Used-Vehicle Wholesale Volume Collapsed, Prices Drop: Mega-Pain for Automakers, Leasing Companies, Rental-Car Companies, Banks, Bondholders, Stockholders

No one has ever seen a mess like this before.

By Wolf Richter for WOLF STREET.

The used-vehicle wholesale market is normally very liquid. Millions of vehicles a year are run through these auction houses around the US and establish day-to-day pricing. The sellers are leasing companies, rental car companies, lenders with repossessed vehicles, and the like. These auctions are where dealers buy part of their used-vehicle retail inventory. The wholesale market is a crucial component in the vast and complex apparatus of the US auto industry that sells 17 million new vehicles and 40 million used vehicles in a good year. But sales at these auctions have collapsed.

In response to Covid-19, auction houses have now switched all auctions to simulcast, where buyers and sellers participate online. So now, after everyone got used to dealing with simulcast auctions, transactions have begun to tick up from catastrophically low levels to near-catastrophically low levels.

It sounded like this, from J.D. Power Valuation Services today: “Wholesale auction sales reached nearly 28,000 units the week ending April 19, a 19% lift over the prior week’s 23,500 units.”

In the good times through the week ended March 15, auction volume ran in the range from 109,000 to 114,000 vehicles a week. But then volume collapsed by 84% to 18,000 vehicles by the week ending April 5.

It is from this catastrophically low level of 18,000 units that sales via simulcast have started to rise to the still catastrophically low 28,000 units in the week ended April 19. Auction volume from mid-March through April 19 has plunged by 72% to just 160,000 units, down from 579,000 units in the same period last year.

In the chart from the report by J.D. Power Valuation Services, the light blue is actual sales; the dark blue is actual sales through February and then the old projections – now obviated by events – for the rest of the year:

Wholesale prices of vehicles up to eight years old dropped 17% from the week ended March 15 through the week ended April 19, according to JD Power, and so far, there have only been relentless downticks – without upticks in sight (chart by J.D. Power Valuation Services):

Looking at this from the auction house’s point of view, Manheim, the largest auto auction house in the US and a unit of Cox Automotive, reported that price declines “accelerated over the last four weeks, with the first two weeks of April seeing a decline of 4.8% in the Three-Year-Old Index.” And it added:

It should be noted that, given the unprecedented downturn in sales and market disruption that the industry is experiencing because of the COVID-19 pandemic, the decline we have observed thus far in MMR [Manheim Market Report] values at the vehicle level and at all aggregation levels does not fully reflect the declines occurring in the relatively limited number of sales transactions taking place. Adjusting MMR for retention, which is the average difference in price relative to current MMR, results in a decline of 11.9% for 3-year-old since the end of March.

“Rental risk” vehicles have seen steeper price declines at auctions, Manheim reported. These are vehicles that rental car companies bought from automakers and that they have to sell later at whatever price the market might bear – as opposed to vehicles that they buy with repurchase guarantees from the automaker, where the automaker takes the risk associated with the resale value.

The average price for rental risk units sold at auction in the first 15 days of April plunged 17.1% year-over-year, and 18.5% from March.

The broad Manheim Used Vehicle Value Index (which is mix-, mileage-, and seasonally adjusted), has so far in April dropped 9.6% compared to April a year ago. If it stays there for the rest of April, it will be the steepest drop ever in the data, far outpacing the prior year-over-year plunge-record of 5.5% set in November 2008:

This collapse in volume of the wholesale market – lack of demand from dealers – and the resulting price declines that are still getting worse, pose a large risk to:

  • Leasing companies, from the smallest outfit to Ford Credit and big banks
  • To rental-car companies for their rental risk units
  • To automakers on their program rental units where they agreed to provide repurchase guarantees.

There are millions of vehicles per year that fall into these categories. And they all are collateral. Those inventories have been funded with debt.

The whole math of leases with a low monthly payment is pegged on a high resale value of the vehicle. A leasing company buys the vehicle and owns it. It then leases it to the customer. At lease-end, the customer turns the vehicle in, and the leasing company has to sell it. When proceeds from the sale are below the residual value figured into the lease, the leasing company loses money. This is no big deal if it happens on a few units. But it’s a huge deal if there are double-digit losses across the fleet that persist month after month as the constant flow of these units has to go through auction.

Rental car companies have a similar issue with their “rental risk” units: large potential losses built into their inventory that become apparent when they sell that inventory. This comes in addition to the swoon in revenues. Rental car companies have not been included in the bailout mania.

For example, Hertz shares [HTZ] have plummeted to $3.71 at the moment, from over $60 in 2016. Its bonds have collapsed. This eight-year 6% note, issued in November 2019 at around 100 cents on the dollar, and that traded at 104.5 cents on the dollar on February 21, closed today at 21 cents on the dollar (chart via Finra-Morningstar):

Hertz has hired restructuring and bankruptcy advisors, as have its lenders, the Wall Street Journal reported this afternoon.

Automakers like Ford, get hit from several sides. Ford Credit was the big money maker at Ford in recent years. But the resale value issues of its units that will be coming off lease – in addition to the credit problems associated with tens of millions of people suddenly losing their jobs – are going to put the hurt on it. Ford is also exposed through its rental program units that it will have to buy back from the rental-car companies at a price that will be higher than what Ford will be able to obtain at auction.

This impacts all automakers with captive leasing companies and that sell program cars to rental companies.

Then there is the volume issue: Auto sales are a constant flow. It starts with new vehicles that cycle through the system as they get older. The sales of new vehicles to leasing companies and rental-car companies by automakers in prior years become an onslaught of used-vehicle supply that no one can stop. These vehicles are coming down the pike whether anyone wants them or not.

And they must be sold, ultimately to a retail customer. But if retail demand has collapsed by 50% – which is about what preliminary numbers indicate – then the whole flow gets backed up.

Pricing solves those kinds of problems. Once prices drop far enough on the retail side, retail customers will gradually come out of the woodwork and poke around for deals. This mechanism works. But it’s this precise mechanism of lower prices to get the flow going that causes havoc among leasing companies and rental-car companies and their lenders, bond holders, and stockholders.

[Ah yes, I was just going to say that the Fed announced after hours that it will buy a million used vehicles at the auction and park them in its Special Purpose Vehicles (SPVs) to push up prices so that Americans will have to pay more for their used cars in order to bail out those stockholders, bondholders, and banks… I’m just kidding, I hope].

The Fed tapered QE-4 Further, Still Hasn’t Bought Junk Bonds or ETFs, Was Just Jawboning the Markets. Read... Fed Cut Back on Helicopter Money for Wall Street & the Wealthy

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  205 comments for “Used-Vehicle Wholesale Volume Collapsed, Prices Drop: Mega-Pain for Automakers, Leasing Companies, Rental-Car Companies, Banks, Bondholders, Stockholders

  1. Car buyer wannabe says:

    So how does a new car dealer handle a trade in? The trade in is possibly not wanted or worth much less than it would be in ordinary times. So is this a bad time to buy a new car if you have a trade in?
    I suppose could just buy the new car and keep the old car, but I don’t want or a have place for the old car.

    • dr. gerbs says:

      They new car also has lower demand so that products price goes down by equivalent percentage points. Your trade in is worth less and asking price of new car is less. Depending on your negotiation skills, you should make out the same or sightly better than before the crisis.

      • Joe Mische says:

        Let’s take a F-150 with a sticker price of 50-55k which is stupidly high.What will they be selling for in 3,6,or 9 months down the road while inventory is stacked to the gills? Does anyone see Ford swallowing their pride selling them for 20k less?

        • No they will probably sell them to federal state and local government for years to come, deferred payments. You got your check, now they unroll the red carpet for business.

        • Joe Saba says:

          I’m willing to put 100 $100 bills in someones hands for low mileage F-150 2015 or newer – 3.5 ecoboost 4×4 crewcab

          until then I’ll keep driving my 2001 diesel – works great and just upgrade pulling capacity

      • Denis says:

        I think they’d be happy to offload a new car and take your old one. The trade in might be quick to flip for them too. What they don’t want is you doing no business and holding on to your car. Brand new has some fairly set prices, but you may make out like a bandit on light used higher tier vehicle. Have fun it’s good for everyone!

        • evil twin says:

          No matter how desperate the dealer is, he will do his best not to show it. Don’t think you will be getting a deal.

    • WES says:


      My best guess is you are not going to find any car bargains anytime soon.

      If you show up now, wanting to buy a vehicle, they will correctly guess you are one of the impatient ones, ripe for the plucking!

      You need to wait until they have been hurting for awhile as others here have suggested.

      Some dealers will be in no hurry to sell, preferring to wait it out, while other dealers will not have time on their side and will break ranks.

      You need to let this play itself out before you will see any of the 10% price drop in a used car you might want to buy.

      For now dealers will want to keep the 10% price drop in used cars for themselves.

      • Mark says:

        Their uncle point dpends how much leverage the dealer is using via auto stocking loans. Similar to everyone else in present times.

      • Endeavor says:

        Used car dealers are underwater on all inventory purchased just before the shut down. They will trying hard to sell them before they loose even more value. For new cars and trucks God only knows what will be cooked up to try and fix this.

      • Ray Dietrich says:

        Have bought 2 cars last 10 days. Price 20% lower than price 1 month ago. It is happening now on certain makes/models.

      • char says:

        Think about the oil price. It is now super low but don’t be surprised if it is $200 in 2 years. Or not. The future at this point in time is very unpredictable.

    • Clete says:

      I’m going through this at the moment, trying to replace a good car with a slightly better car, mainly for the all-wheel drive. The local dealer for the car I want (not a high-demand car, for the record) is being delusional about holding to the sticker pricing, and the routine is the same as it ever was — with the MAJOR exception being that I’ve been dealing with these idiots from my house instead of them trying to sweat me in the dealership.

      So they can keep theirs, and I’ll keep mine, and we’ll see which of us is still solvent a few months from now.

      • Ed Wisniewski says:

        Potential price drops will probably exceed expectations. Used car pricing was already weak because of the SUV & pickup transition – now, that $9000 ASK MIGHT BE FORTUNATE to take $6,000 before it drops to $5000.

    • c smith says:

      Ideal is buying a new or used car for cash. Even if you have a trade, now may not be the time to trade it. Keep it parked somewhere (if you have space) and sell it later.

    • Mike says:

      Reliable brands of used cars with a long warranty from a large manufacturer like Honda are much better deals than new cars. Pareto’ s principle.

      You will get a better price selling your used car yourself. However, wait for now. In October, even new cars will be at bargain basement prices, particularly if the reopening of states backfires. Sadly, that is how I would bet. I now have three cars for similar reasons. :-)

      • Prof. Emeritus says:

        How do you determine reliability? Basing a purchase on the fact that Honda was reliable in 1999 is like saying oil can never go negative.

  2. Tim says:

    This will be mirrored in a different area – classic and vintage car sales and auctions.

    A 4 wheeled bubble.

    Go whistle if you think your 1960’s 911 is going to be worth more than 20000 this time next year…

    • Pro-Establishment says:

      Used & Classic car markets can be fixed with a new cash for clunkers program. Worked like a charm last time. Maybe throw in some more handouts to citizens, tax incentives for small businesses to buy trucks etc

      • noname says:

        They already get those handouts!

        • noname says:

          Section 179 Deductions and Depreciation

          …in addition to the general dollar limits, the maximum section 179 expense deduction for sport utility vehicles placed in service in tax years beginning in 2019 is $25,500, based on a specific IRS description of the vehicle type.

          The IRS specifies that the vehicle must be a “4-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, or highways, that is rated at more than 6,000 pounds gross vehicle weight and not more than 14,000 pounds gross vehicle weight.”

          Handout not only to small businesses but also manufacturers of vehicles over 6000 pounds!

      • Jdog says:

        Just because something works once, does not mean it always works…..

      • Noelck says:

        Please not another cash for clunkers bailout.

    • MC01 says:

      The vintage car and motorcycle bubble was already hissing air in 2019, with average prices down 10% and many listings receiving no interest from buyers. Classic example are the restored Volkswagen T2 (“Hippie Van”) which have gone unsold at €30,000 last year. In 2018 they were going for €35,000 and I will spare you how much the rusted spare hulks were going for. A lot of people will be singing the Blues this year and the next.

      For all of those who are looking for investments and have cash on hand this is a sector that will be worth looking into over the next six months: just wait for aspirational pricing to evaporate because it’s one of those sectors for which no bailout is coming.
      If the government lets me out of the house I swear to do my bit to stimulate the economy and I have compiled a list of vintage motorcycles I may buy for the right price: they are a better deal than bonds and if they don’t pick up in value at least I can ride them around. ;-)

      • Dan Romig says:

        Not sure if a 2008 Harley Davidson V-Rod is vintage or on your list, but it might be worth looking at if one comes along. A 1981 or 1982 Honda CBX in line six is on your list, no? Good luck on your quest!

        After riding my new Tuono with all the computer controlled features it has, there’s no comparison to my older sport bike for performance. But, the throttle by cable, low rpm torque and different gear ratios of the ZRX 1200 make it an easier low speed city cruiser to ride. Hell, in first gear, I can’t go any slower than 12 mph up the alley to my garage on the Aprilia.

        I missed a 2009 Porsche 911 Carrera S 6 speed manual for $40k two weeks ago (sold in a couple days @ Minneapolis Porsche dealership), but figured I’d take your advice and wait until late summer before writing a check for a new(er) sports car. Keeping my eyes open though.

      • char says:

        Vintage cars is part of the recapture youth market. People buy the car they wanted when they were young but could (mainly driver license issue) The market for that car goes up until their buyers start to drop. Then it drops to.

        • MC01 says:

          The most valuable car over the past decade have been Ferrari 250’s in all hues, with the GTO reaching absolutely insane valuations.
          The strange thing is the 250GTO was basically a homologation special which quickly faded from memory as it was superseded by more performing models on the racetrack: after Ferrari stopped supporting it in 1964 these were cars nobody wanted. It wasn’t competitive on the racetrack against the new breed of homologation specials and it was simply unsuited for the road. Ferrari had sold these cars for $18,000 (1962 dollars) but prices quickly sunk to $7,000 and below.

          Valuations suddenly skyrocketed in the late 80’s, driven by Japanese collectors made rich by the Bubble Economy. This is a strange thing: the 250GTO had a very short racing history and was chiefly raced in the US. Japanese collectors were unlikely to remember it from their youth, like they could remember, say, the Ford GT40 or Jaguar E-Type. Aggressive marketing techniques by US classic car brokers may have kickstarted the phenomenon.

          When the Bubble popped, so did 250GTO prices, and they remained comatose for a whooping 15 years, starting to pick up around 2005 before exploding in an orgy of insanity after 2010.
          This is even stranger, because in 2010 the 250GTO had not been raced for 46 years and the crazy prices of the late 80’s were all but forgotten.

          And what about the Porsche 914? It was one of those cars the German manufacturer would like us to forget. Nobody, literally nobody, would want one of those things because he was enamored of it in his youth. Beside being a veritable piece of junk, age hasn’t been kind on it as most cars were uncerimoniously parked in “unsuitable locations” when valuations tanked and this was just an extremely expensive to fix car (I remember in the 90’s a single headlight motor was actually worth more than the whole car).
          Now? You would be hard pressed to find a 914 for under 20 grands. Why? Simple: classic car magazines told people the 914 would be the “next hot thing” as people would scramble to buy anything with a Porsche badge on it. I have seen some of these things advertised for 38 grands. Insanity doesn’t even come close to describe this phenomenon.
          Let’s see how many of these things are sold over the next six months.

        • char says:

          250 GTO 62-64
          914 69-76

          The GTO looks like a prototypical early sixties race car you were given a macthbox car of. 914 is even later and butt ugly in my opinion but a Porsch. Both are cars for which it is still true that their 6 year old are still alive and can, with problems, crawl under a car. If you look at cars from 52 you will see something different

  3. Cobalt Programmer says:

    One of my apartment neighbor brought a car couple of months back. Little did he know, the temporary tags expired and DMV is closed because of Covid. He is afraid of the driving the car but went to groceries or something.

    I saw a middle aged guy standing in the nearby bus stop. The bus service is reduced/sunday service. I do not know how long he was standing. Anyway, vehicle purchase is the last thing on anyone’s mind now. It might be a couple of months or more before anyone visit a dealer.

    • California Bob says:

      I had an appointment at the DMV on April 1 to get the vaunted ‘RealID’ (my license expires late May). The DMV shuttered, I think, on March 27. Word is the deadline for getting a new DL has been extended 90 days; I suspect the same extension should apply to license tags.

      • 728huey says:

        Real ID has been pushed back another year to Oct. 2021. Then again, even though the Read ID requirement was created during the end days of the George W. Bush administration, it was delayed several times due to issues over civil liberties, but pushed to a hard deadline for implementation by Trump during the whole Muslim ban issue. But if the Democrats win the elections this November, it may be scrapped altogether.

        • California Bob says:

          Good to know. But, I still need my DL renewed, and I don’t think I can do it online.

    • VintageVNvet says:

      Not according to my friend who is sales person at local dealer in tpa bay area. He says lots of interest with zero interest for 84 months making for low payments, etc. He also said dealer just happened to ‘overstock’ on used of all kinds and those are moving well with some good discounts.
      Nobody sure about when they will get new vehicle stock delivered again, so comment above about folks in a hurry is probably spot on for now. Last time, we bought two brand new 2007 pick up trucks, one in late 07 for 70% MSRP, the other in early 09 for less than 50%, close to cost of manufacture from what I have been told re pick ups.
      Hard to say if this time is different, with some laid off folks making more on UEI from Feds than they made wages???

      • Noelck says:

        84 months? What kind of long term problems is this going to cause?

      • Is this time different!? We’re in the Twilight Zone dude! But who knows how outcomes might differ. I do expect another cash for clunkers bill. They tried to get my 1975 Cutlass last time. This time they’ll tell me my 2010 Prius is a clunker and push me into a 2021 F-350 to help stimulate the oil industry. EPA’s already rolling back emmission standards “for the good of the nation”.

  4. buda atum says:

    They’ll get shipped to Nigeria where we would do clunkers for newer clunkers.

    Oops. My bad. Our money is in oil barrels!

  5. Tim says:

    On a more serious note, the UK govt has announced that there will be a 3 payment pause for auto loans as well as mortgages.

    Feels like a bandaid over an arterial bleed.

    Not seen anything similar as to your article over here. Maybe I’m looking in the wrong places. But here it seems like ‘nothing to see, move along’

  6. Anthony A. says:

    Here comes Cash for Clunkers II !!

  7. Car buyer wannabe says:

    It might be that when the economy starts to recover a little,,,,that used car demand will go up first, and so it might be a good idea to wait until then to buy a new car, if you have a trade in; just a guess. What do you think?

    • noname says:

      Base your purchase on the price of the new car. Buy when it’s low. Sell your “trade-in” a week before you buy the new car—dealerships don’t give squat on trades. I don’t remember new car prices dropping much during the Great Recession (obviously someone might prove me wrong). In fact, Cash for Clunkers kept prices high. Another gimme I missed out on.

      • DanS86 says:

        Around early 2009 someone I know got 35% off on a new Nissan Xterra.

        • noname says:

          There are always outliers.
          They only sold 16k Xterras for 2009, half of 2008’s number.
          Compare that to 356k Camrys.

        • Dave says:

          2007 I bought a new leftover 2006 Xterra. List was 27100, we talked them down to 20500. We did nothing to dissuade them of their belief we would finance with them, but we never intimated we would. Once the price was agreed upon we presented the cashiers check. Of course they tried the desperately to upsell us on protective services, to no avail. As we were walking out with keys in hand the finance manager congratulated us.

          We cross shopped 3 dealers and left this particular one 2 times to go to others in the area.

          I still have the truck at 160K miles and it is getting very long in the tooth. Stuff keeps breaking and I keep on wrenching. I may be in the market soon, but only for used.

          While the Covid is horrible and I wish it to go away with all haste, it will help me when I go to buy a replacement.

      • Denis says:

        Well you only have to pay tax on the price of the new car minus trade. So if you go private ya gotta beat the tax, and paper work, and people. I say you show up and say how much for th 2019s. Although I’m just shooting shit, I am curious as to the real deals.

    • Noelck says:

      I would assume used car demand would increase once the lock down restrictions are lifted but with a huge glut of inventory I’m not sure where pricing will be. There will be some big losers and some big winners but in the mess that Wolf describes above I can’t possibly identify those. Hint – It’s typically not the consumer that is the big winner.

  8. GotCollateral says:

    HTZ, 4 pieces of trash in HYG (US428040CN71, US428040CS68, US428040CY37, US428040CZ02) all S-NT, joining ‘WLL’,’JCP’,’FTR’, ‘NMG’,’DO’, ‘VAL’,’CHK’, ‘CRC’, ‘INTELSAT’ in qualifying for Jeromes cash-for-trash program!

  9. Johann says:

    So this would be a good time to pick up a used Ford cheap, right?

    • Wolf Richter says:

      Dealers have been very reluctant to cut prices. Used retail prices have barely ticked down. They’re pretty sticky for now. Dealers are sitting on all this inventory that they bought at much higher prices in January, February, and early March. They’re trying to not lose their shirt on those cars.

      • Tim says:

        ….and come September…..?

      • Cas127 says:

        Excellent as always, Wolf – strong use of relatable industry stats.

        I’ve often wondered if that 40 million in annual used car sales (with just 115 million US households) includes auction/wholesale used car sales.

        I ask because I’m trying to estimate how long the median used car sits unsold at retail – a metric useful in judging how hungry a lot might be to sell a unit (before recycling it back into the much, much, much less profitable wholesale market – which sounds fairly huge and active in normal times).

      • Bricks n mortar says:

        60 day old used inventory is ancient for the larger dealers. I have several friends that are new car dealers, used is a big part of the business. A couple of them told me that the lenders initiated a interest deferral program for the flooring plans.

        • Wolf Richter says:

          Yes, and it’s tough: sales stopped in mid-March… so at the time, a 30-day unit (mid-Feb purchase) is now a 75-day unit. And a 45-day at the time (late Jan purchase) is now a 90-day unit.

        • Cas127 says:


          Thanks for the info – still curious about whether or not wholesale/auction sales included in that 40 mil figure – would also help estimate how long those used retail buyers hold on to a given car.

          If 40 mil is all retail that suggests that a given household (out of 110-120 mil HHs) buys a used car about every three yrs – possible…but seems a bit high to me.

          But if 40 mil figure is half wholesale sales (possible if dealerships recycle unsold units back into wholesale auctions after 60-90 days…although that seems pricey way to run business…) then the average HH is only buying a used car every 6 yrs (that seems more likely to me).

    • Denis says:

      I hope so. Despite the above graphic, I remember in 08 there was such a demand 5-6 year old cars that the deals were gone.

    • Gte343z says:

      Keep an eye on the hertz car sales website for rent2buy vehicles… I just picked up a 2019 BMW X3 for the wife at 7k below blue book. A bunch of these rent2 buy cars popped up on there in the past week. They are active in the rental fleet but available for direct sale. No dirt cheap bargains yet but they seem be trying to unload these extra vehicles no one is renting and the prices are much better than the dealers.

  10. andy says:

    Like Steve Bradbury at the 2002 Winter Olympics, Tesla might just bereak thru as a major global auto manufacturer as existing auto manufacturer’s owned leasing companies take them down.

    • Canadian says:

      A massuve plunge in auto sales is a good thing for Tesla, as they lose money on every car they make and sell. A significant decrease in sales should reduce their losses.

      • Blockhead says:

        With Tesla at close to all time high in market valuation, Elon Musk can now afford to buy up the Big three and set Tesla up as a monopoly. This will allow Musk to charge what he wants and laugh all the way to the bank.

        • Willy Winky says:

          Musk would quickly turn the big automakers into mega money losers too by applying his innovative business model and tremendous lack of acumen.

          And he’d be the world’s first trillionaire.

          Imagine how much money he could lose if he actually shifted some real volume and lost say $5000 per sale.

          Take for instance GM – they sold 7.7 million vehicles in 2019 and made a 6.7Billion profit.

          Apply the Tesla Business Model and that 6.7 quickly becomes a loss of $38,500,000,000 (at least)

          If you apply the Tesla valuation model which is subtract the total loss from the total loss, add 10 billion then multiply that by 5 and add another 20 billion (just for fun)

          And before you know it GM would have a market cap of… I dunno…. 500 trillion billion or something like that.

          Where did Elon learn this magic? Did it come to him after 3 bottles of red, 6 tabs of great acid, and a bag of high grade?

          I am just like… wow…. I am in awe.

      • Clete says:


  11. SocalJim says:

    I have been out looking for a new F150 … crew cab 4×4, but more of a base model to keep the cost down. I have yet to find a dealer willing to cut a decent deal. I can’t figure it out.

    • Tim says:

      ….wait till August/September…..

    • Canadian says:

      No new cars or trucks are being produced right now. The dealer is betting someone else will pay more and not be willing to wait until production resumes in late summer.

    • Wolf Richter says:


      Dealers get volume incentives. Right now, those are unreachable. So until the incentives get rejiggered, there really aren’t a lot of incentives.

      Also the plants are shut down, so there isn’t any new supply coming out, and less reason to put incentives on selling existing inventories. It’s really a mess… little demand, no new supply… everyone uncertain… huge hassles to even look at a car…

      I heard that shopping for a new vehicle online is starting to gain traction. Might want to check it out.

    • sc7 says:

      What engine?

    • R U Kiddin says:

      This worked for me as they had my car but would not let it go:
      1) Made a reasonable offer which they refused.
      2) 30 days later called to see if they still had it: yes
      3) Calculated sales tax and tag and added to my fair offer.
      4) Drew a bank check for the exact calculated amount. Made out to them.
      5) Walked into the showroom and handed the check to the kid (sales person) . He looked at me like Bambi. Told him it was payment in full for the car.
      6) Finance guy told me they were not making any money on it, but they washed it, filled the tank with gas, and sold it.

      8 years later with like 170k miles, it got fender bendered in the rear, and it was totaled for $3,300.

    • VintageVNvet says:

      Had the same problem in SoCal in fall of 2017 Jim,,, eventually got the deal I wanted on the same vehicle in tpa bay area,, though it was another month into the 2018 model year to be sure…
      IMHO, SoCal auto dealers have too big a consumer base to be willing to deal until the very end of each year as well as the last day of the month,,, rest of the time not,,, and they are the worst ”bait and switch” and flat out lying dealers I can remember anywhere or anytime last 50 years.
      CA relative has gone/goes to ”farm country” part of CA to buy his new pick ups, says their people will negotiate honestly, etc. I have had success with ”brokers” in CA, saved quite a bit, though some just rep one brand these days.

  12. andy says:

    Has maximum auto loan volume and value just intersected with peak auto demand?

    Enter EVs, Zoom, and boom.

    Aaaaaannnndd its gone.

  13. andy says:

    “Ah yes, I was just going to say that the Fed announced after hours that it will buy a million used vehicles at the auction and park them in its Special Purpose Vehicles (SPVs) to push up prices so that Americans will have to pay more for their used cars in order to bail out those stockholders, bondholders, and banks… I’m just kidding, I hope”

    That’s what the US Fed exists for – uses public assets to buy private paper with market value 5c on the dollar, for 100c on the dollar, to bail out private owners of dud investments.

  14. Kasadour says:

    We are on the buying side only. I moved to online years ago but I still have to show up in person for other things- like to pay off a car and collect the title because I’m too impatient to wait for the mail. Sometimes we half to travel to Vegas and Fresno with a trailer to bring the cars back here. Right now, Portland Auto Auction (Manheim) is open for business but nobody’s bidding or nobody selling. It’s like supply and demand suddenly evaporated in synchronicity. I don’t see demand coming back like it was before this dreaded mystery virus. Off topic, but I really hate the name Covid19. It means nothing, really when you think about it. So, I’m just calling it the dreaded mystery virus.

  15. Greg says:

    One thing that is happening at auctions especially Manheim is that they are not letting dealers on the property to look or drive the car. A big reason why the percentage is so low. But of course retail business is down 50-60% as well. Who knows when auction will be operating like normal but until it does prices will remain down.

    • Cas127 says:

      Doesn’t Manheim have some sort of green/yellow/red inspection/certification service that helps lower risks when buying at wholesale?

  16. Iamafan says:

    A different news. I have a close friend who works in the HQ of one of the too big to fail banks. He hasn’t had the time to chat for the last 2 weeks despite the lockdown. Why? Because almost all employees in HQ were asked to work on checking the applications of the Payroll Protection Program even as the money has run out. He has been ao busy approving SBA sponsored loans, a job he has never done before. Now get this, if a small business is not approved, the application goes to a special team that sees how it can be approved by fixing the problem.

    Best news I’ve heard so far.

  17. WES says:

    Car sellers like house sellers are simply not willing to lower prices.

    They will wait instead.

    Only time might be able to force their hand(s).

  18. Yancey Ward says:

    Kidding? Wow, I thought you were serious!!

  19. polecat says:

    Poor babies .. I feel for them. /s

    Why pay for over-priced conveyances (New OR Used) .. and thus feed the monied ferengi, when I can purchase a mule .. and build a cart for a fraction of the grief of doling precious covidbucks for some hulk that will be ‘non conveyable’ some years ahead, when petroleum production rolls on down Hubbert’s coaster ?

    • WES says:


      You are in luck!

      I have a used mule only driven by a little old lady on Sundays!

      The mule comes fully equiped with automatic self driving too!

    • Implicit says:

      Mules know their way back home from the pub’ so you can fall asleep at the wheel if your out there far enough.

      • MC01 says:

        My great-grandfather ran an inn in the Alps after coming back home (badly wounded) from WWI.
        He had plenty of customers who would come around with a donkey or mule (often bought for a song and dance at military surplus auctions) precisely for that reason: they would get blind drunk and the animal would get them back home.
        However it did happen that people who had one glass too many passed out and fell on the ground and did not wake up, especially on freezing Winter nights. People would see a saddled donkey standing near the road in the morning and would call the priest, the gendarmes and the undertaker even before checking out who had fell off.

        Different times.

        • Implicit says:

          Good story. My Dad told me he did that as a young welder’s apprentice. after work at the pub on Friday night. It was a long time ago. Just another of those confagan special purpose vehicles

  20. Al Loco says:

    There seems to be a lot of speculation on what dealers are doing right now. I am at a lease end so ive been forced to find out. They are absolutely dropping prices on both new and used units. Im sure some are more agressive than others but in the past week they’re starting to crack. Sure prices will continue to go down but even right now there are deals. The dealers are ghost towns with tons of inventory piling up everywhere.

  21. raxadian says:

    “No one has ever seen a mess like this before.”

    *Looks at the charts

    Did you had your eyes closed during December 2008?

    By the way how much is to have a whole car, including the inside, cleaned up and disinfected?

    • Wolf Richter says:


      If you look at the Manheim chart carefully, and squint just right, you will see that in the first half of April, the Manheim index plunged 9.5%, and in the two entire months of Oct and Nov, 2008, it plunged 11.5%. The way things are going, the second half of April might well get the index to beat the two worst months combined. That’s in percentage terms. In terms of points, the first half of April blew everything away.

      • Brant Lee says:

        Wolf, is March 15 the official date that the good times ended? Perhaps on the next beer mug, that date could be put on top of the mug near the rim. Then as the beer is drunk, we can watch the line go straight down past all the financial disasters of the last 100 years?

    • California Bob says:

      re: “By the way how much is to have a whole car, including the inside, cleaned up and disinfected?”

      Depending on where you live, type of car, etc. a thorough ‘detailing’ can be over $200. I think the only disinfecting necessary would be to wipe down all the plastic surfaces with disinfecting wipes (Clorox, Lysol, etc.). Maybe open the windows and let the car sit in the sun/breeze for a day or two.

      I get ‘free oil changes for life’ from the Ford dealer I bought my Mustang from. I was reluctant to have a change done due, mostly, to mingling in the service office waiting room, but they were observing commonsense prophylactic measures. I did wipe down the interior with Clorox wipes after the change; I was concerned they might damage the p/leather steering wheel cover, but nothing was damaged.

      • VintageVNvet says:

        Depends on what is meant by ”complete” clean and disinfect RX…
        And you will want to make a very thorough visual and odoriferous inspection to find out a couple of things that may not be readily apparent in a short view or test drive.
        A friend tried to clean and de-odorize a vehicle he bought very cheap that someone had died and lay in a week or so,, ended up trashing and scrapping it.
        Similarly, another friend bought a cheap vehicle that had been smoked in for years and never could get rid of that smell in spite of spending hundreds $$ several times…
        Bee careful, ”caveat emptor” etc

    • Prof. Emeritus says:

      Automobile disinfectation is kind of a tricky thing – there are methods on offer (as there are people willing to buy), but I’m not sure any of those are approved by infectologists. The problem with cars is that they aren’t really made to be cleaned up but the interior materials should rather absorb the particles and keep them trapped. Not to mention the A/C system. Buying a car that may have been coronavirus infected is like buying a crashed example in which someone died. It is unlikely you will get sick of it (as the virus dies anyways after a few weeks if it can’t reproduce), but simply knowing it’s been there is a bit scary.

      • Deadmeat says:

        Viruses don’t die. They are not alive, at all. They are rendered non-viable after length of time in open air.

  22. Some Guy says:

    I sense an Abbott and Costello routine in the making at the FED:

    “What’s in the new special purpose vehicle?”
    “Sure, OK, there’s more than one, but what’s in them?”
    “No, I mean what is the vehicle’s purpose?”
    “It’s special”
    “What’s special about it?”
    “The vehicles”
    “That’s what I’m asking – what is special about the vehicles!”
    “We’ve never had a vehicle with this purpose before”
    “What purpose?!”

    In all seriousness, with people reluctant to take transit, I could see some support, eventually, for the bottom end of the used market, but probably a lot of things going to heck in variously shaped lines before we get to that stage.

  23. OutWest says:

    I drive a car every day that has 240,000 miles on it. Looks great and it’s dependable. Most of my neighbors have new-ish cars so who in this economy is going to buy new?

    • Al Loco says:

      Me. I really pushed to get a newer low mileage used but the private party sector for these vehicles are basically gone. I was even willing to travel for more optiin and get something with no winters. This proved difficult. I reluctantly started at dealers. After a giant waste of time trying to close a deal on a cherry used Honda Pilot, I found ac leak dye all over the rear evaporator bulkhead and they basically told me to pound sand. They know there are plenty of suckers that dont know what a rear evaporator and why a leaky one is bad. Cut a deal with my local preferred dealer for a new one at 15% off and 0.9%. I could of hammered more but I was in and out in 90 mins and zero paint protection bullshit. We will drive it into the ground.

  24. Realist says:

    Wolf, is it possible to find information on how auto repair shops manage ?

    It would be interesting to know. The sales of after markets auto parts is another thing that is interesting.

    • Al Loco says:

      I have a freind who owns a 6 Bay private shop and it typically very busy all times of the year. Does local muni fleet repair also. There was a surge when people had time to take care of maintenance but has now droped. He has cut hours and at half staff. Not looking good at all.

    • RD Blakeslee says:

      A local NAPA franchise owner tells me parts for older cars are declining as they leave service and newer car parts are not needed in volume, except for “consumables” like batteries, tires and brake pads.

      A function of the increased trouble-free longevity of contemporary automobiles, I suppose.

      • RD Blakeslee says:

        An independent repair garage where I have had my 1995 pickup truck serviced for years has gone to a 4-day week. Again, except for consumables, the owner doesn’t see many newer cars in his shop and says that only dealers can service major modern components like computerized controls, anyway.

      • Cas127 says:

        “A function of the increased trouble-free longevity of contemporary automobiles, I suppose.”

        I hear this a lot but…why are new car warranties still stuck at 3 years, after decades of claimed reliability improvements (except for blessed Hyundai – which hiked warranties to 5 yrs, 20+ yrs ago, in the wake of initially horrible reliability ratings).

        I’m sure it is partially due to scaring owners back into the lots to buy the next new car…but keeping warranties at 3 years also discourage some new buyers from paying the new car premium in the first place.

    • Petunia says:

      We spent our stimulus money on a set of new tires and a wheel alignment, almost $900. Not a bargain, but they had the tires and we didn’t have to wait. The place was empty. That check arrived just in time too.

      • RD Blakeslee says:

        ” … they had the tires … ”

        Need to be careful, there.

        Tire rubber compounds degenerate with age and “shop worn” tires can be a problem.

        • Petunia says:


          Always a ray of sunshine.

          I actually experienced what you describe with two pairs of shoes, one a very expensive designer pair. The soles were a hard foam and they disintegrated over time.

          There is also a big secondary market in sneakers and the people who trade them are finding out the hard way not to store the shoes for years.

        • Cas127 says:


          “Always a ray of sunshine.”

          You should be very careful about some of the C19 threads here too – some of the posters are one step away from pro-disease necrophilia.

        • El Katz says:

          All current tire production has a “date code” imprinted on the sidewall.

          Since 2000, the week and year the tire was produced has been provided by the last four digits of the Tire Identification Number with the 2 digits being used to identify the week immediately preceding the 2 digits used to identify the year.

          While the entire Tire Identification Number is required to be branded onto one sidewall of every tire, current regulations also require that DOT and the first digits of the Tire Identification Number must also be branded onto the opposite sidewall. Therefore, it is possible to see a Tire Identification Number that appears incomplete and requires looking at the tire’s other sidewall to find the entire Tire Identification Number.

          Most chain tire stores won’t install a tire that is more than 10 years old….. They don’t want the liability.

      • California Bob says:

        You didn’t mention what type of car you have, but unless you’ve noticed irregularities in tire wear or have hit a curb or some real bad potholes you don’t need an alignment every time you buy tires. Alignment shops have promoted the ‘get an alignment when you get tires’ trope for decades–not surprising–but front-ends don’t go out of alignment during normal driving. If you’ve hit something hard enough to need an alignment, you’ve likely damaged something important (tie rods, ball joints, etc.).

        Also, manufacturers’ recommended tire pressures are often on the high end, to add a bit of MPG to their ratings. This can cause tires to wear excessively in the middle of the tread.

    • Wolf Richter says:


      A heavy-truck dealer – selling and servicing Class-8 trucks – told me that heavy truck sales have ground down, but parts and service sales are doing very well.

      If you’ve got a mechanical problem, you gotta fix it. Maybe you can defer the upcoming oil-and-filter change or defer fixing a leaking power-steering hose (just refill the fluid when you hear the noise), but some things need to get fixed. So I suspect, as people keep their cars instead of replacing them, that the parts & service business is doing OK-ish, and this is a high-profit margin business.

      I will call a Ford and Toyota dealer friend of mine in Oklahoma to see what they’re doing. That’s my sample of one to extrapolate to the entire US dealer body. I’ll let you know.

      The retail sales data for April, when it comes out in May, includes detail for auto parts sales on a one-month lag. The March report (released a few days ago) detailed February parts sales; the report for April will detail March parts sales, and that’s still too early, given that the data is gleaned around mid-month. So the report for May, released in June, will tell us about auto parts sales in April, and that should be the first real reading how parts retail sales are doing. My expectation is that they’re doing OK.

    • cd says:

      DgDg in Bayarea laid off 500 in one swoop, up to their eyeballs in vehicles,

      Service business for auto dealers is off 50% on low end, 70% on top end and they are only keeping master techs who can fix anything, the C level oil change guy is unemployed….

      Dealers had it great for 10 years, time for some pain. I work in the industry closely with dealers across the US. They are already clamoring for cash for clunkers and other stupid stuff.

      I say no way, time for reality….selling debt to force our children into serfs is messed up and I have stated it to these big shots…though many are just cool cats….

      time for pain…..risk was so mis-priced in lending that there will be a ton of it

    • Prof. Emeritus says:

      Totally different part of the world, but European shops are operating at 100% capacity as they are full of customers in like war-preparation mode wanting to get their cars fixed before even bigger uncertainty comes.

  25. CtKahanamoku says:

    As someone who sells into the used class 8 market I can tell you that truck dealers have been owning this experience since at least December 2019. They’ve been dumping wrong priced inventory for 4 months. It’s not unusual for a dealer to take a hit of 30K on a unit they acquired as a trade, overvaluing it just to get the new truck sale. Currently, most of them have bled out and have less than 30% of their overpriced inventory stacked on the back line. And they’re only purchasing used to fulfill orders where they don’t have the equipment to satisfy a customer. Bottom line, they’re surviving by taking the loss now because they have to adjust. Those that refuse to adjust will have to sell or file.

  26. S says:

    I’m curious if the Hertz unsecured bond debt at 21 cents on the dollar is likely to survive bankruptcy in some form (e.g. as new equity in new Hertz), making it a good highly speculative investment now?

    • Paulo says:


      I don’t think any car rental company is a good buy going forward. I have a relative who just resigned his job this year as comptroller at a major rental firm. (Won’t mention the name here). Anyway, he moved on to a new career and the old firm just ‘fired’…not laid off…fired 25% of all staff. He would have lost his job for sure. Any company worth its salt does not fire key people if they believe things will improve.

      Uber etc was killing them BEFORE all rental business tanked. I don’t see how this will improve going forward. The real answer lies somewhere between mules and new. Meanwhile, I’m using this lockdown as a time to doll up my ’81 Westfalia. People still want them, maybe as full time residences? :-) But we’ll never sell. It’s only 40 years old and my grand daughter will get it one day, hopefully, about 30 years from now which makes me…..

    • Wolf Richter says:

      We will find out. Hertz has a lot of secured debt. Not sure what’s left for unsecured bondholders. But some cents on the dollar plus a slice of the new equity might be a possibility. At least they have a big seat at the table, unlike stockholders.

  27. felix cat says:

    I rented a ‘hertz’ this past summer, and terrible experience.

    Just wanted to say that the 5yr high is $38, and now $3.71, but they’re still saying its over-valued at this price.

    I can’t imagine a worst experience of renting a car, of course I did it in the city, not the airport. The line was endless to get in the queue to talk to a human, and that was just to pickup the auto. Of course I didn’t get the car I had pre-paid, they upped me from a econo-box to a cadillac escalante, they said ‘same price’, but not true, as I needed to pay insurance. I really wanted a econo-box, and didn’t want to drive a luxury auto.

    So then I was stuck driving around the State for a week, in a gas-guzzler. They don’t even begin to care anymore, nor is anything even relevant to reality.

    Lastly, I don’t accept the Wolf assertion that ‘We havent’ seen this before’, all I can say is where were you during the odd-even gas lines of the 1970’s? Probably Europe right?

    Hertz is a terrible company and deserves to die.

    • Wolf Richter says:

      felix cat,

      “Lastly, I don’t accept the Wolf assertion that ‘We havent’ seen this before’, all I can say is where were you during the odd-even gas lines of the 1970’s? Probably Europe right?”

      Tulsa, OK. But you know, Oklahoma is in the oil patch, and the oil companies and the cities and everyone just printed money at the time when oil prices surged. At the time, I lived with a car-dealer family, and money was floating in the air.

      And there weren’t any gas lines either because the local refineries did just fine, because they got their crude oil locally, not from Saudi Arabia, and they too printed money.

      It was a boom town at the time (depression followed when the price of oil collapsed in the mid-1980s). Texas was booming too. The oil price surge at the time was great for oil-producing states. Sure, it sucked on the East Coast, but in Oklahoma, it was the time that old-timers now think back to nostalgically.

    • fajensen says:


      In my experience, Hertz used to be pretty solid here in Europe, but, around 2015 they started getting more and more sucky, with too many grotty Citroen’s and those odd-ball models of Renault that obviously nobody would buy with their own money, so they got them in bulk at a discount.

      Sixt is eating their lunch!

      The ‘upgrade game’ is what they all do: They try to offer you an upgrade from the cheap car you ordered, and in reality it is the car already reserved for you (because thats the cars they actually have at the pickup, they have a few high-end and a few low end).

      Just say ‘No’ and you will still end up with the ‘upgraded car’ anyway. With Sixt for the same price. They still try it, though.

  28. David Hall says:

    Business travelers used to fly into DCA on Monday and picked up a rental car. They returned their cars on Friday and flew home. Now they work from home.

    The government is hoarding used cars with tax payers’ dollars. This might make auto manufacturers build more cars in a constant loop.

  29. Iamafan says:

    The Treasury now has more than $1 trillion in cash.
    They can do cash for clunkers (or even not so old vehicles).
    What are they gonna do with all this money?
    Buy votes anyone ???

    • Jdog says:

      With States, Cities, Counties, and and pension funds nation wide going broke and needing bail outs, I do not think the Feds are going to put the auto industry at the top of their list of bail outs.
      The fact is, there is too many sources needing bail outs for even the government to cover.
      Governments main concern is to maintain “order” and keep control over the masses. That will require keeping government going at all levels, and keeping people housed and fed. I am not sure they are even going to be able to do that.

      • Cas127 says:

        I’m with Cocaine Mitch – let the public sector pensions go BK and get renegotiated down/internally re-distributed to payout levels that are less obscene relative to the 80%+ of the public that are not part of the political class that self-dealt itself supra-normal benefits and compensation in exchange for sold votes.

    • Ed Wisniewski says:

      …. and did they hit that $24 Trillion Debt Level yet? So, 2020 closes out above a $4 Trillion deficit. That Trillion isn’t gonna last 3 months! It’s already gone!

  30. Augusto says:

    Another huge economic sector decimated by this virus-lockdown. Anyone think these broke, borrowed to the hilt consumers are going to race out of quarantine and buy a car, new or used? Maybe if they need it to get to work, if they have a job left. Hey, if no job maybe they sell their car, how’s about that? Probably not. Will Rogers once said America was the first nation on earth to go to the poor house in an automobile. Now, many Americans need a car to get to the food bank or sleep in (after the Hedge Fund takes their house). Anyways, lets all call the V-shaped recovery what it really is, a: vacuous, vaporized, valueless, verbal, void.

    • Jdog says:

      Now they are going to the food bank in an automobile, and usually a fairly new one at that……

  31. Jdog says:

    Car markets are kind of like the stock market. They are convinced that this thing is going to end soon and things will get back to normal.
    This is a normal reaction to a recession / depression. It takes 6mos. to a year before people finally capitulate and realize this is real and they have to just sell for whatever they can get.
    The government give away programs may delay this process temporarily, but it will happen. I think you are going to see commercial real estate lead and then everything else will follow.

  32. M Dubya says:


    Always love your articles!

    You mentioned the companies impacted by this, but left out the auto dealers. A significant drop in volume and resulting depreciation wouldn’t play out well, especially for used car dealers. I would guess most dealers are highly leveraged due to their inventory financing.

    My company bonds more auto dealers than any other in the U.S. We’re seeing an exceptional amount of auto dealers completely unresponsive on their renewal invoices. It’s important to know, they aren’t legally allowed to operate without our bonds guaranteeing their dealer’s license.

    • Wolf Richter says:

      Dealers that have a strong parts & service business and that have managed their vehicle inventories tightly going into this will get through it – if it doesn’t last too long. The issues started mid-March, so right now, it’s just the first month. Even in lockdown states such as California, car dealers are considered essential business, and they’re open, but right now everyone is trying to figure out how to do business, and many customers are scared.

      Clearly, this is a time for dealers to be prudent and figure out how to get through it. But I don’t think they’re ready to throw in the towel just yet.

      I have a question for you: Are you sending out the renewal invoices by postal mail? I’m trying to figure out if there are reliability issues or slow-down issues now with the USPS.

      • M Dubya says:

        The majority of auto dealers in the U.S. are used only, not new and used. Therefore, they don’t have a strong auto parts and service department; volume is minimal on all fronts.

        Inventory depreciation, sales that fell off a cliff, a popping sub-prime auto loan bubble (impacts their ability to put deals together), and a consumer that is going to put off large purchases as long as they can. I’m anticipating an increase of those going out of business and an increase in claims on our bonds due to an increase in fraud.

        I saw mortgage brokers get decimated in real-time in 2008. I don’t think auto dealers are in for anything as drastic (75% gone!), but still there is likely to be a good deal of pain ahead.

        To answer your question, renewal invoices are sent by mail, email, utilize automatic ACH pulls, and have calls placed for late A/R. The late A/R calls are either ringing off the hook (likely due to COVID and no one being at the location) or business owners stating that they don’t want to pay yet, as they are unsure if they will be in business next month.

        Starting back in Nov 19′ and continuing through COVID, we saw a several fold increase in mail coming back marked “return to sender”, which means they are no longer there or moved and no longer have a forwarding address setup (happens since some only pay for 6 months of forwarding). Just as you have been suggesting on this blog, we’ve been seeing something in works prior to COVID.

  33. We might as well embrace the auto-less society. Together with the jobless society it raises the stakes in government. A new generation without Social Security numbers, without drivers license numbers? Without mortgages, or even credit? The consumer without an automobile is like a riderless horse, (not a rider without a horse). The auto was an extension of horse power, now reversed back to one.

  34. Michael Engel says:

    1) The do nothing hawk is circling high above, between the sun and the medical center lawn, is using the hot air updraft, to go around and around, looking for a prey.
    2) Those who open the medical center doors eat junk food.
    3) those who walk/ jog around, in the sun, eat god food.
    4) There is no proof that people infected with covid19 will not be infected again.
    5) Those who beat covid19, fighting it, without signaling submission, have a strong immune system.
    6) People with impaired and obstructed lymphatic system, clogged
    thoractic swamp canal, cannot remove toxic junk and waste materials,
    produced daily in their body.
    7) For the same reasons people get a stroke, cancer, heart attack…other chronic diseases, they get covid19.
    8) Those who open the medical center doors are visiting a doctor who
    can fix the symptoms, at high cost.
    9) Those eat good god food + vitamin D from the sun, for free, can fix the cause at low cost.

  35. Iamafan says:

    Look at big picture. From March to April 15, banks added more than 850 billion cash assets.

    Big companies drew their credit lines.
    Foreign bank activity rose a lot due to Fed swaps.
    For you, nothing.

  36. Michael Engel says:

    1) Inspection day diversion.
    2) Chinese spare parts are high.
    3) Used car prices are lower. There is plenty supply, but no demand.
    4) Your mechanic on inspection day can hit u with expensive repairs.
    5) Before “D” inspection day, u have to pray :
    6) Become a prey on.
    7) Dump the price to attract potential buyers, sell it fast, before your “D’ day.
    8) Buy a new car, trade in, at high new car prices, because there will be a delay before the market cave in.
    9) Transfer your ownership to your friendly mechanic, at 25%-30% of wholesale prices and ask him to drive you back home.
    10) Your mechanic doesn’t need you. The market is bad. It will get worse. Why should he pay u cash, fix your car at his expenses and wait for a buyer. YOU must give him enough incentive to take the risk.

  37. Jdog says:

    There is a glut of cars in the US. I believe it is around 2 cars per household. About a third of those have loans on them. With finances tightening up and people looking to cut expenses, I expect a lot of people to decide to get rid of the extra car to lower their monthly bills. That is going to increase supply.
    Smart people never buy new cars because of the terrible beating you take on “”curb” depreciation. Car rental companies are going to be going bankrupt and selling off inventory soon. I expect in 6 mos. you will be seeing unbelievable deals. Too bad I will not be in the market…. I already have 6 cars…

    • Just Some Random Guy says:

      “Too bad I will not be in the market…. I already have 6 cars…”

      Nonsense!! You can always have a 7th. :)

      “Smart people never buy new cars because of the terrible beating you take on “”curb” depreciation.”

      Smart people lease cars with really high residuals, offered by clueless leasing companies who can’t do basic math. Leases get a bad wrap because most people don’t understand them and get killed by dealers on leases. F&I managers salivate and noobs leasing. But if you understand the components of a lease and do a little research (which has to be done monthly since leases change monthly), you can score crazy good deals. Like $350/mo for $50K cars good deals. They’re out there, just takes some effort to find them.

      • Jdog says:

        Cars like anything else have an intrinsic value and a perceived value.
        Used cars sell closer to their intrinsic value, while new cars sell for a perceived value. A 1yr old car with 20K may sell for 35K while that exact make and model with the same mileage 5yrs old may sell for 10K. You can drive both for another 150K miles so you do the math.
        People pay most of the money they spend on cars keeping up appearances…. The most expensive thing you will ever have to support is your own ego.

      • Dana says:

        I don’t buy used cars anymore, because of a used Ranger P/U. The dealer swore it was a “non-smoker vehicle”. They lied. After a couple of months the cigarette stink came back. To get back at them, I buy new and drive it forever. My current vehicle is a ’15 Jeep Wrangler. I will probably drive it until I’m too old to climb up in it anymore.

  38. Jdog says:

    It is really too early to make that determination. People have the mistaken concept that if you do not die from Covid, you have 100% recovery and go on with your life as if it was just a cold or flu.
    That is not necessarily true.
    We are finding out now that this thing does a lot of permanent health damage. It is now even being tied to strokes in people in their 30’s and 40’s that until now were not thought to be related to what were in many cases very mild cases of Covid. In many cases, it does permanent damage to organs and the vascular system. This is clearly not a black and white issue, and while money is very important, health is even more important. Money can always be replaced later, but permanent health problems and death are forever.

    • Cas127 says:

      “It is now even being tied to strokes in people in their 30’s and 40’s that until now were not thought to be related to what were in many cases very mild cases of Covid.”



    • Bobber says:

      I agree it pays to be cautious until we understand it better, and I have no major disagreements with the approach so far, but I’m betting the numbers presented over the next few weeks are going to show this virus is a lot less harmful than the mass media has presented thus far. Like most new situations, the outliers and extremes receive more attention than what is justified. You never hear about the average or expected outcomes, which vastly outnumber the outliers. Over time, common sense and number crunching start to take over.

      Like Buffet says, people want to be active and productive, and there is nothing that can stand in the way of that. People and the economy are resilient, and they overcome obstacles as history shows again and again. Sometimes it takes a while, sometimes it doesn’t, but it always happens.

      • char says:

        You don’t sound cautious.

      • Bobber says:

        Char, “caution” on its own isn’t worth much. You also need facts and logic. I sense a lot of people are allowing fear to throw facts and logic out the window.

        It will be interesting to see how the next year unfolds. I predict people will largely have to face the consequences of their individual decision-making, in both financial and health matters. If people saved more and took their own health more seriously, we’d be better able to weather challenges like this virus situation.

    • Erich says:

      I agree. What needs to be ramped up is antibody testing for Covid-19. Back in March I had diarrhea for two weeks, which was preceeded by a mild fever that lasted for half a day. So, did I have the mild version of Covid-19? Who knows without an antibody test. Until then I continue to wear a mask when I leave the house to go shopping. Of course since I’m retired I don’t leave the house too often anyway.

  39. Henry says:

    “Ah yes, I was just going to say that the Fed announced after hours that it will buy a million used vehicles at the auction and park them in its Special Purpose Vehicles (SPVs) to push up prices so that Americans will have to pay more for their used cars in order to bail out those stockholders, bondholders, and banks… I’m just kidding, I hope”
    Don’t give them any ideas.

  40. Just Some Random Guy says:

    I have a lease coming up. I called my leasing company and made them an offer to buy out at a lower price. My pitch was, you’ll get this vehicle back, that will be impossible to sell at auction and even if you do sell it, you’ll get a lot less for it than what I am offering you. They said thanks but no thanks. My offer was a solid $3K more than what they will be lucky to get wholesale. But since I got such a cheap lease with a really high residual, my buyout price makes no sense for me. It’s $5K above what I could buy the same truck for retail. Leasing companies are about to get annihilated with leases coming due. Perhaps they’re not quite aware what’s about to happen.

    And then as I have mentioned here before, shopping for a new truck – to replace the expiring lease – there’s no deal to be made. A couple of dealers have told me demand is still OK. With supply shrinking daily, due to production lines being offline, there’s no reason to make deals. One mega dealer that usually has hundreds of trucks on the lot is down to about 30. Once production ramps up again…..then the game chances drastically.

    Moral of the story is, things haven’t really started yet. If you want to buy, wait a few months. The deals will be coming.

    • Wolf Richter says:

      Just Some Random Guy,

      Be patient. Everything is frozen right now. No one is moving. Production is shut down. Buyers are not showing up. Inventories are not getting bigger because production is shut down. There needs to be a thaw. Time is with you. Once production is restarting, and inventories are filling up, there will be deals.

      • Just Some Random Guy says:

        Yeah I think you’re right. I can extend my lease for yup to 6 months, so no rush. Only downside is I’ll be out of warranty. But worth the risk to score some deals this summer.

      • Wes says:

        Mr. Richter, what happens when the owners of vehicles financed for 84 months start coming in for trade? How do you bury the negative equity? It may take five years of payments before they’re at break even… That’s if the vehicle has been kept up. Have the manufacturer’s done the math on this?

  41. Cas127 says:

    Well, that explains the two factions that inhabit this site.

    Crumb always creeped me out too.

    And don’t get me started on Dr. Seuss…

  42. sierra7 says:

    Just had to comment:
    I wonder how many individuals, families, etc., that outright condemned those who in the past collected any kind of gov support including unemployment, etc. are now kicking back and saying “what a great system we have!” I was destitute and the gov bailed me out!
    The great “rethinking” of gov. support by those who always condemned others and called them “lazy” and/or other derogatory names.

    • Just Some Random Guy says:

      My guess is that number is very small. People who condemn leeching off the govt tend to be prudent with their money and save up for a rainy day.

      • noname says:

        You are far out of the loop.
        I live in Farmville, where everybody complains about welfare queens yet they themselves are subsidized up the wazoo by John Q Taxpayer.
        They have been lobbying like hell for bennies for every reason the past few years.
        But they are “conservative Republicans”!

        Sample size one: read my comment below.

        P.S. Just because someone preaches one thing doesn’t mean they practice it! Look at all the anti-gay bigots in this world—usually closeted gay themselves! Total hypocrites!

        • Just Some Random Guy says:

          Comparing living on welfare with farming? Weak.

        • noname says:

          Never lived in Farmland have ya..

          They used to publish subsidies in the newspapers…wonder why that stopped. Some available online.

    • Jdog says:

      The thing you need to remember is that government does not have any money itself. Anything it gives it has to take, either before or after the fact. In this case it is taking it from the future. How moral is it to give to those who have not been personally responsible and then bill people who have not even been born yet? It is not. Not at all. But no one ever said we were a moral country, or moral people….

    • noname says:

      Saw this today in my family. A sibling mentioned they were now on unemployment because they are temporarily laid off/furloughed/whatever. This sibling is the biggest condemner of people on benefits, constantly raging against perceived abuses. And looky here! A couple weeks of time off yet immediately grabs the bennies when they’re being passed out like candy. Suppose the unionized gvt working spouse persuaded them..

      • Dave says:

        Well in their defense they paid into unemployment. He(she) was forced to not work. I would collect as well, if I was furloughed due to .gov mandate.

        Collecting benefits under these circumstances is completely proper. Milking and working the system for benefits is entirely different. And yes by golly, there are people who work the system, not the majority though.

        • noname says:

          I come from people who didn’t even take SS/Medicaid/Medicare. Never took SS. My grandfather would give his family members money so they wouldn’t be on the gvt’s dole.

          I’m not saying someone isn’t justified taking UE—it’s the fact that, oh now they a problem, so it’s OK. Wasn’t OK for other people to collect even though they faced a hardship? It’s hypocrisy, which sierra7 is alluding.

        • Jdog says:

          None of them paid into Cares, at least not yet, but the majority of that bill will be passed on to his kids, grand kids, great grand kids…..

  43. El Katz says:

    I think there’s an issue that’s not raised it’s head as yet and that’s the mausoleums that dealers have built at the insistence of the vehicle manufacturers. The quest for “bigger, better, fancier, grander” facilities has been ongoing for 20 years. I used to question TPTB (I worked at a manufacturer for a number of years) when we were pressuring dealers into building multi-million dollar exclusive facilities on prime real estate or mowing down perfectly serviceable facilities because they didn’t meet “image standards”.

    A local dealer here in Scottsdale, AZ just completed a multi-million dollar “update” of their existing Generation 2 building (that probably cost in the neighborhood of $20M to begin with). Autonation, Lithia, Asbury, Penske, Sonic (and others) balance sheets are loaded with these white elephants.

    With the next logical step being consolidation of franchises for survival, what is the fate of these single purpose buildings? What about Carvana’s “vending machines”?

    That may be the next boot to fall….. as someone is going to sue someone. And note that many of the manufacturers are holding the notes on those buildings… as well as the floor plans on the new inventory….. some dealers have used inventory on floor plan…. and the 2019’s are likely approaching curtailment (having to be paid down) if they haven’t hit there already. Wonder how long it will go until the dealers go SOT or send “jingle mail”? Add that to the malaise of crashing lease portfolios……

    Happy to be retired but sad to watch the carnage….. Some really nice people are going to get destroyed.

    • Paulo says:

      Yeah, they often look like Mormon Temples with extra glass. Apology to Mormons, but these dealerships are beyond extravagant. I always think when I see them, “These guys make too much money”, and buy used using a private sale.

      • WES says:


        Knew the female architect who designed all of the car dealer’s new showrooms in Canada.

        Wonder, if she still has a job!

        • El Katz says:

          The franchised dealerships in Canada for the company that I worked for were penned by a company called Design Forum out of Irvine, CA. The interior features were specified in the design documents (aka “DID’s”). In order to be “compliant”, the dealerships had to use specific materials (tile, carpet, furniture, partitions, window mullions), colors of paint, graphics, etc.,. and deviations were frowned upon – usually by withholding reimbursements for construction.

    • Just Some Random Guy says:

      Personally I would never buy from a Carvana type place. I’ve bought sight unseen before, but I have always had a pre purchase inspection. Places like Carvana don’t allow for that and that’s an absolute 100% deal breaker for me.

      Sonic and Autonation are like Carmax, with no haggle pricing. In other words, always 10-15% more expensive that anywhere else. I hope they’re the first to go away.

      • Marc D. says:

        Carvana has a 7-day money back guarantee. So you could do the inspection after buying the car, and then return it if necessary.

        • Noelck says:

          Be careful with Carvana. I believe they have you sign an arbitration agreement which means you waive your right to sue. So you better take the car you just bought to get checked over by a third party in that 7 day period.

    • MARK H RESPESS says:


  44. Island teal says:

    Good article Wolf. Lots of interesting comments. Have not bought a “new” car through a dealer type organization since the mid 80’s. Became addicted to Audi brand and need the money for P/L…..????

  45. Michael Engel says:

    1) In May 2019 total vehicles sales was 18M, slightly lower than
    the 2015 peak.
    2) Before the shutdown, in Feb 2020, vehicle sales dropped to 17.2M.
    3) Mfg inventory rose above the healthy 60-70 days level. Demand was slowing down before the vertical plunge.
    4) Before the shutdown mfg dumped excess inventory on the dealers, cut production until they were forced to stop.
    5) Dealers, in Feb 2020, still had 2019 inventory in Feb 2020.
    6) During the shutdown dealers takeout window slightly reduce
    inventory, but when America will open, both mfg & dealers have plenty
    inventory in their parking lots.
    7) Mfg will start slowly at 30%-40% capacity. Falling demand will
    match the new supply.
    8) The market will be in equilibrium at much lower level.
    9) In Feb 2009, at the bottom of the great recession, total vehicle sales fell to 9.2 units.
    10) There might be an up tic, but when the recession will start to bite, sales will drop below 2009 level. Care sales might not see 18.5M for many many years.
    11) In frozen market there is no pain.

    • Wolf Richter says:

      Michael Engel,

      “In May 2019 total vehicles sales was 18M, slightly lower than the 2015 peak.”

      That’s incorrect in several ways.

      1. You’re citing SAAR, not actual sales. SAAR = seasonally adjusted annual rate. It means that if sales in May 2019 had continued for an entire calendar year at this pace, total sales for the ENTIRE CALENDAR YEAR2019 would have been 18 million.

      2. SAAR in May 2019 was not 18 million but 17.4 million;

      3. Actual sales in May 2019 were 1.59 million.

      I just looked it up.

  46. Holding on to my 02′ Silverado 4WD PU w 8′ foot bed. Think in a year or two it will double in value.

  47. Michael Engel says:

    1) Merchant Wholesales Motor vehicle and Motor Vehicle
    Parts Sales is frozen since Feb 2020.
    2) When dealers inventory is piling up, their banks have a problem.
    3) When the market open, when customers will open their doors and demand a big discount, the dealer will turn his back.
    4) The banks will force some discipline in the games.
    5) Kick the can down, or try to score a touch down, or win a first down to extend possession.
    6) Medium size dealership with thousands of cars in their lots,
    loaded with brand new expensive cars, in desired colors, are packed together like sardines.
    7) The sleek car salespeople would like to generate sales, but the uber
    ego of the owners will prevent sales.
    8) If a sales manager will ok a big discount, he might get fired.
    9) The manager would like to drain their bloated swamp, but the macho owners want to see profit.
    10) Their ego is as big 400 pounds offensive linesman. They look strong,
    healthy and scary, but covid19 proved how really vulnerable they are.
    11) The banks will bend their ego.

  48. Michael Engel says:

    1) Fred : Total Vehicle Sales in May 2020 was 17.933M.
    2) !.59 x 12 = 19.08M.

    • El Katz says:

      Michael Engel:

      May 2020 sales did not equal 17.9 million units. As Wolf indicated, that was forecast based on SAAR.

      Your bullet point number 2 is annualized for 12 months based on March – which is flawed logic as sales in, for example, January are usually far lower than March due to weather, holiday spending hangovers, and sales stuffing that occurred in December of the prior year. If you applied the same logic using January sales data, the number would be far lower… that’s why the industry uses SAAR.

      Many of the larger dealerships are publicly owned. Sales managers (and general managers) are usually paid on gross profit or department net profit (smart ones on gross, dumb ones on net). Their income gets monkey hammered if they don’t generate profit. Salesmen are often paid on a draw against commission. A good sales person cannot survive on $75 mini deals.

      Dealerships are fairly sophisticated businesses. Few (if any – maybe a Ma & Pa store in Podunk) still work on “washout” sheets. Each part of the transaction stands on it’s face. New car gross profits are (and have been) in the toilet for years. Dealers make their profits from hidden money (hold backs, marketing allowances, floorplan assistance, etc.,) and rebates/incentives from the manufacturer. The bulk of sales department profits come from “mop and glo” products (aka after sale) and finance reserves. That’s why walking in and saying you’re “paying cash” doesn’t work in your favor. The total dealership profits are mostly supported by fixed operations.

      My prediction is that the smart dealerships will pencil the cost of carrying the vehicles (floor plan, insurance, lot rot, maintenance, storage lot fees, etc.,) and calculate the amount they can discount based on projected volumes and then dump inventory like a bad habit. They’ll try to stuff you in a loan to at least break even. They’ll try to steal your trade or not take a trade at all – unless it’s something really desirable and they can steal it or they have it sold to another dealer before they even take it in.

      The next step is to go on voluntary “floorplan hold” which stops the manufacturer from shipping vehicles because the bank won’t pay for them.

      Manufacturer’s will turn to “wholesale incentives” to try and channel stuff, but the dealers will resist because now they have similar vehicles with variable costs (same car, but the $1,000 wholesale incentive is not on their older inventory) plus they just cleaned the lots out as far as possible and don’t want to end up there again. The only thing they’ll take is specialty vehicles that they probably already have an order for. Deposits for ordered cars will become non-refundable (unless required by state law).

      It’s going to be a hard slog as no one has seen this before… it’s going to take months for the dust to settle and those dealerships that are poorly capitalized may not live to tell about it. If they fold, the inventory, contractually, goes back to the manufacturer…. as that’s usually how the dealer agreements are worded. That goes for current parts (most manufacturers have provided obsolescence funds based on parts purchases) inventory as well. Obsolescence remains the property of the broke dealer.

      Fun times….. as I said, happy to be out of the game.

  49. Like the ah ha moment in the 70’s oil embargo (US cuts production – how do you suppose that is going to work out?) the US auto industry finds itself with too much inventory of the wrong product. Some investors are betting on Tesla, based probably on two things, the government may not be able to stabilize gasoline/energy markets, (or guarantee supply), but they have decent control over electricity. While we confront the virus, climate change
    continues. After we come out of the pandemic we will realize what six months of industrial shutdown has done to help the cause (shelter-in greenhouse gases). The key to EVs is renewable energy which should gain new government economic commitment. Will a macro government initiative even be possible? Musk could rework the old VX bug, put a couple lithium AA batteries in there and sell it for 2500, but his shareholders are not on board for that. I like CNG a lot better. American pragmatism is last century.

  50. Michael Engel says:

    El Capitan Katz,
    1) Many large dealership are publicly owned, but many are not.
    2) After pencil the cost, based on estimate volume, they will calculate their discount. and than dump inventory. ==> volume will be low, but the dealers will not dump in May.
    Sales will be slightly higher than the shutdown, but less than half of May 2019, whatever this SAAR was.
    3) Many managers are paid base on gross profit or department net profit.
    ==> Management demand profit. Executives bloated ego will retard sales, because they think about themselves, about the short run, the long run is beyond their range.
    They will kick the can down, wasting critical time, reducing the probability of keep the business alive. Instead of clearing their fancy swap fast and now, they will keep clogging. Unless, unless there will be a change of character from the top of the tops, ordering those managers and executives : Dump Fast NOW, Or U Are Fired Tomorrow.
    4) Voluntary floor plan hold ==> will clog mfg shipment when America open and mfg capacity is at min of 20% to 40%.
    5) Mfg cannot survive on 20%-40% capacity for too long waiting for dealers to unclog.
    Wall street cardio will make money when the industry will get a heart attack.
    6) You are lucky, happy and retired and restless, good luck!!

  51. Jdog says:

    There is one thing that keeps a debt driven system viable, and that is people believing they need to make their payments. At the point, they for any reason, stop making their payments, the entire credit / debtor system collapses. It appears that may be where we are at.
    The thing is everything we have been doing for the past 50 years socially, has led us to our current situation.
    We have developed a culture of entitlement and dependency, much like rich spoiled children. Now faced with hardship, we as a society, want to be paid without working, live without rent or payments, default on our debts and commitments.
    In 2008, our so called leaders, jumped the shark of moral hazard and proved to the people that cheaters do prosper, and that it is possible to break the rules and not pay the consequences. That laid the foundation for the societal breakdown we are now seeing and will convince people not to pay their bills or loans and that it is the governments job to bail them out….

  52. Short_Seller_Blake says:

    So basically, short CACC to zero?

  53. steve says:

    My lease runs out in 3 days, no-one has asked for it back, not that they would want it currently anyway, and I cannot order anything new.

    If I see flashing lights Im making a run for it!

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