I hate to say it, but I’m a car guy.
There are two reasons why I’m sheepish about it. The first is that sinking a lot of money into a depreciating asset isn’t a great idea. The second is that a sporty car with a combustion engine isn’t exactly climate friendly.
Nevertheless, I’ve always liked the sportier versions of cars such as the Volkswagen Golf or Honda Civic. They have more horsepower, stiffer suspension and electronic upgrades that make them faster but aren’t too flashy, have utility for every day uses, and they generally don’t cost all that much more than the economy version of the model.
Take the Volkswagen Golf R, for example. It starts at a manufacturer’s suggested retail price (MSRP) of $48,495. It isn’t cheap, but it’s also not much more than what a typical fully-loaded SUV would cost. For comparison, the VW Tiguan, a smaller SUV, starts at roughly $33,000.
The problem is, the MSRP is no longer indicative of the actual selling price in this category. Go to any online car forum and you’ll see complaints of the Golf R and similar rides selling for thousands of dollars above the MSRP.
While data specific to this class of sports family vehicles is hard to come by, AutoTrader’s editor-in-chief Jodi Lai says economic forces are clearly playing into these unusually large markups.
For one, Ms. Lai says the semiconductor shortage that plagued the auto industry likely means that manufacturers are using more of their chips on more lucrative models, such as larger SUVs or luxury vehicles. That means fewer sports hatchbacks are being produced.
For instance, the Toyota Corolla GR is a version of the family car that comes with 300 horsepower and a full package of performance parts. Toyota made only 8,500 of them globally for the 2022 model. While listed prices start roughly around $45,000 in Canada, Ms. Lai has seen dealers tacking on enormous premiums, including one U.S. dealership that listed one for US$120,000. Yes, that’s a six-figure price tag for a Corolla.
While that’s an extreme example (the Corolla GR is a completely new model with an especially limited run), even used models of cars like the Golf R are now often listed at a price tag that’s higher than the MRSP for a new model. For example, a 2022 Golf R with 23,000 kilometres was listed on AutoTrader at $64,000 in the Toronto area last week. That is roughly $10,000 more than the MSRP on a new fully-loaded vehicle.
Ms. Lai says there may be another factor driving up prices: auto enthusiasts are rushing to buy up sports cars with combustion engines – including the more affordable, compact ones – before they’re phased out for electric cars.
“As electrification is happening really fast, sports car models are dying off and discontinued so quickly, so a lot of driving enthusiasts are in a panic,” said Ms. Lai.
“This topic comes up in conversations all the time.”
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Sal’s personal finance reading list
The climate crisis is a factor behind growing tourism taxes in Europe
Tourism taxes, such as extra fees on hotel stays, have always been a thing in Europe. But governments in cities such as Barcelona and Amsterdam are moving to raise them, driven in part by a desire to make tourism more sustainable for local communities.
Here’s how to negotiate car purchases dealerships
It’s not just the sporty cars that appeal to me that are increasing in price. The average price of a new vehicle rose by 21 per cent in June compared to last year according to AutoTrader. Negotiating for a new car at a dealership can be a completely foreign process, especially when bargaining isn’t really a part of the consumer experience here in Canada. This piece talks about some of the tactics you can use to get a better deal on a new car.
What happens when a high-profile couple like Justin Trudeau and Sophie Gregoire Trudeau divorce
One of the biggest breaking news stories last week was the Prime Minister’s separation from Sophie Grégoire Trudeau. On a personal finance note, what happens when relationships as prominent as theirs end? This Financial Post piece gives some insight into that.
Simple financial mistakes to avoid for students heading to college and university
The school year is just around the corner, and this list has some useful tips for postsecondary students to avoid taking on unnecessary debt. One of the things I completely forgot about when I went to school: all the people trying to sell you credit cards. As this piece says, you only need one credit card to start building your credit score.
Today’s financial tool
When I need a reality check for my car-buying aspirations, I take a look at how much interest I’ll actually pay in the life of a car loan. This tool is an easy way to get an estimate and currently has made me waiting a little longer to save a larger down payment.
The money-free zone
Continuing with the car trend in today’s newsletter, take a look at this point-of-view video of a race start in the Porsche Cup Series. It feels claustrophobic in that cockpit, especially with other cars swarming around in the corners.
ICYMI
What I’ve been writing about
- New couples rent apartments together all the time. But what if someone is moving in with a partner who owns their home? I report on just how financially complicated it can get in a relationship where only one person owns the home.
- So many people consider home ownership a vital part of a retirement plan. But what if you simply can’t afford to buy? Financial advisers tell you how to build a retirement investing plan in my latest piece.
- There are all sorts of reasons why buying a fixer-upper home may not be the right choice for everyone. But here’s one I recently learned about: the high cost of home insurance during renovations.
More Rob Carrick and money coverage
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Even more coverage from Rob Carrick:
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- ✔️ The housing file: A house isn't special. Get your head straight about the reality of home ownership • The good, the sad and the unaffordable: Saving for a home downpayment in Canada's big cities • Property taxes are popping in some cities – how worried should you be about other tax hikes? • Our other real-estate problem – people have too much wealth tied up in houses • Borrowers and savers, here's how to time the eventual rollback of interest rates
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- 💰 Your money: Mortgage holders, savers and GIC investors, it’s time to change your thinking on interest rates • How much debt is each generation of Canadians carrying, and how do you compare? • For the sake of their financial futures, young people should leave Toronto and Vancouver • This practical new spin on a savings account might just peel you away from your big bank • Rental fraud grows amid rise in fake, falsified tenant applications • Are Canadians worse off financially now than in the 1980s? • From groceries to auto loans, here’s how much more it costs to live right now • When saving for retirement, should you change your asset mix over the course of your career? • Do retirement income needs always rise alongside inflation? Not necessarily • When the bank suggests you lock in your variable rate mortgage, it has an angle
