**Car Prices: Is It Time for a Change?**

Car prices at dealerships across this country are insane right now. And everyone is paying artificially inflated rates for anything and everything in stock. Ranger was actually listed for $200,000. What? I like so many of you am sick of it.

So who's the blame for this mess? Is it COVID? Is it corporate negligence? Is it the people at the dealerships themselves or something entirely different? We're gonna find out.

Our videos might look easy to make but that's because of all the preparation we do behind the scenes. Pre-production, scheduling, costume design. Let's go with the white one. Being prepared is how Donut makes great videos. And it's how today's awesome sponsor, ShipStation helps you run a great business.

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My Mustang is getting old and I've started looking for something to replace it. I think another Mustang would be pretty sweet. One with a manual. Yeah. One with a big Coyote V8. Yeah. A 2014 with low miles, shouldn't be too much, right? They built 33,000 of those things that year alone.

And it's almost a 10 year old car. So imagine my surprise when I find out that people want over $20,000 for a car with a little less than a 100,000 miles. Man, this sucks. And that got me thinking, how do we even get to this point in the first place?

Well, it starts with one of these. Well, not exactly one of, this is a RAM. This is RAM for a computer. We didn't have a microchip on hand. I feel like we've all heard the phrase chip shortagemore times than we ever need to, but in this digital age, computer chips control almost everything we deal with day to day.

And that's especially true for cars. Automakers rely on two different types of chips for car production. There's super simple ones that operate things like power windows and seats. Then there's fancy ones for your car's more advanced functions like engine tuning and lane assist.

The simple chips are typically easier to manufacture, and advanced chips take a lot more time. South Korea, Taiwan, and Japan are all leaders in building advanced semiconductors with China's capability quickly gaining momentum.

WEBVTTKind: captionsLanguage: en- Car prices at dealershipsacross this country areinsane right now.And everyone is payingartificially inflated ratesfor anything and everything in stock.- Ranger was actuallylisted for $200,000.- What?And I like so many of you am sick of it.So who's the blame for this mess?Is it COVID? Is it corporate negligence?Is it the people at thedealerships themselvesor something entirely different?We're gonna find out.Our videos might look easy to makebut that's because ofall the preparation we dobehind the scenes.Pre-production,scheduling, costume design.Let's go with the white one.Being prepared is howDonut makes great videos.And it's how today'sawesome sponsor, ShipStationhelps you run a great business.Mm.Getting ready for yourbusy shipping season aheadof time is way easierthan catching up whenyou're already behind.And with ShipStation, youhave all your productsin one place without limitingyourself to one store.You can integrate it into every platform,including Amazon eBay,Shopify, anywhere you wanna be.- We got a big word intotoday's script, automobile.- Mobile.- Beal.- Bile?- Just say car.- You got it.See? Being ready is important.And when you're prepared with ShipStationyou get the same discounted shipping ratesas Fortune 500 companies.98% of companies that use ShipStationfor one year become customers for life.So it's not a stretch tosay, you're gonna love it.Start now and get set upbefore the biggest shippingseason of the year.Go to shipstation.com/donut todayand sign up for a free 60 day trial.That's two months free.My Mustang is getting oldand I've started lookingfor something to replace it.I think another Mustangwould be pretty sweet.One with a manual. Yeah.One with a big Coyote V8. Yeah.A 2014 with low miles,shouldn't be too much, right?They built 33,000 of thosethings that year alone.And it's almost a 10 year old car.- Yeah.(person whistling)So imagine my surpriseWhen I find out that people wantover $20,000 for a car with a little lessthan a 100,000 miles.Man, this sucks.And that got me thinking,how do we even get to thispoint in the first place?Well, it starts with one of these.Well, not exactly one of, this is a RAM.This is RAM for a computer.We didn't have a microchip on hand.I feel like we've all heardthe phrase chip shortagemore times than we ever need to,but in this digital age,computer chips controlalmost everything we deal with day to day.And that's especially true for cars.Automakers rely on two different typesof chips for car production.There's super simpleones that operate thingslike power windows and seats.Then there's fancy onesfor your car's moreadvanced functions likeengine tuning and lane assist.The simple chips are typicallyeasier to manufactureand advanced chips take a lot more time.South Korea, Taiwan andJapan are all leadersin building advanced semiconductorswith China's capabilityquickly gaining momentum.At the beginning of the COVID pandemic,automakers figured thatcar demand would fall.So they canceled theirorders for these microchips,both simple and advanced.And to be honest, I wouldprobably make the same decision,but this would be one ofthe first dominoes to fall.The semiconductor factoriesthat didn't shut downeither due to productivityor employee health reasons said,"Alright Detroit, youcan cancel your orderbut we're still gonna make microchipsand shifted their focusto producing chips forconsumer electronicsof which demand was skyrocketing.This is why it's still hardto get products like a PS5.I'm not mad that I still don't have one.A few months after,I've missed the (bleep)Ace Combat 5 Remaster.A few months after quarantine hit the US,automakers realized thatpeople did want to buy cars.A ton of people actually.And they put their chip orders back in,but making computer chips is along and very precise processand chip makers couldn'tshift gears overnightand still had a preexistingbacklog to contend with.Most automakers operate byToyota's just in time philosophy,where companies only keep partson hand that they'll use immediately.So car companies ended up making a bunchof incomplete cars that woundup sitting in parking lotswaiting to get their precious microchips.And if you're thinking,"Nolan, why not just buildmore semiconductor factories?"Well, those take years to designand billions of dollars to construct.So until semiconductormanufacturing gets back to normal,the car market's gonna feel the burn.And it's not justmicrochips in short supply.Hard materials like steel,aluminum, copper, and soft goodslike leather, foam and petroleumare all essential componentsfor your car that are inextremely high demand.And COVID's not just a blamehere. It's also the weather.Texas's brutal cold snaplast year shut down all fiveof the petrochemical plantsthat produce car foam herein the US, which hamperedcar seat productionfor new cars for a few months.And overseas multiplefloods have hit Thailandsince 2020, tragically ending lives,as well as making it really hardfor rubber farmers to produce.How many things can you thinkof that require rubber?The situation is not good.But when you combine thatwith global conflict,things get even worse.One component in your car,that's just as importantas a microchip is its wiring harness.Think of the wiring harnessas your ride's spinal cord, okay,connecting the sensors ofits central nervous system.Without the harness, your carhas no way of communicatingwith the various sensorsand computers within it,preventing the car from functioning.And guess where a ton ofwiring harnesses are built?Ukraine.When Russia invadedUkraine, they disrupted oneof the biggest wiring harnessproducers in the world.A recent report by Reutersfound that 22 car companies relyon 38 plants across Ukraineto produce wiring harnesses.This caused Porsche toshut down production oftheir Leipzig plant inMarch and both Volkswagenand BMW got hit hard too.Czech manufacturer Skoda wasforced to delay the releaseof their Enyaq Electric SUVby eight months after Russia's invasion.And they decidedthat they would justproduce their own harnessesin house rather than wait forthe situation to cool off.It took a lot of timeand was probably not verycost efficient for them.So clearly pandemicsand conflicts have huge impacts on cars.But what about on the consumer level?Through most of the 20th century,car dealerships were locally ownedsmall businesses, buttimes are different now.Every year, more and moreindependent dealers are boughtup by large dealership conglomerates,shrinking the number of car suppliers.In other words, fewercompanies are now responsiblefor selling a larger percentageof the new and used car market.So now not only is there a limiton the supply of cars being manufactured,but a slowly dwindlingamount of places to buy them.And because of this, dealersknow they can sell any car,at any time, at any price.Last week, we reviewedthe Toyota GR Corolla,a turbo all-wheel drive rallycar that you can live with.It's great. I want one.For the lowest trim Core EditionToyota set the MSRP at $35,900.And I think that'shonestly pretty reasonablefor what you get,but the wind was takenright outta my sailsas soon as I realizedwhat was gonna happen.Unscrupulous dealershipsare gonna get these cars,then mark them up by doubleand likely have no problemgetting what they want.I've tried telling myselfthat this won't happenbut I think I'm just being naive.The car companies aren'tnecessarily to blame here.Many automakers realize thathuge markups are not goodfor their brand image,but when you buy a car,you aren't buying itfrom the manufacturer.You're buying itfrom the dealer who alreadybought it from the manufacturer.And some companies aretrying to prevent markups.Hyundai recently sent an order to dealersdiscouraging them fromgouging their customers.They're worried thatonce the market eventually equalizes,customers that paid ahigh price might thinkthey got ripped off and goto a different manufacturerwhen they buy another car.However, Hyundai didn'treally lay out a planfor what they would do todealers who kept on gouging,so I guess we'll seewhat happens with that.The Ford Motor Company also has a problemwith big markups.Ford CEO Jim Farley saidon an earnings call quote"We have very good knowledgeof who they are andtheir future allocationof product will be directly impacted."In other words, do bigmarkups, get less cars.And that's important becauseFord is experiencing someof the most rampantmarkups around the country.The Bronco, Maverick, Mustang MACH-Eand F-150 Lightning EV Pickupare all highly sought after cars,but they're insanely overpricedat most dealers, becausethey're in high demand.- Oh.- It's nice to hearthe manufacturers stickup for the customers,but you gotta wonder ifit's legit or justposturing for the public.Most of us don't workfor these dealerships.So we don't know if the OEMs are followingthrough with discipline.And if you feel like the dealersare being treated unfairly,don't, they're doing just fine.A report from Hage Partners foundthat the average gross profiton a new vehicle is $6,224.A 180% increase from2019, a 180% increase.And publicly owned new car dealershipsmade an average profitof 7.1 million betweenMarch, 2021 and March, 2022.That's almost two and a half times as muchas they did in 2019.So clearly corporategreed is a huge factorto the situation we're in now.But strap in,because this next part iswhere things get really shady.What I'm about to tellyou is the real reasonI can't find a 2014 Mustang GTwith manual transmission,premium leather seats,Shaker Sound System, and Coyote V8with less than a 100,000miles for under $20,000.Since new cars are so expensiveright now, a large portionof used cars on themarket are not trade-ins,but rather repossessed vehicles.Over the last couple of years,lots of people boughtcars at the King Fordand lots of banks gave outloans without verifying incomes.I have to give a big shout outto Andre Jikh and Lucky Lopezwho made a very insightfulvideo on how all this worksif you really want to get intothe financial side of things.People buying things they couldn't affordwith money given from banksthat didn't verify anything.Why does that sound so familiar?(dramatic foreboding music)Nah, it's probably nothing.So you've got all thesecars that have been repoed,but they don't just goback to the dealership.They go to wholesale auction houses wheredealerships go to bid on the inventory.Huge lots reminiscent ofthe energy harvesting fieldsin "The Matrix" are filledwith repossessed cars waitingto hit the auction block.This is where dealers finda lot of their used cars.Now the auction houses are very carefulabout how many cars they keep on hand,because if they sell too many at once,the increased supply could causeprices to actually go down.This means less profit for themand they can't let that happen.In his video, Andre points outit's just like the diamond industry.A monolith company with a large supplyon hand artificiallyinfluencing the marketto control their own income.That's kind of shady.That sounds to me likethe makings of a monopoly.Of course, Cox Automotiveprobably isn't theonly company playing thisgame, but owning an assetlike Kelly Blue Book, whichis hugely influential,definitely helps putsome weight on the scalein their favor.Is the supply of used cars really that lowif they have to control howmany cars go out in the market?Doesn't really sound like it to me.So the auction house tells the dealer howmuch they're gonna pay for the car.Then Kelly Blue Book tells the bank howmuch money they can loan for that car,and then Autotrader tells the customer howmuch they're gonna pay for it.And here's the kicker.All three of those companiesare owned by the same people.At the beginning of this video,I asked if anyone isto blame for this mess.Clearly there's some manmadeschool duggery going on here.People in corporations aretaking advantage of the marketsand folks like you and meget caught in the middle,but the economy is also anextremely complicated beastthat's also subject to thewhims of nature itself.That's something wehave to remind ourselvesevery now and then.My best advice,if you want to buy a new caris to hold off if you can,be patient, because even ifthe system isn't that great,prices will almost definitelygo down eventually.If you want a cheap, cool, good used car,check out this video right here.If you want this hat, visit our store,I'll leave a link down in description.Big thank you to Andre and Lucky Lopez.Check out their channel,I'll leave a link down inthe description as well.If you want more Nolan content, follow meon all social media @NolanJSykes.Be kind, I'll see you next time.And speaking of Ford,I just wanna address my t-shirt right now.Mark Martin, the NASCAR driver drovefor Ford and apparentlyopened his own Ford dealershipwhich I had no knowledge of until rightbefore we started recording,this was not intentional.However, if Mark Martin Fordis gouging their customers,I will rip this shirt off my back and cry.(man laughs)I swear to God, I did not plan that.