We recently caught up with Michael Szudarek to discover if new American cars are becoming too expensive. This is what they said…

 

“Yes. New cars have unquestionably become more expensive over the years, partly due to consumer demand for more features, but that is not the only reason.

Advancements in vehicle safety and technology, engineering and design and government regulations are duly responsible for driving up window stickers.

 

Smarter Cars Cost More

Modern vehicles have come a long way since their predecessors as sophisticated technologies and superior quality, once reserved for upscale brands, have now found their way into base-level models. It is a smart move by carmakers; as they compete for your business, they need to make vehicles more appealing. Brand loyalty is no longer a given.

Today’s connected consumers crave comfort and convenience and expect their rides to be equipped with the latest technology to complement their mobile lifestyles without compromising safety or quality. While rear-view cameras, touchscreen displays and fast-charging USB ports are standard options on most current base-level trim packages, higher trim levels typically offer added luxury.

They contain more safety features like blind-spot monitoring, lane-keeping assist and adaptive cruise control. All of these “extras” add a premium to a vehicle’s bottom line.

For instance, look at the Ford F150 pickup truck, a best-selling vehicle for decades, especially among contractors. Shoppers looking to purchase a 2021 model have six different trim packages to choose from, starting at $35,280 for its entry-level F-150 XL Regular Cab 4×4 and $75,945 for the top-tier F-150 Limited SuperCrew 4×4 before options; a fully loaded hybrid Limited will cost over $80,000.

Furthermore, almost everything in a newer vehicle is controlled by a complex network of computers and sensors – all communicating with each other to operate the features drivers have come to rely on, including the safety assist systems designed to minimize accidents. Car repairs are also becoming more expensive because of these technologies.

Then you have electric vehicles (EVs) and hybrids, which are more expensive than traditional gas-powered engines. EVs cost more because of their batteries, while hybrids are pricier due to having dual powertrains.

 

Size Matters

Another factor is people love larger vehicles. Light trucks (pickups, SUVs and crossovers) have dominated the market for years driving smaller sedans to the brink of extinction.

An analysis from the National Automobile Dealers Association (NADA) issued in December 2019 found light trucks accounted for 72.1 percent of all new light-vehicle sales – increasing 2.9 percentage points compared to 2018.

Subsequently, as vehicles get larger, not only do they require more materials to manufacture them, they also require additional safety features due to their increased size and weight, equalling more dollar signs.

According to Kelley Blue Book, the estimated average price for a light vehicle in the United States was $38,635 in August 2020, even as the coronavirus pandemic persists. With median household incomes earning $68,400, owning a new automobile seems unattainable for many families.

This may explain why more people are financing their vehicle purchase for extended periods, stretching to six or seven years on some leases, and ultimately adding thousands of dollars to the payment.

 

Regulatory Compliance

Automakers are constantly under pressure to comply with government policies and mandates regarding safety systems and environmental standards, including fuel economy and reduced emissions. For example, The U.S. Department of Transportation’s National Highway Traffic Safety Administration’s (NHTSA) Corporate Average Fuel Economy (CAFE) standards regulate fuel economy for vehicles produced in the United States.

Original Equipment Manufacturers (OEMs) must take into consideration these regulations when designing their engines, and that inevitably raises car prices.

In the end, the question of whether new cars are becoming too expensive depends on sales. We already know that today’s vehicles are smarter, safer and loaded with technology making them better products.

As long as consumer demand is there, automakers will continue to seek out ways to maximize their margins, and that, unfortunately, trickles down to your pocketbook.”

Who is Michael Szudarek?

As a Partner, Szudarek counsels clients in the automotive, technology and professional services industries, among others. He is responsible for directing a broad range of marketing communications, media relations, reputation management, expert positioning and strategic guidance activities for clients in both the consumer and B2B market segments.

Szudarek brings a unique understanding of the complexities of engineering and product development, management, and public policy and regulatory affairs, combined with the communications skills and relationships to deliver strategic programs.

 

Specific highlights include:

  • Public relations and marketing communications advisory services to two Chinese automakers related to increased North American visibility
  • Media affairs and communication strategy services within the automotive telematics sector for two of the world’s most recognizable brands
  • Media relations and marketing communications services for numerous automotive component suppliers—both consumer and B2B
  • Public relations counsel and day-to-day marketing communications for a premium European automaker

 

Prior to joining Marx Layne in 1998, Szudarek worked for another metro Detroit area public relations agency, where his efforts were focused primarily in servicing several automotive suppliers in implementing marketing communication programs for use throughout North America.

His academic credentials include a Bachelor of Arts degree in journalism from Wayne State University. He holds membership in the Automotive Press Association as well as other public and private board positions.

You can follow Michael on LInkedIn here.

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