Back in the early ’70’s I worked at a Porsche dealership in Boston and watched as the price of German cars was headed north due to the rising value of the German mark against the US dollar and changes required by the EPA. Big bumpers, door guards and emission requirements added to the costs of every car everywhere. The new 914 quickly went from a starting price of $3995 to $6995 in just 5 years. New 911’s that had a base price of $8600 in 1970 but started at $15,000 by 1977.
Compare those numbers with Pony cars that started the period with Mustangs at $3800 and Camaros at $3500. By 1977 they were only higher by about 15% ($4300 and $4000 respectively). For a driver looking for a sporty car it was a tough sell unless they could be educated in a hurry.
I remember when the first new 911 arrived that had a MSRP (base price before shipping and any options) of $9995, we thought the game was over. A Z-28 was half that amount and the goal of most buyers was to keep their car payment under $100, tough to do using those numbers.
Cars have never been cheap but over the years while we haven’t been paying attention they have really become a major expense for every family, not just rich single guys looking for a super car.
A recent article in the Wall Street Journal prompted the above review. Edmunds.com, as quoted, reported that the average monthly car payment in the US is a record $754 per month. The report went on to say that 18.9% of all buyers pay over $1000 per month to put that car in the driveway, plus the cost of insurance and various taxes. What happened?
Data shows that the average auto loan today is $42,113 compared to $39,977 a year ago and that’s just the average, some are higher. Interest rates on auto loans have declined in the last year from 7.4% to 6.8% but those zero interest loans from a few years ago are long gone. Used car loans start at 11% so it looks like cash is king nowadays.
Six year loans are common now, while we couldn’t go beyond 48 months back in the day. Most cars then wouldn’t last that long.
Those kinds of numbers are causing drivers to keep their cars longer than ever before with the average age of cars on the road at 12.6 years. Even with high parts and higher labor rates, $700 per month will cover a lot of repair bills, so used cars look like great value. Just keep throwing money at it and keep it on the road.
With the higher costs of cars everyone needs more insurance to cover the risk of accidents. As I reported last year a slight bumper cover scuff is no longer $1000, it’s $10k and four weeks to repair. Insurance rates are up over 32% in the last two years and that’s if you haven’t crashed or been caught speeding. Do I have to mention the annual car excise tax in Mass?
Excise taxes are based upon the original cost of each car without any options. The tax is $25 per $1000 of value but that value is reduced in the first 5 years to 10%of original base price. For old cars like a couple in my garage I pay the $5 minimum. For newer cars like the Audi RS4 (2001) the bill is less than $70 per year. When I get those bills I can’t get the check mailed fast enough.
A new Porsche, like a 992 ,even after the 5 year depreciation window, would carry a $330 per year excise tax bill into the future. No wonder there are so many expensive cars driving around with NH plates on them.
The price to play has never been cheap but it’s always been worth it. As they say, ” you can’t take it with you”. We made it this far, now’s the time to drive fast and take chances.
-KTF