Interesting Finding Regarding Auto Pricing

Aug 02, 2005 4 Replies

I did a little research, and found that the market sets car prices, not the manufacturers. That being said, both the new and the used car market prices HON/TOY products to last about 150,000 miles. Sure, many go much longer and still have some residual worth at



150,000 miles. At 150,000 miles, they become "might last longer" vehicles...but not a great bet. But for GM/FORD the market prices them to go only to 100,000 miles before it's worth merely a residual "might last longer" value. That's why a loaded CR-V can command $23,000 while you can find a similar Ford Escape that they can only get $18,000 for (after all the rebate shenanigans). The market is recognizing that the Escape approaches crap at 100,000 miles while the CR-V probably won't approach crap until
150,000 miles. The HON/TOY is actually cheaper to own. Here the 'Scape costs
18 cents/mile while the CR-V costs 15 cents/mile. And while most people don't own a car from showroom to junkyard, this same pricing pattern will show up at resale time so, again, even for the 2-3 year owner, the HON/TOY is cheaper than the GM/FORD to own. (I will say that with the depth of the GM/FORD rebates today, their cost per mile is approaching that of HON/TOY. But, of course, cutting prices enough to compensate people for this 50,000 durability gap is killing both GM and FORD in the process).



Way to beat this is to keep the vehicle as long as possible. My '92 EB Explorer had 185,000 miles on it when we sold it for $2,500. My '99 EB has about 120,000 and running fine. My '05 Limited has about

16,000 miles but has depreciated $14,000, or about 1/3 of its sticker price accord>I did a little research, and found that the market sets car prices, not the

Yes and no. Yes in theory...but the market is saying that the odds of an American vehicle going much beyond 100,000 miles without expensive repairs is slim. Yeah, I am sure that there are MANY MANY MANY on here with examples like yours, but the odds are against it. In other words, a TOY/HON has a much better chance of reaching 150,000K without expensive repairs. But if you can do it in an Explorer (or Town Car, for instance, which has horrendous depreciation yet seem last as long and as carefree as HON/TOYs...but then again, you'll have to buy plaid pants and eat dinner at

3:30 in the afternoon).

The market is based on perception, not reality. This creates opportunities for savvy buyers.

Ed

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