After Crazy Price Spikes over the Summer, Wholesale & Retail Prices Drop, amid Lower Sales and Plenty of Supply.
By Wolf Richter for WOLF STREET.
The prices of used cars and trucks that are sold at wholesale auctions around the US dropped again in the week ended November 8, compared to the prior week, the 12th week in a row of week-to-week declines that followed a historic 36% spike from April through mid-August, according to data reported by J.D. Power on Thursday. Wholesale prices are now down over 8% from that peak but are still 6% higher than they’d been at the beginning of March. What a historic trip:
There is typically a seasonal decline in wholesale prices at this time of the year. For the month of October, according to Manheim, the largest auto auction house in the US, the typical seasonal price decline would be 2.1%.
But the typical seasonalities have been upended all around in this stimulus-driven economy, including in the used vehicle market whose wild ride violated every seasonality since March. The price decline over the past four weeks in the J.D. Power data was 3.2%.
Sales volume at auction houses around the country has also been on a downtrend since June. In January and February this year, around 110,000 to 115,000 up-to-eight-year-old vehicles were sold each week, according to J.D. Power data. In March and April, the market froze up. And then it thawed and recovered with volume returning to the old normal in June. But volume has since declined. In the latest week, 80,000 used vehicles up to eight years old were sold at auction, down 19% from what is typical for this period. The decline in sales volume was across all segments:
Wholesale supply of used vehicles was at 26 days, up from the normal level of 23 days, according to Manheim.
The combination of declining prices and lower sales volume in the wholesale market, with plenty of inventory on hand, is a strong indication that demand from dealers, who buy at these auctions to replenish their inventories, is waning – at least at these prices. Ultimately, demand is a function of price.
What these dealers are facing is a retail market that had gone haywire. Weirdest economy ever. During the three-month period of July, August, and September, retail prices of used cars and trucks spiked by 15.1%, according to the Consumer Price Index data. The 6.7% spike in September alone was the biggest month-to-month jump since February 1969.
But in October, used-vehicle retail prices, based on the Consumer Price Index for Used Vehicles, released by the Bureau of Labor Statistics on Thursday, ticked down 0.1% — “seasonally adjusted,” meaning it already accounts for any typical price declines in October:
There is a lag between wholesale price movements and retail price movements. So the decline in wholesale prices takes a while to work its way into retail prices.
That the CPI for used vehicles ticked down, rather than further rising, is an indication that these huge price increases in the used-vehicle retail market bounced off a ceiling too, and that the 12 weeks of wholesale price declines have started to work their way into retail prices – just like the wholesale price spikes over the summer had contributed to the wild spike in retail prices.
Retail sales volume of used vehicles in October was down 5% from a year ago, according to estimates by Cox Automotive (which owns Manheim). It appears that the crazy price spikes over the summer have tamped down on sales volume.
Used-vehicle retail inventory, at 44 days of supply at those sales, was back to normal. In other words, dealers in aggregate have plenty of inventory, and in aggregate, sales are slow-ish, struggling with the distorted prices of the past few months in the weirdest economy ever.
The Ford F150 XLT & the Toyota Camry LE are at it again. My annual brain-twisting stunner. Read… The WOLF STREET “Pickup Truck & Car Price Index” for 2021 Models Crushes Official “CPI for New Vehicles”
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We are still a long long way from the bottom of 09 in terms of prices, in fact, we’re at an all time high in terms of the index.
I guess if I may need to just think about this in terms of a new car rather than a used. The other charts looks more promising though. I guess there is always the rental fleet sales market still.
Hope thier deals are still good.
getting my 2001 truck fixed at shop – still cheaper to keep it purring like kitten
paid $6k for my F250 diesel 10 years ago
can’t afford to drive anything else
patients is virtue and so many people aren’t patient
I’ll sit this one out til I’m needed when SHTF
(1999 4×4 Suburban w 189K miles). Bought it 3 years ago. Runs like a top. $2,200. only downside is mileage (14) but I don’t need to drive to work so…. nice for me. Pay 40K for new vehicle??? – not a chance.
wait for it
yeah… well, I’m not exactly in a rush, this only becomes a problem if our government gets its act together and actually contains the virus. Otherwise, our one car now will do the job just fine.
I guess that it is the same in the USA, as it is here in England, that all retail charts will slowly change to reflect the real unemployment rate in both countries. At the moment who knows what the true figure is. Here in the UK it looks around 3 million plus and in the USA around 20 million plus…but, as I have said, who knows as the greatest bubble at the moment, is to be a master and promoter of the art of being economical with the truth…..lol
I tend to drive used cars in the 10 – 20 year old range. It’s the sweet spot for me. My current vehicle was getting lazy starting and I checked the battery. I was amazed to find it was the original one16 years old. Shout out to Mercedes and battery maker Johnson Controls for giving me a many happy starts.
you need to come out west to Arizona
all batteries here die within 3 years
sure glad costco has free replacement – no questions asked
and it’s about time to replace my 2 batteries(in truck)
The battery was in the trunk. I think it helps if they are not under the hood too.
I have a 07 sprinter. Changed the battery after 9 years only because I was worried it would die. It is stored under the floor board.
The eviction moratorium has decreased the demand for this alternate housing solution?
I suspect that a similar trend hit boats. I am a boater. I have heard from brokers that boat sales stopped dead in the spring, and then went nuts. People were offering over asking price for used boats. A friend lost out on three boats he made offers on. Now I’m seeing price decreases in listings.
Apparently the combination of not being able to travel, and the built in social distancing you get when you’re out on a boat with a small group or family made boating very popular.
Break out another thousand.
Sort of like European cars.
Used to do offshore, big boat, sailboat racing. It was described as standing in a cold shower tearing up 100 dollars bills.
I am a ‘boater’ also. Actually I’m a live aboard.
I have seen a steady trend towards more live aboards in the last 5 years due to housing costs. I have since seen an additional spike since the virus. This time due to housing loss (in part).
Pricing trends of boats is difficult due to condition, age, equipment etc. Doable but difficult. I think it’s better trend to follow is that of number of empty slips and asking price of slips
Where do you dock, tie up, or anchor out? Live aboards get the bums rush around here and no one wants to wait out the winter in some empty inlet with 100 kt outflow winds and minus whatever.
Plus, private marina space is very expensive, and coastal towns and cities move boaters out of their harbours within 14 days. Just curious.
My wife went to uni with a live aboard….years ago…decades ago, actually. When asked what it was like and how to do it he replied, “Go and step in the shower and turn the water to cold. Then, flush hundred dollar bills down the drain while you soap up”. That was in Vancouver. The live aboards I know lasted about a year before they sold and moved on. Winters are long here.
Winter aboard in Kronstadt is worse.
That story of what it’s like to ”live on a boat” is as old as the hills…
Been hearing it in the live aboard communities all over FL back in the late 50s, and the Bahamas in early 60s where i lived aboard my grand fathers home made 45′ Alden design 3 masted schooner in Nassau harbor for a few months..
the actual story is,,, ”living aboard a boat is like standing in a cold shower shredding $100 bills as fast as you can.”
OTOH, my many live aboard experiences have been delightful in each and every case,,,
but i am fully cognizant that , shamefully, that is not likely the case in USA these days, with all too many NIMBY types pooping their pants when they see someone doing similar right in the water into which the nimbys poop will go eventually with the addition of a big load of chemicals,,,
though it is still delightful, from what i read, other places that appreciate that ”live aboards” have the same food and fuel and friendship needs or at least wants as all other humans..
and love to spend their monee to support local economies, which, maybe unknown to many in USA, still exist, though, as always, still marginally
And you and your clothes smell like a mildewy bilge. That really turns on the chicks.
agree with you re: ”holes in the water into which one throws money” AKA boat, KH:
not likely to buy another after a dozen or so, mostly rag tops which i mostly sold on for mo monee after doing some serious improvement work and/or cosmetics,,, but i still love em,,, and watch the local tpabay mkt closely on CL, along with a bunch of other stuff such as SUVs, RVs, which i am more likely to buy,, though i will admit the motor head in me is still jonesing for one of the big old classics stink pots as i was on as a kid king fishing in the GOM,,, so who knows, eh
but not soon, as in the next few months soon,,, more likely for both/all of those V types, at the earliest in the late spring in FL, when those mkts always sag as our ”seasonal visitors and residents” leave once again..
for sure, if we have more of this ”extend and pretend” ””ssttuufff” as so clearly reported by Wolf and Nick,,, maybe not in this lifetime for any of these toys, much as i love em
I don’t know V Vet about how old the story is? I do know this, (west coast) that cosy little cabin with the wee little oil stove or propane htr gets awfully small after 6 months of winter. I think living aboard would be best in the south, but for those pesky hurricanes. Same goes for an RV, and that is why my in laws always suffered from two feetitis, finally culminating in a Bluebird bus motor home. They started with a small camper and must have had 10 different rigs over the years. We have lots of full time RV people around here, but by and large they did not prepare for retirement and that is all they can afford.
They are cooold and drafty. Take care.
When they locked down here in Victoria people were not allowed to use their boats.
Guess the idiot politicians in charge of the virus crisis concluded that it was possible to catch the virus by being on your boat out in the middle of the bay.
Reality is checking in. Elevated income due to big checks from the government is waning. Have a friend whose daughter works for Quicken Loans in Detroit market. She said home prices stabilized and are now dropping this fall. Inventory is also up and growing. It has been said Michigan is the bell weather for the rest of the country in past downturns and maybe still true. We may need another shot of Fedrenalin!
NEED MOE COFFEE
My AI powered typo-screwup-fix-it algo fixed it for you :-]
It is, certifiably, ”mo” cough eeeeeee”’
and, to be very clear, if you do not cough, you don’t need IT..
at that point, you probably need only Wolfstreet and lots of your choice of pain reduction..
have to say, Wolf,,, enjoy HUGEly your clear information,,, and hope the Great Spirits will help you in every way they can…
It’s getting to be winter in MI and that slows RE sales.
Stage 1: People can’t afford new cars so they buy used.
Stage 2: People sell used car because they can’t afford food.
Stage 3: Government buys indigent consumer brand new electric car for free.
So this brings one to the perverse conclusion one should buy Tesla stock.
Alimony, aviation & marine (auto racing runner-up) share similar econometric behaviors.
A black hole you pour cash into (X for marine, 10X for aviation, ymmv w/ alimony) never seen again.
“Alimony is like buying hay for a dead horse.” – Grouch Marx
“Humor is the truth; wit is an exaggeration of the truth.” – Stan Laurel
If the majority of americans don’t have 400$ to cover an emergency, where is the money coming from?
and they are not credit worthy by most standards, so fraud?
Lenders hoping that they get bailed out whenever sh*t implodes?
They’re credit worthy until they’re not. Meanwhile, lenders make money off the spread between the interest rate they charge and their cost of funds. If borrowers default, repo the car and sell it, take loss. The risk of doing business.
The default rate on auto loans by customers with prime FICO scores is 0.2%. So hardly any.
The default rate on auto loans by customers with subprime FICO scores is usually between 3% and 5%. Those defaults that cannot be cured lead to repos. So do the math: lender earns 15% on the loan year after year that has a 4% chance of defaulting (4 loans out of 100 default). If a loan defaults, the loss might be 20% to 50% of the loan amount. This can be a very profitable business.
Lots of people with no savings have excellent credit and take care of their credit and have plenty of room on their credit cards. They use credit cards as a cash management tool. They might have a huge 401k as well. And a house with equity. They just don’t have a savings account.
“They might have a huge 401k as well. And a house with equity. ”
Which were proven to be over valued in 2008 and only remain high because of money printing. My point being those are not savings, they go whichever way the wind blows.
I went to have a used car financed for my Daughter, and the Credit Union avoided me like a plague when they saw I had a 800 credit score.
I searched for weeks to find financing.
They prefer to make loans to ppl with poor credit, because they can charge exorbitant fees and do 8 year loan terms.
Soon, we’ll see 50 year home loans.
Wolf, et alia,
The point is that any loss on the obviously very very bad loans is a ”tax deduction” for someone in the chain of that loan…
While that alone is not a bad thing for the economy and WE the PEEDONs, (thanks Unamused),,, in the long run it is a very bad thing for both.
Until and unless all of these kinds of metrics and measures of current and likely ability to pay off the loans,,, loans of all sorts, from cars to houses to boats to airplanes,,, etc., etc. are once again based on at least some kind of basic and rational basis, I, for one, am staying out of all such markets, and suggest all rational/reasonable folks do the same…
Plus the selling dealer accepts a lot of the risk of default from subprime buyers.
My step son-in-law is 54 years old, divorced, has only worked about 4 years in his entire working life, spent 5 years in prison for felony DUI, is on SS disability ($$) (potential fraud, IMHO), is NOT employed, and was able to get a new car loan (15% interest) on a 2019 VW Jetta with $2k down.
Anyone can get a car loan in the U.S. (unless, of course, you are dead)
you are correct AntA, especially you last sentence,,, and that is just one reason we who pay cash or have 800+ CR have to pay more than is reasonable,,,
thanks to Wolf and others who are at least trying to report accurately and conscientiously, we know much much more about how WE the Peedons (Thanks Unamused) have been majorly abused the last few decades…
My understanding of ss disability is it’s based off of your contributions. If he worked just 4 years can’t imagine he draws more than $300 per month. He has a rough life ahead.
“Anyone can get a car loan in the U.S. (unless, of course, you are dead)”
Why should that be an impediment…I hear they sometimes vote….
elysianfield, thanks for reminding me of that since we just had an election, well, kind of like one anyway. I should have known better.
Old School, I don’t know all the details, but I remember now that he also collects long term disability funds from an “injury” he got on one of his recent jobs. He also lives with his Dad and step mother.
Sad case, nice guy, but no common sense. My wife (his mother) is not the least bit thrilled about his lot in life. He also is divorced with a 24 year old son that he rarely sees.
But he has a nice Jetta!
Price spikes and lower volumes means people with money are moving into the market, and those buyers tend to buy at the high end, (used vehicles at retail blue book). Same thing in RE probably and stocks definitely. In a broad context there will be supply constraints (today TP, tomorrow Tesla) The media focuses on service businesses, like restaurants, but manufacturing faces Covid fatigue. Worker safety a completely ignored subset of the virus. Of course the rental meltdown and lease vehicles pushes up inventory, and has a somewhat beneficial effect for the lumpen. The wealthy have a different supply chain problem.
“Worker safety a completely ignored subset of the virus.”
Funny how “essential workers” are actually treated as disposable workers, sometimes also known as “deplorables”. Reports from the meatpacking industry suggest that when managers decide to protect their workers, they don’t get sick. But protecting workers takes organizing skills and competent managers, both in short supply.
Dead workers, like dead care home residents (and their caretakers), are a policy choice made by Dear Leaders and their corporate paymasters.
The reserve army of labor is getting too big, and it is getting uppity. If it shrinks a bit, that is a feature, not a bug.
The labor movement will actually have more gravitas after there are no employees left. Easy for corporate America to be generous after 90% of all work is automated. Curious that a lot of food product is being loaded gratas, into autos, at drive in food banks. Free food on the backs of dying workers. Even Marx would have trouble with that.
What I find entertaining in this economic phase, is the extreme confidence that risk doesn’t matter, and that good, if not great times are ahead (as within a matter of a few weeks). Obviously, car buyers are just a little hesitant to invest in their pennies in older machines, but perhaps their funds are tied up in equities speculations?
Yah, something is very weird here, like a disconnect from reality and a very broken world — who could have guessed that a global pandemic and insane president would result in such exuberance? Why are people not buying more big ticket items and spending more money??
It’s a big country. I think the current administration has been good for my slightly red state. Things are still hot and booming except in the bar, gym, flying hotel businesses. Everything else seems wide open, especially tech and residential real estate. Might not last. If Mr. B gets in probably more resources will flow to blue states.
“We Tote The Note” used card dealers have an interesting business model. The down payment pretty much covers the dealer’s cost of the car. (At least in the old days. Might be different now.)
The buyer directly pays the dealer every week. Miss one week and It’s Repo Time! The dealer then sells the car once again to the next sucker.
What could be better than a system where the more the buyers default, the more the seller profits? It may not be good for the buyers, but who cares about those bums anyway! After all, if they weren’t stupid and lazy they wouldn’t be poor.
This sounds like a complicated rent to own scheme.
You bring up an interesting point about the poor. I’ve done volunteer work with the poor for about 10 years and have much insight on that regard.
There are some people who are poor because of addiction or mental health or medical reasons.
There are others who simply don’t understand money and compound interest. This is a very large category. People who have not learned the time value of money, or who do not understand the delayed gratification is part of building wealth or financial well being.
Family upbringing is also very critical. People emulate those closest to them in the long run.
I’ve seen only a few people who were poor because of outright laziness. It has more to do with mental health and delayed gratification and upbringing in my experience.
After the loss of sales volume during the Panic Days of the Pandemic, auto resellers this Fall have been generally very stubborn to keep prices high, even if it means less total profit for them versus selling more vehicles at lower prices. But the prices are starting to come down as I type, as the rental car fleet tsunami is gradually going to auction, the lenders don’t need rusting product to unload and sitting on this potential cash costs money also. And replacing each battery, at about $120 a pop, cuts into their final margins.
Have been searching for a used mini-SUV since December (Ford Escape S 2.5L), so I have watched the show each and every month this year. A couple of thousand more down on the Ask, then I will feel I can still negotiate a deal via reduced processing fees, a total rip-off/margin pad, and some form of warranty. Financing I can get anywhere below 3% for 4 years.
Back in ’13, the LAtimes reported on burgeoning ‘leasing tires’ market to those with tight finances.
“rent a wheel” (and similar organizations) took a page from ‘rent to own’ furniture operations. The financially stressed are the easiest to pluck.
Now anyone can ‘pimp their ride’ for a monthly/weekly price.
This used Chevy Bolt looks pretty hot.
Millions of cars get recalled every year, nearly all of them ICE vehicles, to fix anything from suddenly exploding airbags to fires. From my just published article on EVs:
“Batteries remain a challenge, and billions of dollars are being thrown at battery-related technologies. Reports of fires continue to excite our imagination. There have always been fires involving ICE vehicles, given the combination of gasoline and heat. Each year, from 2014 to 2016 — before the mass-arrival of EVs — “an estimated 171,500 highway vehicle fires occurred in the United States, resulting in an annual average of 345 deaths” per year, according to the US government. But we’re used to ICE-vehicle fires. BEV fires are new, and different, and more fun to watch on YouTube, and they get all the attention.”
Gee, our old LaSalle ran great,
Those were the days.
This is like the old game of comparing unique charge cards. I’ll throw out a 1967 Chrysler New Yorker (w/ Barricrafter ski racks on top of course). Plenty of hat room.
My old Datto 120B ran great. Except up hills and on flat ground. Ever had that disconcerting feeling of rolling backwards down a hill despite being full throttle in a forward gear? It was right in its element when I did a U turn and effortlessly drove it back down the hill.
I have distant twin cousins, probably about 75. They are simple women with not much money. Never married. They inherited their parents house and car. The car is a 1965 Plymouth Fury 4 door kind of a sky blue. This is their one and only car and daily driver. (My parents bought one new 1966 and it was right at $3000.)
Anyway it’s been a functional piece of machinery for 55 years and it’s probably going to be the one and only car they ever have.
“Weirdest economy ever”. I’d say it’s the Great Brownian Motion economy. Everything bounces around like water on a hot skillet.
I’m in SoCal. I’ve owned houses and this is my second sailboat. I’m comfortable. I do a lot of my own work. Yes there are repairs. But right after I bought my last house I had to replace all the plumbing overhead due to a slab leak (who the hell thinks burying your plumbing in concrete is a ‘good idea’?) Then I had to replace the water heater, then the A/C. Boats are a bit more expensive but I enjoy the surrounding and the lifestyle. My boat is a Columbia 45. Old, solid, tight, dry and very spacious. Certainly a step up from tiny house living. And cheaper than renting…for now…which I need for a few personal reasons. I’m seeing this as a project to take a 20th century system and re-equip it to 21 century tech. Not for everyone but it works for me and my wife.