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The Impact of Cost Increases & Manufacturing Shortages on Ford’s Truck Sales

Throughout its entire existence, Ford has played major roles in the automobile industry, from manufacturing to vehicle innovation and more. Recently, however, among parts shortages and supply chain disruptions, its sales took a surprising year-over-year decline. 

Ford recently announced a slight gain in quarterly sales despite experiencing a slight decline in September. Nonetheless, the company’s year-over-year sales in the U.S. have dropped significantly and are down by about 9%.

Why exactly did their sales slump? There are a few contributors, primarily economic fears, a strengthening dollar, rising interest rates, and parts shortages affecting high-margin trucks (like the F-150) and SUVs. 

Let’s take a closer look at how these cost increases and shortages affect Ford’s truck sales, why this is happening, and how it may affect Ford F-150 auto insurance rates.

The Economic Factors at Play

The current state of the economy is a big contributing factor to Ford’s decline in sales. Ford experienced its best truck sales in 2015. Since then, there has been an overall economic slowdown affecting Ford’s sales. 

To make matters worse, in Q2 2022, GDP growth weakened significantly, and some experts believe that we are heading toward another recession.

With an uncertain future, many people are choosing to save their money instead of spending it for discretionary purposes, like on a new vehicle.

In addition, interest rates are on the rise. Ford’s truck buyers are mostly middle-class Americans who finance their vehicles. As interest rates increase, these buyers are less likely to purchase a new vehicle.

The Parts Shortage and How It Affected Ford’s Sales

Another reason for Ford’s decline in sales is due to a parts shortage. Ford has been struggling to keep up with the demand for its trucks and SUVs, and the company has had to halt production at some of its plants due to this shortage.

This parts shortage is largely due to the Trump administration’s tariffs on imported steel and aluminum. These tariffs have caused the prices of these materials to increase. As a result, Ford has had to pass these costs onto consumers in the form of higher prices for its vehicles, and therefore, many potential buyers are opting for cheaper alternatives.

The effect of these cost increases and shortages on Ford’s truck sales is significant. In the first half of 2022, Ford’s truck sales were down by about 8%. This decline is expected to continue into 2022.

Rising Interest Rates Affecting Buyer Interest

The interest rates on new Ford trucks have been rising along with the overall cost to borrow money and insure vehicles. This is due to the Federal Reserve’s decision to gradually raise interest rates in their aggressive fight against inflation.

Because Ford’s truck buyers are mostly middle-class Americans who finance their vehicles, these buyers are less likely to purchase new ones. In addition, the higher prices of Ford’s trucks due to the Trump administration’s tariffs make them even less affordable.

For example, the new 2023 Ford F-150 has a starting price of about $34,000. If you finance this vehicle at an interest rate of 5% over 60 months with a down payment of about $5,000 including sales tax, your monthly payment would be about $547. 

However, if interest rates continue to increase, your interest rate on your monthly payment may follow suit. Let’s say it rises to about 7%. If this is the case, your monthly payment would increase to about $575. This is an increase of $28 per month.

Anyone planning on financing an F-150 should anticipate this aggressive rise in interest rates as a result.

Other Factors Affecting Ford’s Truck Sales

In addition to the cost increases and shortages, there are other factors that are affecting Ford’s truck sales. 

The Strong Dollar

The strong dollar is making Ford’s vehicles more expensive for buyers in other countries. Ford exports large percentages of its vehicles and parts, and these exports are important for Ford’s bottom line.

The strong dollar, therefore, has caused Ford’s export sales to decline as the relative international price of Ford’s vehicles rises as importers bargain for lower prices.

Gas Prices

In addition, rising gas prices haven’t helped Ford’s sales. This is affecting Ford’s truck sales as not only have they become more expensive, but they’ve also become more expensive to fuel.

These rising gas prices may cause many potential buyers to reconsider their purchase of a new Ford truck, though Ford remains optimistic.

How This May Affect Ford F-150 Auto Insurance Rates

The decline in Ford’s truck sales will likely have a direct impact on Ford F-150 auto insurance rates. As fewer people purchase Ford trucks, there will be less demand for Ford truck insurance. This could lead to a decrease in Ford truck insurance rates.

However, keep in mind that even with a decline in sales, there may still be a large number of Ford trucks on the road: In 2021, it was named the best selling vehicle in the U.S.

As a result, the number of Ford trucks on the road may help or hurt its riskiness as a vehicle in the eyes of insurance companies, who may either raise or lower average insurance rates as a result alongside overall increases in average insurance rates and the costs to own a Ford F-150.

If you are a Ford truck owner, shop around for the best Ford truck insurance rates. Make sure you compare quotes from multiple insurers to get the best rate and keep your driving record as clean and safe as possible.

How will these challenges factor in for you?

Despite the challenges Ford is facing with cost increases and parts shortages, the company is still committed to providing quality trucks for its customers. Rising interest rates, rising insurance rates, and an overall increase in the cost to purchase an F-150 may make it more challenging for you to buy one, but it’s not impossible.

Take the time to shop around and find the best deal. The used car market is cooling down in conjunction with the housing market, and some who currently own Ford F-150s may no longer be able to afford them. Put in the time and effort to look, and you’ll likely come across something you can finance.

Stay diligent, do your research, and happy driving.

Luke Williams writes and researches for the car insurance comparison site, QuoteInspector.com. His passions include insurance and helping drivers understand market fundamentals and how they affect their vehicle purchases.

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