What’s Behind the WTF Spike in Used-Vehicle Prices? My Gut Says, it Can’t Last. But if it Lasts, It’s Scary-Crazy Inflation

And if it doesn’t last after the stimmies are gone, dealers will sit on massively overpriced collateral, which could get messy.

By Wolf Richter for WOLF STREET.

This has been going on for months: Used-vehicle prices spiking from jaw-dropper to jaw-dropper, and just when I thought prices couldn’t possibly spike further, they do.

Prices of used vehicles that were sold at auctions around the US in April spiked by 8.3% from March, by 20% year-to-date, by 54% from April 2020, and by 40% from April 2019, according to the Used Vehicle Value Index released today by Manheim, the largest auto auction operator in the US and a unit of Cox Automotive. All heck has broken loose in the used vehicle market:

The price spike has now completely blown by the prior record spike over the 13-month period through September 2009, which included the cash-for-clunkers program that removed a whole generation of serviceable older vehicles from the market.

Dealers that purchase vehicles at auction to restock their inventory face tight supply and lots of other dealers bidding on the same vehicles. So they curse under their breath and bid up the prices to get some inventory, hoping they can pass on those ludicrous prices, plus a hefty profit, to consumers. Retail prices tend to lag wholesale prices by about six-weeks.

Consumers have been willing to pay those ludicrous prices, rather than go on buyers’ strike: Used vehicle retail sales in April rose to a seasonally adjusted annual rate of 22.4 million vehicles, according to estimates by Cox Automotive. Stimmies made perfect down-payments.

My gut says, a spike like this cannot last. If consumers balk at those prices and go on a buyers’ strike, after the stimmies are gone, and these insane prices unwind, dealers are going to sit on some massively overpriced inventory – collateral for their floorplan financing – and this could get messy if it goes awry.

But if these price spikes don’t unwind soon, they will turn into scary-crazy inflation.

Tangled up supply woes.

Wholesale inventory at the end of April was down to just 17 days of sales, when 23 days is about normal supply, according to Cox Automotive. Retail used-vehicle inventory stood at 33 days, when 44 days is about normal.

The seeds of the used-vehicle supply woes were sown last year, when the rental car business collapsed, and rental car companies cut their fleets by selling units they had, and by slashing orders for new vehicles. The latter strangled the flow of new vehicles into rental fleets last year and this year.

But now, the rental business is picking, as people start traveling again, and rental cars are in short supply.

The supply shortage is now difficult to remedy as the semiconductor shortage has hit automakers starting early this year. They shut plants and canceled shifts; they have prioritized production of their high-end vehicles to make up in price what they will lose in volume. Ford announced that its global production in Q2 will likely be down by 50%. In this environment, the low-margin sales to rental fleets are put on the back burner. And rental fleets have been struggling to get new vehicles.

Avis warned on May 4  in its quarterly 10-Q filing with the SEC about not being able to get enough vehicles for its fleet:

“We face risks associated with our suppliers of vehicles, including as a result of a global semiconductor supply shortage.”

“We have faced, and may face additional delays in receiving delivery of new vehicles from vehicle manufacturers for a variety of reasons, including due to closures at manufacturing facilities or otherwise.

“In particular, a global semiconductor supply shortage is having wide-ranging effects across multiple industries, particularly the automotive industry, and it has impacted multiple vehicle manufacturers that supply vehicles to us.

“For example, some automobile plants in North America and elsewhere have halted or reduced vehicle production due to the shortage of semiconductors used in the production of their vehicles.

“As a result, the semiconductor supply shortage has had, and is expected to continue to have, an impact on new car deliveries, which may make it challenging to meet consumer demand.”

Other rental fleets are facing the same issues – they’re being put on the back burner by manufacturers that are having large-scale problems assembling vehicles due to the semiconductor shortage.

During the first four months of 2021, compared to the same period in 2019, sales by automakers to fleets plunged by 48% from 693,000 units in 2019 to just 360,000 units this year, according to Auto Rental News.

Rental fleets are now keeping the vehicles they do have longer, and they’re sending them to auction with a lot more miles. According to Cox, the average mileage on “rental risk” vehicles (these are vehicles that are not under a repurchase program with the manufacturer) sold at auction in recent years ranged mostly between 40,000 miles and 50,000 miles. But in March, average miles jumped by 12,000 miles from the already high mileage in February, to 67,000 miles. And in April, average mileage spiked to 82,800 miles!

Even as the mileage has spiked, the average price of these rental risk units – and that’s how crazy the market is – has jumped by 32% year-over-year.

Rental fleets have now turned into major buyers at the auctions, thereby increasing the price pressures. They have always bought some vehicles at auction periodically to meet demand locally; that is not new. But this is now happening on a larger scale.

Enterprise told Bloomberg: “Our fleet acquisition team is working hard to secure additional vehicles – both new and low-mileage used vehicles – through all channels to meet the ongoing increase in demand.”

A Hertz spokesperson told Bloomberg that the company is “purchasing low-mileage, preowned vehicles from a variety of channels including auctions, online auctions, dealerships and cars coming off lease programs.”

On the customer-facing side of their business, rental fleets have been making hay while the sun shines and have jacked up their rental rates in markets where they can – which, you guessed it, is adding more fuel to the inflation fire.

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  207 comments for “What’s Behind the WTF Spike in Used-Vehicle Prices? My Gut Says, it Can’t Last. But if it Lasts, It’s Scary-Crazy Inflation

  1. MrNobody says:

    Just to show you how crazy I have a 20 year old Infiniti that had not moved in years stolen out of a garage and the thieves got caught with a GPS unit. The officers involved said that car theft has doubled in 2021.

    • Mike says:

      I’m sure there’s lots of used cars ready to be imported if the USA raised the 30years old age limit to qualify. :)

      • Old school says:

        I am 65 an my parents are still living. They have a very low mileage car and a mid mileage truck. Both of those will be inherited or sold. Seems like that is going to be pretty common as boomers age.

        • NBay says:

          Wolf, “Dealers that purchase at auction”

          That means “dealers” as in “Joe’s used cars” and like not the Ford dealer you worked at, as it seems they would keep the best trade-ins for resale there, anyway, right?
          Maybe dealer/dealerSHIP is the lingo I am missing here?
          Do some dealerSHIPS have to buy at auction ALSO with the shortages? I suppose that is my real question (and I read article twice this time.)
          Also in early 80’s I went to an auction with a guy and his dad who had a “permit to enter/buy”. They bought the front and rear sections of totaled Rabbits and welded them together as one of their biz things. Was on a HUGE dirt field around Sears Point IIRC. (I bought and fixed a crashed Honda 500 4). So second question is are the auctions you speak of sight unseen or do bidders wander the rows? A lot of cars looked to be in good condition there , just dusty.

        • Wolf Richter says:

          Dealers buying at the auction are independents or franchised dealers. Or anyone else that has been approved to buy at the auction.

      • cas127 says:

        Mike,

        Could you provide more detail on what you are saying?

        Are there restrictions on importing used cars into the US?

    • Cobalt Programmer says:

      In DC area there is a huge spike in car thefts. Advertisement outside the metro bus says “when you jump out of the car they jump in” (something like that). The cars were not so fancy just regular basic model cars. I read an article in NPR (I read NPR), that even catalytic converters make money from old cars. The scary aspect is most arrested were in teens with baby face. May be just a joyride or planned shipping to Mehico. Who knows señor ?

      • Cobalt, the CATS have been stolen in DC for years now, what a fun place for our Nation’s Capital. Have you noticed what the prices of Platinum and Palladium have done the last two years?? Wish I had bought some!

        • Auldyin says:

          DWY
          CAT theft has become a ‘craft’ crime almost everywhere. They compete to see who can take them out fastest with a battery powered angle grinder and a long arm reach. What guesses the current ‘champ’ is around 10secs start to finish!

        • NBay says:

          Modern cats are “3-way”. They use Rhodium (maybe Cerium in 90’s stuff) along with Platinum and Palladium, to get a pretty complex chemical sequence done. I doubt stolen cats are just melted down for money, as their honeycomb ceramic construction is pretty complex. They are worth more as parts. They are $1000-$2000 or more new. Obviously the newer car they can be stolen from the better, and hybrids are also favored because they obviously get less gas run through them.

          These are the social costs of extreme income/net worth inequality…..expect more as it gets worse. A “social tax” on letting things go too far. Unfortunately the poorer folks who can’t have an apt or home with a garage get hit the worst, adding to the problem.

      • MiTurn says:

        “even catalytic converters make money from old cars.”

        And air bags.

      • David G LA says:

        Maybe to Canada?

      • Lisa says:

        Catalytic converters stolen all the time in my neighborhood. Everyone who owns a car like mine (Honda CRV 2000)needs to budget for a new one

    • OutWest says:

      My coworker had an old broken down camper stolen last week that had sat idol on her property for about 15 years. It was worthless, until now.

    • MCH says:

      It’s crazy, my neighbor had his 15 year old F150 stolen a month ago right during his trip to Home Depot. The skyrocketing costs of used cars are making for some very bold thieves.

      • RightNYer says:

        Also, modern cars are nearly impossible to steal by non-professionals. I suspect that’s why 15 year old trucks with high resale value are prime targets.

        • MCH says:

          Yep, broad daylight and all. And the funny thing is that the cops took a report and then told my neighbor that even if they caught them, the thieves would just get a ticket, and that’s it.

          It seems like a joke, but it really isn’t, imagine if you’re just a contractor starting out on the trade and you had an older truck and suddenly it gets stolen, there goes your livelihood.

          It’s crazy.

        • El Katz says:

          The best “anti-theft” device on an old vehicle is to switch the coil wire and a plug wire at the distributor cap (we’re talking old here). It won’t start. If they pick up the hood, it looks “normal”. Inconvenient, yes. But it works.

          Of course, in some areas they just hook ’em.

        • Anthony A. says:

          Really good theft deterrent is a manual transmission.

        • NBay says:

          Slim Jim’s are everywhere and varied and easy to master. Also I had cordless tools stolen out of a 92 Nissan (had no wing window, they are too easy) by bashing out the window. In carport right under my apt and in a large complex. Maybe they put a big piece of sleeping bag over it for noise kill? Most likely an apt resident.
          Anyway, desperate people do desperate things, and I bet many “pros” are hoping to start their own American Dream, just need to build up cash. Entrepreneurial spirt……

    • Kenny Logouts says:

      I wonder how it felt just before 1929 in the USA.

      Or if what we’re seeing is more indicative of a pre hyper inflationary period.

      I still don’t see how the result of no one being given salary increases to heat up the economy is inflationary.
      This is all about supply vs demand which is a temporary anomaly.

      Driven purely by the spectre of inflation.

      Personally I think this is one giant inside job bull trap.
      The herd are running for inflation/reflation/new cycle, just as it’s about to end in horrific deflation… and all the sovereign debts can be printed away as “bailouts”… and the very rich/central banks buy up assets dirt cheap.

      • Trailer Trash says:

        “the very rich/central banks buy up assets dirt cheap”

        Global Crossing, an international backbone telecom provider, collapsed 20 years ago and was bought by the usual parasites. The suddenly-very-cheap telecom connections to India gave birth to the Indian call center industry. And the death of US call centers.

        The “natural” business cycle destroys naive investors, enriches parasites, and eliminates employment. But rich people devouring the rest is some kinda law of economics, like gravity, so it’s all good.

        • Old school says:

          Prices get so out of whack during crashes that assets have to be sold at nearly any price.

          Fed has stopped that from occurring in 2020 as they were afraid to let market clear. I think some hedge funds are probably the dirtiest as they are using too much leverage knowing Fed will always try to backstop banking system who facilitates hedge fund leverage.

    • shandy says:

      A rehash from last week and the week before about the boo hoo used car market.
      If your money is placed as lying a used car market it is gone.
      Take a look at tonight’s Ethurum
      Pig play musk on saterdsy nite.
      Look for a quick tank then a triple top immediately before a pull back as btc swallows.

  2. JV says:

    Whatever happens, the FED will blame it ALL on the pandemic. It will hide behind Covid-19 when it can’t fix it.

    • Mr. House says:

      What came first, the chicken or the egg?

      • Mr. House says:

        December 2018: Markets start to buckle

        Spring-Summer 2019: Fed stops raising rates, begins to lower them and talks of no more reduction of balance sheet in the fall

        Fall2019: REPO market begins to go critical and remains that way until Spring of 2020

        Spring of 2020: CARES ACT is passed and creates more money then all of the insidious life support those that rule us required from 2008 until 2019.

        What came first? The chicken or the egg?

  3. JC says:

    If that happens then I’ll do the unthinkable, I’ll buy some Chinese whatever mobile.

    • Paulo says:

      Before I bought my 18 year old PU a few years ago, I seriously looked at the Chinese versions of ‘jeeps’. Based on their simple military version utility vehicle, it looked like a no-nonsense no-bling reliable 4X4; kind of like a modern version of the Willys Jeep. Beats the Hummer nonsense, or Envoys, or Jeep PU.

      Anyway, l was dipping the toe and doing research until the family deal came up. Instead of a 4X4 (which I actually need on the local weed slick boat ramp) I throw some weight in the back like we used to 50 years ago.

      New vehicles re waaay too complex and more expensive than they need to be. 7 airbags? Really? How about just slowing down and driving carefully? Buyers need to wait and not be stampeded into this market….if they can do so.

      • drg1234 says:

        Yes, really. You are not a genius for driving a 40-year old van with no fucking airbags. You’re just a cheapskate.

        Just so you know, every single air bag in a new car protects against specific injuries. The side head curtain reduces the likelihood of death from a side impact brain injury by forty percent. The little air bag under the dash protects against tibial plateau fractures in frontal crashes.

        It’s not just the airbags either. Ask Tiger Woods why his legs are still attached. Hint: it’s from the high-strength steel toe/lower leg pan now mandatory in new cars.

        I could go on, but the point should be clear: the shit you drive is demonstrably less safe than any vehicle built in the last five years.

        • Jos Oskam says:

          Yes. New cars are generally safer than older cars. However, that doesn’t make a person driving an old car stupid, nor does it make someone who drives a new car smart.

          It’s all a matter of risk acceptance, and that is very personal. I drive an old car that lacks lots of safety features. A also ride a powerful motorbike. Given this, would it not be a tiny bit weird if I insisted on the newest, safest car around while also using a two-wheeled means of transport that is orders of magnitude more dangerous than the oldest clunker of a car?

          Of course, being a careful and capable driver doesn’t guarantee you’ll never end up in a serious accident. But on the other hand, I tend to feel that cars that have a reputation for protecting against any type of accident attract a certain class of drivers. Just sayin’.

        • TimTim says:

          Undeployed airbags are a major danger for emergency services personnel trying to extricate bad drivers from their cars, as anyone who has had any training in emergency response will tell you.

        • nodecentrepublicansleft says:

          I think it’s a case of ‘different folks, different strokes’. I have a nice 1993 Nissan 300ZX that’s my fun/fancy car. It has less than 40K original miles and drives like a dream.

          For me, it’s about “bang for the buck”. For me, that’s the best car I can get for the $. Like I can’t afford a Cesna, but I have a fast motorcycle….so I get to “Fly near the ground.

          But my daily driver is a 20 yr old Acura TL. I don’t think I’m a “genius”, I just like getting something that’s insanely reliable, very comfortable, parts/repairs are cheap and I don’t care if somebody hits me, door dings it, scratches it, etc.

          I’ve seen people who spend stupid, ungodly amounts of money on cars. That’s not for me. I would NEVER buy a car from a dealer, they are uber-skuzzy in my book. And I would certainly never buy a new car. Why? So it can lose 30% of it’s value the second you drive it off the lot?

          My Acura cost somebody $35K. I paid $3400 for it….so 90% off, w/about 100K miles, in mint condition, from original owner, w/all the service records. An old man owned it and kept it in a garage.

          I’m stupid with my money in other ways. I’m definitely not a cheapskate as I’ve wasted a metric shit-ton of $ on my life on a wide variety of stupid crap.

          But I learned early on that I felt sorry for people whose identity was tied to their automobiles. The guy trying to hard to be cool/relevant/look tough, he buy’s a hummer (micro-penis alert!!!!) comes to mind.

          As the band Fugazi sang: “You are not what you own.”

          Different people value different things. I’m happy you have the latest in air-bag technology, congratulations!

        • MyLadyHumps says:

          If only people would listen to you and fully understand the dangers. As you point out side impact air bags only reduce the danger by 40%. This is unacceptable danger and we are letting people travel with children!

          Please people, stay in bed! The world is crazy dangerous and scary. It’s not worth the risk. Our modern life affords us the safety of our beds, you are crazy to get up in the morning.

          Accept money from the government and use it to purchase food online. Unfortunately there is no way to avoid the dangerous trip from your bed to your front door but clearly there will always be some risk. You must do everything possible to eliminate risk from life, something bad could happen. Stay safe.

        • nodecentrepublicansleft says:

          Why don’t YOU ask Tiger Woods?! I certainly wouldn’t be friends w/that goofy golf buffoon.

          He was driving a Genesis GV80 SUV, which cost $50K.

          Some drugged up celebrity jackass is a terrible example to use.

          I’ve purchased 2 homes, 1 that Commercial zoning since 2014 for less than $50K. As Lou Reed sang on his eponymous “New York” album: “Does anybody really need a sixty thousand dollar car?!”

          Not all of us have or care to spend $50K on some stupid, vainglorious SUV for wealthy people OR the insecure folks trying to impress everybody else. “Look at me!!!”

          Again, kudos on your fancy airbags, but the reality is exactly what Paulo said.

          If you’re not high as a Georgia pine and driving 84MPH in a 45MPH zone, you may not need your fancy, special LEG airbags.

          Somehow the greatest generation and others survived w/out them!

        • Wolf Richter says:

          nodecentrepublicansleft,

          “Somehow the greatest generation and others survived w/out them!”

          Generations always survive because they’re a theoretical construct. Individuals don’t always survive.

        • Old school says:

          No doubt that is true, but the biggest factor is the driver. How fast? How much? How much at night? How much in the rain? Do you look twice at intersections? Do you drive tired? Do you drive after a drink? Technology can give you a little too much confidence and cause you to take toouch risk.

        • NBay says:

          I get Paulo and Nodecent’s points completely. Good friends have called me “disgustingly practical”, but never ever “cheap”. I’m fair and I always tipped well back when I used to go out to eat….5-6 years or so ago.

        • Gte343z says:

          Yes… every <5 yo compact electric/hybrid car with airbags will definitely be much safer than my 6500 lb 1991 diesel Landcruiser.

          Do yourself a favor and go to the junk yard and check out these new cars after a bad accident. They usually need to cut them up to get you out because they are so light weight construction.

          Not saying that airbags aren’t safe but really it depends on the situation and not everyone that drives an older vehicle is a cheapskate

      • MiTurn says:

        “New vehicles re waaay too complex and more expensive than they need to be.”

        I get your gist Paulo, but newer cars are in many ways easier to fix. Many brands, like Chrysler, will give you a code from the odometer read-out that pinpoints the problem. Easy-peasy to diagnose, compared to older models. And parts are cheap on Rockauto!

        • Ensign_Nemo says:

          If you need anything with a semiconductor in it, then the price of that part could increase quite a bit real soon.

          My father was a “shade tree” mechanic who could fix *anything* in his cars – until they started putting electronic control systems in them. Those are like light bulbs, if they break they can’t be repaired, only replaced.

          He was so good that he was able to get a AMC Gremlin to run for 100,000 miles, until the odometer rolled over. Anyone who knows anything about legendarily terrible 1970s American automobiles will be duly impressed.

          I think that he still has the engine for the racing version of the 1962 Model E Jaguar sitting down in the basement, even though he sold the actual car in the 1980s. He’s quite possibly the only person in history to ever own a 1962 Model E jaguar, and use a AMC Gremlin as a daily driver, at the same time.

  4. John says:

    It was a short few years ago that the genius brain trusts at the giant auto manufacturing companies determined that they would only build trucks and SUVs. Ford specifically announced that the only car they would build was the Mustang, period. Soo, here we are later with another miscall by the “smartest guys in the room.”

    • Gl says:

      Um, Obama fired the CEO of GM years ago for building trucks and SUVs that nobody supposedly wanted. Had them build the wildly successful Volt. They still didn’t listen. I’m pretty sure they have been selling lots of trucks and SUVs. Sounds like a good time for you and other smart people to get into the car business.

      • nodecentrepublicansleft says:

        The guy you’re talking about, Richard Wagoner, was CEO of GEM as their market valuation went down by more than 90% and the co. lost more than $82,000,000,000.00. Sounds like Obummer was right. :)

        If you look around the room at basic logic, it’s obvious that trucks and SUV are largely a shitty idea: poor gas mileage, SUVs are prone to flipping over, and most of the truck beds sit empty anyway.

        I rented a car this week for a long work trip. They gave me an SUV for some reason. I hate the but said ‘screw it’. Driving it reminded me of what crap they are. High center of gravity, that big ‘box’ just grabs the wind. It’s a roll-over waiting to happen.

        SUV = cool! Mini-van = dorky! Except…they’re basically the same thing! If you want to drive something that gets 12MPG, kudos, but don’t pretend like it’s a good idea.

        • MyLadyHumps says:

          Two thumbs up for having common sense – a rare trait.

        • Gl says:

          If you’re in the business to sell cars, I think you give the customer what they want. You opinions may or may not be right but all manufacturers are selling a lot more trucks and SUVs than cars and Volts. Even the “golden boy” is offering trucks and SUVs now.

        • Kenn says:

          Big SUV on a full chassis – heavy, high ,low gas mileage, but can pull a large trailer.
          Minivan – lighter weight, lower to the ground (unibody construction), carries a lot of people, kids, or work stuff, medium mileage (mine gets 20 mpg average)
          Smaller SUV – holds less people or stuff than a minivan, gets 25 to 30 MPG depending on size.
          Different vehicles, different uses.

        • cas127 says:

          Never really understood the SUV frenzy…significantly higher cost, significantly worse gas mileage, more difficulty in finding parking.

          Early research showed higher percentage of women buyers, who preferred the perceived safety and elevation…but the SUV has lived too long and spread too far for those to still be only reasons.

          Obviously the manufacturers prefer the higher margins and push accordingly…but that doesn’t explain demand side.

        • NBay says:

          SUVs were designed and marketed for mainly ONE purpose. To get around the old fleet mpg laws, as they are “Trucks” and therefore exempt. And for people who like the idea of being in a “tank”, where the poorer guy in the Civic or Corolla dies instead, even if it was the SUVs fault and could care less about cost and mpg.
          Old Cadillacs, etc, followed that second theme, also.

  5. Nathan Dumbrowski says:

    Prediction for the next shortage will be airplanes. Whatever the story it will be that due to unprecedented travel there are not enough seat, airplanes or capacity to handle the load. So what used to be a $400 flight will be going for $1,200 if you can find it. Blame the pent up demand, the chip shortage the vaccine or WTF de jour

    • Dampkring says:

      I totally expect at the next finger snap everybody and their dog will be boarding airplanes for missed out family visits and that trip they always wanted to take to all those places they kept talking about.
      Unless, of course, Indian Super Covid-21 is a thing.

  6. GotCollateral says:

    less supply x higher prices in most cases of malfeasance at work here != more profit

    Already overpriced collateral, it will end, it always does…

    (Rhetorical) Questions remaining are:

    – how much are people willing to protect against the inevitable downside and for how long?

    – how much are people willing to think about how to make protecting such downside as cheap as possible?

  7. makruger says:

    Curiously, the St. Louis Fed says used car prices have been pretty much flat for the last 25 years. While the last year of data shows a notable jump in prices, it’s apparently been bludgeoned a little with some old fashioned hedonic quality adjustments.

    • Wolf Richter says:

      makruger,

      I’ll help you out since I’ve been covering this for years. So here is the correct link that explains it all, new vehicle CPI and used vehicle CPI (which is what you cited), plus “hedonic quality adjustments.”

      https://wolfstreet.com/2021/04/13/yup-dollars-purchasing-power-dropped-to-record-low-again-but-more-sharply-and-its-worse-than-cpi-shows/

      And some relevant charts from that article:

      • NBay says:

        When talking about cheap common chips, I realize you just picked “door locks” off the top of your head. But actually that’s (and pwr windows) one place where many good old fashioned switch and wire control circuits are still used, no chips, at least once you are inside.

        But as I’ve been trying to say for years, software and chips are much cheaper than switches, buttons, wiring, and knobs. Both to buy, but especially to assemble….more complex wiring harnesses, more expensive pieces, more hand labor.

        You can bet they are working on touch screen replacements for those inside on your door switching panels, and when they figure out how to to it they will ad “extra features”, and charge more for yet another “hedonic luxury choice”, and say the buyers wanted it.

        • Wolf Richter says:

          NBay,

          When was the last the time you were near a new car? I haven’t used a car key in two decades (at least!). Entry (door lock) is electronic via wireless connection (chips all over the place). You don’t need a key to start the car — it’s a push-button now (more chips), with wireless connection to the key fob in your pocket to make it work (more chips). From the inside, door locks are activated by little push buttons (chips). But the locks also lock automatically when you drive (more chips)….

          I suggest you rent a cheap rental car for a day and play with all the electronic stuff even cheap cars have these days. It’ll probably keep you busy all day :-]

        • NBay says:

          Probably would, I hate menus, and “trick” stuff.
          Bought 2012 Nissan Frontier with 5K mi from dealer 2013. Can barely set clock. Don’t even mess with radio and it’s “features”. Last auto shop training ’10-’13. Haven’t been to dealer or driven anything newer since….sounds like I’m already out of date.

          Hedonics moves on, but still think it is mostly cheaper to mfg.

        • NBay says:

          Also my remote fobs are in the metal box with registration, I use the valet key….which yeah, has a RF powered chip in it, like entry badges.

  8. Scott says:

    I can see how the supply for these auctions will be tight for some time given that business travel and the resulting car rental usage is way down. In addition, I would expect a lot of corporate car purchasing is down considerably as many sales reps have worked remotely which stalled corporate car purchasing schedules.

  9. rodolfo says:

    Another aspect of this WTF is the crazy prices car rentals are going for due to lack of vehicles and huge demand with people heading out for the summer.
    I usually go to the states 2 times a year and rent from enterprise for 1-2 months. I have for 5 years always paid $950-$1,090 per month total for a compact car.

    Prices today are $2,000 or more per month. Evidently selling all their cars and now huge demand allows them (and applies to avis and others as well) them all to make huge profits on the cars they do have.

    In November the price reverts back down to a bit more than normal.

    As Nathan above points out not a big leap to see this same story play out with airlines.

    As an aside not seeing tons of inflation in food here in Costa Rica. Locally grown and produced food anyway. Also no housing spike. Houses sit on the market.

    Enjoy summer all. We are buying a used cheap car in Mexico and we are road tripping there this year.

    • Paulo says:

      Long before the Pandemic, Enterprise and other rental companies were in big trouble. (My nephew was a comptroller in the industry). The cuts were so bad he just bailed and never looked back. They treated their employees like sh!$ and demanded more and more of managers.

      Uber was the cause.

      Now, people are hesitant to sit in a stranger’s car and get sick. They want to rent.

    • Seneca’s Cliff says:

      I read that in Hawaii, rental cars are so hard to get and expensive ( $700 per day) that tourists are renting U haul trucks to vacation in.

      • RockHard says:

        Seneca – can confirm. I was kicking around the idea of a Hawaii trip and priced out rental cars. The smallest subcompact runs about $700/day.

        • KnowNothing says:

          BS. I just looked on Expedia. June 8-June 15. Sub Compact from Thrifty for 52 bucks a day. 455 for the week. Try harder.

        • Wolf Richter says:

          You need to make sure you’re talking about the same location. This stuff really depends.

  10. Micheal Engel says:

    1) SPX : take a line between Nov 16 2020 high and Apr 16 2021 high. // take a parallel line from Nov 19 low. Lets call it Lazer #1.
    2) After twice bouncing of the cloud in Mar, SPX was back in channel.
    3) Between Apr 16 and May 6 SPX moved sideways.
    4) Next week SPX might reach or breach it’s resistance line.
    5) Take an uptrend line from Mar 4 low to Mar 25 low. // take a parallel
    line from Mar 11 high. Lets call it Lazer #2.
    6) SPX might popup in a crazy scary melt up.
    7) Lazer #1 Y-axis component and Lazer #2 Y-axis component will
    add up together and build a bubble.

    • tanstaafl says:

      To paraphrase Stanley Eddington’s famous quote about the theory of general relativity: “I’ve heard there are only 3 people in the world who understand Micheal Engel’s posts. – Oh, no! I was wondering who these three might be.”
      Best regards!

    • Here it comes says:

      I didn’t look at the exact chart but you are correct and it’s nice to see someone taking objective viewpoints. From an Elliot wave count we are now in the heart of the 3rd wave up. This commonly sees us move into the accelerated channel above the one you mention.

      The market runs on sentiment, not fundamentals and not news. The targets put us at 6000 before this turns (not in a straight line obviously).

  11. Micheal Engel says:

    8) Another option : SPX will escape both #1 and #2 on it’s way to the cloud.

    • ME, are you promoting a clandestine advisory service?? Can understand most of your goobly gook but what does this data spew have to do with the topic?? Don’t encourage him fellow readers!!

      • NBay says:

        Oh come on. I’ve used the excuse “Engel made me do it” here as have others. Think of him as an electronic car device you haven’t figured out how to work. He’s a fixture here.

  12. As a homeless man, it is interesting to think that soon I might not even be able to afford to live in a van!

  13. Ron H says:

    The just in time delivery chain is broken. This leads to backwardation of price to fill orders until supply catches up. When supply has caught up in 6-18 months inventory will be higher than normal & will need to be financed causing further pressure on short rates. The only price which seems to be not yet in backwardation are short rates. Watch for spike in short rates to start unwinding of leverage.

  14. endeavor says:

    Soon they will be pulling intact carcasses from the junk yards creating ‘Havana’ specials. We will be seeing ads for ‘Resurrection Motors’.

    • Yancey Ward says:

      🤣

    • Kenn says:

      Already happening.
      Was at a junkyard recently to get an out of stock part for my van. They have a sales lot there for their resurrected cars.

  15. Brant Lee says:

    I need to trade my 2010 Camry before long but there is little available at the Toyota dealers in used cars, a few overpriced Camrys, no Corollas, lots of used SUVs, trucks in $35k to $50k range, ouch.

    My Toyota is still purring so I guess I’ll stretch it out as long as possible. I’m already on buyers strike with building materials and now cars. Eating out is inflated even MORE than before so the heck with most of that.

    Spending too much and paying too much for things has never worked out well for me.

    • Depth Charge says:

      The worst mistake I ever made was selling my Lexus ES300. It was getting a bit long in the tooth with 177k, but it ran like a top and looked brand new inside. If I could go back in time I would have just kept it. I think it would have easily gone 300k.

      • Dampkring says:

        I specialize in buying my personal cars from people like you. Perfect interior, high mileage, owner thinks it’s old junk due to mileage and wants to upgrade. I’ll restore the entire car with new parts which costs about 2-3 grand and run em for another 100-200k miles. Thanks bud!

        • Depth Charge says:

          I didn’t think my Lexus was “old junk.” Quite the contrary. I simply was not using it at all, having other vehicles. A sedan doesn’t work for me most of the time, but I sure did enjoy driving it to the store or taking the pretty one out to dinner.

          Reality is that I am still registering and insuring 7 other vehicles and trailers, so it was the right move. Paying insurance and maintaining a vehicle that I had only driven 1,500 miles in the previous 3 years was kind of pointless, so I sold her off.

          My only regret is the new owner was a young woman who had just totaled her previous Lexus and mommy and daddy were buying her something a little more used after that. Egads. It probably died a horrible death.

      • Rg says:

        I’ve got a 2002 ES 300. I’m the original owner and it’s got 290K on it. Still looks good and is running fine. I’m told the engine should be good to 400K.

        That being said, I had hoped to replace it in April 2020. I looked around and didn’t see anything I really liked. So I figured I’d hold on a bit longer to see the 2021 models.

        Now prices have lifted off. I’ll hold out until next year.

  16. Degobah Smith says:

    I recently tried to find a rental car for a couple of days here in Savannah. No dice, none to be found. I looked into the Turo car-sharing service and, viola, plenty of cars at very reasonable rates for local travel.

    Do y’all imagine that one of the “unintended consequences” of all this disruption will be a permanent shift from rental car companies to car-sharing services for a not-insignificant group of customers?

    DB

    • Trucker guy says:

      The big car company’s are already moving towards a subscription model and iirc ford was talking about a version of a subscription being where autonomous cars just show up to drive you where you need to go like a autonomous Uber taxi. Of course the pandemic slowed that a bit probably.

      At 84 month car loans, already seems like a subscription to me

      • RockHard says:

        Or leases which are designed to go 2-3 years. I know people who have to have a newer car all the time and are completely OK with always having a car payment. Not my style, but a lot of people are like that.

    • Dampkring says:

      No way on earth…. Except if the car owners find a way to deal with the extreme wear and tear on their cars.
      Imagine dropping off your car after every rental to have repairs done at a garage, it’s not going to happen.
      And then you have to question to safety for the renters, I personally would not want to drive a questionably maintained beater with a christmas tree of warning lights on.
      But then again, it’s now the most normal thing to get into cars with strangers and then sleep at another strangers house, so times are changing
      I’ve seen people successfully do car rental apps by utilizing car auctions, and at home rebuilding. I would not want to drive that, but the average renter has no idea about this.

      • Trailer Trash says:

        ” it’s now the most normal thing to get into cars with strangers”

        I wonder if people will remember that poor people used to do this all time. We called it “hitchhiking” in the Olden Days. Guess it would have to have a new name before it would catch on again.

        I did plenty of traveling by thumb and by bus in my youth. I am sorry that today’s young people are being denied those sorts of adventures by the culture of fear of everyone and everything.

        • Depth Charge says:

          I seem to recall quite a few young people never being seen again after thumbing a ride, suspected to have been murdered by one of the many serial killers roaming this great country at any given time. Not a practice that was ever recommended, at least in my house. In fact, I remember my older sister bursting into the house in tears as a kid when some creeper with his pants pulled down tried to lure her into his car. She and her friend got away. I must have been around 8 or 9 at the time, she a teenager.

        • NBay says:

          Used to be able to stand at GG bridge last on ramp even at night and get ride in 5-20 Min (20 being much later than after show over at original Fillmore). Usually got something to smoke, too.

  17. MiTurn says:

    “My gut says, a spike like this cannot last…But if these price spikes don’t unwind soon, they will turn into scary-crazy inflation.”

    Wolf, I hope your gut is right. I run my vehicles about 200k and then get another used one. Which means another vehicle in the next year. But these ridiculous prices might keep me out of the market a bit longer.

    • Find a good mechanic that has 20 years swapping out engines and transmissions.

      • Depth Charge says:

        This is our grossly corrupt CONgress and the terrorists at the FED destroying the country in real time.

        • Depth Charge says:

          I have no idea why this nested here. It was supposed to be a new post.

      • MiTurn says:

        I’m my own mechanic. But trannies are too costly to replace, although I have done so in the past. The key to longevity is meticulous maintenance, esp. the tranny if an automatic.

        And never, ever, ever tow unless the automatic has an auxillary cooler.

        • You can buy a solid salvaged trannie with low miles, say 50k to 60k miles, that has been tested and mileage certified, for about $1500 to $1800. Labor to install about $1200 to $1500 at most, about a 4 to 5 hour job. JUST DO NOT ATTEMPT THIS WITH A CONTINUOUSLY VARIABLE TRANSMISSION (CVT). They are a nightmare from design, maintenance, and operational standpoints, just ask late model Subaru owners. I would try rebuilding or replacing even the ECM or PCM before opting for a new or overpriced used vehicle esp. with VIRGINIA PERSONAL PROPERTY TAX ON ANYTHING WITH WHEELS, EVEN RUST BUCKETS.

  18. Lisa_Hooker says:

    Hey! Let’s put lots of superfluous and unnecessary electronics into our new cars. More razzmatazz and more high margin profits! People don’t want simple transportation. What could go wrong?

    • Old school says:

      I knew there was going to be a price to be paid for Covid-19. Inflation is part of it. Taxes will be part of it. Government picking winners and losers will be part of it.

      • Lisa_Hooker says:

        OS – Taxes we get stuck with. Inflation we can try to hedge and adapt to. It’s the Government picking that scares the ever-lovin’ hell out of me.

      • RightNYer says:

        There’s no way you can borrow $7 trillion (and printing $4 trillion of that) and not have inflation

      • nodecentrepublicansleft says:

        Govt has been “picking” winners and losers for a LONG time and the details of how they do it is controlled by huge corporations and the 1%.

        In Manatee Co., FL were I used to live, if I called the Board of County Commissioners and asked to meet for an hour w/each one, my call would not be returned and I’d never get a single meeting.

        A co. I worked for a few years ago had a lobbying firm called “Ballard Partners” make those calls to the BCC for meetings and we had them set up in a day or two.

        See how it works? Regular Joe, hell no! Lobbyist, hell yes!!

        Manatee Co. is not unusual….this is business as normal.

        The entire system is gamed from top to bottom.

        • NBay says:

          Tried for months to rezone my BLM 40 to RR. Person I needed to see was “somewhere”…”back soon”…..waited a lot. Saw developers (some I recognized) with suits and briefcases walk through swinging door and into offices like they worked there. Smaller Corps, but big enough there.

    • Heinz says:

      All the tech do-dads and doohickeys in newer cars appeal to lots of people who feel special if they have the latest and greatest luxury or gee-whiz features in a vehicle.

      Apparently the car-buying rabble want:

      built-in 4G wireless hotspots so you will always have full bars reception and always be bathed in microwaves in car;

      traffic-sniffing GPS systems;

      sensors that track your driving style and warn if it deviates from normal (for those times when you had a few too many beers or are sleepy);

      automatic braking for idiots not paying attention to road;

      automatic parallel parking system if you are too are too lazy or inept to do it yourself;

      car seats that heat and massage at same time (but please don’t get TOO relaxed);

      back up and 360 degree cameras to keep a digital eye on what is around your car– so your usual irresponsible distracted driving gets a bit less dangerous.

      It is not just cars– modern houses have their share of electronic gadgets and ‘extras’ as well.

      I chalk it all up to our society’s infatuation with playthings and a feeling that they should not deprive themselves of ‘nice things’, for after all YOLO (you only live once). And easy access to debt to purchase it all.

      • Lisa_Hooker says:

        Heinz – I have decided to hold off on a new vehicle until the OEM on-board espresso maker comes with a milk steamer for cappuccino.

        • NBay says:

          Not holding out for voice command so you don’t have to read all the usually incomplete “feature” documentation…(I mean “owner’s manual”)….? It’s only a bit >1″ thick in my 2012, base model truck.

    • John Clarke says:

      Yipper. I fully expect my 1971 VW will be on the road long after these newfangled plastic electronic people boxes have been twice to the recycling plant.

    • NBay says:

      “Alexa” (or whoever), set my clock to daylight savings time and find me a 60’s rock station, and lot’s of bass, and equal volume front , rear, sides., and move me over safely to the right lane, turn off coming up.”

  19. David Hall says:

    Steel prices are out of control. Concrete infrastructure requires steel rebar. Cars are made of steel.

  20. I still find it hard to figure out what happened to all of the used rental vehicles sitting on Rental Companies lots (and possibly now in desert lots so they don’t rust too much). The bottom literally dropped out of the rental car market last February through most of 2020, so that stream of excess inventory should have caused a drop in used car prices as the Rental Companies got rid of them to reduce operating costs during Lockdowns. The EPA was probably testing the lots for oil and trannie fluid leaks!

    Something is rotten in Denmark here. We are talking 100’s of thousands of vehicles that went into neutral around March, 2020. Now there is the fact of rental company retention of rental vehicles longer and longer, which in my opinion, having worked on my own vehicles for over 50 years, doesn’t make them a compelling choice for used vehicle purchases. A vehicle that has been driven with two wheels off the ground, braked like a race car, and pushed to 60 mph before totally warmed up by a myriad of different styles of drivers is not my first choice by any measure.

    There should have been a further dip in the Manheim data above by summer of 2020 as the market was flooded with jettisoned rental company idlers, but it did not happen. Why? (Am launching drone to check the SW deserts). The cost of monthly payments with some 6-year auto loans priced at 2.4% for those of us with excellent credit ratings is probably the main reason.

    American consumers are now blind to the total price of a vehicle, take a big, naughty bow U.S. Federal Reserve, double bow Blackstone Powell, and IT IS ALL ABOUT THE AFFORDABILITY OF THE MONTHLY PAYMENT, NOT THE BLOATED PURCHASE PRICE. But wait until these blindered buyers get their Personal Property Tax bills at 4.86% of NADA prices in Virginia. Smelling salts please.

    Wolf is right as rain. With the stimmies fading into the rearview mirror going into summer 2021 and the U.S. economy so knotted up with supply chain issues and semi-skilled labor not wanting to return because the Government trough is more fun, there is change in the wind.

    FOR ONE, THE INFLATION MINDSET IS FIRMLY EMBEDDED IN THE AMERICAN POPULACE’S BRAIN. Don’t look TRANSITORY to moi. Wheelbarrows for purchasing a loaf of bread is not too far away, just a matter of time with nothing but hot air behind the U.S. Dollar. Sounds like a fiat cryto-currency, doesn’t it!!!!!

    • Mr. Wake Up says:

      My lease is up and I managed to get a 6 month extension as I am frustrated with my options. I dont like keeping a car after 3 years everything starts going wrong.

      The buyouts have always never made sense always above market price. So I checked this time and apparently my buyout is 10k below market price! Wow. But after it’s all said and done I would not see that gain after expenses fees etc etc and in the end might be more hassle then it’s worth. So unless I can leverage the buyout with the new purchase/ dealer than I might some bonus chips to play with.

      But this sucks. My plan this time around was to actually purchase the vehicle and ride out for 8 years.

      This perfect storm is going to wreck soceity

      • Seneca’s Cliff says:

        I ordered from the factory in 1998 a bmw323i that was stripped down with a manual transmission and sports package. When my lease was up a few years later my buyout was way lower than bluebook. So I purchased it, then turned around and sold it on auto-trader and pocketed $4000 or so.

      • endeavor says:

        Since you are making out so well on your lease buyout, get an extended warranty to protect agaisnt any unpleasant surprises.

        • Mr. Wake Up says:

          Thanks gents.

          I’ll do more DD on the buyout now.

          I always thought those extended warranties were a scam.

        • El Katz says:

          An extended warranty from the manufacturer is not a scam. They usually mirror the original factory warranty. There is no third party “administrator” that skims off the top and makes it next to impossible to have it honored.

          Many repair shops won’t take the “Mickey Mouse” warranties (too much hassle with getting approvals). The factory service contracts are honored by the franchised dealers without blinking.

    • Wolf Richter says:

      David W. Young,

      A lot of the vehicles were sold last year.

      More importantly, rental fleets stopped ordering new vehicles and just rented out what they had in the fleet. So about 2 million new vehicles were NOT ordered and didn’t get manufactured and didn’t make it into rental fleets last year and early this year. That is HUGE. They just turned the supply pipeline off for 10 months, and now they cannot reopen it.

      • Okay, Wolf, that definitely answers the rental fleet supply issue (but I am still sending a drone out!). Just have to wonder how good a car renter feels jumping into a buggy with $50k miles on it? I will drive a 70k mileage rental right back to the front desk! This higher mileage retention scheme by the rental companies is definitely going to increase their per unit operating cost, but we now know they have much fewer vehicles on their lots.

        I think after this summer, when the economy itself has the flu, we will see some rationalization of used vehicle prices because parabolic price trends never end well. Just like in the crazy housing market now, it becomes an affordability issue (3x families in a house!) and that cuts the legs out of demand. Incomes are not keeping up with on-the-ground inflation, and will not catch up for the 90% at the lower quartiles before the bottom falls out of the economy, again.

        Thanks for the rental fleet data.

        • Icing on the info cake: Rental vehicle companies in U.S. bought 1.74 Million new vehicles in 2019, our now spike-less data point for 2021.

    • meadows says:

      DWY…..

      My Pops was a used car salesman in the late 1970’s….. it was the same then as now, buyers only cared about their monthly payment. For those geezers here, remember how high interest rates were then!

    • The Bob who cried Wolf says:

      Agreed. If there’s a transitory component to any of this is pretty darn small. It’s inflation. I’m not sure what metric determines inflation vs hyper inflation, but when Joe Sixpack is no longer fooled by CPI it’s probably hyper inflation, which I’m guessing isn’t too far away (maybe already here)

  21. DR DOOM says:

    If you are not in debt , sit back and relax . If you are in cash you will be hurt to some degree. If you think cash is worthless then jump in the mania pool and good luck. This Hillbilly is laying back and gonna let Wolf inform and entertain me with his posts on the shit storm heading our way. He had better eat his Wheaties ,

    • Auldyin says:

      On the nail DD.
      There are times in life when the only thing to do is order a case of Scotch, sit in a warm comfy chair by the window and watch the s***storm go by.
      With an eye on Wolfstreet, of course, for commentary on the show.

  22. NaturalCoast says:

    Needed a comfortable minivan for a few long road trips I’m planning this summer. Monitored used car prices at Enterprise fleet sales all year long in 2020. Turned out there were great prices in Dec 2020 when covid was spiking again here in Bay Area CA.

    Picked up a low mileage 2019 Grand Caravan with 34k miles for $17k. Must have been sitting idle during most of 2020. Like new condition inside and out. The same car now on the website is $23k!

    I never finance cars, but I did this time since I got 1% financing at my CU. I financed 100%, even the tax and paperwork fees! The deals were just too good to pass up. My other car, which is my daily driver is a 22 year old Volvo.

  23. Beardawg says:

    WOLF

    In the typo department, this short paragraph did not seem to flow correctly ??

    “….Even as the mileage has spiked, the average price of these rental risk units – and that’s how crazy the market is – has jumped by 32% year-over-year.. “

  24. Michael Gorback says:

    Everything is screwed up right now. You’re sifting ashes. If the government can keep its fingers out, people will normalize a lot of the things we’re here wringing our hands over.

    People are self-optimizing. Leave them alone so they can get their work done. IMHO humans in groups – especially government groups – are the #1 cause of problems, whereas individuals looking out for their own best financial interests are the #1 cause of resolutions.

  25. Lou Mannheim says:

    How many trillions have been printed in the last year? I’ve lost track but between Treasury and the Fed it’s about $6T? $8T? There’s another $2T on the table and our leaders have signaled it will keep coming.

    When we reflated the tech bubble 20 years ago, Manhattan RE zoomed. Why? Because that’s what the printed dollars chased (among other things). Since 2006, however, most of the market has been dead money. The inflation moved on.

    Eventually the inflation will all come crashing back – presumably after our leaders’ terms in office expire. :)

    This is not the world of my Econ or Finance textbooks, possibly because the folks in power have only answered to the wealthiest for decades.* The wealthy love the bailouts and printing because it inflates their precious capital assets – and leaves everyone else in the dust. We never stop competing against each other.

    * yes, there have been payments to the needy, but let’s be honest, that’s just to keep America, Inc. running and generating dividends

  26. Micheal Engel says:

    1) Iranian hell poured a climate change hale in May on northern gas stations, to blackmail US. They are able to reach short and long range strategic targets.
    2) Ford & GM commitment to high end pickup trucks is a failure of strategic
    imagination.
    3) Alberta trains will be longer than ever.
    4) CNQ, SU, Casy, Musa, Gold, PAAS… might popup on Mon.
    5) Manheim misbehave.

  27. Heinz says:

    Yes, but not a black swan in true sense.

    China/Taiwan/US armed conflict (kinetic or political) is already baked into cake in geopolitics.

  28. Micheal Engel says:

    6) The war between wars, without shedding much blood, is a new
    bubble in it’s early stages.

  29. Trucker guy says:

    It’s almost as if there is a recession occuring beneath the surface but it’s causing one of the biggest boons on a superficial level. So weird how this time last year it seemed like it was going bust and it sort of did, and the fallout out from it was noticed but despite shortages, inflation, unemployment, etc, everyone is “doing better than ever.”

    Have we moved beyond the boom and bust cycle where the good times are good and the bad times are great? Or is this going to be looked upon in a few years with some new term like how we had stagflation once upon a time. This time we had roses that smelled like shit.

    • RightNYer says:

      I mean, all we did was transfer all pain from the recession to the U.S. government’s balance sheet. That’s why people appear to be doing “better than ever.” No one tightened their belts, because no one had to.

      • Trailer Trash says:

        Plenty of pain is being transferred to people who can’t afford shelter even though they have jobs. But they don’t donate to Congresscritters, so they don’t count.

  30. TimTim says:

    Perhaps ‘WTF’ could also be ‘Wolf’s Take (on) F*ckwittery’

    Which is what a lot of recent madness just seems to be.

  31. This is a business which went from selling one car per family, 50 years ago, to two or three cars per licensed driver, in today’s market. Just count all the different cars you drive, or ride in, in a year. Then as the average miles driven, (we fly more), dropped the overproduction caught up with the lessening demand, in terms of miles driven. Now you have a market where consumers are used to choice. I need to rent a pickup, I need a shuttle to the airport, or an Uber ride to a party. On the front end of the pandemic there was not enough food, while there was of course, but it was allocated to restaurants, and we weren’t using them. This is the backside of that in transportation. Wasn’t Hertz dumping units last year in bankruptcy? Arm chair free market capitalists scream ban the command economy but when the supply chain hiccups they scream inflation, do something Jay Powell. Maybe everyone should make semiconductors in their basement? When an automaker like Ford sees their F150 is selling better than the Taurus they dump the midsize altogether and push the pickups on everyone. (This is a form of propaganda) So now they pay the price, but no, you pay the price. The Auto industry was nationalized years ago, (bailout Chrysler Lee Iocacca) but government never took responsibility. Same problem in the banks, and the drug makers. Now we are going to unlock their patents, and did Wall St notice? New highs baby, and corporate America is okay with tax hikes, just keep the buybacks rolling. Then the lumpen complain about government over reach. Predictable.

    • lenert says:

      Have you seen the video where Neil Kashkari cooks a steak sous vide? I bought a T-bone yesterday for $6.99 per pound – exactly what it was priced at almost every other Friday back in 2018 and 2019 – like nothing ever happened. Not much of a market for used T-bones, doe.

    • Auldyin says:

      Good thinking AB.
      The ICE car industry in the west is mega-mature and saturated. They can no longer sell on ‘need’ they have to market on ‘want’ to make a buck, and that is very hard. China, India, Russia, etc with huge pops getting richer can still sell on need and that’s where to move the volume of metal.
      But don’t worry, in the West, they are going to do a ‘green’ deal with the Govt to make you all abandon your dirty ICE’s and start again with a legal ‘need’ to buy electric. They can hardly wait to get started creaming in your money all over again until they’ve sold you 5 electric cars each
      Life’s a laugh init?

  32. Lou Mannheim says:

    The bigger question is who’s watching SNL tonight? 😀

  33. Micheal Engel says:

    7) Ford average transaction cost is $48,000. Less for more. They deleted compact cars at lower prices.
    8) Our enemies will bend our will and pride. We will have to comply to avoid another hit.
    9) Their blackmail envelope will get fatter and heavier.
    10) They will accept : gold, silver and US dollars, like in the old good days. No F-150 or Silverado trinkets. No bitcoins.
    11) Iran and Venezuela will sell us heavy oil at Brent. WCS minus WTIC might flip to a positive territory.

  34. Micheal Engel says:

    12) No Tesla jokers for the Ayatollah.

  35. endeavor says:

    Auto industry will take a hit first in hyper inflation scenario. You have to have a roof over your head, you need to eat and somehow you must afford health insurance. But you can drive a 15 year old beater and still get about.

    • Dampkring says:

      Sorry to inform you that 15 year old beaters doubled and tripled in price last year.

    • El Katz says:

      Endeavor:

      When I was in the car biz, we used to say: “You can live in your car but you can’t drive your house”.

  36. Micheal Engel says:

    1) Since ManU anti Glazer resurrection, EPL stadiums are empty.
    2) It’s cheaper to operate with empty stadiums than with 2K – 3K fans
    at 3% – 5% capacity, with dozens of security guards to control them and expensive union people to serve them.
    3) BLM 3 : 0 EPL fans.
    4) US restaurants will have to do the same P/L. Operating at 25% – 50% capacity cost more than takeout. Both option bleed small business, but the takeout bleeding slower.
    4) Since small business cannot compete with the gov piling up debt,
    they will have to go bk, in frog cooking.
    5) US labor participation rate will fall and unemployment will rise, because there will be nowhere
    to go. Too many business forever shut their doors.

  37. Micheal Engel says:

    6) EPL players are best at collection con jobs pk from the stupid English refs.

  38. Yaun says:

    I could totally see this as the next thing for the government/fed to get involved in: The Car and Road Afforability Act for the American People (short CRAAAP), which would see fixed 30 year government backed loans for cars and the FED stepping in to supress rates whenever car prices fall enough to allow a normal person to afford one debt free.

    • Auldyin says:

      Y
      You’re talking about the electric car green deal Govt subsidy schemes and ‘initiatives’ aren’t you?
      Tell us what you know that we don’t.
      Craaap is good, you should claim that as your’s.

    • Yuan, don’t give Xiden any ideas!

    • Depth Charge says:

      Every time the government comes up with an “affordability” scheme, prices go even higher.

  39. Engin-ear says:

    The home-flippers are rubbing hands in delight: a whole new industry to express their talents…

    Car-flipping!!!

    Remodel your car and sell it 2x!!!

    • You can stucco an old car cheaper than you can paint it?

      • lenert says:

        And most of the time all this metal and petrol is just sitting around decaying on pavement.

    • billytrip says:

      Used car dealers have been doing just that…. forever. They buy cars at the auction, where only problem cars appear as dealers keep and sell trade-ins that are in decent condition, there is good money in that.

      The lower echelons are stuck buying junk and fixing it good enough and cheaply enough to flip it for a profit. One would think it would be a difficult biz and it is but with pricing flying right now who knows.

  40. fred flintstone says:

    Don’t worry about it……since the price of used cars is outrageous the econ team at the fed will be substituting bicycles for cars in the next report. No CPI increase.
    As for those of you that insist on traveling in snow or rain……the fed will insist that this is causing the move to dry climates like west Texas.
    The labor department branch of the Madoff Institute for honest government strikes again.

  41. YuShan says:

    The Zimbabwe hyperinflation was transitory. The Great Depression was also transitory. So what is everybody so worried about?

    • MiTurn says:

      Have you lived through either? Be worried.

      I’ll assume you’re joking.

    • MonkeyBusiness says:

      Life is transitory too. How I Learned to Stop Worrying and Love Inflation.

      We all know you are kidding ;)

  42. Steve says:

    For all the problems discussed here, car parts and repair shops are stocks that do better / well in a recession. It us likely that localism apps like Nextdoor will evolve into neighborhood coop bulletin boards, an original internet function. Neighbors offering ride services to other locals who develop a relationship like a small town cab service will put the hurt on Uber and Detroit. Mutual aid networks can be set up by families carpooling to school, shopping and sport events. Is there a better use for those seven passenger vans. Mutual aid networks – the price is right.

    • Depth Charge says:

      Auto repair shops slow down and suffer greatly in a recession, too. The money is simply not there for repairs for a lot of people. Most shops around here are charging close to $125 per hour. That adds up very quickly.

  43. David Hall says:

    A new Schwinn commuter bicycle for $329. Without driver’s side airbag. Free delivery – Walmart.

  44. zr says:

    Hey Wolf, we miss your quarterly report on “consumer debt slaves”.

    • MonkeyBusiness says:

      They are getting more confident and have started to utilize their credit lines again.

      • zr says:

        Are they taking on debt because they are “getting more confident” or because they have no other choice? In this “cosumer economy” where ~70% of gdp is consumer spending, I feel like the economy can’t grow without we the peons taking on more and more debt at sky-high interest rates. So when bank ceo’s and politician boast “the economy is great”, it usually means Americans are in DEEP DEBT and working ungodly hours to service their debt. However, when this downturn came, a lot of people paid off their debt with stimmies and UE benefits. this got bank revenue down and Jamie Dimon talking about “credit growth remains challenged.” Like OK Mr. Bankster I think Guillotine production remains challenged as well. Anyway, the last report Wolf posted showed that people actually pay off their debts when they have the money and they understand that debt is bad. I think they are taking on debt because there is no other choice and their wages can’t keep up with their expenses. so in this neo-slave neo-feudal economy, the economy only grows when people are not paid living wages.

        • MonkeyBusiness says:

          If you’ve been following this website, then you know a lot of people used their stimulus checks to pay down debt. A lot of people lost jobs, but a lot more didn’t and the later got a healthy helping of stimulus money.

          There’s no need to feel confident if you know the country is going to pay your debts for you.

    • Wolf Richter says:

      Well, gotta wait till May 12 (I think). That’s when the data comes out :-]

      The overall consumer credit and credit card debt come out monthly. But student loans and auto loans come out only quarterly.

  45. Tony says:

    Used car prices haven’t gone up one iota in Canada. Although there’s less inventory prices haven’t risen.

  46. Tony says:

    As a side comment up in Canada the problem is the cost of car insurance. Everyone can afford a used car but can’t afford the car insurance on any car of any type. This is the real reason for no price spike in the used car market.

  47. Micheal Engel says:

    The Zimbabwe and the German hyperinflation were cause by
    the same foreign powers who gang on their targets.

  48. Depth Charge says:

    For kicks I was just looking at used cars on Craigslist. There are plenty of 15+ year old vehicles available for cheap, many which appear to have a lot of life left. I think it’s the newer stuff that’s gone bananas.

    • El Katz says:

      Private parties advertising on Craigslist may not have caught on yet…. it’s only a matter of time.

      • Depth Charge says:

        A 30% increase on a 2 year old, $35,000 vehicle could mean an extra $10,500 which is a serious chunk of change. On a $3,500 vehicle it’s $1,050. That’s doable.

  49. ram says:

    Similar situation in Australia. Vehicle prices, real-estate prices, and hardware prices escalating rapidly, yet the government claims there is no inflation. No inflation except on the things you’d actually want to buy. The A$ is turning into another Z$ real fast. Similar levels of government corruption as well.

    • Depth Charge says:

      The central banks of the world are largely following the lead of Weimar Boy Powell. It’s essentially billionaire globalists stealing everything.

  50. Rowen says:

    But if you got paid in Lumber or DOGE, then used cars are a bargain!

    • Depth Charge says:

      Plot twist: The FED is buying Dogecoin.

    • Trailer Trash says:

      I remember a long time ago I rebuilt the engine in my neighbor’s Farmall and he cut my firewood. Both parties were very satisfied with the arrangement: he hated turning wrenches and I don’t care much for cutting firewood in July.

      I predict it won’t take long for people to relearn how to barter, etc. Humans working together is wired into us in spite of determined efforts to atomize all of society. Rural people will adapt faster, since we’ve always been poor and forced to work together, even when we don’t like each other much.

  51. Auldyin says:

    There are things that happen in life that you just can’t figure and the only thing you can do is to say, “Get back to me when this is all over”

  52. Phoenix_Ikki says:

    Consumer strike? I think the system has groomed all the lemmings to just pay whatever via cheaper but larger debt as multiplies generation in this country. People are generally way too distracted with many forms of distractions to really strike or fight back. Keep them dumb and distracted with easy way to take out more debts, the elites and they people up to knows this and has well taken advantage of it.

    • MonkeyBusiness says:

      Yep, this country is hopeless. We are now in the terminal stage. Collapse of the country is now certain.

  53. Ron says:

    Just. Sold my 2010 camaro 2ss to car max 21,600$ only 17,000 miles trophy in garage remember always take a profit uninformed people usually overpay than end up upside down

  54. shandy says:

    What is the continuing obsession with automobiles?
    Just asking for a long term Wolf Street reader.
    -K

    • Wolf Richter says:

      shandy,

      I have always covered automobiles. That’s part of my beat and I used to work in the industry. As long-term reader, you shoulda known that.

      • shandy says:

        There is no financial automobile nowhere.
        The secondary banks call this a “Skid Market”
        We are discussing a depleted financial overture.

      • Depth Charge says:

        I love that you cover the auto market, Wolf, and I look forward to your next post on it to see how far these WTF charts can go. Like you, I have a hunch this just isn’t sustainable.

  55. Cash Guy says:

    Welcome to the new normal. That’s why I don’t regret buying a house in this market, at an outrageous price, while it was still even possible. Democrats won’t let that house of cards collapse for the next 8 years. In those 7 remaining years, your cash would literally turn in trash.

    • Depth Charge says:

      I’m betting against you and your overpriced pressboard box. I don’t see the incomes to support any of this. A crash is coming. It’s never “different this time.”

      • Ron says:

        So true except trucking companies giving 5-6 sign on bonus for 6 months then trucker moves to next company gets another5-6k bonus why not just raise wages to a sustainable level turnover costs a fortune by the way my son in law is a dispatcher for Werner trucking

        • Anthony A. says:

          Trucking companies gave sign on bonuses when oil went to $100+ several years back. That was for transporting crude oil and produced water. The only requirement was you had to pass a drug test, which many truck drivers could not do. Even today, that’s the most difficult thing for them to get by.

      • Cash Guy says:

        It’s alright even if it crashes, no loss to me. My income is secure and my down payment is huge. I would not be affected if the prices go down tomorrow and stay low for the next 10 years. For reference, see 2009.

        What scares me more is that I’ve lost 20% of my money to inflation, when compared to the 2019 housing market. While I cannot lose by owning a (very nice, by the way) home, I could definitely keep losing money if this market keeps going up.

        • Depth Charge says:

          You conveniently ignored the fact that your “huge” down payment gets wiped out, so you lose a boatload of money if/when prices go down. Like I said, I’m betting against you and your down payment. My money is in cash in the bank. I’m betting that asset prices crash, which is when I start earning a MASSIVE return on my cash. That’s what I did last crash, too, then bought a bank-owned property for cash.

  56. Andy Fanter says:

    The year 2020, people had more money from not traveling and eating out, and had time to shop for houses and vehicles. Some bought new and some bought used/existing. Now the supply is low and unless you bid high, you get nothing. Few people have any patience so the shopping for houses and cars end, and the vacations and going out to eat with friends begins. The same thing that created money in 2020 will be the same thing that takes it away in 2021. Popular time for houses and cars in the spring. I am not saying it crashes, but the situation will become manageable over the next few months.

  57. Chris Herbert says:

    Private indebtedness is probably not good fodder for hyperinflation. How do you charge more for something no one can buy? Debt deflation/recession is my bet forward. Full employment with Congress playing the role of ’employer of last resort.’ At least that keeps people busy doing something. A lot of work needs to be done, but much of it has no profit potential. Only the Gov can afford to do this work!

  58. Micheal Engel says:

    1) GM Mary Barra : there will be no chip shortages for Silverado, GMC and Cadillac Lyriq EV for $80K.
    2) Ford : better before price. Better command higher profit margin.
    Cheaper dilute P&L. 50% production cuts to scare Ford fanatic fans and lift prices.
    3) Ilan, a real mommy’s boy, was the “chosen” to save SNL .
    4) SNL is dead in the water after Trump. Ilan and his new SNL friends are bunch of jerks. They were not funny. The stoned leading singer and her band trumped the hour and a half. Mommy Mask clustered together and gave everybody farewell Masks kisses on the small stage ==> she is too white for SNL.
    5) Ilan is the most flexible CEO on planet, more than Timmy.
    6) Ilan support climate change, Bezus on Mars, BLM blackmails, China and bitcoin.
    7) Twitter will never stop Ilan with such flexibility and political bending.
    8) Happy mother’s day !

  59. Les says:

    Rental agencies have been buying up the used cars in bulk at auction. There were those stories about tourists renting U-hauls in Hawaii due to the shortage.

  60. Micheal Engel says:

    The insane inflation will send WTI slightly higher. When the colonial p
    will be fixed, WTI might have a change of character to form a RS to form a four/ five years inverse H+S, starting in 2018 low, with LS.

  61. rick m says:

    More people going into more debt chasing fewer reasonably priced cars, and a key component in short supply as prices skyrocket…sounds familiar, new fabs aren’t cheap and have limited service life, chips to the moon. Expensive cars are probably pretty available, like the slabbed Eagle proofs are the last to go on the bullion sites. Those who need affordable transportation the most will have little to choose from, and increased competition from corporately funded bidders and private speculators with recently deepened pockets, on your dime. Even worse, ICE vehicles from the past twenty or so manufacturing years have been much more reliable than many of their predecessors that could still be worked on by an average mechanic, but are getting up there in age themselves and amidst all the misbegotten hoopla over EV’s who’s gonna fix them?or want to learn how?they might feel they’re apprenticing in the Conestoga-wagon-building trade in 1898, somebody probably did and regretted it. ICE’s are going to be around and needing fixing for quite a while yet. Hopefully enough people will recognize an opportunity. And common sense shall prevail, we’re not finished yet.
    The car sharing has been around in prenatal form for ages sans Internet. But it was a lot like the Sears catalog store versus Amazon. Scraps of paper on university bulletin boards with destinations and phone numbers was so trouble free back in the day. And everyone I knew who actually did it found it mechanically instructive and more expensive than Greyhound. Or jail, it was the times. Uber works, and my guess is illegal ride sharing will become the norm, as regulation “drives” the Uberallführende guys under the radar and your waiter or doorman or dog walker hooks you up with their guy for cash or (not again) crypto. Car pooling will make increasing sense to those without a choice, and choices are fewer and more often than ever involve installment debt with putative inflation on the horizon. Sometimes all doors lead to winter. Dress warmly.

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