This would normally have triggered a Buyers’ Strike, but the Inflationary Mindset has changed.
By Wolf Richter for WOLF STREET.
Why do people – dealers and consumers – still pay those crazy spiking pries of used vehicles? For most people, replacing a vehicle can be delayed unless some major calamity befell the vehicle. This was proven to a shocking extent during the financial crisis when consumers went on a buyers’ strike, and sales of new and used vehicles collapsed and stayed low for a long time. So why is demand now holding up at those crazy spiking prices? Because the entire inflationary mindset has changed.
My gut says that these crazy price spikes cannot continue for long, and some of this will eventually unwind, and thereby they sort-of fit the Fed’s definition of “temporary,” but they won’t go back to where they had been. Some portion of these price increases will become the permanent foundation for future price increases.
Prices of used vehicles sold at auctions around the US in May spiked by 4.6% from April, by 26% year-to-date, and by 45% 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. Retail prices lag wholesale prices by about six-weeks:
Dealers that go to the auctions to buy inventory to sell on their lots are paying those prices. They’re bidding against each other to get some of this inventory – confident that they can pass those higher prices plus big-fat profits on to consumers.
These dealers are now also bidding against rental car companies that are normally the biggest sellers at these auctions, but that are now running low on vehicles in their rental fleets amid a burst of domestic travel demand, and now they have turned into buyers at auctions.
Rental fleets normally buy over 2 million new vehicles per year and cycle them through their fleets and dispose of them later by selling them at auctions, on their own retail lots, or directly to large used vehicle dealers. But that whole flow was interrupted last year when travel – and demand for rental vehicles – collapsed. Rental companies “defleeted” by cutting their orders for new vehicles and by selling part of their fleets at auction.
Now they’re short on vehicles, just when the semiconductor shortage has hit automakers that now cannot build enough vehicles. So automakers are prioritizing high-profit decked-out trucks and SUVs to be retailed by dealers, where everyone is making a ton of money. And rental car companies have complained – such as Avis in its 10-Q filing with the SEC – that they’re having trouble getting their orders filled.
Pickup trucks continue to be the hottest WTF price-spikers, with prices up 70% compared to May 2020. The low man on the totem pole were the despised compact cars, and even they experienced a year-over-year price spike of 39.7%. In terms of the “Base Effect” for year-over-year comparisons: it’s minimal because auction prices in May 2020 were already on the upward trajectory, having bounced off the April low, and were just a tad below May 2019.
A buyers’ strike of the type that occurred during the Financial Crisis would normally sort this out quickly: As buyers revolt against these price increases, demand would collapse, and supply would be able to catch up, inventories would build, dealers would curtail their auction purchases, and prices would drop until demand reappears.
But that buyers’ strike has not yet kicked in. Instead, the entire inflationary mindset has changed, with consumers jostling for position to pay those crazy prices, and with dealers being confident that consumers will continue to pay them.
Total used vehicle sales – retail and wholesale – continued in May at the same strong pace as in April, and were up 3% compared to May last year, at a seasonally adjusted annual rate of 41.0 million vehicles, according to Cox Automotive estimates.
Used vehicle retail sales alone also matched April at a seasonally adjusted annual rate of 22.4 million vehicles, up from 21.1 million in May last year.
Supply remains tight for this pace of sales. Used vehicle retail inventory at the end of May was down to 38 days, according to Manheim, when 44 days would be normal; and wholesale supply at the end of May was down to 19 days, when 23 days is normal.
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I’d sell my car but I’d need another. Maybe I can bike.
Get an E-bike instead. If you are handy with bicycles you can install a Luna Cycles mid-motor kits. Way more powerful than off the shelf E-bikes. 35 mph easy. $1000 with a fast powerful setup and a suitable donor bike.
Lol.. Try $2500 and up…. Seems even high school kids no longer use public transportation and are buying $2000 scooters, They are $3000 e bikes and $5000 trek bikes…
By the way where are these pockets of poverty in the NYC public school system??? I mean if parents are spending this type of money along with $200 sneakers does that 1 in x number of people suffering from hunger apply?? – – that radio ad constantly playing on WBZ AND 1010WINS NEWS RADIO
Costco has foldable ebike for $350 with its awesome return policy
A combination of housing bubble, stockmarket bubble, crypto bubble, and free money in the form of stimmies?
If you add it all up all up that is literally $trillions of “value” created. People feel rich now and bid the prices of used cars up?
I cannot wait for this charade to end.
On another note: I read an article about business owners on Venice beach complaining about the homeless tent camps there. It is bad for business because the tourist now stay away.
I already said before there’s a wealth effect going on.
Should be epic when this goes into reverse
Can’t happen soon enough.
Does the fact that I’m going to get an enormous sense of schadenfreude when it does make me a bad person?
No sign of any reversal now whatsoever but.. I mean I will say it again. This COVID-19 ‘pandemic’ benefitted the economy more than anything else in American history, the600,000 lives were collateral damage. I know most would agree with this statement even if they wouldn’t dare say so
I mean has any recovery in American history ever been stronger?? Has the wealth effect mentioned ever been more widespread and made more regular middle class people wealthier in just a year? Even the 2000 nasdaq runnup pales in comparison. By early 2000 the signs of reversal seemed imminent, they do not now which is why people don’t seem to care about Inflation
We need more pandemics not less. The vaccine was obviously a mistake. Think about it guys. Without the vaccine, the S&P would have reached 10K!!!
More pandemic would mean we would be knee deep in new stimmies!
Nickl, what “recovery” do you speak of? All I see is government borrowing/printing trillions, handing it out, and people spending it. That’s not “growth,” because it all evaporates the moment the “stimulus” is turned off.
That’s why we need an excuse to keep the printer pumping moolah.
Get your cardboard shack lot at a warm southern location before they’re gone.
I think another factor is the student loan repayment holiday. That could be a biggie.
Yes!!!! When you have 800. more to spend each month that you’ve never had before….
It is not going to stop, Helicopter money is in agenda.
Seems like people love trucks so much they’ll pay anything to have one with every option imaginable. $70k. No problem. It’s got a vacuum cleaner, fridge and generator on board. Next up, a hydraulic lift for fatties who can’t climb high enough to get in.
Prices are going up until China decides we have learned our lesson and can have chips again. Personally, I’d like an exact copy of my mid 80s camry. No power windows or doors. Air bag for front seat occupants only. Very minimal electronics for air/fuel mixture control and cruise control.
At a time when we know we have to pollute less, Americans are going out and spending more than the median wage on big trucks. Trucks that you can run over a ten year old and not even see them from 20 yards away until you hit them.
All because of the fragile masculinity plus advertising, that tells them they need to hand over 50k or they are not a man. No way do most people need these.
Methinks the “wealth effect” created most of the homeless. Keep in mind there are maybe 3-5 unsheltered people for every one you see sprawled out on the street talking to the angels.
Again I ask why didn’t this wealth effect trickle down to them especially if they are Caucasian?? Will be interesting to see if anyone answers this question…
An epic “Careful what you wish for…” in the making. Owners of appreciating assets who couldn’t care less about the adverse impact on those displaced by the hyper-inflation will be outraged by the commensurate spike in homelessness in their backyard. I wonder how a homeless encampment adjacent to one’s property impacts its market value.
The homeless are a byproduct of illegal immigration displacing them from the lower tiers of the job market…
There was plenty of “illegal immigration” 20 years ago but nowhere remotely near the amount of homelessness.
They are the byproduct of the FED’s no billionaire left behind asset price bubble orgy.
“There was plenty of “illegal immigration” 20 years ago but nowhere remotely near the amount of homelessness.”
It is cumulative. As the new immigrants move up the ladder they begin to displace higher paid workers. Go look at a construction site in CA and count how many not Hispanic workers are there…
Then the new arrivals take the jobs at the lower tiers. The people with ADHD, or substance use problems are no longer employable when there are alternatives…. Many end up on the streets…
Money supply way up worth much less also about velocity of money really not costing government much collect it back in taxes give to musk bezos
Is Venice Beach Still Paradise? Homeless take over
On the spot reporting and interviews with locals.
So how come these homeless living in tent camps didn’t benefit from one of the four things you mentioned? I mean it seems even someone that is dumb as rocks could have made a huge amount of money (and have a huge amount of spend able money) in the past 5years…
1) Fill A tank = $40.
2) Teslas Model S = $113,000.
3) Model S : tanks = 113,000 : 40 = 2,825 full tanks for EV.
Someone who spends $113,000 for a tesla hardly worries about something mundane like the price of electricity vs. diesel.
One tank is bs, 3000 tanks for one Tesla isn’t mundane.
Makes my 69 chevy seems environmentally friendly by comparison, especially since it is not a whole new petroleum and silicon based media mobile that consumed a ton of scarce resources and blew off a ton of Co2 just to be constructed the other day to veastly inferior standards.
I bet my old Impala will still be on the road after half of the cars from the 2000’s are crushed, melted, and gone.
Most of my friends/acquaintances driving $100K Tesla Model S stand in line for an hour or so to get their free charger time.
Exactly… this is why the incentives for green is entirely backwards and utterly regressive. And it is the height of irony that such activities are promoted by those who call themselves progressive.
Tax credits for EV during the last decade was a joke. It was targeted payments to the wealthy who didn’t need it. The same is true with solar credits. The poor schmuck who rents his apartment is not going to enjoy the benefits of having solar put on their roof. Cause why should the landlord pay for electricity for his tenants?
The entire scheme is a bad joke with the aim of getting the rich, think EV companies, solar companies, etc, more rich. (Not saying that oil companies didn’t get the same favor in their time)
It may surprise you to learn that fossil fuel industries continue to receive subsidies, far more than clean energy industries, in fact.
Rest of the planet is moving to green energy. How much is gas going to cost when we are the only customer?
That’s also 1.13M miles = 20gals x 20mpg x 2825 tanks. That is about 3 Tesla batteries, which have comparable replacement cost of an ICE motor. Cost per mile is about .03 to charge or 40k over the life vs almost 200K at $3.50 a gallon 20 x 2825, Premium models twice as much. Subtract the added cost up front makes it pretty much a wash. if you live long enough. Assume the car ex motor has the same maintenance costs. When the cost of a product (monthly) is exceeded by the cost to operate that product, that product basically has no value. Tesla makes the car more expensive than the cost to operate and once that is no longer true the car is worth(less). The only reason ICEs are still expensive is the money printing scheme. Those who bought long term (Tesla) will lose big when government outlaws private transportation.
You’re really reaching for these numbers. The base Model S is $70K. The base Model 3 is $40K. And you didn’t include the cost of the car whose tank you’re filling here.
With a $113,000 Porsche you have to PAY for those tanks of gasoline, which you don’t with an EV. So you get to add them tanks to the price of the Porsche.
And who pays for the electricity for your EV? If not subsidized by the taxpayer directly or indirectly its more than $20 a recharge at current SF PG&E rates. Overnight. Double that for fast charge. For the real world range of the EV I can fill my 1991 BMW with less than $30 of gas and when I arrive at EV max range, say around San Luis Obispo, fill it up again in less than 10 mins and drive back home again.
Then there is the single problems with EV’s in SF. When the next Big One hits you will own a brick for months. Many months. You wont be going anywhere in that EV car. Old timers like me have a safety gas can in the garage for just such a situation. With the rest of the bug out kit. Enough to get us out of the disaster zone if we are not lucky like last time. Or to get around until they work out how to restart the grid in the City. Might take a week or two. If the Transbay Cable holds.
As for used car prices. Simple demand. Enough people who used to use public transit now drive. In SF road traffic is back but MUNI is still pretty much empty. Does not take much extra demand to destroy market equilibrium in a market like used cars.
“…with EV’s in SF. When the next Big One hits you will own a brick for months.”
Gas stations in SF don’t work without electricity. Neither the pumps nor the payment systems. So you cannot get gas.
In addition: you plug in the EV every night in your garage to top it off. So every morning, it’s fully charged. Do you do that with your ICE vehicle? Nope. So when the big one hits, the EV owner has a fully charged vehicle, while your ICE may only have 1/8 of a tank. Hahahahaha
In terms of the gas costs v. electricity costs: you don’t even know how an EV operates, and how efficient it is especially in stop-and-go traffic, and that a good part of the energy it uses in stop-and-go traffic is regenerated by its braking system. We drive a hybrid, and the only thing that charges up the battery is the braking system. If you don’t get what a regenerative braking system does, you don’t get anything about EVs.
(No Reply button below..so here..)
I am well aware of how gas stations work. I was around in Loma Prieta. I filled up in Marin the first few weeks. Hence my backup gas supply.
You must have missed the story about how the Potrero Hill power plant restarted the City grid in ’89. Now gone. They recently upgraded the Trans Bay Link to do a grid restart. 15 years late. It might work. If the Hayward fault is not the one that pops. It will take months to run the replacement HEV lines. Your EV will be a brick. I will driving my ’91 BMW, out of region, just as I always have.
I have also been reading the engineering reports, the PUC reports, and more important the stories out of CARB since the 1970’s. I know the Tom Quinn story. My day job involves doing the sort of math that even my kid who is doing a pure math PhD (in ML) scratches his head in confusion, it is heavy duty applied engineering math, and I know more than enough financial engineering to unwind a CDO Squared default cascade, partially hedged.
Last time I did the numbers I pay at least $30 / $40 state taxes tax a month to subsidize EV’s and a at least 40% of my PG&E bill goes to cross subsidize the “renewable energy” scam. Drilling way down in the PUC reports tells an interesting story.
As for how cars work. I’ve never owned a new car in the last four decades. Always old cars, buy at 100K miles, usually last to 250K. I have always owned the shop manuals. Had the same mechanic in San Bruno since the early 1990’s. Some of my fondest childhood / teen memories is helping an uncle rebuild farm machinery, cars, trucks and even heavy construction equipment. My real regret was not learning how to weld once I got old enough.
So yeah, I know how it all work. And I also know a scam when I see it. Which is what EV’s and associated paraphernalia will eventually prove to be.
“As for how cars work. I’ve never owned a new car in the last four decades.”
Yes, that explains everything. You have no idea about modern cars, ICE or EVs, everything you refer to is from many decades ago, and you’re totally clueless about EVs, and how they work, and that’s fine, no problem. But for some reason you feel like posting your anti-EV nonsense here. Sheesh.
If people are keeping their cars about 11 years now, then it’s also been about that long since the last big drop in car production in ’09?
Wonder if Ford Pinto or Pontiac Aztecs also went up in used car price, well if there are still any left for sales in the used market.
One thing for sure those 4Runners are getting crazy out of control with used price, this was actually happening even before Covid.
I had a guy follow me home at 10 PM, for about ten miles, a while back. He wanted to buy my 2005 4Runner. 125k miles and only a front wheel bearing being unscheduled maintenance. It makes more sense to buy a new 4Runner with these crazy prices. I did not sell it…
Last week the clerk in a building supply store wanted to buy my ’81 Westfalia. I think I finally talked her into buying a used short bus and then camperize it. . Funny how no one wants to buy my geezer mobile work truck. It’s invisible. Looks new, but definitely a geezer truck. Could it be the ham radio and antenna?
“bad for tourism, don’t cha know.” . . .
“it’s ok, Book.”
Trillions of dollars flooding the markets, payment moratoriums, stimmies, extended benefits, etc. Fertile ground for the Great American Irresponsible I Want it Now Consumer.
What happens when the music stops? When the music’s over, turn out the lights, turn out the lights.
The billionaires-owned “Federal” Reserve has discovered that a “cure” for preventing a stock market crash is creating hyperinflation? Maybe, it will work?
eventually (so they tell me), the continuous handing over of free money to the ultra-wealthy will trickle down to the mega-wealthy.
once the mega-wealthy are letting some trickle down to the fabulously wealthy, it won’t be long before the unemployment problem is solved as the fabulously wealthy, with so much extra to spend, will surely pay several somebodies to wait in the gas lines with their various vehicles, because time is money.
You know when the music is over when the power company shuts off the lights.
With Cyberattacks / Ransomware now coming into vogue trying to get access to the Disc Jockey’s power button. The U.S. is vulnerable where it counts to these disruptions.
There it is ^ Giving a series of stimmie checks to debt addict Americans is like giving beer and car keys to a teenager.
Free money burns a hole in their pockets, and they become manic on the feeling of having more money than many have ever had in real cash…
Plus some are counting on the child stimulus and spending that money too.
The music won’t be stopping.
The next album will be UBI.
Next leg is going to be new cars, expect their prices to double and this without the electronic enhancement due to the semiconductor shortage.
I wonder if the hedonic adjustment for calculating the inflation will work in reverse now that new cars are coming without those electronic gadgets.
At 15$ a hour hhaha
So disappointing that the fight for 15 might get totally blown out of the water if this inflation does take off.
The fight for 15 is a joke, if one thinks about it carefully, there is a subtle message there that would be just utterly insulting to anyone who actually understands it.
The idea is we must raise the minimum wage to enable a living wage. Or put it another way, most of those targeted to “benefit” from minimum wage are only capable of minimum wage, and not anything else. Why, because they are far too uneducated and unsophisticated to realize that they are being preyed upon. No emphasis at all on how to help people get to a point where they are above minimum wage and advance themselves.
It makes me think that in fact, what this whole fight for 15 is promoting is to ensure that companies go faster toward automation. Cause, let’s face it, who needs a teenager working at fast food when you can get a few robots to replace that teenage at a fraction of the cost.
This will ultimately beget UBI. And eventually to a point where the productive members of society wonder why the hell it is they are supporting the unproductive ones, and how to get rid of them. After all, if we have robots delivering our stuff, robots picking our fruits, robots serving our food, why do we need those excess people for.
The raise in the minimum wage is inflationary, as it has been know for a long time. Employers must raise prices to pay higher wages….
they can also cut margins, just sayin. and yes, i understand there are limits. i just don’t think anyone but smallish businesses are under the type of pressure that makes raising wages a bit untenable.
i saw a sign the other day for $19/hr to start at a restaurant i had never heard of before. just driving home from band practice.
amazon can afford to raise wages. it won’t break their back. paying $19/hr for starting at an anonymous restaurant? how does that work out?
but back to the margins. they are easier to cut for businesses that can affort not to pay taxe
1) Missing in action : volume.
2) AMC directors unloaded to the Rabbit Commando when prices
jumped from $2 to $70.
3) That’s what car dealers are doing. They liquidate inventory, they are cashing in, WTF, tomorrow might be 2008.
4) The PPP loans kept the dealers alive.
5) The Rabbits are buying at crazy prices and car dealers lot have a shrunk inventory. The safe parking lots are empty.
6) Buying a car isn’t day trading. There are no days with huge ATR.
7) The Rabbits need a car to go to work.
8) But if the market will correct, jobs might evaporate.
9) The “hawks” will get them.
I am very happy to be driving my 1971 Ghia. The thought of spending as much for an automobile as my first HOUSE in 1984 is NUTS.
I suppose I was fortunate (as fortunate as you can be when you total your car), I had to buy a car just when Hertz declared bankruptcy last year.
As a result, Today if I bought a similar Jeep as mine 6 years older with the same mileage as mine when i bought it last year it would be selling for $3k more than the one I was able to purchase.
This pandemic has dramatically reduced the number of miles driven and you can really see this when you browse a Carmax inventory online. The miles one the recent used cars they are selling appear to be down significantly from that of a year ago.
Sold my camaro 2ss 2010 to carmax got 3600$ more than last year
My friend just bought 4 used cars to rent out on one the new Air BnB for cars platforms and has them rented out already for next two months and expects to have them paid off before summer ends. I am not sure who else is doing this but it has to be adding to used car pricing. I expect he will be looking for more cars shortly.
Are they using Turo? The AirBnB dynamics could be coming to the auto market.
Lol renting out a car to someone to go with the air bnb rental. what can possibly go wrong with that..
“I expect he will be looking for more cars shortly.”
That’s funny, because I expect he’ll be looking to sell those cars as his little rental empire implodes.
They’re out buying cars at the same time they don’t want to work? Sounds like the repo man will be knocking on a lot of doors in six months. Dumping all those just bought cars back on the market driving prices back down, maybe?
Two different sets of people, maybe?
The only excuse I have is arthritis flared up in my knee. Not sleeping well lately.
Astounding that this would even need to be pointed out. This comment section is comedy gold sometimes.
There’s also an issue of supply. A lot of used cars come from rental fleets and other short-term leases, and those didn’t happen last year. Combined with recovery demand, stimmies and low rates, prices are exploding higher.
A lot of this price inflation in used cars must be a function of most sales being financed, for ever longer terms, with ever less down. Same dynamic as housing market with even looser credit standards. Lower interest + longer term = higher price.
I’m seeing some nice deals on 1967-1981 cars for cash, by owner, in various classifieds. Cash sales by owner is the only car market for me. Financed market is too overpriced. I know enough about these old cars to make them very economical for me. There are also some desireable imports built between 97 and 2013 that can be had cheaply for cash.
“There are also some desireable imports built between 97 and 2013 that can be had cheaply for cash.”
Care to name the top 5? Serious request…thanks!
I like FJ cruiser, Lexus Sc300, Hondas, depends on your taste. Tons of cars out there pre 2010 that are excellent cars built at the height of ICE automobile construction without all the doo-dads that make you dependent on a flunky with a computer to diagnose the problem and another computer to him to see the installation proceedure on you shutup tube.
I go for under 70k miles cars and under 10k bikes.
Yep and anyone buying a truck because it makes them a “real man” won’t be able to do the math.
How about the crazy spike in RV prices from all the modern Tom Joad’s caravaning around the country, looking for the old future that’s gone.
IMO, there’s going to be a nice correction to the boat and RV market sooner than later. I live on a lake in the N GA mountains, and last summer, every weekend looked like Memorial Day weekend on our lake due to people fleeing the oppression of the big cities and either going to their lake home or renting a lake home. This weekend, there was hardly any traffic on the big lake Saturday or Sunday.
All those brand-new boats from 2020 are sitting somewhere unused with carrying costs. My part-time neighbor next door paid almost full list for a Sea Ray that would normally be 25-30% off at the boat show.
I don’t keep a normal schedule but when I went out for a drink a few weeks back with a friend on a Tuesday at 3pm. The bars all up and down the street were already full at 3pm, on a tuesday. Must be a gilded age.
Our roads are full of cars and trucks at 2:00 PM each day. No one is working anymore. We stopped at a Cracker Barrel restaurant last Thursday after golf at 2:30 in the afternoon. The place was 75% full.
Plus add in all those boats that people are being forced to pull out of the reservoirs in California because of low water levels. Next big trend, people living in boats up on blocks around the neighborhood .
Shasta Lake is a mess… has to be seen to be believed.
” This weekend, there was hardly any traffic on the big lake Saturday or Sunday. ”
Like SW FL coast one day after Easter in the day 93-00’s. Seasonal people take the first plane back. Everyone felt rich the day the tourists left. They all felt poor four months later. The smart ones eight.
Might be end of Covid Season. Prices may adjust accordingly.
Might be the beginning of the UFO season, however. Masks not required but tin foil hats will be in demand.
New cars hold little appeal to me, as who is going to pay to fix all of the touch screens, electronics, sensors, etc in the future?
I coild buy a new car, but decided that as long as the frame doesnt rust out on my Grand Marquis that has been paid off for 16 years, it will keep running and running….
I bought a new rig at my wife’s insistence last fall. I ordered a 2021 F350 from the factory because I could only get the engine/trans options I wanted with the 1 ton. Before you launch, we live off grid in the woods and actually use our rigs – not hauling just groceries. At negotiations for the new pickup the dealer would not give me anything for my old pickup – $2k. I laughed. I’ll use it for a backup and utility unit.
The old rig is a 2000 F250 V10 4WD Super Duty. Having my tires rotated recently the mechanic offered me an almost crazy price if I would sell it to him. Short of 4x what the dealer offered last fall.
The rural market seems to be in turmoil as well. Folks are not wanting to spend huge amounts on new vehicles and are looking to older equipment and spending the money for restoration. New tires, ball joints, steering, shocks, brakes and if the drive train is in good shape you can drive down the road riding like a new pickup. You can even buy a hang tag that has new vehicle smell. But you might not have cab WiFi, backup cameras, etc. Using Wolf’s terminology its a WTF moment.
I put a touch screen Bluetooth and Video Pioneer head unit in my 1998 F150 and ran a backup camera cable to the tailgate. All this for under $200 installed by me.
Works as well as the factory units. (no WIFI though, but I have a cell phone).
Just bought a 1999 Chevy 3/4 ton pickup. Runs great. $2800.
The rural economy is all over the place. Some are doing fantastic and some are about busted. Its always been like that to some degree but more drastic and emotional now.
Many, many places are not corporate farms, big private land owners, etc. I don’t want to shift the subject but so little attention is given to small family farms. This is not LA , SF, NYC, etc. But if this infrastructure breaks down it will hit you where it hurts.
I can buy a pig or part of a beef from a neighbor. Known source. The butcher is my neighbor. And there is a never ending supply but not enough butcher time OR butchers.
And they need work rigs too.
It’s truly a luxury to have a old, solid pick up without having to use it as a daily driver. Back up transportation, haul when you need it can last darn near for ever. Keep the $700 monthly payment. The best tool I own.
Yes indeed; it’s great to have one when needed.
Love my 2000 tundra
Good little workhorse
Ditto, 95 Tacoma. Wife wants me to get rid of it. She’ll go first.
I’m an urban dweller in a megacity. I rent taxis and use Uber. Car ownership is overrated.
Thats what the amish say were I live.
But they sure like having neighbors with cars and plowtrucks!
There is an informal national network of drivers who hire out to drive the Amish. Even overnight trips. They usually pay good. And always in cash.
People think the Amish are homebodies but actually they travel a fair bit, especially by bus and Amtrak.
For you. I live 45 miles from the nearest “city.” Walking is over-rated…and slow. Especially in the winter.
I live in a suburb, in a very large house, on a very large lot. I have 6 cars, and my biggest problem is, I have so many cars, I don’t know which one to drive…
Sounds like a good time to “sell high” during the bubble.
It’s only 6. Roll some dice or something. Not that hard to figure out
That’s why gas prices to the moon are not a problem. Who cares about rural people.
We live on a farm and we really do need a four wheel drive truck.
City slickers will care about us when the grocery stores are empty. Until then we don’t exist, except as caricatures in Hollywood rubbish.
Inflation is temporary because we are heading for hyper inflation, the ultimate state of affairs.
A common story will be some poor sap pays top dollar for a used Luxury SUV only to have the engine management computer, or fiber optic bus fail on him(or her). Then they find that a replacement part is 2 years out due to the chip shortage and the limited supplies available going to keep the factories running. Game over Sap.
My father in law kept getting an airbag message light on his Buick Whatever. The part quote was for $995 for a new board about 5 years ago. It runs great with the malfunctioning idiot light.
That’s what black electrical tape is for…. to put over malfunctioning idiot lights. “There! I fixed it!” /s
I think the lack of new vehicle supply is triggering much of this surge in used vehicle demand, and hence, strained supply. The rental vehicle demand, at least for the intermediate term, is likely to remain well below 2019 levels, because the business traveler is just walking over to his or her computer to do a video conference instead. So I think the rental vehicle companies effects upon used vehicles will subside as we go into Fall, and the executives of these companies re-group to the new reality in their businesses.
The chip shortage for new vehicles may be more of a long-term problem, because I think these coded/smart silicon wafers are going to begin to be played more and more as a strategic/national security card than strictly a commercial one. Would think that American auto companies and State-side manufacturing foreign auto companies would be getting together to build at least one chip fabrication plant, say in Kentucky, to help eliminate this problem in the future. Sounds like the lead time to first production is 3 to 4 years, but regulatory/EPA hurdles can be lowered by Woke government actions.
The monthly payment is still key, in my 50 years of buying and selling my own vehicles, have never traded one in, and that volatile component to vehicle buying has probably seen its low. With 40% plus year to year used vehicle price increases, any rise in rates at this point will begin to be its own limiting factor to sales volumes in another crazy ZIRP created market. Secretary Yellen has labeled inflation and interest rate increases as a good thing, but she ain’t trying to make the monthly payments each and every month for some 72 months.
Existing home sales are now on the downward slope due to Only In America crazy price appreciation, but used cars are likely to follow before the end of the year due to sticker shock and tougher financing terms. FIND A GOOD MECHANIC. Keep the roadster on the road a little while longer, BECAUSE NOW SURE AS HECK IS NOT A GOOD TIME TO BUY ANY VEHICLE, USED OR NEW. Your demand for 16,000 miles driven per year is probably closer to 10,000 miles per year now, since you work part of the week from home or the park. We ain’t exactly in good times, economically or financially, so save your devaluing Dollars for brighter skies.
No one takes into account the large
number of Hispanics who are going home, driving south, used car or truck full of tools. Those used vehicles have more value in Mexico, Honduras or Guatemala than they do here, relative to the local currency. No problem with illegals crossing the border going southbound. Look at overall number of registrations in a year to see that.
1) Total vehicle sales M/M down 9% from 19,244K to 17,541K.
2) Light vehicle sales M/M down 9.5% from 18,771K to 16,988K.
That’s new vehicles, seasonally adjusted annual rates (SAAR) of sales, not actual sales for May, and they include fleet and medium-heavy and heavy (class 8) trucks. Fleet sales are still in collapse mode because automakers cannot make enough vehicles (semi shortage) and are prioritizing retail units (high margin). Numerous plants are shut down due to semi shortage.
In terms of actual sales, cars and light trucks (not including medium-heavy and heavy trucks), in April = 1.53 million and in May = 1.57 million, a 2.8% increase MoM
This FOMO mentality is going to have a severe whiplash effect. It all started with toilet paper and now has carried over to many other items.
Damn. I put my 100% Restored 71 VW Squareback up for sale at 40% of what I have into it – on a national site – it’s like the original mini-SUV !! Can’t get a bite. :-(
They’re ugly and without the sentimetalism attached to a VW bug, bus, or Ghia. Or a Thing! Sorry.
My wife and I put out stimmie checks and PPP money into the bank and are not spending it. But we are the type of people who just keep adding money to our assets every year and plan to be able to retire. But we have relatives who are spending every last dime they receive, despite being in their 50’s and they want to retire, but have only about $150 in retirement accounts and no other savings.
This live in the moment economy is fine while the Fed is pumping out the free money, but that will fade away quickly.
I give it about 5 months before most of that stimulus free money is spent, even by households that still have a job.
There are so many balls up in the air – mortgage foreclosures, forebearances, eviction moratoriums, stimulus checks, PPP checks, unemployment insurance benefits, deposits at the Treasury that are being spent to finance the deficit, proposed increasing tax rates, proposed increasing corporate tax rates, very high margin debt in the equity markets, very low corporate borrowing rates in low quality debt, inflation in commodities and retail prices.
It is all just this huge bubble that is going to unwind over the balance of this year. But unfortunately, the news media is so corrupt that they wont expose the politicians and special interests that have driven the country into this sad state.
How is Extend and Pretend going anyway? Will the first reality ‘check’ be when the eviction moratorium ends at the end of this month, or will there be another extension?
I don’t think there’ll be another extension, and here’s why. The last thing the people in power want is a court to rule that their administrative state don’t have the powers they want. So what they’ll do is appeal, wait for the June 30th to run out, and claim the court challenges are not moot, so as to prevent a ruling on the merits.
Which level will actually be pulled? Endless stimulus, student loan forbearance, eviction moratorium, PAU, near zero % interest loans based on government rates, PPP or others.
US Government has coaxed the world financial powers to USE this once in a lifetime as a real reason to pop the champagne
I thought PPP money had to go to wages for employees. How is it that you just put it in your account? Something reeks big time.
We received the PPP loan. The rules are vague, and are skewed in favor of the recipient. Not a lot of strings.
There will be a sizable chunk of recipients who technically qualified for the loan, then financial circumstances improved enough to make the funds entirely unnecessary. Those guys will be sticking the money straight in their pockets – legally. I know of a few personally.
Unfortunately for us, we burned through the vast majority of the funds as intended…keeping employment and wages stable through a period weak demand, then even paid a modest bonus to help out the employees.
Don’t forget the child care credits start in July. If you have enough kids, you could easily pay the rent/utilities with that money.
Presumably they are “selling” these cars on finance deals at low introductory rates?
Some kind of ninja finance is my surmise. I’ll hold my breath until I learn the new trick.
An expense I don’t hear much about that goes up along with the price of cars is…insurance. Living in the East Bay, with a near new car and low mileage accumulation, I am now being ripped off at over a dollar per mile.
I just rented a car in Bozeman for a family vacation. $3400 for 6 days!!! The only thing cheaper was an economy car for $2800. yikes!!
Look into Turo, it’s like AirB&B for people renting out their private vehicles.
Why would you agree to pay almost $600 per day for a rental car? Makes no sense. You are the reason for these prices.
I would call what is happening now, stimulus hang over. Many people used stimulus money to facilitate the purchase of used cars, and people as we all know are sheep who tend to follow the flock. In the old days they used to call it keeping up with the Jones’s.
I used to know a tool salesman that said if he called on a dealership service department and saw that most of the mechanics had old beat up tool boxes he would find a mechanic and sell him one at a really low price. He said he knew as soon as one mechanic got a new box, many others would get jealous and want to buy one too. He said the best thing was that some of them would spend much more to have bragging rights over the others…
Gas prices are increasing rapidly. When gas is selling for 4 or 5 USD per gallon, how can people afford it for their truck?
I am happy with my 7 years old Corolla. My savings go to gold, silver and miners.
True happiness comes from positive attitude and peace of minds.
Just sold my 2016 Ford F-150 XLT SuperCrew with 25000 miles for $46K + change. I paid $39K in 2016. Going to miss it, now it’s up to my Toyota RAV4 Hybrid to get my ‘macho’ fix!
Love my RAV4 hybrid. Best thing is, in Florida, we get to use the HOV and “express” pay lanes for free.
The truck market has been terrible for nearly 5 years at least on the ground level from what I’ve seen. Especially for anything with a diesel engine in it. Pickups are all that america wants right now. Most of these trucks are utterly useless as actual trucks as well.
They’re gigantic 4 door grocery getters with the tiny little beds. The wheel base is growing rapidly but the actual cargo and utility is shrinking. Not to mention the bed sidewalls and tailgate heights are getting higher and higher. The trucks cost so much the owners would have a heart attack if they got a single scratch. The vast majority of the clown suburbanites buying these things hook up to some crappy tractor supply trailer to actually even haul anything. Then you’ve got super contractors thinking you can pull 40k lbs behind a 1 ton pickup because they showed it on tv. They end up dead at the bottom of a long mountain grade with brakes that permanently smoke for the rest of time lol.
I remember when I had a 1 ton c30 dually and someone pulled up next to it in a Toyota Tacoma and aside from length, that what used to be a little baby sized pickup nearly was as large my dually flatbed for so many decades ago.
Glad I’m still puttering around in 80s model beaters that I can replace the entire engine, tranny, and transfer case for less than a grand at a junkyard. Not to mention I actually have an 8 foot bed so I can use a truck like a truck if I needed to. I still can’t wrap my head around these 4 foot beds on glorified SUVs.
Trucker Guy, a lot of what you say is true, and you continue to apply negative connotations to your point of view. Light duty trucks have changed since your ’80’s beater’. They have evolved to suit the needs of a greater percentage of the population. Of course they are not suitable for most commercial and heavy duty applications. The light duty trucks of this century ARE ideally suited for the suburbanites of which you speak. Just how many of these light duty trucks have you seen stranded anywhere, verses heavy duty trucks, which I have seen many. The utility of these trucks has increased for the vast majority of people buying them. They are perfect for hauling appliances, furniture, plywood, lumber, landscaping supplies, while great for hauling the family and boat for a nice vacation. The trucks provide luxury, comfort, and utility, while not being an eyesore as of your 89 model hunk of metal. As for the price, you just have to be conscientious of your needs verses the current market. By the way, they are terrible “grocery getters”, I use my unglorified SUV Rav4 that purpose. It just makes more ‘cents’.
Sounds like someone trying to justify their purchase of an overpriced new truck. I’ll give you that I’m a pessimist but these newer trucks suck as trucks.
The new stubby bedded trucks can’t fit a washer and dryer in the bed, they can only fit 1 pallet of anything in them, plywood is 4×8 so you’re not fitting that in there efficiently, other lumber is 8′ lengths or longer, you’d be lucky to fit a full sized sofa in one with the tailgate down, and to top it all off the beds are much higher off the ground and the bed sidewalls are as well resulting in working a lot harder loading and unloading. Due to the proliferation of crew cabs, the rear axle is closer to the cab meaning more weight is loaded behind the wheel base taking weight off the steering. Some trucks, (ford iirc); are going to aluminum frames, the issue there is aluminum use in vehicles results in inevitable cracking and structural failure for slightly more payload. It is nearly impossible to get a manual transmission in newer trucks, all things being equal the manual will hold up far longer and will last far longer than the service life of the vehicle, not to mention being substantially cheaper and holding up far better to towing. They also cost so much you can’t work them without being terrified of scratching or breaking something.
There is essentially no benefit to the modern trucks we see designed today outside of suburbanites playing weekend warrior or hauling boats and RVs. I’ll keep my “eyesore” (as if trucks were supposed to be show stopper Cadillacs) and be able to use it as an actual truck and also have tens of thousands in the bank instead of a substantially less effective vehicle.
I also don’t get your point about broken down heavy vehicles. You’re comparing trucks that run to town and go to desk job parking lots and get decommissioned to a junk yard at 200k miles to trucks that get beat on all day everyday and last 500k-1mil miles. Your point makes absolutely no sense. A typical pickup is more durable than tractor trailer or dump truck? What?
Stop comparing the last century’s truck to today’s truck. No one said they are comparable in price, durability, and utility. You hate them, fine, don’t buy one. Since today’ trucks have long been the best selling vehicle by far, a few people see otherwise. For me, with the bed extension that fits over the laid down tailgate, all of the previous items fit well and good. Of course, this was not a service or business needed truck, just a vehicle that fit in great for this suburbanite of a family of 4. Now, if you find that truck that is not a shell of what trucks used to be, then please, enjoy the next 500k miles.
BTW, I do not want to sound as if I am totally sold on all the virtues of modern american trucks. It’s just the fact they satisfied what I required for the past 5 yrs, with zero problems. I am not ignorant of the fact, that just selling it for 10% more than what I paid for it, is possible not such a bad move after all.
I wonder if people are seeing the higher grocery prices, house prices, etc. and thinking it’s time to buy now, since everything will be more expensive later on.
That is how inflation begins to gain momentum, then when it begins to be “accepted” prices begin to raised in anticipation of higher wholesale costs and at that point it spirals out of control.
I cannot remember where I read it now but I saw a mention of used car inflation in the regular media last week. Nice to see that readers of WolfStreet get a year’s heads up on economic topics.
so – replacement tesla headlight – $1500; replacement for our 2000 camry with 350,000 miles is $29 – gee tough decision on whether to change from my ICE to EV
I had purchased a 2012 Ram 3500 diesel brand new in late 2011. The Uconnect infotainment screen was glitching out within the first year, but it was intermittent. I had to shut the truck off and restart it for it to work properly, kind of like rebooting a computer – something not possible while traveling down the highway at 70. A replacement unit was over $2,000 at the time.
I sold the truck once the warranty was up. I didn’t want to risk high priced repairs. I had my old truck at the same time, and kept it. There are no high priced replacement parts for my old truck. The problem is parts, PERIOD, are getting difficult to find.
A apolitical massage :
1) We don’t care about the climate change.
2) We don’t like the people who buy a Tesla to impress the elite intellectuals.
3) We will buy a pickup truck to F…u.
4) That’s the price of freedom.
5) Contractors, those who do real jobs, between 20Y – 50Y are down. The old who tow and travel across the country are up.
6) When a lease expire, they will not buy a SUV or EV. the will buy a used truck,
or lease a new one for higher price.
The climate always changes. It always has. It is yet to be proven with any degree of certainty that man is effecting it in any meaningful way.
When you get to be my age, you have heard it all before. The same “scientists” who are selling global warming today, were peddling poison air in the 1960’s and were absolutely certain that by 2000, everyone would have to wear a gas mask outdoors. They told us we were running out of oil and gas was going to $100 a gallon. National Academy of Sciences, published a chart in Scientific American that looked at metal reserves and estimated the humanity would totally run out of copper shortly after 2000. Lead, zinc, tin, gold, and silver would be gone before 1990. Acid rain was going to make it deadly to go out in the rain. By 2000 famine was going to kill millions a year. This shit never stops. There has never been one single year in the past 50 when the scientific community was not selling impending doom for the human race, and there has not been one single time they have been right. And yet the gullible masses keep believing this time they are right. It is truly comical, or sad… probably more sad.
Jdog-bankruptcy-‘…happening gradually, then all at once…’-comes in many forms (i.e.-populations expand to the limits of their technology and resource base, reaching that limit usually takes more than an average human lifetime-or times). Most likely impending resource crisis will be freshwater-if you think a mass dwelling rentier future is scary, wait until more wells run dry worldwide.
may we all find a better day.
No surprise here. Over the past 15 months, government transfer payments kept demand high while the pandemic crushed supply.
1) Surprise : the value of an old truck from the 80’s/ 90’s is rising.
2) You can put antique plate on anything : cars, trucks…
3) Inspections cost a lot. Let’s say $1,000/y.
4) There are No inspections for antique trucks.
5) Add : min 5Y x $1,000 = $5K dividends to the book value of the truck.
6) Do the same math Warren Buffet does to evaluate companies, for 10Y (or 15Y) of est dividends plus book value of the truck.
While there may be no inspections, most antique vehicle plates come with mileage/use restrictions. Don’t get caught using an vehicle with an antique/collector plate for a daily driver. It gets expensive…. quick.
Example from the Michigan statute:
“Historic vehicle” means a vehicle that is over 25 years old, and that is owned solely as a collector’s item and for participation in club activities, exhibitions, tours, parades, and similar uses, including mechanical testing, but is not used for general transportation. For purposes of this section, use of the vehicle during the month of August in each year is considered an exhibition.
(The August exception is to allow for travel to the Woodward Dream Cruise)
Then there’s the issue if you have collector car insurance… you may end up without coverage if you daily drive it.
Depends on the state apparently ek.
FL gave me antique plate automatically when we had to move back to care for elderly family.
Registration was $25 per year; no restrictions of any kind mentioned.
I’ve had people approach me in parking lots wanting to but my truck and/or boat. They’ve offered me stupid prices for them either individually or for the whole combo. If it weren’t for having to replace them, I would be all over those offers.
And by stupid prices, I mean 200 to 300% of book value.
My car is making $166 per month. I guess that “covers” the insurance.
Are you done tinkering, Jerome? This ain’t normal.
Or your paycheck is losing $166 a month…. Just a different perspective.
This is a wind up Wolf,
They are obviously queuing up for their last chance to buy ICE’s before the Govt bans them and they become stuck with with feeble and expensive EV’s.
I admitted it was a wind up otherwise I would have got slammed, right?
Here in the UK I am getting “furlough” similar to your US stimmi of US$2949.
As a result I have no incentive to look for new clients for my business because what I have noticed over the last 10 years are that the younger generation are generally living in fantasy world and they actually infuriate me with their attitude.
I have no business costs, with my office at home. I have no reason to go out. I am not going to a restaurant wearing a hideous mask. I am spending my money on building materials and extending my house myself so I don’t need to listen to excuses as to why it wasn’t done correctly.
I have become very negative regarding dealing with people, especially the young that (1) are future employees, (2) customers (3) are to be relied on to pay taxes for our state pensions.
Is it just me?
I think over the next 5 years, the current cars being sold will have massive depreciation.
They are so complicated with so many electronic gizmos and processors inter linked to go wrong. Vehicles used to be sold on the basis of top speed, 0-60mph and power; now they are sold on their media system and the number of USB ports that are redundant within three years.
Anyone that wants to do DIY mechanics and self maintenance, anything newer than 2006 gets complicated and probably pre 1996 was the turning point in reality. Though some of the Chinese ODB testers are becoming affordable and useable by ordinary DIYers.
with you there.
I put it around 1990 when the carburettor was replaced by electronic fuel injection which was the first specialist component that you could not ‘knock-up’ in your shed.
The EU (3rd Reich) went on to make it compulsory, of course. Guess where Bosch the monopoly supplier is?
It’s been a one way street ever since and electric will be much worse. Have you seen a stripped down ‘motor’ from a Tesla?