15,000 loan over the same term. Interest rates are a big part of car buying, and they remain dynamic as our economy traverses ups and downs.
Manufacturer Incentives Decline to Record Lows When Buyers Need Them Most
Why would automakers offer new car incentives when demand far exceeds supply? To be nice to the consumer? We could only hope for such benevolence from OEMs, but we know that’s not how big business works.
New car incentives are down 59% in just 12 months as supply chain problems squeeze new vehicle inventory to record lows that have struggled to climb back. In the second quarter of 2022, incentives averaged $1,228 industry-wide. That’s a 59% drop year-over-year.
New Car Inventory Remains Low, and That Needs to Change
In January of 2020, the industry’s average was 82 days’ supply. By early 2021, that figure had fallen to 66, but it would soon plummet as the chip shortage lasted longer than most expected. In July of 2022, new car inventory is slim with just 21 days’ supply.
Subaru, Mazda, Volvo, Kia and Hyundai have had the lowest new car inventory, and therefore have had the least incentives for buyers. See the latest new car inventory numbers.
A Silver Lining: Used Car Prices Are Going Down
For three consecutive weeks, used car prices have declined at wholesale auctions. This leading indicator suggests that relief may be on the way for consumers in desperate need of a more affordable option. In fact, only full-size vans appreciated last week. All other vehicle segments have seen prices decline at the used wholesale level.
Will used car prices continue to decline? It all depends on new car inventory. When there are more cars on dealer lots, used cars will lose value, and may ultimately come back down to Earth from record highs. This is something to bear in mind if you’re thinking about buying a used car at today’s inflated prices.
The FTC’s Comment Period Is NOW OPEN. Make Your Voice Heard!
The U.S. Federal Trade Commission is proposing new regulations that would ban anti-consumer sales tactics notoriously common in the auto industry. These shady practices include..
Bait-and-switch pricing
Forced add-ons
Poor F&I disclosures
Discrimination against cash buyers
Car dealer lobbyists are NOT HAPPY about this set of proposed regulations! We the consumers have until September 12, 2022 to leave a comment in support of these common sense regulations. Find out how YOU can make your voice heard here. We must fight back against powerful dealers!
In June, the Federal Trade Commission proposed a new set of rules that would ban unscrupulous sales practices that are commonly employed at car dealerships. Among the notoriously anti-consumer practices targeted are the sale of products without benefit, bait-and-switch pricing, forced add-ons, and discriminatory practices for cash buyers.
There’s a reason the annual trustworthiness of profession poll from Gallup ranks car salespeople at the bottom; it’s not because every salesperson is bad, it’s because a few bad apples ruin the bunch. Over the years I have heard countless stories from our community of these aforementioned practices. Still, powerful dealer lobbies are combating the FTC proposal, and it’s become clear that they’re determined to defeat the proposal at all costs.
Fortunately, consumers have a real opportunity to have their voices heard. A public comment period is now open until September 2022, and we’re calling on you to share your opinion with the FTC. It’s clear that auto dealers are already amassing a unified position, and we need to do the same. If consumers show up in numbers, car buying may be transformed for the benefit of we, the people. Time is of the essence, as this narrow window leaves less than two months for the public to share their support.
FTC Proposal Levels the Playing Field for Car Buyers
On June 27th, The Federal Trade Commission proposed a new set of rules that would ban specific auto sales tactics commonly used by car dealers to take advantage of consumers. In an FTC proposal titled Motor Vehicle Dealers Trade Regulation Rule No. P204800, the following auto dealer practices are targeted:
Selling Products with No Benefit to the Customer
Advertising the Real Price of the Car Online
Non-Discriminatory Practices for Cash Buyers
Enhanced Consent for F&I Products
FTC Bureau of Consumer Protection Director Samuel Levine explained the reasoning behind the proposed rules. “As auto prices surge, the commission is taking comprehensive action to prohibit junk fees, bait-and-switch advertising and other practices that hit consumers’ pocketbooks. Our proposed rule would save consumers time and money and help ensure a level playing field for honest dealers.”
The average new car transaction is now $47,202, or 72% of the median household income in the United States. Bait-and-switch pricing, forced add-ons and dishonest financing tactics have all contributed to the average monthly car payment soaring to $730, 40% higher than the average payment just five years prior. With car prices at record highs, consumers are fed up with anti-consumer sales tactics that proliferate at many dealerships nationwide.
This is our chance as consumers to unite behind a proposed rule that could change car buying for the better unlike ever before. However, this battle is far from won.
Car Dealer Dissent Has Been Swift, Yet Flawed
The National Automobile Dealers Association, or NADA, is a nationally-recognized industry and political force that represents over 16,000 auto dealers nationwide. Every year, the NADA and its counterpart for independent dealers spend millions of dollars lobbying politicians to advance legislation that is pro-dealer, too often at the expense of the consumers the auto industry relies on. The power and influence of today’s car dealers can be traced directly to the NADA and NIADA.
Needless to say, the dealer lobby isn’t happy about the FTC’s proposed rules. In a letter to the FTC, the NADA characterized the proposal as unsupported, sloppy and inconsistent. How so? NADA senior vice president Paul Metrey dismissed the proposal as “woefully inadequate” because the regulation is unnecessary in his view, because it would address “things they can go after” already. It’s as if dealers and their powerful lobbies are fully aware of the anti-consumer sales tactics flourishing in the industry, but are content with pushing the limits of regulation until enforcement encroaches on their bottom lines.
Another flawed argument promoted by the NADA is that complaints are few and far between. The FTC said it received more than 100,000 auto-related complaints in 2021. To counter that startling statistic, the NADA says there were 42 million new- and used-car sales last year. We all know that car buyers rarely have the time to seek out the procedures to submit a formal FTC complaint. Consumers have jobs, families, and other financial obligations on their minds. Imagine if one out of twenty dishonest car sales resulted in a formal complaint. In reality, reporting is likely even lower.
CarEdge’s Community Members Share Troubling Car Buying Experiences
There’s no way of knowing just how widespread this problem is, yet every day our community of CarEdge members shares tales of shady dealership practices, and dishonest, anti-consumer tactics that cost them time and money. Whether it be comments on YouTube, or essays we receive via email; our millions of monthly viewers are fed up with the status quo, and demand change.
Industry media outlets are picking sides, and some heavyweights are clearly siding with dealer lobbies. Industry news outlet Automotive News published an editorial promoting the talking points disseminated by the NADA and NIADA. They too are calling for interested parties to submit comments during the narrow public comment period.
The Time to Act Is NOW. Make Your Voice Heard By Submitting a Comment in Favor of the FTC’s Proposal
The FTC’s open commenting period is now open, and it will remain open until September 12, 2022. Anyone can submit a comment to voice support or displeasure with the proposal. In a classic David versus Goliath scenario, dealer lobbyists are facing off against consumers like you and I. With massive auto dealer lobbies and even media outlets calling for dealers to submit comments opposing the proposed rules, it’s up to all of us to make our voices heard. Submit a comment today on Regulations.gov. This should be a priority for all Americans who are sick and tired of car buying being synonymous with deception and dishonesty. We’ll keep you posted on the latest developments.
As someone who spent 43 years managing automobile dealerships and advocating for better enforcement of rules and regulations regarding dealer advertising and F&I practices, I strongly support your efforts to finally rid America of the unethical practices that many dealerships employ. Business decisions are made by dealerships everyday as to how to advertise the price of a vehicle online. Should we include the destination charge that is part of the MSRP in the price or should we disclose that in the small print? Should we disclose any dealer installed accessories or packages that the customer is expected to pay for in the advertised price or should we only disclose that once they have come into the dealership? Should we disclose all dealer and state fees or again wait until the customer has agreed to buy the car? How should we disclose our F&I offerings, or our rate markups for placing indirect loans? These are all business decisions that truthfully should not have to be made, full disclosure and transparency is not only what consumers want, it is what they are entitled to. You can read many consumer complaints in regards to this issue on our YouTube channel: https://www.youtube.com/c/CarEdge/ videos, just click on just about any video and read what consumers are saying on a daily basis.
One must question what is wrong with a society as a whole when everyone knows that consumers are taken advantage of everyday when purchasing a car or truck and everyone turns a blind eye to it. Law enforcement, consumer protection agencies, State Attorney Generals, the Federal Trade Commission and many other “consumer” protection organizations all know what is going on yet do next to nothing to correct it. The essence of commerce should not be “who can we take advantage of today” but rather how can we operate in a consumer respectful and honest manner. I believe the enactment of these proposals would bring us closer to the later and finally rid our society of the former.
Who can afford a new car in 2022? The latest data from Cox Automotive’s Kelley Blue Book reveals that the wealthy are making up more and more of new vehicle purchases as prices soar out of reach for many. New car prices are at all-time record highs, but could this be the peak? Let’s dive into the details.
New Vehicle Transaction Prices Make a Run for $50,000
Last December, we reported a new record that everyone saw coming, but no one was thrilled about. Six months ago, the average new vehicle transaction price reached $47,202. In June of 2022, the average transaction price (ATP) soared to $48,043, according to Kelley Blue Book’s data. June prices rose 1.9% ($895) from May and were up 12.7% ($5,410) from June 2021.
A bit of perspective brings to Earth just how high new car prices are right now. Ten years ago, the average transaction price of a new car was just $31,000. The average price of a vehicle purchased in 2022 is 54% higher than it was in 2012. That’s INSANE.
Here’s how new car prices have risen over the last decade:
New car average transaction prices from 2012-2022. Source: Cox Automotive
Luxury Vehicles Are MORE Popular Than Ever, Despite Record Prices
Here we are in the roaring twenties, and it appears that those with the means are going all-out with their vehicle purchases. Today’s data suggests that to many, it’s all about lavish luxury, no matter the price tag. The popularity of luxury autos happens to coincide with America’s total personal debt reaching an all-time high of $14.96 trillion. The average American debt (per U.S. adult) is $58,604, and three-quarters of American households have at least some type of debt.
Incentives Disappear When Buyers Need It Most
The image below shows the industry average transaction price versus the industry average incentive as $ of ATP. Clearly, manufacturer incentives are evaporating as new cars become more expensive.
The industry average transaction price versus the industry average incentive as % of ATP. Source: Cox Automotive
Electric vehicles had the lowest incentives (as a percentage of ATP) of 0.4%, and entry-level luxury cars had the highest of 3.4%. Incentives dropped to a record low level in June, averaging only 2.3% of the average transaction price. See the latest new car incentive numbers here.
Hybrid and Electric Vehicle Prices Climb Higher
With an average transaction price of $39,040, hybrid cars saw the largest ATP increase of $3,593. Hybrids have been in the lowest supply lately of any segment. Electric vehicle prices climbed to new records in June, with an ATP of $66,997, an increase of $2,444 since May 2022.
Electric vehicle market share has crept up over the first six months of the year, despite overall vehicle sales sliding. Recently, Bloomberg noted that when other countries attained 5% market share, the floodgates opened to more rapid EV adoption. Will this familiar pattern play out in the United States? With EV transaction prices averaging over $66,000, it’s a bit of a stretch to think EV adoption could happen so quickly. We must not forget that the median household income is around $70,000, just a few thousand dollars more than EVs are selling for today. Electrification is not top of mind for most American households, but the worsening affordability crisis is for many.
Are Car Prices Going Down?
Is the car bubble about to pop? Here’s what the latest data shows. We keep close tabs on the latest automaker inventory numbers, and we’re finally starting to see inventory increase, albeit slowly. Wholesale used car prices are another leading indicator of where the car market is headed, and this week we saw a sharp downturn in prices in almost every vehicle class.
In mid-July, wholesale used car prices dropped 0.35% in just one week, the third week in a row of declines. Trucks and SUV prices declined by nearly half of one percent. While this alone may not sound significant, remember that this is week-over-week, not monthly or yearly data. See the full data on used car numbers, updated weekly.
Wholesale used car prices by week, 2020-2022. Source: Black Book
In conclusion, car prices may drop if both of these trends continue. But they’ll have to continue much longer before we see a substantial decline in used and new car prices. If automakers are finally able to overcome supply chain constraints, new vehicle inventory will continue to rise, and dealer lots will have more vehicles. Until that happens, used car prices will remain high. Check back for the latest updates at caredge.kinsta.cloud/guides.
If you’re in the market for a GMC Sierra, Buick Enclave, or any of the two brand’s other models, we have some disappointing news for you. At what most would agree is the absolute worst time for automakers to pack more profits into car sales, Buick and GMC are forcing what they consider to be ‘value added’ subscriptions, and it’s not optional. The news from GM is just the latest example of automakers introducing what they call ‘software-derived revenue’, and executives are not being shy with their plans to introduce more of the same in the near future.
Not a Fan of OnStar? Too Bad, Says GM
Would you consider forcing customers to pay for an add-on they may not want to be anti-consumer, or is that just how the world works these days? It’s one thing to sell a new vehicle with a trial subscription, but it’s another to add a thousand dollars to the price tag for a software subscription the customer may never use.
As of July, General Motors is adding between $905 and $1,675 to Buick and GMC price tags for a 3-year subscription to GM’s OnStar Connected Services. To the uninitiated, this may sound like yet another add-on. But the thing is, GM says it’s not optional. No matter whether you want a 36 month subscription to OnStar or not, GMC and Buick customers will have to pay for it. The only model to receive the full suite of software free of additional charge is the $100,000-plus GMC Hummer EV.
A GM spokesperson confirmed the move to GM Authority, saying, “This offering provides our owners with a full suite of OnStar and Connected Services for three years, providing them with more time to enjoy services such as remote key fob, Wi-Fi data and OnStar safety services. By including this plan as standard equipment on the vehicle, it provides more customer value and a more seamless onboarding experience.”
Manufacturer incentives are already at record lows, and new car inventory is increasing at a snail’s pace. How could you push back against these new forced add-ons? Considering that GMC and Buick’s OnStar ‘Connected Services’ mandatory subscription is tacked on by the automakers themselves, dealers are not likely to negotiate on it. What we can hope for is the return of other kinds of incentives and deals. With more and more signs of the car price bubble beginning to burst, it’s too early to lose hope on that front.
It’s likely that GM will lose some customers for life as a result of this decision. Look at some of the comments we received on our YouTube video covering this topic:
Consumers are fed up, and with good reason. General Motors isn’t the only automaker trying to make car subscriptions mainstream; Volkswagen, Stellantis, Ford, and BMW all have their eyes on increasing software and subscription revenues.
BMW wants you to subscribe to your heated seats for $18/mo
Welcome to microtransaction hell. BMW wants you to subscribe to your heated seats in your new 3 series:
Monthly fee: $18
Annual fee: $180
The car will come with all the necessary components, but payment is needed to remove a software block. How wild is that?
GM is taking the tact of “subscriptions are mandatory,” while BMW is shipping cars to customers with all of the necessary hardware to offer functionality, yet imposing a software “paywall”.
So far BMW has not launched this program in the United States, however it’s likely they will at some point. More on this from The Verge.
Volkswagen, Stellantis and Ford Pursuing Subscriptions and Software Revenues
GM surely isn’t the first to say it or even do it, but this is the boldest forced subscription we’ve seen from a legacy automaker to date. For a decade, Tesla has been offering acceleration boosts, more range, and autonomous driving features as software ‘upgrades’ that controversially don’t get passed on to future owners. Clearly, many buyers don’t mind, as Tesla has dominated EV and overall luxury sales.
Is this yet another example of legacy OEMs going after Tesla, or is it a ploy to introduce new revenue streams for the sake of simply making more money, and charging more for vehicles? Fortunately, there’s no need to speculate, because multiple automaker executives have already shared their intentions with the public.
Stellantis Plans to Bring Subscriptions to Vehicles
Not looking forward to paying a monthly subscription for conveniences like remote start or advanced cruise control? Me either. Automotive News Europe recently reported that Stellantis is launching a $23 billion software push to get into the auto subscription business.
The Chrysler Airflow EV will surely have subscription options to access all features.
Just how big of a business will auto subscription services become? Stellantis, the sixth-largest automaker in the world, says it plans to make $4.5 billion in annual revenue from software subscriptions in the near future. How soon? Mamatha Chamarthi, the head of Stellantis’ software business, says the company can reach their goal by 2026.
Stellantis CEO Carlos Tavares chimed in too. He’s confident that Stellantis’ software business will generate high margins more like those at tech companies than the traditional auto business. He added that in the company’s view, software-based services and subscriptions will help vehicles last longer and have higher resale values. Do you buy that?
Ford Wants To Be a Tech Company
The Blue Oval is getting into pay-to-play automotive services, too. The Ford Mustang Mach-E and F-150 Lightning electric vehicles are Ford’s first mass-produced vehicles to be fully-capable of over-the-air updates, and now Ford plans to turn their latest innovation into new revenue streams.
Wes Sherwood of Ford Communications recently told Pickup Truck Talk that Ford knows the value of what they’re bringing to their models. “These subscription services are big business for automakers – to the tune of billions. We see connected vehicle services as a huge opportunity, which is why we are transforming Ford into a software-led company and, for customers, ‘always-on’ ownership experiences where before our relationships were periodic (sales and some service). In fact, we see this market growing to $20 billion by 2030.”
Volkswagen’s Pay-As-You-Go Autonomous Driving
If you want to be a beta tester for Tesla’s ‘Full Self-Driving”, you’ll have to add $12,000 to the price of that shiny new EV. However, Volkswagen, one of Tesla’s most admiring competitors, envisions a subscription-based payment plan for autonomous driving capabilities.
Volkswagen Group’s software unit Cariad believes pay-as-you-go autonomous driving is one way the automaker can monetize future software developments.
“There is a new business model already out there — a subscription model, or function-on-demand — where you can drive autonomously if you want, for the next 50 miles. We would support that, “ Cariad CEO Dirk Hilgenberg told Bloomberg.
Hilgenberg said it was possible to see that the service would allow the automaker the opportunity to offer other services to consumers who are freed from driving the vehicle.
“You have to make sure to have what we call a digital services platform that lets the outside world in — Google, Apple, Amazon — where you can bring your accounts to stream and be entertained, or where you can work with office products, do a videoconference or prepare yourself for the next meeting. This is the product we want to sell. The product is our platform,” he said.
CarEdge Insights
