CATA News

The average cost of new-vehicle ownership is approaching $10,000 a year amid a shortage of cars and trucks that has driven up prices, according to a new study.

The rising cost of vehicles stems from multiple factors, including a global semiconductor chip shortage that has limited car production and led to price hikes.

The average annual cost for owning a new vehicle is now $9,666, or $805.50 a month, according to the 2021 Your Driving Cost study released by AAA.

The study, conducted from May 2020 to May 2021, reviewed costs for the five top-selling vehicles in nine categories. The vehicles were then assessed across six categories of expenses: fuel, maintenance/repair/tire costs, insurance, license/registration/taxes, depreciation, and finance charges.

The vehicles studied by AAA had an average price tag of $32,903, which is $1,502 or 4.78% higher than last year. That suggests that the average cost of owning a new vehicle is even higher, since the average price of new vehicles recently topped $40,000, according to car-research site Edmunds.

Depreciation, a measure of how quickly a car loses value, makes up 40% of all ownership expenses, the report said. Cars typically decline in value over time, though used-car values have temporarily increased in some cases due to the new-car shortage.

Fuel is the second-highest cost of owning a vehicle at 17% of the total, while maintenance represents 15%, insurance 14%, taxes 7% and finance 7%.

"We like to talk often about other aspects like cost of fuel or insurance," said Greg Brannon, AAA’s director of automotive engineering and industry relations. "But whenever you look at what the important costs are for all costs, depreciation is really the major factor."

Fuel on average costs 10.72 cents a mile, while maintenance and repairs cost 9.55 cents. 

While maintenance costs vary depending on the vehicle, this year’s most expensive are those in the half-ton pickup trucks category. 

This year’s list includes two new categories that have never been included in the 71 years AAA has done this study: subcompact SUVs and midsize pickups. 

With how strained vehicle inventory has been, Brannon said it is important to do research before buying or simply hold off until prices aren’t as high. With a little research, consumers can save thousands of dollars per year.

Brannon said that consumers who are ready to pull the trigger on a new car should buy a gently used car instead because new cars lose a tremendous amount of value in the first year of ownership.

By finding a used vehicle that is 2-3 years old with lower mileage, consumers will pay less, and "that’s because somebody else already paid" off part of the depreciation, Brannon said.

"While we all like that new car smell, which is actually plastic leaching into the car, the truth is that new cars depreciate at a quicker rate than used cars," he said.

 

CarGurus is an automotive marketplace website that consumers typically use to buy vehicles from dealers. But In a sign of the times that used-car inventories are in such short supply at dealerships, CarGurus has debuted a digital platform that allows consumers to sell cars to participating dealers who need to replenish their dwindling supplies of pre-owned vehicles.

Named CarGurus Instant Max Cash Offer, it instantly presents consumers the highest offer available from thousands of participating dealerships. 

"We think we can meet an unmet need," said Lisa Iannucci, CarGurus vice president of commercialization.

 

Here is how it works:

 

Interested consumers visit the no-haggle "Sell My Car" page on CarGurus.com and enter their vehicle’s information. They quickly receive offers and, upon opting to proceed, the vehicle is picked up and paid for following an on-the-spot inspection to verify its condition matches what the seller said on a questionnaire section of the web page.

Questions include asking for the 17-character vehicle identification number, mileage, license plate number, whether the vehicle has been in an accident and if it is damaged in any way.

"We’ve tried to strike a balance with the questions," Iannucci said. "We want to make it lightweight for the consumer, but also detailed enough for the dealers."    

A picked-up vehicle gets taken to local dealers who will have the option to buy it for the CarOffer matrix price or take a pass.

People who pick up and deliver the vehicles work for a third-party firm. "It’s an auto-specific partner with employees trained to inspect cars," Iannucci said. "We want people who know what they are doing."

Instant Max Cash Offer rolls out first in Florida, Massachusetts and Texas because those states have a large representation of auto consumers and CarGurus dealer clients, Iannucci said.

Sam Zales, the company’s president and chief operating officer, said, "We are headed towards a digital world where shoppers and dealers are both buying and selling vehicles online, and CarGurus is in a prime position to help both do so with the technology-first approach that we are known for in the industry."

The digital platform for the new program comes from CarOffer, a company CarGurus acquired in January. The platform originally had been a way to conduct dealer-to-dealer wholesale vehicle sales and trades. Said Iannucci: "We’re taking it up a notch. This is a game-changer for dealers and the CarGurus audience."

Because of the inventory dearth, today’s used-vehicle prices are relatively high. That may tempt many car owners to sell their vehicle. But won’t they then have to turn around and buy a replacement vehicle that also is pricy?

Not necessarily, Iannucci said. "Maybe it’s an extra vehicle, or maybe they are moving. There are various situations."

She cites two factors that point to potential success. First, car consumers are rapidly becoming more interested in online auto transactions versus in-person deals. Second, dealerships are hungry to find new and efficient ways to acquire vehicles amid the current industry shortages.  

"Inventory acquisition is a major priority at our dealership," one principal said, "and we often look for ways beyond auctions or trade-ins to purchase vehicles, and that includes searching for consumers who may not immediately come to us to buy a car."

 

WASHINGTON — President Biden this month made dual moves to reduce greenhouse gas emissions, imposing tougher fuel-efficiency standards on automakers and challenging them to drastically ramp up sales of electric vehicles by 2030.

Biden signed an executive order on Aug. 5 that sets a target for electric vehicles, hydrogen-fuel cell and plug-in hybrid vehicles to make up 50% of U.S. sales by 2030 — a voluntary goal that auto makers said would entail federal support for vehicle charging stations and consumer tax incentives.

Separately, the U.S. Environmental Protection Agency proposed new rules that would require automakers to achieve a fleet-wide average fuel-efficiency equivalent of 52 mpg by the 2026 model year, using an industry measure that takes into account both fuel efficiency and emissions reductions.

The current requirement for that model year is 43.3 mpg under rules set in 2020 by the Trump administration.

Automakers would be allowed some increased flexibility to use credits they banked in past years by surpassing their goals to comply with the rules, the agency said. Auto executives said the targets were largely in line with their expectations.

 

Polling of consumers in the Chicago marketplace showed many positive takeaways from the first Chicago Auto Show ever held in July, Michigan-based Foresight Research found.

Conductors surveyed 500 random households in the Chicago market between July 20 and Aug. 4, plus extras to ensure that 200 respondents personally attended the show. The show continued to have a high awareness in the area, with just 10% of local households that did not attend citing a lack of awareness of the July show.

The summer dates allowed for an expansion of the show outdoors, significantly increasing test drive opportunities. The average visit (show dwell time) was 6 hours 5 minutes — almost 90 minutes longer than in 2020 and the longest dwell time ever measured by Foresight. Analysts attributed that to the show’s outdoor street festival and the abundant number of ride-and-drives offered by manufacturers. Forty-five percent of visitors reported taking a ride indoors or outdoors.

Automakers, researchers found, "were hyper-focused on communicating their current and upcoming offerings in hybrid and battery electric vehicles, and the survey shows these efforts were not in vain." Show visitors were already 50%-100% more familiar with hybrids and electric vehicles than the local general population, and 76% of attendees said their likelihood to buy such vehicles increased as a result of their attendance.

Another notable achievement of the show was the high and increased number of its visitors actively cross-shopping, as measured by adding and subtracting brands from consideration lists: 58% of show attendees added one or more brands to their shopping list (up from 43% in 2020, and 41% subtracted brands from their lists (22% last year).

Other highlights:

• Show visitors continued to be younger, more often automotive influencers, and more ethnically diverse that the Chicago market’s overall population.

• Visitors continued to be disproportionately luxury brand-owning households.

• Visitors who are in-market to buy a new car or truck (12-month intenders) were almost double the intention rate of the local population.

 

Illinois Gov. J.B. Pritzker approved legislation on Aug. 6 that restores the full tax credit allowance on first division vehicles that are traded in at retail. Since 2020, the allowance has been capped at $10,000.

Senate Bill 58 also resets small trailer license fees from $118 to $36. It had been $18 until last year. Both changes take effect Jan. 1, 2022, although customers who trade in their vehicles now, obtain an advance trade-in credit and then wait until Jan. 1 to buy their next vehicle would receive credit for the full value of their trade-in.

Both the trade-in cap and the higher plate fee were instituted as lawmakers in 2019 sought to fund Pritzker’s Rebuild Illinois capital infrastructure plan.

Consumers welcomed the restoration of the full tax credit allowance on their traded-in vehicles. Dealers, whose new- and used-vehicle inventories are at lows rarely seen, hope it will mean fewer private sales and more transactions at dealerships.

Two bills last spring would have returned the license plate fee back to the previous cost of $18. But the Transportation for Illinois Coalition — a group of statewide and regional business, organized labor, industry, governmental and nonprofit organizations which lobbied for the capital bill’s passage in 2019 — warned that lowering the fees that much would take revenue away from state construction projects.

Lawmakers reached a unanimously approved compromise by raising the certificate title fee by $5, from $150 to $155, to replace the revenues lost from the give backs. The law is effective Jan. 1.

 

Vandalism. Theft. Both are ugly words that can be costly for dealers. It seems that no matter how brightly lit a dealership keeps its property at night, vandals will commit damage, and thieves will attempt to steal property any time they think no one sees them.

Trydon, a company whose patented ChaseLight system helps deter vandalism and theft, has been named by the CATA to be the association’s member benefits partner for lighting concerns.

Dealers often believe that self-insurance is their only option for dealing with loss on their property exteriors, and that negatively impact their bottom lines. In reality, deterrence is the best approach to minimize loss, and ChaseLight is surprisingly affordable.

Housed in the Trydon lighting controller, ChaseLight uses a dealership’s existing outdoor lighting and constantly monitors the area beneath each pole. If a trespasser enters that space after hours, ChaseLight immediately flashes the pole’s light and sounds an audible alarm. 

 

It is highly unlikely that the trespasser will wait around to see what happens next; they will leave immediately or run to other areas on the property to escape the flashing light and alarm. But if the latter, every pole equipped with ChaseLight will respond similarly, creating a significant deterrence network to help safeguard the property.

Trydon believes it is better to deter undesirables on the property than sift through surveillance video trying to identify trespassers after the damage has been done.

Even dealerships that have converted to LED lighting should consider the enhanced security benefit of ChaseLight. In addition, Trydon’s patented lighting controller can save energy use while ChaseLight stands guard over the property.

Read more about ChaseLight as www.trydontrue.com, or contact Trydon President Donald Jacobs at (314) 956-7848 and don@trydontrue.com.

 

Thomas H. Peck (Pechousek), 88, who until 2020 owned Tom Peck Ford of Huntley, died June 28.

Mr. Peck ran four different car dealerships during his career. In 1968, he became president of Grange Dodge in Countryside; in 1979, he started Tom Peck Chevrolet in Chicago; in 1988, with his son, Jim, he added Tom Peck Ford in Clinton, Wisconsin; and, with his son, Tom Jr. in 1999, he opened Tom Peck Ford of Huntley.

He served as a past president of the Chicagoland Dodge Dealers Association, as an A.C.E. judge at the Chicago Auto Show, a Resolution Judge for the Wisconsin Auto and Truck Dealers Association, and a past chairman of the CATA Dodge Dealer Laborers.

 

Mr. Peck was a member of the Presidents Club of St. Ignatius College Prep School (of which he was an alumnus) and of the Knights of Columbus, Elmhurst Council. He also was very involved in many civic and community groups in Lake Geneva, Wisconsin, and Naples, Florida.

Mr. Peck is survived by sons Tom, James, Lawrence, and Robert; and seven grandchildren. The family asks for memorials to be made in his honor to the Angels Fund at St. Francis de Sales Catholic Church, 148 W. Main Street, Lake Geneva, WI 53147. 

 

James G. (Jim) M’Lady, who 35 years ago opened a namesake new-car dealership in Crystal Lake, died July 27 at age 74.

                         

He began as an Oldsmobile dealer before adding Nissan and Isuzu franchises. He was the country’s No. 1 Nissan dealer seven straight years.

                         

Mr. M’Lady was raised in Cicero before serving in the Marine Corps in Vietnam. He returned to Camp Pendleton, where he trained before deployment, on the 50th anniversary of his induction. 

The Boys Club of Cicero helped prepare Mr. M’Lady for his life that followed, and he showed his appreciation by donating and returning to the club every year. Contributions appreciated to the Boys Club of Cicero or to the Leukemia & Lymphoma Society.

Survivors include Barbara Ann, his wife of 46 years; and sons Scott and Marshall.

 

Ronald Bernard Hopkins, 73, who operated Ron Hopkins Ford in Elgin, died July 24. The dealership now is named Hopkins Ford of Elgin.

Born in Carpentersville in 1947, Mr. Hopkins was a standout athlete at Barrington High School and later graduated from the University of Illinois. He bought the former Suburban Ford in 1982.

Known for his generosity, Mr. Hopkins gave away more than $200,000 in student scholarships through his A’s for Excellence program. He will be remembered for his love of his family and his sense of humor, steadfast positivity and vibrant clothing to match his bright blue eyes and personality. 

Survivors include Debra, his wife of 47 years; sons Jay and Jeff; a daughter, Kelly; and eight grandchildren.

 

By Randy Barone, ACV Auctions