Used-Car Market Profits from Carmageddon

Many Americans are priced out of the new-car market.

At wholesale auctions, used-vehicle prices rose 4.0% in March from March last year, according to Manheim, the largest auto-auction company in North America, which runs about 8 million vehicles through its auctions a year. In the chart of the Manheim Used Vehicle Value Index, which is adjusted for mix, mileage, and seasonality, note the spike through October 2018, alongside the spurt of the economy in Q2 and Q3, and the subsequent decline that left prices at still very high levels:

At these wholesale auctions, used mid-size cars – total duds as new vehicles – saw such brisk demand in March that prices jumped 7.2% from March a year earlier. Except for vans, all major vehicle classes experienced wholesale price increases compared to March 2018, according to Manheim, but the surge in the prices of midsize cars stands out:

Used-vehicle sales in the US will likely be just under 40 million units this year, over twice the size of the new-vehicle market (about 17 million units). Backing the vast used-vehicle market is a liquid wholesale market, including auctions where rental car companies, leasing companies, and other entities are selling their vehicles to dealers that will then retail them as used vehicles.

In contrast to fairly brisk demand for used cars on the wholesale side, new cars have become total duds for automakers.

For example, when Ford announced its Q1 new-vehicle deliveries (-1.6%) yesterday two days behind everyone else, it said that sales of cars in the first quarter had plunged 23.7% from a year ago to just 98,265 in the quarter, and that sales of trucks – pickups SUVs, and crossovers – had risen 4.4% to 491,984 vehicles. For Ford, car sales are now down to merely 16.7% of total sales. And a big part of that is to rental fleets.

Cox Automotive, which owns Manheim, estimated that industry-wide new-vehicle sales to fleets rose 4.5% year-over-year in March; but that sales to retail customers fell 4%. The largest fleet buyers by far are rental car companies, and they’re still big buyers of cars.

These cars that were sold to fleets will enter the used vehicle market sooner or later via auctions, where dealers buy them to refill their inventories of used cars. And retail customers, who are increasingly spurning new cars, are buying used cars.

The rift in terms of cars between what is happening in the new-vehicle market and in the used-vehicle market is getting wider: On the new side, car sales have been getting crushed since 2014, while sales of “trucks” – pickups, SUVs, crossovers and vans – have become red-hot. Over the four years of Carmageddon, as I call it, from 2014 through 2018, industry-wide new-car sales have plunged nearly 30% to just 5.5 million units while new “truck” sales have soared 38% to 11.8 million units. This is the chart I like to show:

And many of these dwindling numbers of new cars are being bought by rental fleets that will two or three years later place them on the used-car market, where retail customers have the hots for them. So why is this?

Sticking with our example of Ford: Even as total car sales plunged 23.7% in Q1, sales of the small Ford Fiesta surged 30% year-over-year to nearly 16,000 units. For the full year 2018, even as total car sales plunged 17.7%, Fiesta sales rose 12% to 51,700 units. At the current pace, Fiesta sales are going to blow away last year’s total.

In 2018 as well as in Q1 2019, the Fiesta was the only Ford car model with increasing sales (well, OK, in Q1, sales of the Police Interceptor ticked up 1.6%). The Fiesta is now just a hair behind the Mustang (sales down 12% in Q1) and will likely surpass the Mustang and become the number two best-selling car in the Ford lineup (behind the Ford Fusion, sales down 3.5% in Q1).

The Fiesta is Ford’s cheapest vehicle. The base model comes with an MSRP of just over $14,000; decked-out versions cost more, but deals are available. So this is less than half of the national average transaction price of all new vehicles in Q1 of $33,300.

Wall Street hates the Fiesta. The full-pop retail price of a Fiesta is less than Ford’s profit margin on nicely equipped F-150. Think about that for a moment.

The Fiesta has paper-thin profit margins (though it’s built in Mexico), and Ford doesn’t even push it.  It’s designed to keep Ford’s Corporate Average Fuel Economy (CAFE) inline. Without the CAFE rules, Ford might not build it at all because there’s no money in it. But there is growing demand for a car in this price category.

And this price category is what powers the used-car market. $14,000 buys a nice fully-loaded three-year-old car. Heck, $10,000 does. There are many Americans for whom that price range is the maximum. But on the new-vehicle side of a dealership, there is almost nothing left in that $14,000 category, except for a bare-bones small car, such as a Fiesta.

This is a market that automakers have mostly abandoned because they’re having trouble making big-fat profit margins at that end of the price scale. So it’s not that Americans don’t like to buy new cars any longer. It’s that most new cars have been priced above where demand for cars is, and new-car sales have collapsed, even as Americans are buying used cars to get what they want at the price they can afford.

The problem with Mercedes and BMW is that they don’t yet sell luxury pickups, though they’re finally figuring it out. Read… Q1 Carmageddon for GM, Fiat-Chrysler, Toyota, Nissan, Mercedes, Mazda…

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  91 comments for “Used-Car Market Profits from Carmageddon

  1. nick kelly
    Apr 5, 2019 at 11:43 pm

    The shift to real trucks is real enough but I don’t quite get the rationale for calling say the Honda CRV a different type of vehicle. (I”m no expert on this but I’m assuming the CRV is a ‘crossover’.

    Since it’s just a Civic with a different body why is it any more different than a Honda wagon? (not currently avail but it has been) which I assume would be classified as a car.

    The reason for making this point is that I think the challenge for the automakers is not as bad as it might seem. (in this respect only, they are in trouble in others, like price )

    They are masters at sticking different sheet metal on the same basic platform, including Ford and GM, the most famous being the Ford Falcon’s emergence from surgery as the Mustang.

    In other words, it is the sedan body that it is out of favor. In my opinion this is more about its perception than any fundamental difference in utility. But we can’t interfere with whatever image the customer wants to project.

    • Paulo
      Apr 6, 2019 at 7:10 am

      Very good comment.

      I don’t understand the attraction of modern ‘car trucks’ and crossovers, either. Neither fish nor fowl, be.

      This article mentioned rentals. When I see rentals on the road they are either big necessary crew cab work trucks for a visiting crew, or sub-compacts. Not much in between.

      I was interested to see the drop in van prices. I assume they are mini-vans the soccer moms left on the car lots. My son is going to buy a cheap van for his electrical company and this is a good news stat. They actually drive quite well, and make decent shop vehicles. For remote or rough building sites he has a truck to sub in.

      What amazes me is the proliferation of rental rvs in BC. I have no idea if this is widespread, but the season is looming. Apparently, Europeans fly to Calgary or Edmonton and drive them out to the BC Coast. I’m not sure if they are re-positioned by reverse bookings, but most likely are. This is a very very expensive vacation. It would be far cheaper to stay in hotels and B&Bs as opposed to paying mileage and camping fees.

      • Chris
        Apr 6, 2019 at 10:30 am

        Sitting up higher makes people feel safer, more powerful, and that they have more social status. Seriously, that’s it, and they’re willing to pay thousands of dollars for those feelings.

        • Jack
          Apr 6, 2019 at 11:12 am

          It does make me feel safer. I can see over the rear of a Ford Expedition or a Chevy Suburban. I do not feel more powerful or feel that I have more status.

        • Wisdom Seeker
          Apr 6, 2019 at 5:17 pm

          People aren’t switching from “cars” to “trucks” but from traditional low-slung cars to vehicles that are higher off the ground, easier to get into and generally more capable, but not classified as cars due to bureaucratic inertia. This is not a bad thing, just a data-classification issue.

          IMHO the shift is not about power or status, but visibility & safety (Jack’s comment) and also ergonomics and functionality.

          Parents have more trouble slinging kids into car seats that are low.

          And older poeple have trouble getting into traditional sedans with the lower seats.

          Vehicles with higher ground clearance (and often AWD) can drive more safely than traditional autos in more varied conditions.

        • Dave
          Apr 8, 2019 at 4:29 am

          I have an 2006 Xterra, gas guzzling beast that has been paid off for years now. I also live in the state with the highest gas taxes in the country (and some of the worst pot hole riddled roads in the country, funny that).

          The truck is designed to take abuse with its body on frame construction and heavier duty suspension set up compared to a car. I can easily manage snow days to get to work (as I am a mandatory worker, ICU nurse). I can also accidentally hit potholes which would blow out tires, bend rims and break suspensions on lighter smaller cars. And trust me in PA there are plenty of those aforementioned potholes.

          As most other people are driving bigger vehicles now, the height advantage has gone away a bit and is more a parity issue. A car would be a distinct disadvantage today.

          I would buy a bit smaller and more efficient vehicle if I ever have to replace my truck, but it would still need to fulfill the role of the Xterra. Perhaps the time is approaching, but I keep managing to wrench on my truck when stuff breaks, so far at least.

          So there are other reasons for owning besides social status.

        • Steve
          Apr 8, 2019 at 7:10 am

          Replying to Dave from PA,
          Anyone else doing what I’m doing? I have a Nissan NV 2500 HD truck which is my home when I’m in the USA (PA).
          I “moved up” from a Chrysler Town and country van.

        • Rasdolf
          Apr 15, 2019 at 8:52 pm

          When I’m driving a big mofo pick-up, I AM THE KING! My social status is through the roof. The chicks sprint to my window to beg for my favor. I don’t give it to them though because . . I’m the KING!

      • RD Blakeslee
        Apr 6, 2019 at 11:26 am

        “… the attraction of modern ‘car trucks’ and crossovers …”

        Depends of the distinctions within the category, which can suit some situations and drivers.

        My situation (tall, older man) needing a compact, easy-driving car-like vehicle with good visibility, large doors, a high roof and more cargo capacity than an automobile’s trunk. Rough rural roads, off-road use sometimes, lots of snow in the wintertime, all-wheel drive and ample road clearance needed.

        Subaru Forester fits that specification. best, I think.

        • TruckMan
          Apr 6, 2019 at 11:45 am

          I was on a chainsaw course last week. Only guy not driving a truck had a Subaru Forester

        • ft
          Apr 6, 2019 at 12:07 pm

          RD, do you have a Forester? I do and I think you’re right. My only regret with mine is that my daughter-in-law has pretty much taken it away from me.

        • Bobber
          Apr 6, 2019 at 6:24 pm

          I have the minivan because I don’t want my kids banging doors against $100k automobiles in Seattle. I know a door ding can ruin some peoples’ lives.

      • Mike G
        Apr 7, 2019 at 1:00 am

        For Europeans rental RVs are a unique North American travel experience. It’s not about saving money over a compact rental car and motels. In California the RV rental market is almost entirely Europeans.

    • Just Some Random Guy
      Apr 6, 2019 at 10:35 am

      I know this may sound odd to you but here it goes….not everyone in the world wants or needs the exact same thing you do. Some people want/need a sedan, some want/need a cross over.

      Mind. Blown. Right?

      • RagnarD
        Apr 9, 2019 at 9:26 am

        In the 1990s, how many white middle class college girls from Ohio actually connected with the emotions of Eddie Vedder in Pearl Jam? I’m guessing two. How many were Pearl Jam “fans”? Tens of thousands?
        So, yeah, that’s a “want”. Lots of folks can be persuaded to want something. Needing it is something all together different.

        BTW, I’m not a Pearl Jam fan.

    • Dale
      Apr 6, 2019 at 1:23 pm

      The BEA classifies CUVs as trucks, making it look as though truck sales have been great. The EIA, however, generally requires a CUV to have 4WD to be considered a truck. With the EIA system, car sales appear to be approximately flat.

    • BoyfromTottenam
      Apr 7, 2019 at 8:36 pm

      Nick – my take on the sedan body story is that they have slowly become too much like sports cars – each year they have lower roof line, higher sills, poorer rear vision and less interior space. I am over 70 and recently switched from a practical pickup truck to a Suzuki 4wd after trying sedans. The high percentage of 2wd versions of SUV such as Honda CRV, Toyota Kluger, etc. indicates to me that the buyers are looking for cabin space and visibility, not off-road capability. Even Mercedes have fallen for this – the C class of today is less roomy, lower and has poorer all-round visibility than in 2010. Is this progress?

      • Lion
        Apr 7, 2019 at 10:08 pm

        Agree about sedans becoming sports car like.

        Not sure what era you’re from, but the 1st cars my friends and I drove were cars like the Fairlane, Coronet (with push button shifting), Bel Air, etc. Due to the RWD drivetrains of the time, these car sat higher and were easy to hop into and out. Then with the changes in gas prices of the early 70’s and the move to FWD, everything started shifting lower.

  2. Tony Cannon
    Apr 6, 2019 at 12:26 am

    Here in the UK, Ford sell the best selling car, followed by GM… The Brits have always bought American cars and probably always will. That car is the Fiesta but it will never be the big pick-up trucks, as they don’t fit on our roads, it’s as simple as that…..

    • Jos Oskam
      Apr 6, 2019 at 2:22 am

      Probably the same all over Europe. These behemoth pickups simply do not fit in standard roads, parking spots, underground and multistorey car parks, garages, ferries, driveways and what have you.
      And, people will shake their heads and laugh at you.

      • D.J.
        Apr 6, 2019 at 5:41 am

        While it’s true that huge pickup trucks and SUV’s don’t fit on some European roads, I think the greatest difference between the two markets is the cost of fuel. Fuel is far cheaper in the U.S. than in most European countries, so fuel economy is far less important in the U.S. Most Europeans have to buy small cars in order to be able to afford the fuel to power them.

      • Wolfbay
        Apr 6, 2019 at 6:58 am

        Just as important is gas mileage. Fuel is much more expensive than the US.

      • Marc Labbe
        Apr 6, 2019 at 10:04 am

        More,
        These monstera are probably too big for half of the bridges in Europe

        • Javert Chip
          Apr 6, 2019 at 10:01 pm

          Probably double the fun to watch a “dual reel wheel” (actually 4 wheels on 1 axel) give it a try…

          About 6-7 years ago, this was a big status vehicle in…get ready for it…San Francisco. That didn’t last long.

      • RD Blakeslee
        Apr 6, 2019 at 11:30 am

        As Paulo can attest, big vehicles have a hard time in Vancouver CA, too.

        On a trip back from Alaska through Vancouver some years ago, we had a hard time parking my pickup with a slide-in camper where we wanted to dine.

        • Paulo
          Apr 6, 2019 at 12:41 pm

          You know what RD? For the last 20 years or so it is/has been almost impossible to park any large vehicle in public lots, etc. (Supermarket lots). Large trucks often have to park quite aways from the store and take up the full painted-out area. I know a few older (men) quite happy to have their handicapped placards for just this reason.

          We really like our wee Yaris and will be sad when it wears out. Still waiting on Ford Canada for the final word on Ranger discount. I might have to turn the Yaris into a pickup if I don’t hear soon. :-)
          I just had a flashback to an absoutely awesome hunting rig we used to have. A ’71 VW Bug. It went anywhere, and with the engine in back it was awesome in the snow. It was my moms, and what she didn’t know didn’t hurt her.

  3. Frugal by the Bay
    Apr 6, 2019 at 2:18 am

    We’re planning on buying a new car now that we’re seeing some great deals. As a four person family, it’s getting tough with only one vehicle.

    Not sure how people did this in the 50s, guessing preschools were better and nearby. Don’t get me started on how a houses in our neighborhood cost 1.2 million or more, but the local preschools are all state-subsidized crapbags. Is this really sustainable?

    Sorry back to my story. Thinking of the Ford Escape, base model, hoping to get it for 20.5k. Any advice? Best time to buy?

    We’d buy a compact if we didn’t have two toddlers with jumbo rocketship car seats. Car seats these days almost force you to get a crossover or minivan, otherwise you can’t move your seats back :(

    • Frank
      Apr 6, 2019 at 11:12 am

      Ain’t that the truth about car seats. I drive a 2016 Audi A3 and with the 3 year old grandchild in the backseat behind the passenger seat,that seat is non funcitional unless that person is another child. My 5’7” wife always has to ride behind the driver in order to fit in the vehicle.

    • ft
      Apr 6, 2019 at 11:19 am

      We had an Escape for 12 years and, except for when its computer blew up, it served us well. Replaced it 2 1/2 years ago with a Subaru Forester XT that we like better.

    • Paulo
      Apr 6, 2019 at 12:52 pm

      Frugal,

      There were no preschools then. K was 1/2 days. Kids walked home from school. As for transport, kids used to ride in the back of station wagons and fight over who got the old bed mattress (at least we did). As late as the ’80s my own kids would ride in the back of our pickup truck. How we survived I will never know? A three day trip to Minnesota to visit my Dad’s folks, kids in the back, fighting. No seatbelts. Plug-in swamp cooler. When it got too hot crossing Nevada my Dad would drape a wet cloth on his bald head. Did I mention kids fighting? Everyone blaming our poor beagle for the latest fart.

      Fast forward to today. My Daughter brings up our grand daughter for a visit and you think it was a shuttle launch she’s so strapped in. Even the dog is in a crate. My son got stopped last week for using his phone and the RCMP gave him shit for not having his dog strapped in. Son wasn’t actually using his phone, but it was on the pax seat and plugged in so they gave him a warning and talk. Unbelieveable.

      • stan6565
        Apr 7, 2019 at 2:12 pm

        :)

        ha :)

        many many MANY moons ago, i (and my parents) thought nothing of my ski coach fitting me into the front bonnet space of his beaten up vw beetle, for he had another 7 kids (and skis and all gear!) in the cabin to take with him on a 1hr drive down the mountain. the second coach failed to show up because of a mechanical failure ( i don’t know what the second car was but i seem to remember it was a peugeot).

        we all cheered and laughed, before and after.

        today, my poor old coach would have probably been dragged out and shot in the head by the roadside by the pc gestapo. :(

      • JohnnySacks
        Apr 8, 2019 at 12:07 pm

        Immortality isn’t free. Child car seats have to look like the space shuttle launch cabin and must be installed at the police department, otherwise, how could the manufacturers get $100+ for the latest and greatest? You are a horrible negligent parent deserving public stoning for putting your children to imminent death for using any car seat made in the last 20 years that can be bought for $0.05 on a dollar at Saturday yard sales.

  4. tom
    Apr 6, 2019 at 6:49 am

    I would have to go back to the Ford 6.0, last time I purchased a new work truck. Been used ever since then. Personal vehicles we buy used as well.

    Can I afford to buy new? Yep
    Just choose to buy used.

  5. Wes
    Apr 6, 2019 at 7:02 am

    Well said Mr. Richter. If I remember correctly Enterprise sells their used rental cars directly to the public.

    • Apr 6, 2019 at 11:10 am

      Yes, most major rental car companies tried at one time or another to retail some of their units directly. Some continue, others gave up on it.

      We used to have our own rental fleet (500 vehicles) and sold the vehicles directly on our used car lot after two years. That was good deal. But we already had the facility including the repair shop and detail shop, the advertising, the customers, the sales staff, etc. So it was just some additional topping. If you have to set up your own sales organization just to sell rental cars, it becomes a lot more difficult and expensive, and running them through the auction can be the better choice.

      • Petite
        Apr 6, 2019 at 12:56 pm

        Most people consider rental cars ‘off road vehicles’ and treat them poorly. I find it hard to believe there is much demand for used rental cars.

        One of my local dealership people told me they don’t sell cars much anymore, they lease them. It would seem the market for previously leased vehicles would be the bulk of the sales. I would think leased vehicles are treated much more kindly.

        • Apr 6, 2019 at 4:27 pm

          I drive quite a few rental cars. Some of them have over 30k miles on them. In recent years, all of them have been nice and in excellent condition. Sure, there is always a moron out there who mistreats any vehicle, but most rental car customers are like me: we drive them normally and try not to do anything stupid.

    • Just Some Random Guy
      Apr 6, 2019 at 11:38 am

      Used cars miles are like dog years. Multiply by 7. For example a used car with 20K miles is really 140K miles “normal” car miles.

      I rented a Ford Focus last week. Had 28K miles on it, which is unusually high for Avis. The thing was full of rattles, plastic coming apart and above 70 mph if the A/C was on, it vibrated hard. The It was falling apart before breaking 30K miles.

      You’d have to be insane to buy something like that from a rental fleet. A UAW built POS and from a rental fleet? Might as well just take your money and burn it.

      • Apr 6, 2019 at 11:45 am

        By another measure, the most amount of money you burn the fastest with an automobile is when you buy it new and register it into your name. That moment, it becomes a used vehicle, and the value plunges by thousands of dollars in just one moment. It’s like a flash crash from which there is never any bounce-back.

        • d
          Apr 7, 2019 at 10:11 am

          AKA Tarmac devaluation. Generally 20% +

  6. robt
    Apr 6, 2019 at 8:16 am

    Well, when you can get a good car that will last for years for half the cost of the sales tax that you would pay on a new car, why buy new? Easy.
    I’m partial to low-mileage Caddys in like-new condition, and there are usually quite a few around, courtesy of the old dears that drive a few thousand miles a year. My current one is like new, one-owner, with 50K miles, serviced by the dealer for its whole life, and it even came with new tires.

    • Suzie Alcatrez
      Apr 6, 2019 at 10:21 am

      I’m not sure much longer how Cadillac is going to be making cars. Their customer base is literally dying off

      • Rowen
        Apr 6, 2019 at 5:02 pm

        Probably the same time that Harley has to stop. Same demographic bomb.

  7. TooSoonOld
    Apr 6, 2019 at 8:32 am

    I’ve been holding off replacing my 223K-mile compact sedan for 7 years because I don’t want all the add-ons. To me, electric windows and locks are just an expensive repair down the road, and GPS connectivity is an invasion of my privacy. Don’t even get me started on media players, cameras, special radios, etc, ad nauseum. All I want is vanilla transportation and I have the cash saved to write a check for it. Am I really so alone in this?

    • Paulo
      Apr 6, 2019 at 1:01 pm

      Good luck and no, you are not alone on this. We bought a Yaris ten years ago because of thousands of dollars of rebates and a scrap-it program. We had to special order!!!! crank windows and a car with no electronics. They could not believe we did not want a/c. We live on the coast and relish a hot day.

      I am negotiating with Ford on a discount (son gets 25% off MSRP) Ranger PU. They laughed at me for trying to avoid the doodads. You cannot get a vehicle these days without the electronics. They don’t exist. Base model means a/c, backup camera, and a bunch of other crap I don’t want like power windows, locks, etc.

    • Dale
      Apr 7, 2019 at 8:32 am

      These days, and depending on the auto manufacturer, you will likely find that power window motors and other apparati that were expensive to replace are now standardized and can be bought online for extremely reasonable prices.

      Not true for BMW and other autos rating 1-star (out of 5) in reliability (and 5-star in profitability for the manufacturer and their investors), but definitely true for most Japanese vehicles.

    • JohnnySacks
      Apr 8, 2019 at 12:18 pm

      Try finding one with a manual transmission, we had 2 available 9 years ago, each one 150 miles from Boston – Albany NY and Springfield VT. Now, Toyota charges $1100 extra for a manual transmission on a Corrolla, speaks volumes about the quality and durability of those go-kart belt drive CVTs seems like every econo-box comes with, take it or leave it. Correct me if I’m wrong, but the only Subaru model you can get anymore with a stick is the CrossTrek, probably our next car if they don’t blow it too. (Does the damn engine shut off at every stop sign with a stick shift?)

      • Quiet Fox
        Apr 8, 2019 at 8:40 pm

        Also available in a manual is the Subaru Impreza, bought a 2018 Touring edition 5 dr hatch in August 2018. A jeep Compass with 4WD, less equipment and widely determined to be JUNK costs almost $10000 more than the Subaru Impreza. I do not like all the electronic everything, but no choice. That is the only way they build them now.

  8. ken
    Apr 6, 2019 at 9:00 am

    Used cars selling like hotcakes…. hmmmm.

    Here where I am at there are cars, cars, cars! Every used to be vacant lot is filled with cars, cars, cars! Miles and miles of cars, cars, cars!

    Used vehicle lots with signs reading No Down, No Credit, No job needed!

    Oh well,,, I don’t want to be the party pooper but ……………. maybe Manheim is calculating things a little differently,,, like the BLS.

    • Apr 6, 2019 at 11:19 am

      That’s EXACTLY how used cars are sold. There is an inventory, and the dealer advertises those cars and promises special deals, always forever, all the time. That’s how the business works.

      A full lot shows that the used-car dealer feels good about the business. Unlike new-car dealers (who’re often forced by the manufacturer to take what the manufacturers builds), used-car dealers totally control their inventory. If business slows down, they buy less and carry less inventory. When business picks up, they buy more. If they have too much inventory they can wholesale some of it. So a full used-car lot shows that the dealer is doing brisk business.

      We never had too many used cars. But we often had too many new cars, and especially too many slow-moving new cars that the manufacture forced us to take.

      • d
        Apr 7, 2019 at 10:14 am

      • ken
        Apr 7, 2019 at 10:38 am

        “A full lot shows that the used-car dealer feels good about the business.”

        Would seem so,,, although one would expect to see a few customers… no?

        With so many right next to each other I think it may also indicate another bubble or a possible off location site for new cars (hard to tell, they all look alike these days (ugly)) the manufacturers might be forcing down the throats of dealers? I’ll have to check it out…

  9. Old Engineer
    Apr 6, 2019 at 9:04 am

    I think the most impressive thing in the article is the chart. Total new vehicle sales have gone from around 13 million in 2011 to 17 million in 2018. That’s around a 30 percent increase in 7 years. Given that the growth was in “trucks” with their astronomical prices that is very impressive. Given the fact that many people are not doing so well financially, there must be a lot of people who are doing very, very well.

    • Anthony Aluknavich
      Apr 6, 2019 at 10:18 am

      Th people “doing well” are leasing BMW’s and MB’s around here. The truck buyers have 84 year notes……

      • Anthony Aluknavich
        Apr 6, 2019 at 10:19 am

        Woops! I meant 84 MONTH notes. (sorry)

        • Apr 6, 2019 at 11:23 am

          That was kind of funny actually because that’s where this is going, kinda :-]

      • Vic
        Apr 6, 2019 at 9:48 pm

        BMW, Mercedes (most new cars really) are leased because they’re too expensive to buy. And they cost a fortune to maintain/repair once the warranty’s run out. The OEMs are building expensive throwaway cars, a big reason why sales of them have fallen off the cliff.

    • Just Some Random Guy
      Apr 6, 2019 at 11:09 am

      “Given the fact that many people are not doing so well financially,”

      Lowest unemployment rate in decades.
      Lowest first time unemployment rate in 50 years

      Yeah, it’s like the great depression dude.

      • Pasha
        Apr 7, 2019 at 3:32 am

        What they aren’t telling you is that most of those jobs don’t pay very well.

        Post 2008 has brought massive wage deflation to many industries and fields.

        Not to mention increases in healthcare that have consistently outpaced official numbers for inflation.

    • Apr 6, 2019 at 11:39 am

      Yes, there are a lot of Americans who are doing very well.

      Every September, when the Census data comes out, I cover the layers of earners. The bottom 60% have not done so well. And the bottom 40% have seen stagnating or nearly stagnating incomes for many decades. The top 40% have done well. The top 5% have done exceedingly well.

      That top 40% that has done well accounts for about 65 million earners. That’s a lot of people buying a lot of stuff. As for the other 60%, and particularly for the bottom 40%, it’s a struggle.

      If we just look at the overall averages, we get an incomplete picture.

  10. Just Some Random Guy
    Apr 6, 2019 at 10:41 am

    The sweet spot on the new vs used scale is a 2 year old vehicle still under warranty. The first two years take the most depreciation hit and plateau around year 3. So a 2 year old car is essentially new, but without the massive depreciation hit. Anything older than that usually means out of warranty. Which can be OK depending on what it is.

    For Japanese cars, out of warranty is no big deal. A Toyota will go 100K miles before anything breaks. And when something does break, it’s a reasonable cost to fix.

    For German cars, warranties typically go to 50K miles. At 50,001 miles, you need to run, not walk away from it. It’s also at that 50K mark when German cars fall off a cliff price wise. But you still want to stay away. There’s a saying that the most expensive car is a cheap German car. BMW charges $250 to reset the car’s computer when a new battery is installed. On top of the $200 cost for the battery. Like I said, run don’t walk away from an out of warranty German car.

    For American cars….does anyone still buy those things other than govt agencies and rental car companies?

    • andy
      Apr 6, 2019 at 11:54 am

      I replaced battery in my bimmer for $80, got it from walmart. Takes about 15 mins.
      Computer reset is completely optional, i never do it. The only difference the new battery will last 5 years vs 5.5 years.
      So you know not what you’re talking about. And yes, a well-built german car is not for you.

      • Paulo
        Apr 6, 2019 at 1:06 pm

        Why not parallel up another batt with some jumpers while you swap out? Even the shop could do this with no effort. It’s a scam if what you say is true.

        • andy
          Apr 6, 2019 at 4:59 pm

          No need, you remove old battery, install new battery, just like any car. After car was sitting in the garrage for months with dead battery, plugged in new batery, it started like nothing happened. You think you need to take a car to a dealer if battery is drained?

        • Mean Chicken
          Apr 6, 2019 at 7:57 pm

          Some settings will be lost in some cases, such as the time set on the clock. This is why I use a 9V cell battery connected to the cigarette lighter socket while changing a battery.

          Well, considering many new cars don’t have an engine or transmission fluid dipstick, maybe the BMW doesn’t have a cigarette lighter socket?

          And, Toyota’s aren’t what they used to be, including passenger safety during an accident.

    • Kent
      Apr 6, 2019 at 11:59 am

      Buddy of mine bought a 5 series beemer in 2007. He’s probably dumped another 8k into it over the years in repairs. His mechanic told him to keep it since he’s replaced everything that can break.

      • Lion
        Apr 6, 2019 at 2:45 pm

        Friend has an X5. Loves the vehicle, it is a nice ride. He uses an independent shop for repairs, just spent $12k to have the value guides (and likely some other stuff) replaced after 150k miles. Just standard maintenance for his X5 with V8.

        Kudos to all you German mechanics who have the tools and skill to perform these repairs on your German cars.

        • Mean Chicken
          Apr 6, 2019 at 8:09 pm

          My Buick with a real timing chain is pushing 300K miles without a sneeze and still runs like a dream. It’s old enough to have cast iron heads which, AFAIK, vehicles now adays don’t have. It does sport a plastic intake manifold, which isn’t a highlight.

          Just one year later, they removed the passenger side key lock, the console shifter lamp, the internal trunk lid handle and the cross-strut brace, probably more, but they did greatly improve the wheel well inner fender.

          I’m quite sure a new Buick wouldn’t compare but I haven’t looked at them, only heard the camshaft lobes are pressed on. For all I know, the cylinders are sprayed-in silicon alloy.

    • eg
      Apr 6, 2019 at 1:59 pm

      Oh, the big NorAm sedans are by far the best to buy at that 2-3 year mark you mention — their depreciation is incredible.

    • d
      Apr 7, 2019 at 10:22 am

      Tip

      It is not necessary to reset anything as long as you install a matching (or fractionally smaller cca/ah battery.

      What does kill used BM just like john deer is the computer registration codes for many components with electronic modules attached. To prevent the use of preowned parts and increase OEM profit margins.

  11. Jake
    Apr 6, 2019 at 10:57 am

    I personally think the argument between “trucks & cars” is hype as they are both used for the same utility – passenger vehicle. The market for passenger vehicles in the last decade has soared. Debating body styles and consumer preferences and profit margins is a moot point. We could level the same argument between flip-phones and smartphones – margin vs functionality.

    The bigger trend are general passenger vehicle sales and how they’ve peaked. Wolf has chronicled this in previous articles. The peaking of passenger vehicle sales is REAL. Unit sales will likely decline for several more quarters if not years as generational shifts away from car ownership collide with other factors such as longer lasting vehicles and especially electric cars. Reports are showing electric cars could potentially last 2-3x longer than an ICE vehicle.

    This is where things will get interesting, as the manufacturers that build the longest lasting products and have advanced Autonomous technology will be the ones that grow into the shrinking unit sales for passenger vehicles.

  12. Apr 6, 2019 at 11:54 am

    I am thinking of the Pickup Limo, which has the best of both worlds, Texas cowboys, oil money. Something Jet Rink would own.

    • andy
      Apr 6, 2019 at 11:58 am

      Not before the third row seat crew cab.

  13. Ididsa
    Apr 6, 2019 at 12:18 pm

    This amazes me. The bifurcation in wealth disparity is immense. The automobile market illustrates this very well. As Wolf indicated in the comments, the upper 5% have done extremely well.

    I was watching a video on the new 650 hp Lamborghini SUV. Really cool car. 0-60 in around 3.6 seconds. It sells for around 275k, and they are selling so fast that they can’t keep them in stock…..!!

    • Mike G
      Apr 7, 2019 at 1:07 am

      There’s a student at the college where I work with a Lamborghini SUV. Yes, really. Also a McLaren, Aston Martin, numerous Maseratis and Jags, and too many Porsches, BMWs, Mercedes and Audis to count, all driven by international students.

  14. Nicko2
    Apr 6, 2019 at 1:47 pm

    Live in a megacity and use Uber X and Select, I can’t imagine owning a car. ;)

  15. Marc D.
    Apr 6, 2019 at 4:18 pm

    Interesting article. However, with new car sales continuing to plummet, in three or four more years, there should be even more of a dearth of used cars available, which should send their used prices relative to other vehicles up even more (since supply will continue to be going down). Which is what could be the cause of the recent 7.2% increase in used midsize car prices highlighted in this article. Because the downward trend of new midsize car sales started several years ago.

  16. SocalJim
    Apr 6, 2019 at 7:47 pm

    Several reasons for the used car boom.

    1) With rents and mortgage payments reaching dizzying heights, people are saving money by purchasing cheaper used vehicles with lower payments;
    2) Some choose to not purchase a new car because of Uber and Lyft;
    3) Cars last longer than ever causing a lower demand for new cars;
    4) Cars have turned into commodity products, like a washing machine … this drives demand for boring used affordable vehicles.

  17. Dom
    Apr 6, 2019 at 11:37 pm

    “Without the CAFE rules, Ford might not build it at all because there’s no money in it.”

    Are you kidding! The fiesta is wildly popular in Europe. Small cars like it dominate sales.

    • Apr 7, 2019 at 12:57 am

      America ain’t Europe. We like big equipment and gas is cheap.

      • Dom
        Apr 7, 2019 at 11:43 am

        They would still build it for Europe! America isn’t the world.

      • Silly Me
        Apr 8, 2019 at 8:53 am

        We still spend more on gas b/o significantly longer distances. Large engines, however, tend to last longer than small engines.

    • Marc D.
      Apr 7, 2019 at 9:16 am

      Ford has or will soon be discontinuing the Fiesta, Focus, Fusion, C-Max and Taurus in the United States. But they still sell some of those overseas. In fact, they’ve recently come out with new models of both the Fiesta and Focus, that we won’t be getting here.

      • Silly Me
        Apr 8, 2019 at 8:56 am

        Small US Fords are built in Mexico. European ones are built in Germany.

        You can easily imagine the difference, although Germans consider the Mustang cheap crap.

  18. Vadim
    Apr 7, 2019 at 1:22 am

    Here in Romania you are better off buying a cheap used German car, than an expesive new one. You are ahead of your neighbours with a fancy looking 3 year old German car. Try to buy a big one and remember to wash it well!

    When it breaks down, there are plenty neighborhood specialists around to help. And plenty of cheap parts from disassembly lots.

    People here love used cars!

    • stan6565
      Apr 7, 2019 at 2:24 pm

      dissassembly lots:).

      i like that one.

      i remember driving through albania towards greece many years ago. tons and tons of beemers and mercs by the roadside in parking lots, but very few with any number plates.

      fell off a back of a very big lorry, i guess.

      seems fashion trend spreads around.

      :)

  19. Alan Coovert
    Apr 7, 2019 at 8:58 am

    The invention of the automobile is man’s greatest mistake. Corporate capitalism must die, along with it corporate capitalism most important commodity, the privately owned automobile. This must happen so that humanity has even a small chance of surviving climate crisis. But I doubt it will happen because cars and their body parts litter the planet and motorist are blinded to their deadly, diseased obsession with the automobile.

  20. Puddin
    Apr 7, 2019 at 12:17 pm

    Here in ga getting a low mileage older midsize car for under 7000 is near impossible

  21. Nik
    Apr 7, 2019 at 2:46 pm

    Aloha Wolf…think you need to replace demand with AFFORDABILITY in your last paragraph…lolol because that’s what all those used cars BECOME after they come back onto those used lots..simply Affordable….for the dissipated Middle-class and Upper levels of the Poor…aloha

  22. Ripp
    Apr 8, 2019 at 1:06 pm

    Just from a customer value perspective, new cars don’t make sense to me. Like Wolf said, automakers have abandoned affordable cars for higher profit vehicles. The entire market for these smaller cars now only exists in the used car sector because they are overpriced to begin with. I mean, why buy a new Accord when a new CR-V is the same price?

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