Biggest Mess I’ve Ever Seen: Used-Vehicle Wholesale Prices Spike to Ridiculousness. Just Wait till they Hit CPI Again

Supply suddenly jumps, Thanksgiving weekend gets credited.

By Wolf Richter for WOLF STREET.

Prices of cars and trucks sold at auctions around the US jumped another 3.9% in November from October, according to Manheim, the largest auto auction operator in the US. These crazy prices have now spiked by 44% from the already sky-high levels in November 2020.

But underlying market dynamics began to soften just a tad in November from the white-hot activity in October, and Manheim figured that auto dealers “remained more aggressive in buying than is typically the case in the fall, but were less aggressive than in October.” In October, prices had spiked month-to-month by the most ever (9.2%). So slightly less extremely crazy?

Prices in the Manheim Used Vehicle Value Index are adjusted for the mix of models and mileage, and for seasonal factors. The unadjusted price increase in November was 1.9% month-to-month and 44% year-over-year.

Over the summer, the brief hesitation in the price spike – that little zigzag in the chart above – was cited as indication why inflation would be “temporary” and that prices were already unwinding. Then WOOSH. Now even the Fed’s Powell has “retired” the term “temporary.”

But yes, everyone knows this crazy price spike cannot go on forever. And I said it in the spring too, and then it zigzagged and then, you know, WOOSH. It’s the biggest mess I’ve ever seen. Now I’m saying the same thing: These even crazier price spikes cannot last forever. They’ve got to come down to earth. But who knows what’s going to happen – because already, this should never have happened.

Compared to the old-normal in November 2019, prices have now spiked by a mind-boggling 67%…. WOOSH:

These price spikes show that there is something seriously wrong – and it’s easy to blame the “bottlenecks” and “shortages,” and they’re serious issues. But they’re not the cause of these crazy price spikes. The cause is buying behavior – psychology.

Buying vehicles is the ultimate discretionary purchase for most Americans: They trade in one perfectly good but older vehicle for a newer one, though they might as well drive the older vehicle for another year or two to dodge the madness. They have done this during the Financial Crisis, and dealer lots were overflowing with cars. But now, the whole psychology has changed, and price doesn’t matter anymore.

Consumers are just paying whatever, and auto dealers know it, and so they’re paying whatever at the auction, confident that they can sell those units with super-high markups to these crazy retail buyers out there.

Price spikes by vehicle category.

There is one exception to the discretionary nature of vehicle purchases: commercial vehicles.

Used vans – mostly cargo vans needed for ecommerce which is booming, and for the trades, such as plumbers and electricians – are in a special situation. Companies are having the hardest time obtaining new vans as automakers have deprioritized building commercial vans during the chip shortage to build high-end models to maximize revenues and profits.

Ford’s Transit cargo vans dominate that market. Ford said last week that its Transit sales plunged by 54% year-over-year in November, and by 21% for the first 11 months of the year, as it shifted production to models with higher price tags and profit margins. In 2019, Ford sold 153,868 Transit vans. In 2021, it’s on track to sell only 96,000, down 37% from 2019.

Hence the mad scramble to buy used cargo vans. Unlike retail buyers of cars, SUVs, and pickups, companies don’t consider these purchases discretionary. They need these vans to expand their business and meet demand in ecommerce and in the trades. And auction prices of used vans in November spiked by 57% year-over-year.

Also note the 46% price spikes in sedans (compact and midsize), the vehicles that Ford, GM, and Fiat Chrysler, under pressure from Wall Street, have totally abandoned by killing their sedan models.

Total used vehicle sales – these wholesales plus retail sales – in November were roughly flat with October and declined 2% from a year ago to a Seasonally Adjusted Annual Rate (SAAR) of sales of 37.2 million used vehicles, according to estimates by Cox Automotive, which owns Manheim. In a good year, the industry gets to nudge the 40-million line.

Retail sales of used vehicles, at 20.4 million SAAR in November, were flat with October and up about 1% from a year ago.

Supply suddenly jumps. Thanksgiving gets credited.

With the Thanksgiving weekend being near the end of the month, and with supply data being end-of-month data, some of the supply metrics at the final week of November saw “large fluctuations,” according the Cox Automotive. And those supply metrics jumped.

Supply of retail vehicles on dealer lots jumped from 39 days in October to 49 days in November, when 44 days is normal, the first month above normal supply all year.

Supply of wholesale units to be sold at auction jumped from 18 days in October to 29 days in November when 23 days is normal, also the first month all year when supply was above normal.

We’ll see a month from now how the supply scenario washes out.

These crazy wholesale prices here take a few months to filter into the used-vehicle retail prices of the Consumer Price Index. The October CPI for used vehicles – we’ll get the November CPI this week – still reflects the summer pause of auction prices after the second great spike, and they’re now setting up for the third great spike that wholesale prices are already experiencing:

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  206 comments for “Biggest Mess I’ve Ever Seen: Used-Vehicle Wholesale Prices Spike to Ridiculousness. Just Wait till they Hit CPI Again

  1. Depth Charge says:

    Build some f*cking cars already. Oh, what, you can’t because you offshored all of your parts? F*cking IDIOTS.

    • Immutable says:

      Depth, we think alike.
      Before I comment, I use “Find in Page” for your moniker.
      You usually have already expressed my views!

      • Depth Charge says:

        Why thank you. I will now search for you comments as well. It’s nice to know there are some of similar mindset. I do have my share of haters around here, that’s for sure. I’m not really good at sugar-coating.

        • Jake W says:

          when people say i get too worked up, i say if you’re not upset about the fact that your country is being destroyed in front of you, the problem’s with you, not me.

        • Cookdoggie says:

          DC the “haters” might be turned off by your frequent childish retorts to people who disagree with your views….crackpipe much? etc

          Just be an adult.

    • THEWILLMAN says:

      Here is a list of just the Ford Motor subsidiaries of Ford (so finance and other parts of Ford don’t make this list – this is just where parts are made or assembled):

      Ford Motor Company of Canada, Limited
      Ford Lio Ho Motor Company Ltd.
      Ford Motor Company of Australia Limited
      Ford Motor Company of Southern Africa (Pty) Limited
      Ford Motor Service Company
      Ford Motor Vehicle Assurance Company, LLC
      Ford Otomotiv Sanayi Anonim Sirketi (Otosan)
      Ford South America Holdings, LLC
      Ford Argentina S.C.A.
      Ford Motor de Venezuela, S.A.

      Turns out all the “free trade” everyone was talking about in the 90’s was just a way to set up a shell company in various parts of the world and use labor or environmental regulation arbitrage and call it trade.

      We’ve optimized our economy so Ford Mexico can “trade” with Ford USA.

      • Dave says:

        Yep….. and Ross Perot told us during his presidential debate against Clinton and Bush. Perot “that giant sucking sound….”

        He was called an alarmist back in 1992. He was right in 1992.

        The republicans and democrats are and were active participants and beneficiaries….. hence why he was called a crackpot and belittled and demeaned when he said this famous lines.

        People say I waste my vote when I vote 3rd party. Well I voted Perot and I still consider it a fine choice.

        • Jake W says:

          many warned in 1965 prior to the passage of the immigration law that it would radically transform america. they were mocked and demeaned as well.

          it turns out they were right. it has been transformed. and not in a good way.

        • Catxman says:

          You know when they bring out the ad hominem attacks they’re planning something big, and it usually involves a shaft up your rear end. That’s why you should never trust mainstream news to accurately report the day’s events and why the people have such a low trust number for the journalists and their bosses.

        • Lol says:

          Jake – immigration is the backbone of the USA. So, I’ll have to disagree it’s played out poorly.

          To the contrary, immigrants are often at the top of the corporate ladder and innovation. We have brain drained from other countries for decade by attracting the best talent and rewarding them with capitalism and opportunity.

          Where it has gone poorly is the inability of the general Caucasian population to compete, and thus they whine, vote for Trump, and threaten to wreck democracy for the sake of race.

          We can all coexist.

        • Mike G says:

          I worked for Perot’s IT company in the early 00s, they outsourced everything they could to India. He might have talked a good Buy-American game but he was a massive hypocrite and authoritarian crackpot bully who did not treat employees well.

        • Jake W says:

          lol, do you actually believe this nonsense?

        • Anthony A. says:

          Lol, come to south Texas and see who is coming across the border. No PhD’s for sure.

        • Ron says:

          Jake- You mean the CEOs of Microsoft, Alphabet, now Twitter would have been in this country without the that 1965 law, or are these people not who they say they are? Who is running these companies?? As someone who has a significant investment in GOOG, I need to know if CNN and NYT are steering me wrong! They also showed me videos of the Charlottesville demonstrators saying “You will not replace us”. Was that fake news?

          Regarding “those other” immigrants, let’s try a little exercise. If our social security system were such that you were taken into a classroom, you don’t get to pick the school, and have pick out the kid that will be funding your social security in 20 years, you get a cut of his/her pay, who would you pick? I would pick the immigrant kid at any given school of any economic level.

        • Jake W says:

          anthony, open borders apologists like to point to the example of highly educated people from russia, india and china doing great things in america as justification for an open borders policy with respect to illiterate peasants. it’s intentional bad faith.

        • Cookdoggie says:

          Perot was the last vote I cast.

          As for immigration, maybe we can agree on legal immigration being good, illegal immigration being bad?

      • otishertz says:

        Yes, and it also created the phenomenon of Supra-national corporations, some of which have more revenue that most nations, and are beholden to no nation.

        If there’s a problem for them with taxes or regulations in one country they just move that part of the operation to another.

        Their grifter CEOs play the lyre while Rome burns, orgy, then sell reddit infants stock in a vomitorium spinoff that processes their puke into kimchi.

        • Thomas Roberts says:

          Not only do they move their headquarters, they often publicize the fact they are punishing the state for leaving, and then make the prospective cities and states dance for the opportunity.

          I’ll never forget how Amazon did their “Amazon HQ2 search”. They got cities all across the country to dance for them and reveal their secret development plans for their respective cities. Amazon then instead expanded 2 existing offices; in what was almost guaranteed, a pre-planned move. The question of what happened to all those secretive development plans comes up, did Amazon sell that information or give it to anyone? Are companies across America, buying up land, cities will need in the future, based on those plans, to bid up the price? I wonder if smaller scale things like this are commonplace?

        • Winston says:

          “…it also created the phenomenon of Supra-national corporations, some of which have more revenue that most nations, and are beholden to no nation.”

          And right there is the main problem when they OWN GOVERNMENTS… like ours. Legislators no longer do what is in the best interests of the nation that elected them to office.

          How is that going to be changed? It isn’t…

      • rankinfile says:

        So you’re saying the reduction in our carbon footprint is merely a shell game?

    • otishertz says:

      Kind of like all those ports that make more money by not doing their job and letting containers sit around collecting storage fees. Where can I get a job that pays more if I don’t do it. Oh yeah, congress.

    • Finster says:

      All the smart people are mining bitcoins, inventing NFTs, and writing app code.

    • jon says:

      I agree with most of your comments DC.
      I respect Wolf and his work a lot but don’t read all in his articles other than headlines but I do come here for comments as well :-)

  2. MiTurn says:

    My primary car has 145kmiles on it. My other 184k. I won’t be in the market for a replacement used car till we get a reverse-WTF on the charts.

    And it’ll happen when the reposessions resume…

    • Depth Charge says:

      Yeah. I was shopping the past few years, up until this past spring, for the last new car of my life. A good price is important to me, and there are 5 different models I was looking at. But what I found was that, even before this price spike, the pricing was nowhere near as good as the past. What we have now is off the charts ridiculous.

      I have decided that I may just not ever buy another new car. I’m also considering a different retirement than I envisioned, one which is less car centric period. The total cost of ownership has become a major turn-off. I crunch all the numbers in my life, and when you factor not only the purchase price, but tax, licensing, insurance, maintenance and repair, and fuel, the numbers are repulsive.

      I know of some people out there who have the new house, his and her new vehicles, all the toys and everything you can imagine. And they can’t afford to do anything but stay home, and they are complaining about high gas prices. This situation is not sustainable in the least. The people who can afford to go buy 5 brand new diesel trucks cash because of PPP loans cannot carry this market forever. It’s going to break.

      • Lynn says:

        DC, this is off topic, but thought you might want to know. Those regulations the treasury dept is considering on offshore money being thrown into US real estate? – they (FinCEN) are looking for comments before a final draft.

        Right now those regs proving ownership of offshore llcs are only required in certain areas AND only for purchases above $300K. IDK about you but I’m going to comment that they be for residential purchases below $300K as well. Otherwise it skews all that incoming offshore money into lower end residences and raises the prices for many people. Again.

        • Lynn says:

          I can’t link, but will say it took me quite a while to find out how to comment. Contact/comment info for this bill is in a pdf file online; 2021-26548, scheduled to be formally published tomorrow.
          31 CFR Part 1010
          RIN 1506-AB49
          Beneficial Ownership Information Reporting Requirements

          I doubt very much that they get many comments at all other than lobbyists.

        • Depth Charge says:

          Thank you, Lynn. I WILL comment.

      • COWG says:

        DC,

        I know you’ve probably considered this but I have known some people (me) who have transitioned to an older nice car for local trips around town and will rent for long trips or some other capacity…

        For the first time in years I don’t own a truck… I was paying too much for capacity I didn’t need very often…

        The numbers work well for me…

        • otishertz says:

          Exactly, most don’t need their truck. They rent them cheaply at Home Deplorable, U-Haul, and elsewhere.

        • roddy6667 says:

          I would buy a high mileage good-looking car for local use. I got AAA Plus, which would tow the car back home if it broke down anywhere within 100 miles. Of course, I never had to use it. For trips over a couple hundred miles I would rent a car. With promo codes, they are almost free these days.
          If your car is not currently on fire, just wait another year to buy.

        • Anthony A. says:

          roddy, apparently you haven’t rented a car lately.

      • otishertz says:

        If you are old enough to understand old cars or young enough to youtube how to fix them, pre-circa 1986 cars are very affordable, especially Chevys. Sure, they don’t have airbags but I’ve only owned one car with airbags, my old head is still here, and my old car is much safer than the bicycle or motorcycles I ride.

        Almost any part you need is available at the local auto parts and simply bolts on, no computer needed. Also, the insurance is dirt cheap through Hagerty, which is a great company, if you have a garage. I pay $560 a year for comprehensive insurance with $40k stated value. I think Hagerty limits the annual miles to $6k or something, so there’s that.

        Wouldn’t have it any other way, but then I don’t put in the highway miles many must do and I usually just drive downtown where the speed limit is usually under 35 so airbags not so much a consideration. Narrow roads and little parking spaces are more of an issue.

        Perfectly worthy and even nice old cars that can be worked on under a tree are still out there and an excellent one can be had for under $15k.

        Significant long term savings there, young man.

        • TJ says:

          I drive a ’99 Suburban with 126k miles when I’m not driving my ’63 Impala. Fortunately, I bought the Suburban in September 2020 before the WTF spikes. I just recently purchased a ’86 Lincoln Town Car. Including repairs and restorations, I have 3 grocery getters to chose from that cost less than 1 new Accord and I smile widely every time I drive them. There are other choices.

    • Chris P says:

      Its not going to change!!!! this is their segue to Electric vehicles.

      In Norway a beater costs $40.000 You can see where we are heading.

      • Greg Hamilton says:

        Chris,
        I think you are correct. The new car prices for gasoline cars is on par with the electrics. In the U.S. with government incentives, electrics are cheaper, and as Scotty Kilmer pointed out, once everyone switches to electrics they will be billed a mileage tax to pay for the roads. Now since many electrics are already attached to your phone, the charges will be automatically deducted from your bank account.
        And if you can’t pay, thanks to over the air updates your car will be turned off.

        • otishertz says:

          Yeah man. I wouldn’t accept a Biden breathalyzer-moblile like I hear being contemplated unless it also has an automatic diaper changer in the driver’s and passenger seat, macerating toilet, and H2O2 covid sanitizing automatic air spritzer system.

          Preferably it would also drive itself and give me life advice from Quentin the Moneyist on Marketwatch, and suggest nearby shopping experiences so I can stock up on the savings.

        • Thomas Roberts says:

          All cars could end up paying a milage tax. The way it would be handled is that when you renew your car every year, they would ask for your odometer reading, you are then charged a prorated amount per mile, driven since last year. Because they know what kind of car you have, the rate may be different by model. All cars already have an odometer that is illegal to tamper with, and the milage is already required to be on the sale of vehicle form/title.

          If anyone thinks only electric cars would be charged, they’re dreaming.

        • Root Farmer says:

          Greg,

          Many states require an annual inspection to renew registration (such as NC). The state already has 3rd part verified odometer readings by the inspection stations. I expect to see a new line item in the registration/property tax bill within 5 years. Other than legislation, it will take very little to implement.

      • Nathan Dumbrowski says:

        Singapore won’t register the average vehicle past 10 years old. It was odd to see a country with no older vehicles on the road. There are exceptions but they make it cost prohibitive to keep cars around past 10 years. Perhaps we too will get there in the USofA. For national security purposes of course

        • roddy6667 says:

          China has very strict annual car inspections. There are very few older or damaged cars on the road.

        • Wolf Richter says:

          The big reason why China has fewer old cars is because car sales 20 years ago were still minuscule, compared to today. China became the #1 vehicle market in 2014, after years of HUGE growth. But in 2001, car sales in China didn’t measure up to anything. And so today, there just aren’t many cars from those years. But 10 years from today, there will be a lot of old cars on the road.

        • Thomas Roberts says:

          roddy6667,

          Those car inspectors in China are very easy to bribe, in fact you may have to, to get your car approved; even if it legitimately passes all requirements.

        • SwissBrit says:

          Roddy,
          It’s a similar situation here in Switzerland; strict testing an emission controls and taxation depending on pollution limits and engine size.
          Most older or cheaper model, beaten-up-looking cars tend to be ones driven by the cross-border workers coming in from France, Germany or Italy (depending on the area).
          A 15 year old Audi A4 Allroad that an old boss of mine had was costing around CHF 4’000 a year in tax alone, despite still running perfectly well

    • RH says:

      Hydrogen powered vehicles seem more promising to me. Even advances in battery technology may make more electric vehicles practical for more Americans, when you do not have to spend hours charging your vehicle at some charger, because you do not have a home charger.

      I bought carefully, so I will not be buying more vehicles until either option becomes viable. Technology is advancing, thank god. For example, there are more and more energy storage options, so that base power generation may finally be able to be covered by renewable energy.

      Still, I can see that there will be economic disasters soon. I am surprised that more Americans did not resort to the benefit of bankruptcy: due to lower income in 2020 many small business owners (e.g., convenience store, restaurant, and coffee shop owners with sole proprietorships) have low enough income that they can qualify for and get their debts discharged through a Chapter 7 bankruptcy.

      That will result in their getting rid of their HUGE debts. They can buy back their equipment (whose FMV is often close to zero) via loans from relatives and immediately restart their businesses after their bankruptcy. Many will still qualify due to lower 2021 income. However, the lower, 2020 income only can be used if they file before DECEMBER 31, 2021, even if they have to do an emergency filing and then file the rest of their schedules later.

      • Thomas Roberts says:

        For most people, they can get a newer used car (2 to 4 years old) when the prices get better or get an easy to repair 2010-2014ish mid to full size sedan; I think that is the sweet spot for having all the major, actually useful advantages of newer cars, without the too difficult to repair aspects.

        Hydrogen can be made from natural gas or electricity, making from natural gas is only a stopgap and wouldn’t make sense long-term. Hydrogen takes several times as much electricity to produce as compared to charging an electric car and could only ever work if, nuclear power became cheap and the norm. If that did happen, then hydrogen cars might be the best, assuming major battery advances aren’t made. Hydrogen itself is much more volatile than electric batteries.

        Nuclear can only become a good idea if nuclear power plants buildings become simpler to build and very standardized, they would have to be built fast (1 to 2 year constructions). All the major nuclear components, would have to be downsized and manufactured and then assembled in the power plants. Different national inspection agencies, would do redundant approvals.

        Long term construction projects are far more prone to corruption. Being able to build a new nuclear power plant from start to finish in under 3 years is essential. Shipping in nearly all equipment in a much more complete state, is safer, because things can be much more routinely replaced and swapped out as problems arise over time.

        I would expect electric to win. The main reason why batteries take hours to charge is that currently, batteries wear out faster, if charged rapidly, solutions to prevent batteries from aging are being worked on. If they can figure this out, batteries could be rapidly charged and last the life of the vehicle. There is still the elusive better chemistry, that achieves a higher energy density and is cheaper. If these 2 problems get solved, electric cars will definitely take over.

        • COWG says:

          TR,

          My conclusions exactly….

          I think the 06 – 14 model years were some of the best, especially some of the luxury cars…

          A modest investment of tools and diagnostics will garner a significant return on investment…

          On the electric side, anybody have any experience on the graphene battery technology… a local golf course is experimenting with them in their golf carts…

        • Auldyin says:

          @TR
          Unusual to see rational thinking like yours on- line. Kudos.
          The problem about anything electric is I squared R which is just not part of the Greenies conversation.
          Why burn fuel 200 miles away and suffer I2R, when you could burn ‘less’ fuel in the cylinder and clean up a much smaller and more dispersed exhaust?
          It only works for nuclear but the Greenies don’t like nuclear.
          Big reality moment coming, keep an eye on EU this winter.

        • Auldyin says:

          @TR
          That is rational thinking on electric cars!
          Oops! not everything else, obviously.

        • RH says:

          TR,
          As to nuclear, a practical way to recycle nuclear waste, if molten salt reactors live up to their promises would be essential to enable that dead horse to revive. As to the power needed, hydrogen could be used to transport the energy which would otherwise be lost through transmission lines of which the USA has too few.

          Massive solar plants in the desert or plants receiving microwave power (both to produce hydrogen) from gigantic solar arrays in orbit (which may also be able to fry the electronics of PLAN ships, etc., if we direct that power at them) seem very desirable to me. Efficiency versus convenience with accessibility: the latter usually wins. That is why so many drive cars when electric trains would be much more efficient.

          Hydrogen is like a cheap, endlessly reusable battery which uses existing technology– no miracles needed. Of course, it can and would be used to power electric drivetrains in cars.

        • Auldyin says:

          @TR
          The Russians are currently pushing miniature nuclear at a rapid pace.
          China is trialing a super-high voltage grid to address the I2R problem which can only be overcome by low I which means high V or low R which means super-cooling cables which is grossly expensive (frozen nitrogen).
          There are no other ways apart from ‘Stardust’

        • Thomas Roberts says:

          I don’t expect super conducting grids or cooled grids to be realistically possible.

          If small nuclear plants became the norm and was indeed cheap, breaking the grid into smaller sections would help overcome alot of grid transmission capacity. Converting some longer range lines to DC (direct current), if the plants themselves produce DC power, could also help. Certain very power hungry, large industrial zones, might have their own plants (major cities/major industrial zones). Running additional lines is always possible as well.

          We can assume that the bulk of all charging (EV’s) occurs at night, when other usage is much lower. Additionally, power consumption in America is currently dropping, and might drop further if the switch to WFH is permanent. This will also drop the amount of electricity/fuel needed for cars, due to reduced commuting.

          Grid transmission capacity is not something I’m worried about at all; it’s a much smaller issue than perfecting the car battery. If alot of factories that are very power hungry, become super automated; which I see as very realistic; placing them together outside the big cities, has alot of advantages. There are quite alot of possibilities, if the grid was in certain areas DC, the grid might have lines that pass through industrial zones and not be converted to AC and instead the factories could be entirely DC powered. Basically the power plants outside many cities, could have lines that either first pass through industrial zones before being converted to AC, otherwise, there could be a local separate DC grid for the industrial zones.

  3. Minutes says:

    Can I reverse mortgage my car at these prices?

    • Lynn says:

      oh lol, love it. I’d like 1.3% interest, just like the big boys.

    • andy says:

      You can. Reverse mortgage on a car is what Uber drivers do. Same with Lyft.

      Every time I order Lyft I get brand new Lexus or Acura, with a driver, for 10-12 dollars. And no parking.

  4. Depth Charge says:

    Earlier this year, “analysts” and “experts” all said that the semiconductor shortage insofar as automobiles were concerned would be over by the 3rd quarter. Now, in the 4th quarter, these same “experts” are saying 2023. These guys are spitballing. “Experts” don’t spitball. Lots of people should have been fired. None have been.

    • Lynn says:

      We either need to bring manufacturing back or make a few models without much tech. I’d go for an actual wired gas pedal instead of a computer simulated one. The funky computer controls on my old car are actually a bit dangerous- they are not always immediate. The computer occasionally tries to second guess me.

      • Depth Charge says:

        Reminds me of reading some truck forums online where people were complaining of “dead pedal.” As in, they were at a stop sign and hit the accelerator to merge onto a highway and it was like there was nothing there for a couple seconds, which is an eternity, not to mention extremely dangerous, when driving.

        These new vehicles are overengineered pieces of crap. Too much tech, not enough common sense. This doesn’t even get into the fact that they’re basically government spying machines.

        • Lynn says:

          Yeah, & yeah, heard of that.

          Mine is just an irregular fraction of a second- not too bad. & Only with certain conditions beforehand. Could be a very weak data flow that gets overburdened sometimes. I think it’s related to something called “Vehicle Stability Assist” in Honda overwhelming the computer. The VSA itself is horrible in wet weather and on dirt. If you lose traction in mud it is self defeating. It’s slightly dangerous on flooded roads even without any flaws. I just shut it off unless I’m on dry pavement.

        • otishertz says:

          My experience, especially on motorcycles, is that the throttle or gas pedal can get you out of as many potential collisions as the brakes.

      • Anthony A. says:

        Lynn, you haven’t seen anything yet. Like all the car companies, Stellantis (FCA, et. al.) (Chrysler) is planning to make cars a software subscription service in the near future:

        Per their CEO:

        “Our electrification and software strategies will support the shift to become a sustainable mobility tech company to lead the pack, leveraging the associated business growth with over-the-air features and services, and delivering the best experience to our customers,” said Carlos Tavares, Stellantis CEO. “With the three all-new AI-powered technology platforms to arrive in 2024, deployed across the four STLA vehicle platforms, we will leverage the speed and agility associated with the de-coupling of hardware and software cycles.”

        Best experience to their customers? Tesla has already started this crap.

        Want to use cruise control (already installed and you paid for it, BTW), it’s only a $29.95/month use charge.

        • Lynn says:

          OK, that’s a really stupid idea. Not a great sales point.

        • Prof. Emeritus says:

          They already have that in their UConnect onboard system – it’s not that bad as it sounds at first – you pay extra monthly for the
          -navigation (most use their phone nowadays anyway)
          -acess to music streaming app (oldschool radio is free)
          -easy service access (just the usual roadside assistance service imho)
          -some extra Android/iOS apps (they are pretty useless or contain car-specific interfaces, but they want to appeal to the younger generations)

          Not worth a penny if you are not the kind of tech-junkie Tesla also aims for.

        • COWG says:

          Yeah, got that software surprise one day when backing up….

          Opened drivers door to check side clearance, the damn truck (2019 Ram) slammed into park, jacked in the parking brake and threw me around a little…

          Knew right then and there it was gone as soon as possible… and it was… thank you carmax…

          You never know what kind of crap is floating around in the CPUs causing the vehicle to do something you don’t expect it to do at the worst time…

        • otishertz says:

          In other words, they will save the records of your speed and driving habits and sell them to Allstate.

        • Franz Beckenbauer says:

          “With the three all-new AI-powered technology platforms to arrive in 2024”

          And i was wondering what the whizzkids who trained the AI at Zillow would do next.

        • Gilbert says:

          Where do these CEO’s go to learn this mumbo-jumbo? Pure BS in my book.

        • Anthony A. says:

          Gilbert, someone else writes it for them The CEO’s only know the words that have to do with “additional charges to use the features”.

    • Ridgetop says:

      (repeat) A few days ago I spoke with brother in law, his friend, the car dealer in northern California, he said they have started seeing car shipments from Toyota, Honda and Chevrolet. Not all models but solid shipments. He mentioned that he was recently at a Toyota dealer meeting in Las Vegas with over 2000 dealers present. The president of Toyota North6th America stated that they have started to remove all manufacturing from China and ramp up other vendor facilities throughout the world. He stated that Toyota will never again be held hostage to China (HE RECEIVED A STANDING OVATION FROM THE TOYOTA DEALERS PRESENT). He went on to say that Toyota’s goal was to have product shipments back to normal by 1-1-22

      • Jake W says:

        yeah, until their cfo or some other bean counter decides he can impress “investors” with cost cutting.

        • Kenny Logouts says:

          Exactly.

          Never again… until next time.

        • Lynn says:

          With recalls combined with delays I wouldn’t be surprised if they lost much more money trying to save money. Sometimes a reputation is worth more than a handful of cheap electronical components. ..My favorite truck until I could no longer afford it used.

  5. J-Pow!!! says:

    Would anyone like to purchase my 1989 Mercedes? I plan to sell it on Craigslist for $29,000,000,000. I will use the proceeds to pay off the debt!

    Hahahahhaahhahahahahahahahahaha!!!!!!!!

    • Marcus Aurelius says:

      You are off by 3 Zeros.

    • Lynn says:

      It’s haunted by all the souls your policies have slowly killed.

      • J-Pow!!! says:

        I am killing people with LOVE!

        Giving donuts is giving LOVE, telling people what they want to hear is LOVE, and so is showering the masses with MONEY! I am here to spread LOVE!!! (Hope y’all don’t catch anything…)

    • Anthony A. says:

      Is it a diesel?

    • ron of Ohio says:

      I have some old Zimbabwe bills-will be glad to pay that in Zimbabwe dollars. Or Weimar-your choice.

    • AJH says:

      One of the all time great Motor Vehicles, I had a 420 SEL in lapis Blue with cream Leather. It was fun overtaking at 60- floor it, switch kicks to second, bonnet lifts and runs out at 80mph at 6500 rpm, bonnet lifts then your in third and the world just rushes bye at a whisper. Hydromatic suspension floating over all road imperfections and the sprung seat movement ever so slight takes care of the undulations. 600miles later you get out fresher than when you stepped in. In sharp corners the vehicle could see off sports cars with ease due to the assistance of the oil suspension W126, Simply the Worlds Best Motor vehicle.
      25Mpg – 140mph top speed, twin airbags in front, Fuel injection, 1290Kg dry weight…… Not long horn cattle proof at 60Mph in a creek dip.
      I loved that car…. Sold!

      • rick m says:

        1972 280SE cream convertible coupe, not the Sport sl. Dad had a 1952 220A Cabriolet bought from the original owner on the Bodensee. Mercedes hat Vorfahrt!

  6. Cynical Engineer says:

    This is mostly self-inflicted by the auto industry. In early 2020, the car manufacturers panicked and canceled their semiconductor orders. This happened at the same time the semiconductor manufacturers were production capacity limited.

    A few months later when the car manufacturers figured out that car sales were rebounding they tried to order parts only to be told that they had to get in line. I think there’s also been some payback by the semiconductor companies who saw their supposedly airtight contracts torn up by the car guys and aren’t eager to do business with them again.

    Why should they? The semiconductor guys have customers for everything they can build without selling a single chip to the auto industry. The auto industry has made a fine art out of brutally squeezing price reductions out of their suppliers. The only thing that surprises me is that it took this long to blow up in their faces.

    • Depth Charge says:

      There is a lot of truth to this, but also going almost completely ignored is the crypto “mining” community which is sucking supply due to voracious demand in this crypto bubble. What a joke the world’s economies have become. Everything is massive speculative excess thanks to Jerome “Weimar Boy” Foul and his band of thieves.

      • ivanislav says:

        NVDA claims that only a small percentage of their production goes to mining applications, because they created some dedicated crypto-mining GPUs and those sales have fallen dramatically. What I think is really going on is that people just don’t like the value of those specific GPUs and just buy their other ones without the markup. It’ll be interesting to see what happens to sales if crypto prices tank. I have half a mind to buy deep OTM puts considering the absolutely parabolic stock price.

        • Winston says:

          “What I think is really going on is that people just don’t like the value of those specific GPUs and just buy their other ones without the markup.”

          The dedicated crypto-mining GPUs have the great disadvantage of not being able to be sold for gaming use once they eventually become useless for digital tulip bulb creation or are replaced with something better.

      • WES says:

        Once a real miner, it is hard to believe people are now mining for something that doesn’t exist wasting real resources in the process.

        Are we so energy rich that we can waste real energy, to compute electricity into heat cooled by air conditioners, to produce nothing?

      • Jon W says:

        All the work going into crypto is GDP though! And under neoliberalism, who are you, I or the government to judge the ‘quality’ of GDP.

        As long as the number goes up, high fives all round.

        They will have to update the economic textbooks to add the ‘imaginary window’ fallacy (as opposed to the broken window fallacy) when this is all over.

    • Seneca's cliff says:

      The only problem with that theory is that the class 8 truck manufacturers are having as big or bigger problems getting semiconductor chips. But they never reduced chip orders during the pandemic due to large backlogs.

      • ron of Ohio says:

        Over Thanksgiving I was talking to an employee at the Kenworth facility in Ohio. I was told they have 4800 class 8 and 7 trucks built waiting for that final part. These are not $50,000 run of the mill SUVs. There is a lot of bucks sitting in inventory!

      • Jon W says:

        Indeed, I’ve heard that the ‘cancelled orders’ thing isn’t really true. As an EE, the problem looks a lot like (a) Chinese manufacturers stockpiling due to fear of further export bans (b) actual problems at the Texas instrument factory last year (c) run on remaining supplies due to panic aka toilet paper situation (d) sudden appearance of well funded brokers buying everything up and selling it back at absurd prices.

        Personally I am trying to get hold of whatever I can even though I don’t need most of it for at least a year. Multiply this by all the small and medium firms doing the same, throw in some brokers manipulating the market, and you have the crisis we now see.

    • Wolf Richter says:

      Cynical Engineer,

      This meme that the shortages were due to cancelled orders had validity in the summer 2020. But not now. This is Nov 2021, and this meme has gone totally stale and is completely outdated. I have no idea why people keep bringing it up, copy-and-paste. I guess they’ll keep doing it for the next five years.

      • Depth Charge says:

        Wolf – I heard that the auto chip shortages were due to manufacturers canceling orders at the beginning of the pandemic and being sent to the back of the line. Have you heard about that?

        Sorry, I just had to. :)

      • Sams says:

        Cancelled orders are a long time ago now, but what did the chip manufacturers do when they lost the orders to car manufacturers?
        Did they keep the production lines and people standby? Or did they shift production to different chips? Selling out the production capacity to someone else?

        I suspect that the semiconductor manufacturers did adjust and like car manufacturer have shifted to “premium” models, semiconductor manufacturers have shifted to chips with better margins and higher profits.

        There have also been some mergers and reshuffling of ownership among the semiconductor manufacturers.

        One make of FPGA’s did get dropped by their manufacturer due to this. Order placed 2020 may be delivered 2024 or 2026. In short, the are looking for a new production facility for their range of FPGA’s.

        • Wolf Richter says:

          That story about the cancelled chip orders needs to die. It was just a blip, and only a few automakers did that, if any. Chip makers didn’t shut down their production because of it.

          But there were some serious disruptions: the Big Freeze in Texas temporarily shut down three plants in Feb this year; a fire at a chip plant in Japan shut it down for many weeks in Feb-Apr this year. Covid outbreaks forced chip plants in Asia to shut down periodically this year. Etc.

          In addition, there are shipping and transportation delays for components that these chips go into.

          One missing component that lacks one chip and the production of an assembly plant comes to a halt. This whole system is very brittle.

        • Sams says:

          I know from the company I work in that there is a huge problem in getting components for manufacturing electronics. And we did not cancel any orders.

          All kind of components are difficult to obtain, but worst is integrated circuits like CPU’s and FPGA’s.

          As mentioned, the largest problem is one make of FPGA’s that lost their manufacturer due to some merge or buy out where the factory is now owned by a competing make.

          Trouble is, changing type of FPGA requires a redesign of the entire printed circuit board and porting of firmware and software.

  7. Seneca's cliff says:

    I am not so sure about purchases of new cars being discretionary. They are on an individual basis, but when you look at the entire US auto market they are not. If cars go to the scrap yard at the same rate ( wrecks, blown engines, no parts) then then the demand for new cars will be the same. Since nothing has really changed at the backend, and supply is limited on the front end prices are spiking.

    • Wolf Richter says:

      Seneca’s cliff,

      They were VERY discretionary for three years during the Great Recession, and the auto industry collapsed because consumers stopped buying cars. That proves that they’re discretionary for enough buyers to where they can shut down the industry. People should ALWAYS remember that.

      The number of people who total their cars is tiny compared to the 17 million new vehicles sold every year and the 20 million used vehicles sold every year by dealers (not including the private sales).

      • Lynn says:

        There’s 2 variables I wonder about in addition to order delays. How many urban people buying homes or second homes in rural areas are also now buying cars? And how many USA cars are being shipped out and resold on an international black market? There *is* a market for that, I have no idea how big it is. Maybe it isn’t that big but Toyotas and Ford trucks are stolen and brought to Mexico, high end to elsewhere.

        Just as an aside, there’s a huge international “grey” market for stuff like camera lenses.

        • Seneca's cliff says:

          In the ordinary suburban apartment where my wife and I live ( mostly Intel employees) there is a Chinese guy who seems to get a new slightly used exotic car every other week. This week he has a Lambo parked next to us. Two weeks ago it was one of those midengine Audi supercars, and before that it was a Mclaren. He only seems to keep them for two weeks. I figure that he is some kind of middleman that picks up the cars then ships them to China when A buyer is located. Getting empty containers for the trip to China is probably easy these days.

      • Seneca's cliff says:

        In one way the great recession gives support to my theory. Obama’s economic advisors realized that since the number of cars leaving the system had been reduced for a number of reasons. Among them the lower economic activity and high gas prices reduced miles driven so cars did not wear out as quickly. Thus they realized that a good way to increase the purchasing of new cars was to increase the number of cars leaving the system artificially and so they dreamed up cash for clunkers.

        • Wolf Richter says:

          What cash for clunkers did is remove a whole generation of good cheaper cars, and used vehicle prices spiked. But after the program ran out of funds, new vehicle sales plunged again. Surely, you’ve seen this chart, from my article last week on Nov new vehicle sales. After the collapse in 2008 and 2009, new vehicle sales didn’t reach the 2000 level until 2015. And note how deep the plunge in demand was, and how many years it lasted. Why? because purchasing a new vehicle is totally discretionary:

  8. R2D2 says:

    Not just the US…

    Same thing is happening in UK and Europe.

    UK average used-car retail prices have jumped from £13k to £17k in 6 months. Five years of “normal” growth in half-a-year.

    A friend bought a Mercedes E-class for £30k retail in 2020, sold for £40k wholesale in 2021 (a few days ago).

    Amazed that consumers are paying so much more, up 10-30%, for the same thing, in just a matter of months. It’s not like cars are breaking down everywhere on the side of British roads. They nearly all work fine.

    Perhaps, one may conclude that everyday cars are now a semi-Veblen good.

    The higher the price goes, the more we want one…

    • Franz Beckenbauer says:

      People are so stupid (Europe is no different from the rest of the world) that they believe some greenie hysterical girlie-millenial who tells them the combustion engine is dead and by next year, they’ll only build electric cars that are self-driving software nightmares.

      So they try to get a real car while they can.

    • Auldyin says:

      @R2
      Yup!
      I’m short cars for the first time since I was 17.
      Don’t remember how long ago that was.

    • Robert says:

      The amazing thing is, the average consumer’s income not rising at the rate of inflation, is how they are able to afford 40-50% hikes in new card. I would have expected sales to plummet.

  9. James says:

    Sorry Wolf at this I’ll take the ultimate red pill and say the numbers are all fake and “cooked” by our wonderful government.

    I read an article yesterday stating that the reason class 8 truck orders are down from fleets is because of high demand

    “Class 8 truck orders in November were the lowest for that month in 26 years, reflecting a huge backlog of unbuilt trucks rather than a demand issue.”

    Peak clown world.

    “Yeah I’m not getting any sales because demand is sOOO high!!!11”

    -said no one ever.

    • Random guy 62 says:

      The manufacturers are reluctant to take orders right now, so order books are only slowly opening.

      They cannot plan costs well in this environment, and don’t know how many they will be able to build so they are being cautious.

    • Wolf Richter says:

      James,

      You’re in fantasy land. If you order a class 8 truck now, you cannot even get it till later in 2023 if at all. It doesn’t make sense to order because you cannot get it built. Truck makers have a hefty order bank and they’re having trouble building trucks. And there are too many uncertainties. There is huge demand from trucking companies, but they cannot get their existing orders built.

      This is the same everywhere. Ford dealer friend of mine still has lower-end F-150s XLTs in the order bank that he’d ordered a YEAR ago, and they’re still showing up as to be built, but haven’t been built yet, waiting for chips.

      I cannot even get my WOLF STREET beer mugs manufactured that I ordered at the end of May. Because there’s a glass shortage too.

      You have NO IDEA what it’s like out there.

      • dishonest says:

        Is this dislocation due primarily to COVID or are there other more occult economic forces at work here.

        • Wolf Richter says:

          The “occult economic forces at work here” are $10 trillion in monetary stimulus and fiscal stimulus in the US alone (Fed money printing and government borrowing & spending) that created a sudden and huge burst of demand of everything. And there is no supply chain that could ever be ready for it. But after the first few months of this, it has become a psychological thing, and people and businesses are willing to pay no matter what, hence the massive inflation, in face of excess demand, caused by excess stimulus.

        • Franz Beckenbauer says:

          Question: What do people do if the gubment pays them for not working ?

          Answer: They don’t work.

      • Harry Houndstooth says:

        Sell

      • Tom15 says:

        Was with the Mrs at a church dinner.
        Sat next to a commercial lender.

        He said alot business looking to make expenditures before end of the year……nothing to buy.

        My lowest mile work truck has 140k on it. Parts have been a role of the dice for over a year.

        What a mess.

      • otishertz says:

        Sell!

  10. historicus says:

    Wolf….
    It’s the bottlenecks….havent you heard…??? /s

    Not fake interest rates or a ballooning M2 /s

    • ivanislav says:

      How significant is M2 when the overwhelming majority of the “money” in the system is credit and required reserves are zero?

      I think the Fed said they got rid of some of these data series (M something) because it doesn’t really matter. I despise them, but the rationale makes sense to me, although I realize they got rid of the data series because of the poor optics.

      • historicus says:

        ivan….

        https://fred.stlouisfed.org/series/M2SL

        You are drinking the Kool Aid.

        If the Fed is getting rid of something, might you think it doesnt serve them?
        Their PCE allows the dropping out of items that rise too much in price……and it follows that charts of M2 that show big spikes are to be dropped as well.

        M2= M1 plus (1) small-denomination time deposits (time deposits in amounts of less than $100,000) less IRA and Keogh balances at depository institutions; and (2) balances in retail MMFs less IRA and Keogh balances at MMFs. Seasonally adjusted M2 is constructed by summing savings deposits (before May 2020), small-denomination time deposits, and retail MMFs, each seasonally adjusted separately, and adding this result to seasonally adjusted M1.

        How can this not be a measure of money in the system?

        • ivanislav says:

          OK, for some reason I thought M2 was a narrower measure than actually it is. Still, I imagine what’s important is how the broadest measure has changed (M3?).

          Do you happen to know what the M3 data below is? One M3 series was discontinued, but another M3 measure is apparently still being compiled. The new series does not agree with the old series. Also, the newer M3 measure is almost the same as current M2 that you linked, which doesn’t make much sense. Here are the links I’m looking at:

          M3 discontinued https://fred.stlouisfed.org/series/M3SL
          M3 https://fred.stlouisfed.org/series/MABMM301USM189S

        • ivanislav says:

          PS, at the last data-point (Feb 2006) where the discontinued M3 data set can be compared with the M2 you linked, M3 was 50% greater, which is a substantial difference IMO.

  11. Ted T. says:

    We all know that Wolf is correct. We are living in strange times that will end in a year or two, maybe less. All those charts are going to get flipped upside down and those with patience will be rewarded.

    • Old school says:

      I think it’s as simple as the first semester in economics class. They start with supply curve plotted against demand curve. Shift both curves in the wrong direction and intersecting price point is much higher.

      Honda is putting money into its 110cc to 150cc small motorcycle category. All 100 mpg plus and from about $2000 – $5000. Just like in the seventies when you met the nicest people on a Honda.

      • random guy 62 says:

        Right on. In the rural midwest, we tend to need our big 4WD vehicles quite a few times in the year – for work and for play.

        But with the cost of operating them going through the roof, I am seriously considering a small scooter or an e-bike for the short trips in decent weather. Honda has some nice new scooters coming out now for a surprisingly low price.

    • Kenny Logouts says:

      Go watch sheep in a field.

      Rational looking until something happens, then they act irrationally and in unison.

      Humans do this too.

      When the flock moves in the opposite direction… we’ll it’s new paradigm time.

      It’s either UBI, or deflation.

  12. DR DOOM says:

    Every time in America when you see WTF anything it is always driven by easy credit with little skin in the game. If this is not the same this time then we got a bunch of wealthy or suddenly wealthy people all of sudden wanting to drive used cars. Go for it America . There is no down side if you ain’t suddenly wealthy and you get under water. Just park it at Wall Mart. The repo-roll back guy will put Ol’ Blu’ the GPS hound dog on its trail real quick. If the wealthy are buying used cars then I can look like them and be a cool cat tooling around in my 2002 4×4 Chevy Short Bed pickup with 300k miles. I am no longer the old guy in the old used truck. I need me a gold chain and some instant boner blue pills and hit the shuffle board pick-up scene.

  13. TBP says:

    I believe the emergence of Turo is a partial reason for the used car price spikes, just as AirBnb/VRBO etc. are partial reasons for the housing/rental shortage. I am using Turo regularly when traveling. I’ve talked w/ people who have 3, 4, or 5 vehicles in regular use competing with Avis, Hertz, etc.
    It doesn’t take much of an imbalance to create a huge jump in prices. If one lives on an island with 9 other people and 11 oranges are delivered everyday, the price is cheap. Change that to 9 oranges delivered daily and the price goes to the moon.

    • Lynn says:

      That’s really interesting.

    • Tom S. says:

      Could be, on an island. But in reality they are cranking out 20-40% less new cars in 2020-2021 than in 2019, and some people are so flush with cash or credit happy that they are paying literally anything to get that new car to compete with the guy down the street. Either money runs out, or supply increases, or both. Then the bonanza ends and many companies are staring at a large reduction in profits, the layoffs resume, govt spends more and the cycle repeats.

      The boom bust oscillation is faster each time and with a larger percentage of the populace left behind dealing with inflation and borrowing to cover borrowing.

      Crony capitalism coupled with QE has sent the markets into an undamped oscillation with each new rise and fall occurring more quickly and with greater magnitude. Something will break again and there’s not a lot of options left except a pivot full blown communism.

      Some politicians are aware and trying to do the right thing but in my opinion the corporate forces are too powerful, especially since everyone who wants to retire needs the big corporations to “succeed”, whatever that means.

    • roddy6667 says:

      Not if two people die.

  14. David W Young says:

    I think this is a good time for a mini-series based on a Baltimore used vehicle dealer’s life in the weeks and months ahead. Overpaying at auction for months and months now, with fewer and fewer tire kickers and, more importantly, buyers coming into the often dingy showrooms. More like a waiting room in the used vehicle business. With record gross margins probably causing some laidback efforts in sealing deals, the front line dealers are always the last to realize that the bloom has come off the rose and the lots are going to start bulging with unsold inventory as they head into March and April of 2022.

    Throw in a populace that is just now starting to feel the true effects of the Manna from Heaven withdrawal symptoms lightly stirred with a slowly ebbing U.S. economy that has not been anything to write home about for the last decade plus, and VIOLA: unit sales continue to sag even as used vehicle dealers get more aggressive in offering prices at greatly reduced margins. This show could be sponsored by the Federal Reserve, they are into more than just money now.

  15. Rowen says:

    According to FRED (series: AUINSA), new domestic auto inventory is down to 61K as of October 2021, down from 1.2M in 2017, and 558K at the start of Covid.

    This is getting wild!

    • Wolf Richter says:

      Rowen,

      Careful with this data. The St. Louis Fed doesn’t give you the explanation what it means. You need to go the BLS website and download the spreadsheet with the auto data. On the first worksheet of the spreadsheet, you have all the definitions. And so:

      “Domestic auto inventories = U.S. inventories of vehicles assembled in the U.S., Canada, and Mexico.” This inventory figure excludes vehicles in the US assembled in Japan, the EU, China, etc. In other words, it’s a pretty useless figure. Someone started collecting this in the 1990s, and it just keeps getting updated, but no one uses it.

      If you want to check it out, go to: https://www.bea.gov/data/gdp/gross-domestic-product scroll down to and click on “Supplemental Information & Additional Data,” click on “Motor Vehicles,” which will download the data set in a spreadsheet.

  16. Jeremy Wolff says:

    I car shopped for used Kia Souls 6 months ago. It was $9,000 for the 2013 Kia Soul with 65,000 miles. My trade in was worth $2500. I just bought a 2013 Kia Soul with 66,000 miles for $11,000 and they gave me $3,200 for my trade. So in 6 months, the dealer gave me 28% more for the trade and increased the price sold by 22%. But price increases affect the larger $ item more. The deal would of cost me $6500 before and is $7,800 now (20% more). Of course, my used car could be worth more now or the car I bought worth less. My car engine light kept coming on and I drove Uber so I needed to get a car. Just trying to make sense of the experience. But it seems pretty fair to say I felt the 6 month 20% inflation shock.

  17. My Ford hybrid PU goes into production Jan. No addendum, MSRP and destination. I am sitting on a 20 year old Silverado which isnt worth much but twice as much as it was, and may knock 25% off the price. I hope I get the new one off the lot for 15K with trade. I feel like I did right but one is never sure.

  18. David Hall says:

    Am suffering a mild reaction after getting a Moderna booster shot yesterday. Vaccinations are crucial for Pacific Rim chip manufacturing, testing and packaging.

    • Escierto says:

      I got the Moderna booster a month ago. I had almost zero reaction. Maybe the smallest amount of soreness in my arm but not enough for me to even attention to it. Far cry from my first Moderna shot – I was in bed all day and my swollen arm hurt for a week. Second shot – like the booster – hardly anything.

    • Gilbert says:

      It is puzzling why people are having varied reactions to the Moderna vaccine. My first shot was a nothing. The day after the second shot, zero energy and a feeling that someone had body slammed me. Following the boaster there was slight arm soreness that went away before day’s end.

    • I had reaction also, more than either of the first two. China’s official death toll is 5000? What sort of BS is that? Are China’s lockdowns are part of a planned slowdown?

    • Marcus Aurelius says:

      Give it time.

      You are just a lab rat at this point.

  19. Ace says:

    Unreal. Who is buying so many used cars?
    Looks like the chart of lumber prices.
    Wish there was an ETF for used cars, I’d short the crap out of it.
    The steeper the pop, the steeper the drop.

    More madness in stocks today.
    We’ll see what happens tomorrow.

  20. TheFalcon says:

    The Great American Consumer has never been known to be very good at managing personal finances. Most live a life just a paycheck away (or stimulus check away) from financial distress. Reckless consumer spending on discretionary purchases will have some real bad consequences down the road. Might be a few years but tough times are ahead for many.

  21. Boomer says:

    How many people don’t want all of the unserviceable electronic wiz bang modern garbage hung on these new cars? It’s getting worse. Wait until they hang the breathalyzer on your new car. Lane keeping assist, collision avoidance, buzzers beepers, auto start, alertness monitors, spyware event recorders. Glad I didn’t let them have my pre- Cash For Clunkers F150. Or the Honda Civic, 340k repair free miles, going for the used Japanese replacement. Almost bought a ’69 VW. Engine swaps in an hour.

    I’ll pay extra if I have to for an older F150 or Tundra.

    • J-Pow!!! says:

      Toyota lane assist ain’t so good. I tested on the highway last weekend. Guy behind me decided to give me lots of extra space.

      • Anthony A. says:

        I shut my lane assistance off. It tries to take me towards off ramps when the white line it is following stats peeling off the highway. Scary.

        • J-Pow!!! says:

          When I tried it in the city it was like fight some demon for control of my car. But Elon will have this self-driving thing all figured out in a couple of months! Haha. I’ll send him a few trillion for his efforts…

        • Gilbert says:

          I have also shut off the lane assist. When I purchased the car in 2019 I had no idea it had lane assist or how it functioned. On the road for the first time it appeared to have a mind of its own, so I was going to take it back to the dealer. That is until my wife read the owners manual and we understood the technology. It has been shut down ever since.
          We do like the ding-ding alarm when getting too close to the painted lines, and the automatic spacing from the vehicle in front of ours, most of the time. But in the city where spacing is nonexistent, it is turned off.

  22. Prof. Emeritus says:

    What if shifting production towards greater profit margin models is also not so temporary? I mean in a competitive market one would expect that the manufacturers would return to higher volume production of less profitable models once the supply woes go away, but if the consumers are really prepared to pay whatever then why would they do that? They can just as well skip to high volume production of high profit margin goods. Shareholders are happy, employees are happy and it looks like even the buyers are happy.
    It doesn’t necessarily needs to be a de facto cartel (although cartels and the automotive industry go hand-in-hand), but more like an unspoken gentlemen’s agreement that low-cost cars are no longer welcome in the dealerships. Much like you can no longer sell low-cost phones either. Despite all the free trade agreements in place it’s pretty complicated to enter the US market – Hyundai/KIA is the only company that would possibly challenge this status quo and even they would need a decade to ramp up their production.

    • roddy6667 says:

      Hyundai-Kia is huge in China. They operate in partnerships with the Chinese biggies, where they are at the forefront of the EV revolution. They could just copy what they are doing in China, as far as the technology.

      • Anthony A. says:

        Their Kona EV in the U.S. is pretty nice, too (and a hot seller). They just have to send more over here.

    • Marcus Aurelius says:

      The answer is the same for why one can’t get a simple car.

      I don’t want the computer. I don’t want the cameras.

      Imagine a Car Company building a simple car, with the minimumspecs required by law.

      A “Retro” Tucker Auto Company.

      Offer only one model.
      4 door.
      Simple SUV.
      6 Cyl.
      Colors of Red, White , Blue and nothing else.
      No options.
      You can pick it up at the factory and thus save the bloated “shipping” charge.
      Sell them inside a Wal-Mart.
      Sticker Price is the Price.
      No Trade In. You sell it. The Wal-Mart can give you names of buyers.

      • Gilbert says:

        Why not go total Henry Ford and only offer black?😉

      • Anthony A. says:

        Sears & Roebuck used to do just that in the late 1940′ or early 1950’s. It was basically a Henry J. Some stripped down models didn’t even have a trunk that opened.

  23. Mendocino Coast says:

    Classic Cars Took off during the last 6 Months more than Ever .
    I worked for Dealers in The SF Bay Area Ca, as a Line mechanic
    of long standing and after a Divorice I quit a Chevy Dealer in spite of being detained by them paying me $200 a week Cash + my Union Scale just to stay on . Finally I just called in and said I was not coming back so they would not try to keep me on.
    I never worked for anyone since then but bought and sold lots of special car’s of interest as it was my Hobby and this way I got to drive all those great Cars . I still enjoy this and have room for Cars as I live rural on 1 Acre . I buy almost all my Cars Broken for pennies on the dollar so I know the market for
    These Classic Cars but now they are becoming a bit harder to get as people want them as assets like a house and it has driven up the Value intensely however as ” most don’t ” want any needing major repairs.
    I expect to see them keep popping up . Last week I was asked to take a 1972 Mercedes CP ( A $15 K / $20 K Car ) needing a transmission as the owner had to move from his rental
    because J. Powell made the house worth so much the owner wanted to cash in on the House .
    A crazy New world has developed with dollars that are like Fishing weights for bottom Feeders bouncing along the humm . I drove a 75 MB SEL to the Hardware store the other day and some guy offered me $15,000 for it . I paid $1,500 for it not running since it’s rust free and has a perfect interior / dash etc. Had an electical Issue I resolved
    The last New Car I bought was a 1966 Pontiac Grand prix the same year I quit my Job. Never made serious money on Cars but rather on Real Property .
    Cars :
    I just Like Classic Cars and the Insurance is Cheap with State Farm Classic Car Ins . New Cars are a Poor investment normally But not now with the shortage it’s Like the
    Stock market somewhat Buy Low sell Hi a sort of Powell Special .

  24. Brent says:

    I dont believe this Manheim BS.

    I saw it many times before-creating illusion of shortage where there is none.

    Like 1/4 full night club cordoned off with a velvet rope and husky bouncer performing face control.

    Take a look at total fleet sales which are hard to fudge:

    “In October, 100,182 total fleet units were sold, a 2% month-over-month increase compared to 98,415 in September and a 24% decrease from October 2020, which recorded 132,560 units, according to a Nov. 4 news release from Cox Automotive.”

    Which means local-state-Fed Govs & rental companies buy 24% less new cars.

    Then search for “GSA Fleet sales”

    Fed Gov is our best friend and therefore they must be the preferred source of used cars.

    I am looking now at 2016 F-150 selling for $20K.

    You may consider spending $100 on testing devices which not only read faulr codes but also ,for example,print working diagrams for each cylinder.

  25. AdamSmith says:

    A year and a half ago I bought a 2001 f250 with 62,500 original miles from gobestauto.com which buys government liquidation vehicles. Cost was 7,000$ I just saw the same year 2001 truck now on the website inventory list at 11,000. The truck leaks no oil from the trans/engine as it was cared for by Department of Water and Power and they did a good job….

    It has been trouble free except needing new wipers and a new battery.

    Spoke to the owner and he said his projected data sees more of the same in the future (for now).

    Amazing

  26. otishertz says:

    I just saw my amazon cart for the first time in a couple months while looking to buy a $3 leather replacement loop to put on a watch band. I have a couple hundred items in my saved items. Looking at the price changes that Amazon lists whenever a cart is viewed I found to my surprise that about 97% of the items had decreased in price. Half or so were significant price decreases.

  27. Depth Charge says:

    I’m looking forward to the day when all of those car dealers who have my phone number in their digital rolodex come calling again, desperate for a sale. My reply to them?

    “Unless you are calling me to apologize for your greedfest over the past couple years, offering me the best deal in the history of new cars, you can kindly lose my number and not ever bother me again. In fact, I think I forgot to leave that negative comment about your business online, the one about how greedy and smug you were during your price-gouging days. Think I’ll go do that now.”

    • Cold in the Midwest says:

      Too funny DC. Which brings up another variable in the modern car buying equation. That is the CRAP level of service provided by the dealerships. My experience with the local Honda dealers has been almost beyond belief.

      Recently, they were “kind” enough to call and ask if they could buy the car back since my lease end is approaching. In the three years I’ve had the car, they have never contacted me to ask about my satisfaction with the vehicle, whether my recent service was done properly, whether my experience with the dealership was positive, etc. Not once. But the call came in pronto when a quick buck could be made by the dealership.

      My response was to block the dealership number on my smartphone. They called again two days later from a different number. I blocked that number as well.

      • COWG says:

        My girlfriend takes her $50k Mercedes in for service and gets treated very well… on time service, loaner car, great lounge, etc… constantly asking about her well being…

        I took my $55k GMC truck in and get treated like I live under the overpass…

    • Jake W says:

      not only were they greedy, but they had the audacity to lie about it. instead of just saying “we’re charging $5k over sticker” they’d advertise sticker on their website or showroom and then add a “market price adjustment” or some other nonsense.

      if you’re going to gouge, just be decent and be honest about it.

  28. Anthony says:

    Inflation

    When I was young in the 1970s, if I wanted to get my mother to buy something new for me, I used to say, “well it will be dearer next year” and it worked great.
    The phrase …it will be dearer next year…. may sound quite trite but take it from me, it is very powerful….

    • otishertz says:

      When I was 14 I tried to negotiate with my parents to give me the future value of all every Christmas and birthday presents in exchange for a corvette when I turned 16.

      You can guess how that worked, But but it did embark me on an an elucidating, albeit unsatisfactory, journey into classical economics.

  29. Depth Charge says:

    We can’t even build cars on demand anymore. WTF would we do in a wartime situation. “Hey, China, can you please expedite all those parts we need? Oh, you can’t because we’re fighting you? K, THANKS!”

    This is a national security issue. This should have never been allowed to happen. We couldn’t produce weapons and all sorts of things in an emergency, not to mention medications and everything else. The people who did this should be in prison. They have put the country in grave danger.

  30. Michael Engel says:

    1) When normal people face sudden death they go nuts.
    2) Manheim price jumped from 160 to 230 in Nov, or 44% y/y.
    3) Dealers lots are almost empty, but supplied of used cars jumped from 39 days to 49 days, when 44 days is normal.
    4) Used cars retail sales at 20.4M up 1% y/y with such mad mad Manheim prices. Used cars wholesale sales (37.3M total minus 20.4 retail) : 16.8M. Trade in about : 3.6M.
    5) Dealers online catalog houses. In most cases they buy wholesale from other dealers, especially from the large ones, to complete their transaction, for commission, 7% – 20% commission…..whatever.
    6) Since guppies inventory is shrinking, because they lack capital, the
    giant whales inventory must be large, because supply surged to 49 days, way > normal.
    7) Supply at Madheim is rising. The giant whales, their best customers, are not buying.
    8) This mania is over.

  31. Mak says:

    I love Wolf’s focus on this topic but I’d like to see more evidence to support the assertion that buying a used car is discretionary.

    Sure for XX% of buyer it likely is but what is that XX% and are they still buying?

    Just as important is transaction volumes. If transaction volumes have halved then maybe for the ones left buying the purchase isn’t discretionary.

    I don’t disagree with the narrative, I just would like to see the strong evidence.

    • Sams says:

      With lower volumes many of the discretionary may already have left the marketplace?
      At least the most price sensitive buyers may already have left the marketplace and are waiting for lower prices.

    • Wolf Richter says:

      For every customer that trades in or sells privately a derivable vehicle to purchase another vehicle, that purchase is discretionary by definition because they could just keep driving their old vehicle. Simple as that.

      Over 20 million used vehicles are sold retail in a year at dealers. About 2 million come from rental fleets. Most of the rest are trade-ins and off-lease vehicles, and those people that traded those vehicles by definition engaged in a discretionary purchase.

  32. PS says:

    I realize this is anecdotal data, but I don’t see any shortage of used autos near my home. I live on the east side of Madison, WI and there are 8 used car dealers within 5 miles of my house. These are not huge dealerships (50-100 cars each) but their lots are all full. Two have opened in the past 2 years. I haven’t stopped to check prices, which may well be higher than in the past. But there doesn’t appear to be any shortage of used cars here.

    • Wolf Richter says:

      There is no shortage of used vehicles. There is sufficient supply — though it has been tighter than normal. That’s what makes those price spikes so crazy.

      As I pointed out in the article, at the end of November, supply of used vehicles was ABOVE normal. But that may have been a result of the Thanksgiving weekend messing with the month-end supply metrics.

      But there is a huge shortage of new vehicles.

  33. Michael Engel says:

    1) Gen Z talk to each other in the car about the next song.
    2) The elderly are listening to music, while driving.
    3) Millennial are on the phone, conducting business.
    4) Carpool beat prices at the pump, before cutting on beer or phone.

  34. Michael Engel says:

    5) Most female would like to be stuck in traffic with Ilan Musk.

  35. Old school says:

    One thing that has changed in my lifetime is the work truck. It seems people’s work trucks today are high end new 3/4 ton. In the seventies I remember work trucks as being 1/2 ton 10 – 20 year old things that you wouldn’t want to be seen in if you were a teenager.

    • Jake W says:

      another difference is i rarely see a 2 door truck these days.

      • Anthony A. says:

        Ram still makes and sells a 2 door stripped down work truck. But I believe you have to order it these days.

  36. Winston says:

    I don’t use currency much, so perhaps this has been going on for a while before I personally noticed it, but ALL of the bills I’ve been getting lately from ATMs, my bank, and as change are flimsy and well worn. Anyone else noticing this?

    Looking at the Fred Currency in Circulation graph at the five year range, I see an increase in the slope of the growth curve starting in January of 2020 due a percentage of the digital money created being converted to cash.

    Could it be that currency is being allowed to be much more worn before being removed from circulation by banks because there is a replacement currency supply chain issue due that chain, which is probably set up mainly for normal replacement demand, being overwhelmed by the sudden increase in the amount of currency in circulation?

    I’m thinking that the main limitation might be with the very special paper used with the private sector(?) manufacturer of that not wanting to buy the hardware required for increased production only to be left with excess production capacity when the unusual demand ends, although with major inflation it may not end. Anyone know for sure?

    • Marcus Aurelius says:

      More and more people are taking cash out of their bank accounts.

      Every single one of my relatives now talks about it. This was not true 5 years ago. They all want 3-6 months of cash in their homes.

      They discuss “bank holiday’s”, bank bail-ins, etc. Distrust of the Government, etc.

      I don’t know how much they have so far, but imagine everybody wanting $10,000 cash for emergency. Now, I know somebody will say the average person can’t get $10,000 saved up in cash, but don’t forget those who can and those who can stock up large amounts.

      I know relatives with $50,000 in cash and $50,000 in Silver coin. And, consider, only about 1% have Silver coins at home. When (if) this goes to 5% of the population, then we will see the fireworks.

      What is called “Junk Silver” is perhaps the most valuable to have. It is limited. Once the supply is purchased, there is no more. 7 of the major On-Line reputable Gold-Silver internet dealers, that I do business with, can not get Junk Silver. “Out of Stock”. “Not Available at this time”. “Contact Me”.

      It is the sleeping Canary in the Silver mine.

  37. historicus says:

    Where is the outrage toward the FED who shirks their duties, abandons their “stable prices” post? Pumps the money supply, pegs rates at all time lows, then blames bottlenecks for the inflation?
    The real estate market is broken.
    The auto market is broken.
    Stock market?
    Everything the Fed touches it skews and distorts, punishing the People, IMO.

    • Tom S. says:

      Labor market also broken. Could argue we are clearly above previous definitions of maximum employment.

  38. c1ue says:

    Both myself and my mother have been getting cold calls from dealers, presumably, to sell our used car.
    Ironic since I haven’t had a car for 5 years and my mother just bought hers last year and will never sell.
    I would not be surprised if this tactic is one of the reasons why the supply has gone up.
    As for prices: I wonder how much of this is circular. At/over MSRP for new vehicles is at least partly driven by/drives high used car prices for tradeins. High used car trade-in prices desensitize consumers to increased new car prices = higher ASP. High used car prices for trade-in also impact the prices for used car, for people buying them. And all of this fundamentally driven by too little new car supply.
    While I think the MSM/economists’/USG’s line that inflation is mostly driven by supply chain issues is mostly wrong, that doesn’t mean that it could be right in specific areas.

  39. Michael Gorback says:

    Maybe people are buying used cars in order to strip out the computer chips?

    Buy a $10,000 beater for $12,000, pull the chips and put them in a Porsche and sell it for $100,000.

    I have no idea if it’s possible but as long as we’re kicking around ideas, it would be a helluva flip play.

    • Mike G says:

      Chips are custom built for each vehicle type, you can’t really do that.

      • Anthony A. says:

        All those chips are microprocessors that are “flashed” with PROM (programmable read only memory) and that code is part of the code for the whole car. Most of these newer cars have millions of lines of programming code written into their processors.

        So the chips, which are usually soldered into a circuit board, are not exchangeable between different vehicles.

  40. Auldyin says:

    A chart like that defies all rational explanation.
    Things like that can happen in ‘stats’ but very rarely.
    When they do, you just have to hope for the return of ‘normality’
    “But underlying market dynamics began to soften just a tad in November from the white-hot activity in October”
    Just sayin’

  41. Marc D. says:

    I have a 2016 VW Jetta, which I paid $17,000 for new (after discounts). I just quickly looked online and found one just like mine (same year and trim level, with 40K miles on it) selling for $17,900 from Carvana. That’s amazing.

  42. ft says:

    Inflation outpaces depreciation in car prices. If that ain’t a dead canary in the coal mine, I don’t know what is.

  43. Swamp Creature says:

    I predict there will be a startup company formed that specializes in removing most if not all these chips from the car, and putting the car back in the form it once was, a basic form of transportation to get from point A to point B. Some dude, who was a mechanic at Toyota, and was admiring my historical vehicle (2000 Corolla) told me this was already happening.

  44. Michael Gaff says:

    I think everyone needs to read Michael Crichton’s State of Fear.

    The entire ouvre of carbon crap is ridiculous. I will drive my less than state of the art vehicles until I can’t.
    The reason for the computer chips in all of the modern cars is simply to please the “woke” morons.
    My 84-year-old Cord runs as well as my new 2002 BMW Touring Wagon.

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