Marketplace - Time to buy a car?

Episode Date: December 25, 2024

Car prices tend to go up, but after a period of high interest rates, now is actually a decent time to buy. And Americans are buying — it’s one factor in rising retail sales right now. In this episode, why vehicle sales have revved up. Plus, corporate credit card fraud appears to be rising, breakup recovery is strictly business and retailers prep for potential inventory tumult.

Hey everybody, it's Kai. Time is running out to give a tax deductible donation to Marketplace before the end of the year. Donate today to support the public service journalism that you rely on. Every donation and every dollar helps us plan for the new year ahead. Go to Marketplace.org slash donate and invest in news you value and trust. That's Marketplace.org slash donate or you can follow the link in the show notes. slash donate or you can follow the link in the show notes. Retailers are making their lists and checking them twice trying to find out just how much inventory they should stockpile ahead of the next administration.

From American Public Media, this is Marketplace. In Washington, I'm Kimberly Adams in for Kai Rizdall. In Washington, I'm Kimberly Adams in for Kai Rizdal. It's Christmas, Wednesday, December the 25th. Good to have you along. The holiday shopping season has been, by several measures, a pretty normal one. Businesses started bringing in their holiday inventory in mid-October, according to the most recent Logistics Managers Index, and consumers bought a lot of that inventory in November, according to spending data out last week from the Bureau of Economic Analysis. These normal seasonal patterns are a big relief for businesses, since many have spent the

last few years trying to get rid of excess inventory they built up early in the pandemic. But the prospect of additional tariffs in the coming year could cause many businesses to start building up their inventories again. Marketplace's Justin Ho has more on what's at stake. The kind of businesses that have made the most progress bringing inventories back to normal levels are big consumer facing retailers.

So what we call general merchandisers, your Walmarts and your Targets of the world and Costco's. That's Jason Miller, a professor of supply chain management at Michigan State University. He says many big retailers use discounts to get rid of their extra goods and consumer spending has been pretty strong. Miller says it's great that a lot of businesses aren't hoarding inventory, since that can be costly. Because you're not turning through your items quite as quickly and also the longer it takes you to sell something, the more likely it is to get damaged or just essentially go obsolete and lose value. value. That said, there are signs that importers are bringing in extra inventory ahead of any new tariffs on imports from China, says Zach Rogers, a professor of supply chain management

at Colorado State University. He says he first noticed the pickup around mid-December, around five or six weeks after the election. And to me, that suggests that now, because we're worried about tariffs, a lot of inventory is getting pulled forward maybe a little earlier than would be expected. Roger says if that continues, businesses might have a harder time holding extra inventory than they did a few years ago. For one, interest rates are higher, which makes it more expensive to buy inventory. And if all that hoarding pushes up warehousing costs or trucking costs, importers would have

to decide whether to pass those costs on the consumers. And? Consumers are very sensitive to costs, and so it's going to be more difficult for importers to just slap those costs to a consumer base that honestly is tired of prices going up. Some businesses might decide that the cost of extra inventory is worth it. Jason Miller at Michigan State University says if a smaller wholesaler, for instance, needs to stock a good that could be hit with President-elect Trump's proposed 60% tariff on Chinese imports... It may make sense to order an entire year's worth ahead of time in order to get that product in and not pay 60% more for that. Meanwhile, Miller says big retailers might choose to keep their inventories

low and simply pass the cost of any tariffs on the consumers. I'm Justin Ho for Marketplace. Markets were closed for the Christmas holiday today, but don't worry. We'll still have some numbers for you. Like Justin was just saying, figuring out what consumers are willing to buy and when and at what price matters a lot for businesses. And for the broader economy, about two-thirds of which is just consumer spending, which was up again last month along with retail sales driven largely by an increase in car sales. Marketplace's Samantha Fields has more.

Now is actually a decent time to buy a car if you're in the market for one. There's a lot more inventory than there was in the last several years. Patrick Olson at Carfax says if you're considering a new car, many dealerships are also offering incentives these days, like lower interest rates on car loans than you could get from a bank and straight up discounts in some cases. A lot of dealers have a lot of cars that they want to move. This is the time of year to get rid of the 24s and make room for the 25s. There's evidence more people have been buying cars lately, in that most recent retail sales

and consumer spending data. And in addition to that, Carl Brower at iccars.com says new car prices, which had been falling, have ticked up slightly in the last couple months. And the average number of days new cars are on the lot has dropped a little. So that shows an increase in demand and the cars are moving quicker. There are two main factors, he says, are likely driving this increase in demand for cars, new and used. I suspect it's a combination of the price is finally hitting a level that people feel

more willing to make a purchase, as well as some replacement of vehicles damaged in the recent storms. More than 340,000 cars were badly damaged or destroyed this fall in hurricanes Milton and Helene, according to Carfax, and many people are looking to replace them. And then there's the expectations game. Dan Ives at Wedbush Securities says when it comes to electric cars in particular, Everyone knows that that tax credit is going to get pulled once Trump gets in office. If you buy an EV right now, you can get a $7,500 tax credit for many models.

But Trump has indicated he might get rid of it. So you're seeing some buying in anticipation of that. And he says you're also seeing some people buying in anticipation of possible tariffs, which could drive car prices back up. But more than anything, Carl Brouwer at IC Cars says he thinks people who've needed cars for a while have noticed prices are down and realized this is probably as good a time as any to buy. There's been a lot of people who've been waiting on the sidelines and we've just hit a threshold now where a certain amount of them finally got off the bench and came into the game to

buy a car. Because they couldn't afford to wait any longer. I'm Samantha Fields for the year, many companies are trying to close out their books and figure out their own spending for the year, some of which may kind of depend on you and just how you've used your company credit card, if you have one. If you do, it's probably for things like business trips, team lunches, project-related purchases, things your boss would sign off on. But there are people out there who are using their corporate cards for slightly less business-motivated buys, or sometimes outright fraud.

Here to chat about the use and misuse of company spending accounts is Callum Borschers. He's a Wall Street Journal columnist. Callum, welcome to the program. Glad to be with you. So what even got you looking into this? Wall Street Journal columnist, Callum, welcome to the program. Glad to be with you. So what even got you looking into this? You know, I had done a story earlier this year about companies sort of cracking down on what some of us think of as kind of like small persnickety company rules.

And what came up a lot in those conversations was, hey, there's also big stuff, by the way, including corporate count fraud. And so I sort of got working on this with the question of is this going up or down? And the answer is it appears to be going up, although we can't be certain. The twist on it is that the software detection has gotten so much better, right? This is one of the many side effects of artificial intelligence. And so firms are catching more shenanigans than they did in the past. So give us some examples that you heard about as you were doing this reporting of the kind

of fraud companies are seeing on these corporate cards. You know, it really runs the gamut from little stuff to big. So I mean, on the smaller side, it might be, hey, I'm going to put date night on the company credit card, right, and try and pass off this outing with my spouse as a business dinner. I got a chuckle out of a story about somebody who had been working in an office where they had free coffee every day, and then when he went to work from home, he figured, well, I'm still entitled to my free coffee,

so he started expensing his daily Starbucks run, including the mileage from his home to the coffee shop, which I thought was really next level. But then you also get some really outlandish cases, right? Like somebody who tried to expense the purchase of an RV. I was like, how on earth does that happen? Well, SAP concur explained to me this was a case where somebody was gonna be on

a six-month extended assignment and tried to say, well, you know, six months in a hotel room gets kind of expensive. It would actually be more cost-effective to just buy me a recreational vehicle. That one got declined. But it really just shows you the range of things that people will try to slip through

on the company dine sometimes. Right. And you know, you report that a lot of these people just figure it's not that big of a deal, but how much of an impact is this having on businesses? Well, the best estimate is that fraud of a range of types can cost businesses 5% of revenue over the course of a year, which is not nothing, right? I mean, that can be real dollars. And of course, a lot of it depends on the scale of the company.

Smaller businesses, I think, are really the ones that run the risk. I was thinking of a conversation I had with James Toms, who has a fire protection company called Telgen. It's a decent sized firm now, but he said when we were just starting out in the 90s, we had a fraud case that really was a big problem for us.

It was about $50,000, which may not sound like a lot, but for a company our size, it was a big problem to the point where he decided to forego his own salary for several months to try to dig the company out of the hole. His point, his plea basically to other small business owners was just bite the bullet and get that outside accountant to audit your books. I know you want to save money on that bill, but the cost of the fraud could be even bigger than the accounting tab. So other than having, you know, an accounts payable department kind of going through all this and auditing, what sorts of tools and recourse do companies have to

fight back against this? Well, the software that they're using is getting ever more sophisticated, but the bookkeeping tools that every company uses can only go so far. You really need that extra set of eyes to say, hey, does this look suspicious and try to suss it out? They try to make a game out of it. At SAP, they have unofficial quarterly awards for the auditors who catch the most outlandish expenses. I think one of the things that is interesting now is sort of the real time nature

of trying to catch expense fraud, right? Because typically, it's really hard to recoup that money if the purchase is already made. There are things that card issuers are offering now as additional features to employers because they're mindful that this is a really in-demand thing for companies right now. They do not want to be bamboozled, and they feel like they can't afford to be.

There was one example you include in your piece about somebody who tried to expense makeup, and her argument was that, you know, she has a customer-facing job, and the company didn't want to pay for that But how much of this spending is actually speaking to maybe a bit of a disconnect between? What employees feel like they need to do their job that they feel like should be covered expenses Versus what work actually provides

There is sometimes actually a blurry line between what is a personal expense and what's legitimate business expense. And so sometimes companies' policies are not super clear, or sometimes they're just so voluminous that it can be hard for employees to figure out what is allowable and what is not. Roughly one in 10 of these expenses are not compliant when employees submit them. And a lot of that, I'm told, is not because it's some nefarious attempt to scam the company. It's often just because

people aren't familiar with what the policies are. What am I allowed to put on the card and what is over the limit and what is actually a prohibited category? category. Callum Borschers is a columnist at The Wall Street Journal. Thank you so much. Glad to be with you. Thanks for having me. Coming up, I came to this story through personal experience. The business of breakups. But first, let's do the numbers. The markets are closed today for the Christmas holiday, so let's look at some other numbers. Yesterday, we had a story about the ever-popular Frasier fir sold as Christmas trees in North

Carolina. That state is number two for Christmas tree production. Oregon is number one, producing some 4.7 million trees each year. We're in the middle of the winter's biggest travel season, with TSA already reporting some 39 million people traveling through security checkpoints. That's up around 6% from 2023. But according to AAA, nearly 90% of travelers will get to their destination on the roads this season, or 107 million people.

The national average for a gallon of gas rose 2 cents to land at $3.04. And for EV drivers, the average for a kilowatt-hour of electricity at a public charging station is 34 cents. You're listening to Marketplace. This is Marketplace. I'm Kimberly Adams. Like we said in the numbers, this is one of the busiest travel times of the year, with people visiting family and some going on vacation. Two of the biggest destinations for that are Disneyland and Disney World. And the parks offer a bunch of Skip

the Line passes, including a new one launched earlier this year. For several hundred dollars on top of the price of a park ticket, you can skip the line on just about any ride. Disney's not the only place selling line skips. It's a trend that's creating a different consumer experience if you can afford it. Marketplace's Sean McHenry reports. When Melissa Holguin bought her first ever Skip the Line tickets a little over a year ago, it was kind of a happy accident. We traveled to Europe and the Vatican tickets, the regular ones were sold out. And the only option, well, one of the options was breakfast and skip the line, which added significantly to the costs.

They were about $70 US per person. For comparison, regular entry tickets were around $20. In return, they could get into the Vatican Museums and Sistine Chapel an hour before everyone else. And that extra hour came with zero buyer's regret. So it was really nice to be able to see all of that artwork the whole way and all the sculptures without really a lot of congestion. We just kept saying, thank goodness we did this. Skip the Line and VIP experiences within travel has been growing quite significantly over the past several years.

Douglas Quimby is the CEO of the travel research firm Arrival. In a survey this year, they found that over half of ticketed tourist attractions offered some kind of skip the line, which makes sense to him. There is a subset of travelers. It represents about a fifth of all travelers. We define them as the affluent travelers, as household income of at least 150,000. This is just a subset of travelers as well that have been less impacted by inflation. So they're continuing to travel. They're continuing to spend. Last month, airline prices were up almost 5% and hotel prices over 3.5%. That's according

to the Bureau of Labor Statistics. Quimby says that the people who are the least affected by all that are the people being catered to. But there is also that risk of social, I don't want to say conflict, but maybe a friction because it does create different classes of travelers. For the people working in the travel industry, this is what they focus on and have built their businesses around. It is definitely one of the first things, if not the first thing, this is what they focus on and have built their businesses around. It is definitely one of the first things, if not the first thing, that clients ask when they reach out to me to start quoting and booking their trips.

Melissa Geter is a travel agent at Magical World Vacations. She also runs a TikTok account where she talks about planning Disney trips. She's part of Disney's Earmarks program and is commissioned by Disney. There are so many different tiers and levels. So it's definitely gone from just like, oh, cool, look, we get to go through the Vaseline to now it's like, okay, this is a deciding factor in our plans, just as it is with, you know, budget, dining, hotel. And that income level distinction, it factors into all that she does. It's very funny when I explain this, because is a lot and I feel like I'm standing

in front of like a cork board with yarn and all of these different things going in different directions. There's a good chance that line skipping offers are going to become even more common. In a rival survey, on top of the 51% of attractions that already offer them, another 18% are thinking about adding them next year. I'm Sean McHenry for Marketplace. Even though the holidays are often about connection, at least some people may be spending this festive time of year nursing a breakup. Most of us will have at least one bad breakup in our lives, and while friends and family

are often all too happy to step in with advice, sometimes the ice cream and sad music and purging of your ex's stuff isn't quite enough. But where some see heartbreak, others see a business opportunity. Jennifer Wilson is a staff writer for The New Yorker and documented the growth of the heartbreak recovery industry. Jennifer, welcome to the program. Thanks for having me. So what led you down this rabbit hole of the breakup business? I came to this story through personal experience.

The beginning of the summer, I was dumped by text message by someone I was very, very excited about. I just had dinner with a bunch of my friends and had told them all about him and I was so excited. They were asking, of course, for an update and I had to update them that he just wanted to be friends. One of them asked me if I had a plan, if I had a breakup plan. I wasn't sure what she was referring to, so I just Googled breakup plan because she

said it with such authority. And I saw all of these worksheets and books and daily planners for helping you get through a breakup. And I discovered this world of breakup coaches, breakup dieticians. And then I found lots of retreats, kind of breakup-themed vacations. And, you know, so I went to my, you know, heartbroken, I went to my boss and said, you know, why don't we send me to some of these luxury retreats and see what they're all about?

So who exactly is getting targeted by some of these businesses? That's a good question. exactly is getting targeted by some of these businesses? That's a good question. And I mean, these businesses, there's a range, like any industry, there's this whole kind of sub-market of breakup coaches who specialize in, quote-unquote, get your ex back. breakdown. Some of these retreats focus on women. I went to a retreat in the Berkshires at the Kripalu Yoga Center called Healing from Heartbreak. That was focused on working

with women. The short answer is everyone. That's kind of why I was interested in this story is because it's hard to think of a person who has not been affected. I mean, this market is huge. And so I wanted to sort of get in early and try to understand what's happening and who all the players are. And do you have a sense of how big this industry is? How much money is actually involved here? You know, no one knows for sure. And what you include in that is hard to say. But I think that the estimates for, you know, it's been estimated that the divorce industry is sure and what you include in that is hard to say. It's been estimated that the divorce industry is worth, I believe that number, $10-15 billion. And as I say in the piece, you have more and more people choosing not to get married,

you have more and more people going through not divorces, but breakups. And so, I think it's a growth market. Well, I was curious, have these kinds of businesses always been around or is there something new happening right now? I think that none of the interventions that the people I spoke with are particularly new. But what I would say is new is the notion that a breakup could be considered traumatic. And so you're also seeing the rise of trauma that has just kind of entered the popular lexicon. And so I think there's more people who are trauma anxious. lexicon.

That's a good question. I think earlier you had asked me who were these programs targeting. It's important to note these are not cheap. Stay at the Heartbreak Hotel in England can run you around $3,000 for a weekend. Some of these breakup coaches can charge thousands of dollars to work with them, depending on how many sessions you need. So this is something that is targeting college-educated, upper-middle-class segment of the population. Jennifer Wilson is a staff writer for The New Yorker, and her piece is called The New Business of Breakups. Thanks so much.

Thank you for having me. This final note on the way out today, the pressure of shopping for gifts might be over for many of us, but that doesn't mean holiday sales are letting up. According to the National Retail Federation, 71% of consumers plan to shop over this next week to use gift cards, return presents, or take advantage of sales and promotions. The NRF predicts holiday spending will reach record levels this year, with consumers spending a collective $989 billion. Our media production team includes Brian Allison, Jake Cherry, Jessen Duller, Drew Jostad, Gary O'Keefe, Charlton Thorpe, Juan Carlos Torrado, and Becca Weinman. Jeff Peters is the manager of media production,

and I'm Kimberly Adams. We'll see you tomorrow, everybody. This is APM.