Subaru of America has little margin of error for its new all-wheel-drive vehicles. Things are precarious for the Camden, N.J. automaker. Check out two things that could crash its new car market.
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If you shop for a new 2023 Subaru Forester, 2024 Crosstrek, or 2023 Outback, you already know no new models are on retailers' lots. A report from Alex Prestigiacomo, who works at Bachman Subaru, says, "We have little to no new model inventory."
He says demand remains exceptionally high for the Subaru Forester compact SUV and the Crosstrek subcompact SUV. He has one new 2024 Crosstrek Base trim level on the lot, and it's already sold to a customer.
photo credit: Team Gillman Subaru North
Prestigiacomo says, "Demand is high for Subaru vehicles, and all the new cars sitting on the lot are pre-sold."
Subaru has few new models because of ongoing supply chain issues and parts shortages in the auto industry. But Subaru is unique because they have a lower supply of new cars than any U.S. automaker.
Subaru of America likes to keep inventory low, and they sell out of its pipeline. It's not new; they did it before the parts and supply issues. Subaru sells their vehicles at the Manufacturers Recommended Retail Price (MSRP), which allows them to keep pricing stable and incentives on new cars low.
But that could change this year. One thing could crash Subaru's new car market. Subaru is more vulnerable than some larger automakers.
1. Interest Rates are increasing, affecting the affordability of new Subaru models. Auto financing is the most significant issue for new car shoppers now. As interest rates rise, a buyer's car payment goes up.
The buyers most affected are shoppers for the 2024 Crosstrek and 2024 Impreza, who may not have a large down payment or the ability to pay cash. Auto financing affects affordability, and more buyers are taken out of the market.
The good news is as there are fewer buyers, Subaru's inventory will increase. Higher-income buyers who can make a sizeable down payment or pay cash will benefit most.
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Subaru may have to offer significant incentives on their new models, bringing the average price of a new Subaru vehicle down. New model factory incentives and discounts will increase, forcing Subaru retailers to sell under the vehicle's MSRP.
2. Student loan forgiveness was going away, but that could change with the new laws.
The student loan forgiveness plan was going away, which could have affected new car sales in a significant way. But that may not be a reason for a crash now.
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A report from ABC News says, "Starting Monday, hundreds of thousands of federal student loan borrowers will receive emails from their services with the subject line "Your student loans have been forgiven."
"Under these plans, if a borrower makes 20 or 25 years' worth of payments, they get the remaining balances of their loans forgiven. But because of errors and administrative failures of the student loan system that started long before I took office, over 804,000 borrowers never got the credit they earned, and never saw the forgiveness they were promised - even after making payments for decades," President Biden said in a statement to ABC News.
The ABC report says, In all, the debt relief announced by the Biden administration so far totals $116.6 billion for more than 3.4 million borrowers, according to the Department of Education.
High-interest rates will hurt the new 2024 Crosstrek, Impreza, and other new Subaru model sales. But the student loan forgiveness plan could help millions of buyers now get new cars.
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Denis Flierl brings over thirty years of combined auto industry and automotive journalism experience to Torque News readers. He is an accredited Rocky Mountain Automotive Press (RMAP) member. The last twelve years have been spent with Torque News, covering Subaru vehicles and the latest news. Check back daily for his expert Subaru analysis. You'll find the latest stories on the Torque News Subaru page. Follow Denis on Facebook, Twitter, and Instagram.
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The author has little…
The author has little understanding of Subaru customers based upon this article.
Yep, or how Subaru…
Yep, or how Subaru dealerships work at all… If you listen to a dealer complain about low inventory it’s because that dealer is incompetent. We are easily out of the “low inventory era.” Subaru of America sends new inventory to dealers that…actually sell Subaru’s. If you can’t sell cars you don’t get more cars. It’s that simple. A local shop I know of does 300 units a month and has anything you could want.
This was kind of the…
This was kind of the opposite of what I experienced in June when shopping for a car. Living in the suburbs of Minneapolis, Minnesota, there's probably over 100 car dealerships to choose from. We completely skipped over looking at Toyota because a friend was just there and every vehicle was backordered three months. Our stop at the Honda dealership yielded no Honda CRVs to even test drive, 3-4 month wait for a vehicle once a deposit is made, and sales people who didn't care to even try to sell a car because enough people are just walking in and buying them without even sitting in one. When we went across the street to Subaru we had the option to test drive every Outback model available, there was around a dozen we could drive away with that day though they were upper models, and any model we chose would be delivered in 3-4 weeks, not months like the other options.
A customer had cancelled a preorder earlier that day for an 2024 Outback Onyx edition in the color we wanted and had a bunch of accessories installed that we didn't want but the dealership threw them all in for free, so we walked away with a car same day. Clearly that's not the experience everywhere else but it seems to be here since our friends along with my parents had the same experience. Walk out with a car same day or less than a month wait.