Massive Collapse in Used Car Prices and Bankrupt Dealers Is Coming Right Up

oee

3 years ago

May be that is good thing. The market will be flooded with liquidating auctions. That will lower prices and lower…inflation.

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Avery

3 years ago

KIA remains popular in Chicago –

https://cwbchicago.com/2022/11/carjackings-plunge-as-kia-boys-fuel-a-185-increase-in-traditional-auto-thefts-in-chicago.html

https://cwbchicago.com/2022/12/chicago-kia-boy-killed-a-man-bragged-about-it-then-tried-to-kill-two-more-people-prosecutors-say.html

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xbizo

3 years ago

Does anyone believe that people buying $25,000 cars for $50,000 was anything more than an act of desperation doomed to fail?

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StukiMoi

3 years ago

Reply to xbizo

The same halfwits continue to believe so wrt buying $100,000 condos for $a million+. And $250K houses for $10 million. In the process similarly destroying value and wiping out the US once-was stock of productive capital. Just on a much, much larger scale than the car guys could ever hope to.

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Southsiders

3 years ago

I wonder if there is any softness showing up in toys markets like RVs, atvs, boats and etc. I told my wife in 2020 we’d look at rv’s in 3-4 years when everyone got tired of the ones they bought in the craze. Might be a little soon yet.

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Avery

3 years ago

This is a good thing!

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Doug78

3 years ago

France-Argentina very soon. No time to think of less important things.

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FlyNavy1

3 years ago

Reply to Doug78

If you think used car prices are coming down, check out the boat market.

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Doug78

3 years ago

Reply to FlyNavy1

I am in the middle of something very important now.

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Doug78

3 years ago

Reply to Doug78

3-3 now! Incredible.

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TexasTim65

3 years ago

Reply to Doug78

Argentina wins cementing Messi as the GOAT!

Happy to see him finally get his World Cup trophy.

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Doug78

3 years ago

Reply to TexasTim65

It was a very good game. Soccer at its best.

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HippyDippy

3 years ago

Reply to FlyNavy1

Yeah. I met this really amazing person, who happened to be the kind of person I am glad is incredibly financially wealthy. Even better that he had inherited it and never had to work. His grandfather had founded some state bank somewhere up north, and he still can’t spend it all himself. But he was looking at boats some six months ago. All around 100 feet long, and he couldn’t believe the prices then. Of course, he had just bought a 10000 sq ft house just to store his stuff while he was at sea. He saw where all this was headed, and though he wasn’t worried about himself, he never liked the idea that money was God, and had a lot of concern about us commoners. And yes, his father did tell him that money was God. What a sad way to live. But he was as cool as you can get in my opinion.

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StukiMoi

3 years ago

Reply to FlyNavy1

As opposed to fully functional and connected, brand new condos in supposed “ghost cities”, and fully functional cars: Boats are one area where some of the more-expensive-to-keep-running ones may actually end up literally worth less than zero.

Commercial, and some recreational, boats made of metal, have a baseline recycle value. At the very worst. They’re also likely repurposable for productive use in 2nd/3rd world places. But GRP ones with “everlasting” how-the-heck-do-we-deal-with-this resins holding them together……..

Eastern European smugglers/gangsters, during the Yeltsin years, picked up a good chunk of the gofasts left suddenly worthless once the “Miami Vice” boom in 80s turned into the LA riots/Lightsleeper bust. But who knows if there will be enough Gulf Staters and Chinese interested in boating, to maintain any sort of floor under the falling prices for the sheer mass of so called “luxury” floating snot having been launched over the past decade or two for no other purpose than serving as Instagram props .

Only upside is, maybe the guys who are currently straight up drowning in The Med, and even English Channel (nothing spells decline like that. Talk about solved problem…), can afford something a bit less hopeless, than what they currently attempt passages in.

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Casual_Observer2020

3 years ago

OT: Putin is closer to the end of his life than most think. His health crisis is worsening and he may look to appoint a successor soon to keep his legacy in tact. The missiles fired from Ukraine keep getting closer to Moscow.

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Avery

3 years ago

Reply to Casual_Observer2020

At least he lived long enough to see the Cubs win a World Series.

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Casual_Observer2020

3 years ago

I got a deal on a 2020 new vehicle bought in Feb 2021. 8k below its msrp and 4k below invoice. The thing had 3k miles on it. Never buy big ticket items unless you are getting a deal.

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Salmo Trutta

3 years ago

Reply to Casual_Observer2020

The doctor across the street invented the arch support for Dr. Scholl’s. He owned 4 miles of shoreline on the Lake of the Ozarks. He had over 30 fishing rods and reels in his living room. But his car was over 7 years old.

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Casual_Observer2020

3 years ago

Reply to Salmo Trutta

That’s ashame. He should live a little.

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HippyDippy

3 years ago

Reply to Casual_Observer2020

Yeah, old Sam Walton was a fool like that as well. Glad you know better.

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StukiMoi

3 years ago

Reply to HippyDippy

You can’t successfully compete at solving “other people’s” problems, against those solving their own. Tge ones eating their own dogfood will always beat the ones trying to second guess what other peoples dogs like. The very reason Wal-Mart is where it is, is because it was founded/ran/inspired by the most pathologically price-obsessed miser that ever lived.

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HippyDippy

3 years ago

Reply to StukiMoi

He was that, but the wealthy never spend that much on that which does not profit them, while the poor tend to “live a little” every time they have an “extra” dollar. Very few of those nice cars are ever owned by those driving them. They buy their cars new, and lose half its value just by buying it. That’s not living, that’s slavery, and so many sell themselves into bondage just so others will look at them and think they’re wise. So tell me; Walton got his money selling things to people that bought them. I’ve bought from him during his time, and I was not ripped off. But because one thing he did that had nothing to do with the subject was not approved by you, everything he did was wrong. Apples are not oranges. He can be a psycho, but at least he did not throw his money to the winds and call himself wise.

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vanderlyn

3 years ago

Reply to Salmo Trutta

30 fishing rods? sounds like a party boat captain. sounds idiotic.

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Lisa_Hooker

3 years ago

Reply to vanderlyn

Rods and reels. Maybe only 15 rods?

I’m not the only one that stores rods and reels separately.

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Casual_Observer2020

3 years ago

2023 is going to be like 2008/2009.

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Captain Ahab

3 years ago

Reply to Casual_Observer2020

Likely much worse. Everything has farther to fall, and it is truly global with few hiding places.

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Casual_Observer2020

3 years ago

Reply to Captain Ahab

Yes. With high interest rates. Powell is not backing down.

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Captain Ahab

3 years ago

There should be no surprise that used car dealers are feeling some pain.

Leverage comes with forward and reverse gears. In overdrive, the impact of leverage on the upside and downside is HUGE. The downside gets even worse after a decade of near zero interest rates, and insufficient capitalization.

The bad news: we are still in the early stages. What we are now seeing are the low-hanging fruit: high leverage, fixed supply and falling demand, a fixed-variable cost curve that sets the breakeven for dealerships, little/no capital set aside for adverse conditions… All the lessons of Econ and Finance are about to make themselves known.

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worleyeoe

3 years ago

Woohoo! About damn time. First the used car market, then more of the same of new cars, and finally housing. LOVE IT!

Mish’s chart the other day from Experian that shows the AVG Toyota Rav4 car payment being $600 is just nuts.

I hope anyone who bought at these insane prices over the last two years who couldn’t really afford their payment gets what they deserve: foreclosure. That way we get to see if rent & mortgage forbearance make a comeback, so we know that we’re all screwed in the END.

Congress is willing to save the few to kill off the many once the mother of all economic disasters comes around not too far down the road.

Mortgage rates are within a month of breaching 6%, headed for 5% by spring. Once this happens, absent a real recession, housing will stabilize with MAYBE 10% downside. Houses in my neighborhood are still going up over the last 4 months.

Just beyond belief crazy.

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FlyNavy1

3 years ago

Reply to worleyeoe

What neighborhood are house prices still going up?

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TexasTim65

3 years ago

Reply to FlyNavy1

South Florida. But they are finally showing signs of topping here.

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worleyeoe

3 years ago

Reply to FlyNavy1

Woodstock, GA. We’re right next to Roswell, Alpharetta, & Milton, 3 of the top 5 most expensive cities to live in North Atlanta.

My neighborhood is 360 itty, bitty, planned neighborhood of 1,300 SF homes that are ~ 23 years old.

So our prices will be some of the last to drop, since there’s literally nothing below us.

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KidHorn

3 years ago

Reply to worleyeoe

Wow

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Lisa_Hooker

3 years ago

Reply to worleyeoe

Prices at the bottom won’t drop anywhere near as much.

There’s nowhere else to go.

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hmk

3 years ago

A year ago I found out my 2 year old HD GMC pickup could be sold for at least what I paid for it, but alas I could no get another car to replace it. I figured I would get an SUV instead since another pickup was impossible to get. Anyway the dealer told me to put an order in and I must have hit the lotto as he said GM accepted it. Two months later it came in. I sold my pickup online in 2 days for what I paid for it. A BMW dealer? wanted it. When I sold it to them I wondered if they could even make any money on it at the price they paid me. Well, I got an email from the new owner, he wanted the combination for the console safe, I did give it to the dealer at the time of the sale. Anyway I asked him what he paid for it and it was 7k more than the dealer gave me. WTF thats crazy, that was more than a new pickup would cost, although it was nearly impossible to get one at the time. Incredible time period that this type of ridiculous arbitrage could happen in used cars. I don’t know if Mish posted it but there was a good interview on this topic with Danielle Dimartino Booth on this very subject recently. I was wondering listening to the interview how the retail buyer could take advantage of that pricing when the time came. I see that its happening now. One option as mentioned is to find someone or dealer that has a dealers license that is willing to buy it at auction for the $600 markup. As aside note, I got into a MVA on October 2, and its still not done. I was told it would take three months to fix. I verified this by shopping around, most collision shops would not even take it. Crazy times were are in.

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TexasTim65

3 years ago

Reply to hmk

Your experience selling your pickup for more than it cost new is exactly what the manager of CarMax told me was happening in 2021.

He said *everyone* who had a lease that was expiring was buying the car for the residual price (agreed upon at the time the lease was signed 2-3 years prior) and immediately driving to CarMax (and presumably Carvana too) to sell it for cash and making a profit which was something that he had never seen in his 25+ years in the business! He said corporate stopped that policy quickly to prevent a massive inventory build up.

CarMax and the dealer you sold to buy at whole sale prices too and then resell at retail (hence the +7K price on your truck being resold) so that tells you how out of whack things got.

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Doug78

3 years ago

I wonder how many car manufacturers actually make money building electric cars and when the crunch comes will they have to cut the loss-making electric car manufacturing to save the bottom line?

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TexasTim65

3 years ago

Reply to Doug78

I imagine they will make a profit as long as there are government subsidies on EV’s.

In essence, the subsidies are a give away to the car manufacturers to enable them to make money because they just increase the price of the EV by the amount of the subsidy so that they get it entirely and not the consumer.

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HippyDippy

3 years ago

Reply to Doug78

Bottom line is sacred for public corporations. It’s mandated by its creators; the state.

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TexasTim65

3 years ago

I play beer league hockey with the general manager of the local CarMax store and a salesman who works there for him. Both guys have been saying for months (July time frame) that sales have been dead (roughly 1/3 what they were the year before). They both told me that pretty much the only people who are buying are people who have insurance money (ie their current car was totaled in an accident and they needed another car).

Neither of them think anything is changing anytime soon.

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Zardoz

3 years ago

Might be the end of the whole car lot system…. that’d be a good thing.

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Jcbl

3 years ago

You can see prices falling on Bring A Trailer and other auction sites as well. Also sell through rate on these sites auctions is declining as there are increasing numbers of reserve not met auctions. It’s been very obvious this was coming for months.

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Matt3

3 years ago

Reply to Jcbl

You’re correct. I watch the auctions and prices are declining. Still above original MSRP on some vehicles. In 6 months or so, I might actually bid.

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tedr

3 years ago

I have no sympathy for any of them. Buyers, sellers, or dealers. Stupidity and greed go hand in hand.

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Zardoz

3 years ago

Reply to tedr

How’d you get your car? Inheritance?

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MikeC711

3 years ago

I had heard this was coming, sadly, my Jeep Patriot couldn’t wait to die. I was thinking … 6 months with rubberbands and glue … then transmission dropped out. Looked for a late model used car for wife (figuring, as a home renovator, I beat on cars … I’d get her hand-me-down) … many used cars as simple as the Rav 4 were at $35K and more for 3 year old cars. 8 year old cars were going for 28K. So I do believe it’s coming, but I did not have the luxury of waiting for it.

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