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Effect of rising interest rates and market losses

6K views 47 replies 14 participants last post by  R P 
#1 ·
Just wondering how many people may be cooling their car buying with the higher interest rates and lowering wealth effect due to the falling markets. I have the impression that most people lease EVs, just like luxury ICE vehicles. The cost of leasing and financing is going way up. So am curious what people on this forum are thinking. Or do only "rich" people buy EVs.
 
#2 ·
I have a deposit on one at my dealer. With my low mileage BRZ for a trade, and the $8000 Canadian incentive, I can get within $5000 or so. I'm not sure if I'll finance the rest, or just pay it out, as I can do either. If I can get a reasonable rate, I'll finance, with an any time payout, as my Samurai is worth about $5000, and I may sell it.
 
#5 ·
Re gas/diesel prices, at this point it is kind of a vicious circle. Higher diesel pushes up supply chain costs and adds to inflation. Hate to say it, but what we need now is much higher interest rates to slow the economy and break that cycle. As disposal income continues to decline, demand has to decline as well, and that should slow inflation. Oil prices, though, are a global commodity, and unless we have a global recession, I don't see that going down anytime soon. We just don't have enough supply now to meet world demand, esp as China starts to open up again from their covid lockdown.

That's why I am asking how many will be cooling their car buying with all this going on. Of course, those will cash, will not be affected as much. But like I said in my first post, my impression is that most EVs are leased. I could be wrong, though....
 
#6 ·
Every EV manufactured will be sold at or above MSRP for the foreseeable future, even if the stock market drops another 20%. The math just works out to make it a no brainer for anyone who drives regularly. Supply is well below demand. The market dropping is really just a retiree and rich person's problem right now as unemployment is very low. Inflation is more problematic, but in some ways makes you want to lock in price now with no end of inflation in sight. I'm not sure how true it is that most lease EVs. Just like I feel many get it wrong when they compare a $50k EV against a 50k luxury car. Most people I think are cross-shopping a $30 or 40k gas vs $50k EV around here. Similarly a $70k EV against a $50k gas for those with more money to spend.

From a working-person's perspective, we've put 210k miles on our Honda Civic in the past 11 years. Right now at $5/gal it costs just shy of $2000 annually. The Civic will not last forever, so we must buy either an EV, hybrid or gas shortly. Price wise, straight-gas or EV make the most sense when purchasing another 10-year car. Hybrids are approaching the cost of EVs and have "double" the maintenance costs. The only real benefit is road tripping today. Gas makes sense if only driving a few thousand miles per year. The cost in the Solterra is expected to be ~$200 annually for us using our cheap overnight charging rate. We have cross-shopped with similar cars such as the ~$30k Crosstrek, but even at $20k more money, the Solterra comes out on top when combined with the fed/state rebates, lower operating and maintenance costs, with the intangible of having fuel diversity (second vehicle is gas). The real question is will it make it to 200k miles without needing a major $5000+ repair.

Gas trucks on the other hand...it's like ~2008 all over again with cash for clunkers. Seriously thinking of trading in our 6-year-old F-150 on the Solterra while it still has some value in it (instead of selling Civic) and jumping on the waitlist for the Lightning. I know RV supply/demand are turning back to "normal" and they are selling well below MSRP again. My gut says that will carry over to gas trucks too over the next year.
 
#20 ·
Traditionally, credit unions use member money to fund new loans so they are not as dependent on federal interest rates, but many banks use underwriting that are more sensitive to federal lending rates. Home mortgages are the only lending product I've ever heard of allowing customers to lock in rates and that's generally only after most of the paperwork is completed. Where you get your loan will determine all the financing information, not here. There's still a chance Subaru may have decent rates they extend to Solterra that are below whatever the industry is doing at the moment.
 
#25 ·
Well, another big market hit today with the bad inflation numbers and more interest rates hikes on the way. Means that less money available for everyday non-discretionary living expenses not to mention major large purchases such as new cars. And this is on top of losing the tax credits in the US, and new car prices going up further. Bad enough that we have these delays and now it is going to cost more with less money available. Financing and lease costs also going up.

So how does this affect your Soterra buying plans? There was a lot of discussion in the past about the poor charging specs. Now you will have to pay more for a lesser car with less money in hand. Do you still want to buy a Solterra?
 
#26 ·
Here’s my opinion…

Interest rates and inflationary pressures span every consumer market, so in the overall scheme of things, all EV models are in the same boat.

And, while the bZ4x/Solterras don’t have great recharge specs or ranges, its really not an issue for folks charging overnight at home that only drive locally <= 175-200 miles daily.

While it may force some buyers out of the market, unless there’s a major meltdown in the market, there appears to be sufficient demand for almost any EV model to sell out the available supply…at least in the next year or so.
 
#30 ·
And, while the bZ4x/Solterras don’t have great recharge specs or ranges, its really not an issue for folks charging overnight at home that only drive locally <= 175-200 miles daily.
My only concern is charging speed, since I'm taking long road trips regardless. Range is fine, especially since there's a heat pump to help during cold weather. But, I need to see the following tested in the Solterra (not bZ4X):

1. 0-100% charge with specifics of SoC every minute and every %SoC along the way, and the kW all along the way to gauge exactly where the sweet range in the curve is. Again, Solterra, not what we've already seen with the pre-production bZ4X.

2. A 70 mph range test where a baseline highway mi/kWh efficiency can be determined.

Then, I can estimate how long it may take to put 100 miles of highway range into the battery, of course adjusting for conditions like temperature, wind, elevation, a/c usage, etc.

Until all the relevant information is known, and maybe however it turns out, I'm probably all in on the Solterra. Although it's a collaboration with Toyota, it's still a Subaru. And I want to support them since I love them, and they're a natural for the transition to electric.⚡
 
#27 ·
I agree that it is available supply, or more precisely the lack of, that is the major problem at this point. But would have to think that demand will also fall with less money available to buy. The big question is by how much, and will it be enough to let supply catch up. And would like to believe that supply will increase as well, as these chip and battery components production will increase. But that doesn't seem certain either.

So my query is on the demand side. I am wondering if these economic and market conditions are causing some to drop their plans to buy a Solterra.

Related to this, I have a friend that is a spec house builder. He has pretty well totally stopped building, as buyers have dried up. And his building costs have gone through the roof. So there is no doubt that inflation and interest rates are having a huge impact to his business.
 
#28 ·
So my query is on the demand side. I am wondering if these economic and market conditions are causing some to drop their plans to buy a Solterra.
I also posed this question to my local dealer sales manager. He believes that a lot of people on his Solterra list will drop out. But that won't happen until prices are announced (in Canada) and buyers will have to firm up orders. And some (like myself) won't make a final decision until they see and test drive the vehicle they want to buy.
 
#29 ·
The bZ4x/Solterra faces many headwinds…

A botched market introduction caused by a near-immediate stop-sale/recall, extended production stoppage with no end in sight, supply chain issues, inflationary pressures, an unknown “fix” date, etc.

Those ”negatives” will definitely have some impact on demand, but just how much, I dunno.

I just don’t think there’s going to be a massive “drying up” of demand to the level we will be seeing lot fulls of EVs of any brand sitting at dealerships anytime soon.
 
#31 ·
Czech Republic - basically no information about Solterra on web. I am on newsletter, but nothing there.
On one hand I would like to have Solterra, but without information it is hard to tell. Also predefined equipment version doesn't sound nice for me. Not sure if I would be able to choose :)
I want to change car in about two years - older used Impreza. As we still have sparse public charging, sometimes we are doing trip to more rural areas where is even lower possibility to charge.
On the other hand with my year amount of driving, expected prices of Solterra and current gas prices it doesn't sound like logic choice.
The "challenge" of switching to electric car in my area and doing some trips with it sounds interesting, but probably will go with e-boxer, probably XV, which will cost me about one third of Solterra and after about 5 year with it hopefully I will get Solterra gen 2, or something like that.
 
#32 ·
Well, another 75 basis point bump in interest rates and brutal market drops this week. Can't be good for those wanting to finance or lease a new vehicle. And with EVs costing more now, and no $7500 tax credit in the US, have to believe some are rethinking their Solterra purchase plans.

I know many are unhappy with the delays and looking at alternate EVs to buy. But who is thinking of dropping or delaying plans to buy any EV at this time due to rising interest rates?
 
#36 ·
Like it or not, purchasing an EV right now is a game for the "well off" or better. According to the July issue of Car and Driver, the cheapest EV being sold right now is the Leaf, at around $28.5K, and nothing else breaks the $30k barrier, with the 10th cheapest vehicle (the ID4) north of $42k. And those are base models (and in the case of the Leaf, dated tech). You can get a fully loaded, top trimline version of many ICE vehicles for that money.

As the market for EVs matures, prices may come down (or the same price will get better features, which tends to be the way the automotive industry operates), and better tech will become available. If you can afford to wait, or want to wait, the outlook will always improve over time. That's common sense with car buying in general.

It also doesn't apply in my case. I needed a new car back in June, when my trusty 2007 Impreza gave up the ghost. We're currently juggling to manage 2 vehicles for 3 people who work full time and also go to college / grad school part time. Since I can afford it, I'm not buying another ICE car, now or ever. Early adopters provide the cash flow and sales numbers necessary to make those future versions a reality.
 
#37 ·
Like it or not, purchasing an EV right now is a game for the "well off" or better.
Looks like some people are opting for the purchase of an e-bike:


Right now, I commute to work by a plain old human powered bicycle. But the closer I get to my retirement, the more handy an electric power boost will become.
 
#40 ·
Markets now lower than at the end of 2019 and start of 2020 prior to the pandemic, wiping out all the gains of the last 3 years. And the outlook going forward does not look good with the recession fears. So with high inflation, wages not keeping up, and net worth of individuals plunging, hard to believe that we won't see a major pull back on new car buying.
Dow falls 500 points Friday as stocks book third straight quarterly loss, set new 2022 lows
 
#41 ·
Of course, I agree with your theory… at some point, demand (if the economic contraction continues any length of time) will see a reduction.

At this time, tho, I don’t think we’ve reached the intersection of the demand .vs. supply lines on the graph, although if things continue like they’re going, we’re definitely going to get there.

There’s still quite a bit of pent-up demand for new vehicles (ICE, Hybrid and EV units). Until that demand is reduced by a combination of folks eventually achieving the taking delivery of a new vehicle plus the reduction in demand due to economic contraction, the status quo remains.

It should also be noted that a market downturn often doesn’t affect all models equally. For example, back in the 1970’s during the OPEC oil embargo, many higher line vehicles (Cadillac, Lincoln, etc.) didn’t suffer the hits in demand nearly as severely as the more mainstream vehicles (Chevrolet, Dodge, etc.) saw.

If the consumer determines (either rightly or wrongly) that an EV, even selling at a premium, is the more economically centered choice for his/her needs, it’s quite possible that the demand for EVs actually increases, curating even more vehicle backlogs until production ramps up sufficiently.

Sometimes, these things go in unexpected directions.
 
#43 ·
Yes, that is what we would hope for. Unfortunately, there is no inventory to sell at a discount. And with much of the inflation now sticky, don't see pricing coming down anytime soon, actually the opposite for at least the next year. But if demand drops off due to the economy, that could at least allow some that do have money to move up the line a bit. I am seeing a little anecdotal evidence of that, but that seems to be more than countered by those that can and will buy at any price. What we need most is more supply, which doesn't seem to be happening.

In my case, I want an EV, not necessarily any EV. So far only the Solterra and Ioniq 5 qualify for me, although for different reasons. Once I get one, I can wait for the next one. My biggest regret is the early selling of my Kona EV this spring, after 3 years of wonderful use. It really was a good car, just not one that fits my long term. Meanwhile we have have to make do with sharing our Crosstrek, which is another good car for our needs, except that it is an ICE vehicle. Just hope that we don't have an accident, or need some major repair putting it out of service for a while. We would really be hooped then.
 
#47 ·
More and more are forecasting recession next year. This is pretty serious. Last time the index was this bad was 2020 after the pandemic first hit. Before that was 2008/2009. It is a highly accurate and respected indicator of the state of the economy.
US Leading Indicators

And with higher interest rates coming, too now, hard to believe that won't cool demand somewhat.
 
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