Buyers’ revolt, sales plunge 19%. But dealers, sitting on high-priced inventory, resist price cuts, which would boost sales.
By Wolf Richter for WOLF STREET.
Used-vehicle wholesale prices suddenly rose again by mid-May, after falling three months in a row, seasonally adjusted, with the underlying dynamics firming up in May as well, according to the mid-month update by Manheim, the largest used-vehicle auction house in the US. And prices might rise further in the second half of May, according to underlying auction dynamics.
Which is quite a plot twist for the story of the unwinding price spike. The underling price dynamics had started to weaken in November and weakened further in December. In January wholesale prices were flat for the first time since August seasonally adjusted, and then fell in February, fell again in March, and fell again in April.
But it looks like the price declines have fizzled for now, unwinding only a small-ish part of the ridiculous spike that had started in June 2020.
Average listing prices of used vehicles on dealer lots rose by 4.1% in April from March, after three months of declines, in line with seasonality, and was up 26% year-over-year, according to Cox Automotive, based on its Dealertrack data last Thursday. The year-over-year spike had peaked at 28% late last year and early this year.
The average listing price of $28,365 was a new record. This is an indication where retail prices in May and June could be heading and doesn’t look like much of a cooling process either:
Used vehicle sales plunged, but there’s plenty of inventory.
Used vehicle unit sales plunged 19% year-over-year in April. Out of inventory? Nope, that’s a problem specific to new vehicles, not used vehicles.
The number of used vehicles on dealer lots at the end of April, at 2.52 million vehicles, has been in the same range over the past four months, and was up 12% from a year ago, according to estimates by Cox Automotive released on Thursday.
This is plenty of inventory for the number of vehicles sold: Given the vehicles in inventory, and the plunge in vehicle sales, days’ supply at the end of April rose to 48 days. In the old-normal times of the year 2019, supply averaged 48 days.
What keeps unit sales from perking up from the depressed levels are the still ridiculous prices. A buyers’ strike has spread, and many potential buyers refuse to even entertain paying these ridiculous prices.
But there are still enough sales, and inventories are tight enough, and dealers have bought these vehicles at high prices, and now are reluctant to cut prices to boost sales.
Plunge in sales despite surge in tax refunds.
Tax refunds are crucial for the car business this time of the year. They make perfect down payments. Through April 29, the IRS issued $279 billion in refunds, up by 19.6% from the same period last year, with 97% direct-deposited into the taxpayers’ bank account, and so they already got this money, according to IRS data. The number of refunds issued rose 16.4% from a year ago, to 87.2 million refunds. The average refund amount rose by 5.7%, to $3,102.
So more refunds, and larger refunds on average. And that should have translated into more used-vehicle sales. But it didn’t.
Used vehicle sales plunged 19% year-over-year, despite the higher tax refunds. Why? Because prices were too high, and potential buyers had had it, though there is plenty of inventory. And if anything, the boost in tax refunds supported those ridiculous prices.
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Obswrvations from the past week: Had my car serviced at a Honda dealer in the DFW area. They only had about 8 new cars, but had about 50 used cars, none of which were Hondas. Roughly 50% were pickup trucks. Had my motorcycle serviced at a major dealer and I could barely walk through the showroom with the amount if inventory there. Inventory was spilling into the hallway, the secretary’s area, the bathroom entrance and into the waiting area.
I’ve never seen so many motorcycles packed into a dealer showroom in my life.
Why cant anyone figure out a conflict of Interest:
Even if a Real Estate Form or Agent knows that housing market is about to crash, why will he ever tell that to a prospective buyer to lose his commission and business. Even if he is a very good person, all he will say is that “Buy it like a house, not like a leveraged investment”.
Similarly the Car dealer will say: Used car market is really hot. Buy now before the prices go beyond you affordability (FOMO).
They are not a financial advisor. They are a realtor. Their job is to tell you which house meets your criteria and is priced correctly for its market. Whether the market is about to crash or not is not something they should have to have any knowledge about, guess at, or disclose their opinion.
Talk to a financial planner / wealth manager about housing and market timing.
Talk to a realtor to get an idea of prices / locations.
Coming from a real estate broker, theyll sell you a house or car because YOU TOLD THEM you wanted to buy. It’s your job to TRY to time the market. Do your due diligence.
And god forbid, they should call the market wrong, you’d probably sue them, their company and everyone else you could think of.
up to few months ago our lots in Tucson were reasonably full
however now they are ghost yards
my guess is these dealers aren’t paying up for inventory
My brother is a manager of a lot in Tucson. He’s developed a lot of new grey hairs from this market. There are no cars. None. So many dealers fighting over inventory the prices are through the roof. He was told by the owners to have the salesmen look through Craigslist, offer up and Facebook marketplace – if they see a reasonable vehicle make the seller a full price offer and have them bring it down. So if you want a cash no hassle deal the dealer will gladly pay your price. Then they can list that 1998 Honda with 200k for $7,599
What motorcycle company
Honda. 25% of the floor was taken up by Goldwings ranging from $18K to $44K depending on year/model/options.
Baby Boomers are too old to be riding motorcycles now.
Apple, I am just about to turn 60 years old.
Let’s see, when I went to Trader Joe’s yesterday, I had options. Should I take my Chevy truck? Should I take my Lexus hybrid SUV? Should I take my M4?
No, since the shopping list wasn’t too large, it seemed best to grab a backpack and ride the Tuono V4 1100. Good call, as it’s quick, convenient and easy to park in the tight parking lot.
My motorbike shop has a nice, but not out of the ordinary, inventory of new and used bikes for sale. Only $19k (plus tax & licsense) will bring home a 2022 Aprilia RSV4 1100. This is their non-active suspension version, and it’s a full-tilt, street-legal MotoGP superbike. Nothing matches what this machine can do on a price to performance ratio!
I will be riding my motorbike for as long as I am able to. Life would not be as enjoyable any other way.
Dan I sure hope you are driving on less traveled roads and are careful and dressed for the occasion.
My 59 year old friend was driving his big Yamaha to work and back a few years ago and part of the drive was on I-45 near The Woodlands, TX. In traffic, he got cut off and hit by a woman driving a Honda Accord and he dumped on the freeway at 60 MPH. He was wearing his helmet and somewhat protective clothing but got hit by the car in the next lane.
He died the next day in the hospital from internal injuries (bled out internally).
I gave up riding motorcycles when I moved to Los Angeles decades ago. I lived in Connecticut before that move and had several bikes,
AA is key rect Dan, anecdotally far damn shore:
As one of ”those idiots” who used to ride the white lines between the lanes on the freeways around the city of the angels, but only until the same dude opened his driver door on me — TWICE, my advice is to keep on keeping on, but as far from the freeway/interstates as you can get…
That, and understanding VERY VERY clearly what old Clint said in one of his movies before he put the bomb in the car to blow away his crooked boss “” A man needs to know his limits.””
Thank you, and I am always in full “kit” with helmet on. Always sober & alert to all around me when I drive or ride any machine.
You never know what might happen when you’re out there, but I don’t want to live in a shell.
Life is for living, eh.
Nice, had a 2014 Tuono VR4, the sound of that engine is just sublime. Not even my current Streetfigther v4s can match
Anyone who buys a car right now unless they absolutely have to is nuts.
This is me. I bought a 2018 Jeep Wrangler yesterday. I was baffled by the market and prices, but I’m fine with what I paid. I just really wanted one and I’m not getting any younger.
No doubt. I’ve got money to buy a new vehicle outright, but I refuse to pay the current prices. The causes of the price increases are temporary. Losing money on a bad deal is forever.
I’ve been tracking the price of used Fored Rangers 2019 to current. Three weeks ago, the lower end prices had dipped about $2,500. Now, the prices are back up about $2,000.
I agree with Wolf’s assessment. The housing market will fight price drops for the next 3-6 months. Fortunately, this will give the Fed more reason to continue to raise rates and continue QT.
Wolf, do you see this as a predictor for the impending housing bubble wheeze? Sales dropping, inventory building while prices remain high. Could developers throttle supply by choosing to abandon unstarted projects or potentially converting condos to rentals in order to cash-in in the short term, as rents surge?
Good Point BP!
Developer/Res Builder neighbor told me couple days ago that he and his team are ”giving up for now.”
Mainly because of lack of availability of materials; according to him, the windows they ordered in January for their last project now under construction will not be delivered until November — AT THE EARLIEST.
Means his project will sit without progress for six or more months,,, and the same happened to a new house in our hood due to 2 special size windows.
Crazy times far shore in the residential construction biz!!
My friend who is replacing 40+ year old windows is still waiting since May (or thereabouts) of last year. Ordered and paid a deposit and has been given a few dates for delivery but nothing showed as of now.
I work for a building material distributor, there’s a phrase going around right now with my contractor supplier customers that goes “if you have windows, then you have the job”. It’s crazy how contingent the construction industry currently is on simply having windows. Does your supplier not have windows? Then your project will be pushed back 5-6 months while you wait for them. Maybe even a bit longer for custom windows as you mention. Had one cancel an order of siding because he “can’t get windows, so can’t move forward with any of projects”…
There’s a saying in construction,when economy slows ,if iron isn’t moving . Watch out below ,cars not much different .If people stop buying Watch out below
When does $4+ gasoline and rising rates translate into truck price declines?
I think it will take a year. I still see the occasional Hummer being driven and those get 9 miles to the gallon.
Apple, Much sooner than that, I think. We’ll find out next time the US pick up truck makers report new truck sales. Seems to be a lot of used trucks on both dealer and independent lots. It even seems traffic is down a considerable amount in my rural touristy area.
No reduction in traffic anywhere I drive. I also live in an apartment complex abutting a large outdoor shopping center. The parking lot is crowded seven days a week. It’s so regularly full that I wonder how so many cars are parked in it. Makes me wonder if some of the cars belong to visitors in my complex who aren’t supposed to be there for long term stays.
I’m not sure but the price I’m willing to pay for a new truck has fallen drastically. In fact, unless a dealer is offering 50% off I’m not even interested. Fuel prices, the cost of ownership and the war on ICE vehicles in general make it an extremely poor financial choice. I will keep the old truck and repair it for life.
Prices on Craig’s list are more reasonable for use vans and sedans, but difficult to measure.
$4 hahahahaha. $6.55 at my neighborhood tourist trap gas station in San Francisco
Truck inventories starting to increase. Article coming shortly.
Same prices can be seen in North Los Angeles.
What’s the price at your neighborhood (not) tourist trap gas station, so we can see the difference. My guess is 1dollar or so…..
I’m across the bay in Contra Costa, 30 minutes from the nearest freeway suburban area, non-tourist as you can get, and gas prices are about the same, but $0.10 less for regular.
Sw Florida, by port charlotte 4.48 reg, 5.45 diesel, 4.90 premium, 4.95 ethanol free, are typical prices currently.
gasprices dot aaa dot com
I paid a visit to my favorite gas station in Wisconsin this morning. I paid $4.08 for regular. First time in my life I ever paid over $4 for a gallon of gas.
I happened to drive by the local Toyota dealership twice last week. I noticed a line of new pick-up trucks. But the rest of the lot seemed to be used vehicles of all types.
Prices on some items at the grocery store have gone down slightly. Others seem to be going up. I believe the stores are trying to see how much they can raise prices before buyers back off.
Per EIA, the average price in all of San Francisco has risen to $5.91, and in all of California to $5.79.
Still cheap by European standards. But of course we have less miles to drive usually…
European price difference is ALL taxes. compare apples to apples please.
Fed tax = 18.4 cents/gallon gas & 24.4 c/g diesel.
Cali tax = 51.1 cents/gallon gas & 38.9 c/g diesel.
Minn. tax = 28.5 cents/gallon gas & diesel.
In California, without tax, gas is $1.35 per litre.
Looking forward to the article. Re $6+ gas in the Bay Area I suppose that’s one reason every time I’m there (in addition to cultural, parking and other reasons) I don’t see people doing the morning commute in F-250s that I see in my $4 gas state.
There was a recent article (CNBC I recall within the last few weeks) claiming the average household (auto) gas bill will approximate $5K per year at recent prices. It didn’t include calculations or sources for estimates.
It said “average” but the median household income is somewhat less than $70K.
That’s approaching 10% of disposable income.
The Invisible Hand calls BS on CNBC. People will change their ways when they can no longer afford to drive “almost for free” and their credit cards are maxed out.
But, a 2 vehicle household, 15K miles/vehicle, 30 mpg avg … IS 1000 gal/year in gas. At $5/gal that’s $5K/yr. (That gas burns out to around 12 tons of CO2 as well.)
Gas prices were about 50% cheaper a couple years ago.
So at 10% of disposable income now, it was 5% before.
Most people aren’t going to change their lifestyle on something that only alters their budget by 5%.
This is a “Gas Station from Hell” if there ever was one. Start calling it by its proper name.
They had a shot at 666 but didn’t take it.
I wonder if they’re going to jump over $13 altogether, going straight from $12.99 a gallon to $14.01, similar to the way many high-rise buildings are set up.
Are gas pumps and signs set up to go 4 digits or will they crash when gas gets to $10.00 a gallon?
“I wonder if they’re going to jump over $13 altogether, going straight from $12.99 a gallon to $14.01, similar to the way many high-rise buildings are set up.”
They won’t even be open at that point. That kind of price will render the business out of business.
A friend who operates OTR long haul trucks said rates have crashed and are barely profitable. Gonna be a bloodbath in the trucking industry soon.
When all the extra juice in the economy runs out. Unfortunately, the overall economy still has some oomph left in it, so cars & housing will fight the lowering of prices for another 3 & 6 months respectively. As a lagging indicator, also look at IRS / Treasure income tax reporting. Once that’s in decline, you know a recession is imminent if not already here.
State tax collections too.
I’d guess California and New York are two of the leading indicators. Both have above average dependence on the asset mania.
Could the reason for people not buying over-priced cars these days be that many are just unhappy with the state of the world? The news out now is that many retail stores, from Dollar stores to Target to even Costco, are getting hammered by higher transportation costs. This SARS-Cov-2 pandemic and government response has wrecked all the U.S. economy over the past two years, including the car market.
Daimler-Benz AG just broke all prior high price sales records with a $164 million price of one of their two ever produced 1955 Mercedes-Benz 300SLR racing cars from their DBAG museum this week and they are reportedly delighted!
So what?? At a private auction, Daimler-owned prototype. Who was the buyer? A Daimler LLC? All it shows is what? That Daimler is trying to create some high-end buzz to compete with Ferrari?
This was one of only two ever produced and DBAG held a private auction so only qualified buyers would be invited as it already had a number of standing requests to purchase this 300 SLR from its museum. What it proves is that Daimler-Benz did in fact get the highest purchase price in history for one of its vehicles. By contrast Gertrude Cohn and the Estate of Bud Cohn here in Beverly Hills, CA were only paid a now-paltry $1 million for their Benz Velo (the original 1886 Benz) for the 100th anniversary of Mercedes-Benz back in 1986! By the way 300 SL Gullwings are now going for around $2 million for ordinary folks and can be purchased in public online auctions such as at BringATrailer.com!
That race car has a magnesium body for light weight and is un-raceable due to the risk of the body igniting and going up in flames.
Beautiful car though, if you have a museum to park it.
That model of the SLR was responsible for 85 dead and about 170 wounded spectators at the 1955 Le Mans disaster.
The magnesium alloy body expolded after it crashed.
That was a fateful day for the Daimler-Benz racing team and happened at the Nurburgring. A call was immediately placed from the head of
DBAG racing to the Chairman of DBAG which immediately withdrew from factory sponsored racing for many decades.
I would much rather drive my 2016 BMW M4 six-speed manual transmission car. It is faster, safer, and in general, better.
My ride has a rear diff that adjusts the output via a computer controlled, and user-adjustable torque vector mechanism. I step on the gas coming out of a cloverleaf, and the car hooks up at the maximum limit there can be with the traction provided by the tires and road. When a driver who is into performance experiences this, this is no going back IMO.
The Mercedes is a beautiful piece of art and engineering, but my two-year ago used car purchase at a $40k cost to me, will blow it away on the street or track. And, it is worth close to $50k now.
I drive an BMW E38 740i and am in the market for an E31 840i, so fully agree with you!
What made me think about the crazy prices for vintage cars, and my comment on the Mercedes, was a minute watching the Mecum auction from Indianapolis last evening where a 1966 Shelby GT350H Fastback Mustang sold for over $200k.
A neat old car with quite the heritage, yes. An investment for parking money, perhaps. A machine that is worth that kind of cash to drive for a high performance return on the dollar? Not a chance!
Any of today’s true sports cars are so far ahead of what I saw rolling down the the auction block for $100k to $200k in Indy last evening. It is simply crazy. People want to drop a shitload of cash for history.
Case in point is the Mercedes 300SLR.
By the way, this morning (USA time) in Barcelona, a Ferrari went from zero to 200 kilometers per hour in 4.82 seconds. That is what performance is. History ain’t that fast.
I once knew a gal who would take her BMW to track days. The engine only lasted a few months and her racing days were over forever. I talked to her a while after she paid for the replacement engine and she was still financially wounded, told me she’d never race a car again. She had never heard “pay to play.”
The price drop was transitory.
It looks like “business as usual” around here (Houston, TX) with Big Trucks and SUV’s as far as the eye can see on any main road. Maybe when regular unleaded gas gets to $6.00/gallon will panic start to set in.
But the used car lots around here are completely stuffed with trucks and large SUVs.
We just road tripped up to Chicago which we do every other year to see family. I can’t remember the last time I’ve seen to many long haulers on the road.
Long haulers are how goods get to market in this country. If the producers used trains to ship food goods, we all would starve to death.
They are signing their own 401K death warrants.
I’m still driving a 2012 Honda Accord with 195k miles on it (Added a lot of miles storm chasing and acquiring a myriad of hail dents). Car still runs like a charm and can probably get 5 more years out of it with my annual commuting mileage down to about 2-3k from over 15k prior to WFH. A new car would be nice but I refuse to touch this market until it cools off. Unless you absolutely need a new vehicle, you’re better off just waiting.
Collector cars (antique ones) with original paint and patina are in vogue. Someday, hail dents will fetch the same attraction if the car is kept long enough.
AGREE totally AA:
Sold the 19 RAM w 11K miles and bought a couple ”almost antique” ( at least here in the flower state) vehicles for way less than half the selling price.
Still too many ”electronics” to go wrong, etc., but much more value for the $$$
That, and having a domicile 45 feet above sea level should ensure the grandchildren can have both valuable antique ICE vehicles, and waterfront property too!!!
Toyota lot is very empty near my house in suburbs of Chicago. This one of the larger Toyota dealers in the metro area. They have used cars of other brands, basically parked around the edges of the lot. But the center is empty.
Chevy dealer across the street is much smaller dealer, and it’s lot was near empty a lot of last year. Now it’s about half full with basically everything except many Chevy’s.
Lincoln lot is pretty full, but even smaller. More Lincoln’s than used, and apparently their SUVs are in high demand but big shortage.
At some point this car shortage of new cars situation becomes a major debacle, and it goes back into hurting the economy, besides reflecting the hurt of pocket books in the economy.
The used car market is an absolute joke, and I would stay away from anything used. Odds are anything used is not in good condition and so absurdly overpriced, that it’s just not even worth considering. We bought 3 cars in 2019, 2 used, 1 new, but all 3 great deals. In hindsight the timing was near perfect. Could sell all 3 well over what was paid for them. I would not want to have an old car right now. Parts hard to find.
You got way lucky with that one. You may be driving those for awhile.
Seems to me manufacture,s are trying to bankrupt dealers ,u don’t need them for electric vechile.
Except for Tesla sales, you sure do need the dealers.
Only because it’s illegal in many states for manufactures to sell new autos directly to consumers.
Don’t feel bad for them. The Covid years have been incredibly good for dealers! Yes they wish they had more cars to sell at these margins but the car business has been great.
Why aren’t people buying 100 mpg scooters,like everyone else in the world = f**** k oil companies and corrupt govt
It’s like a game of chicken between dealers and consumers…wonder how long this will last. For now, it sure does smell a bit like Stagflation, strangely I think home prices are also following this model of sellers refuse to lower and being extremely sticky with the price
I am starting to see some cracking in hot AZ RE market. A couple houses by me in neighborhoods that were selling in the 700-800 range in 2020 and are now listed for 1.4 and 1.2M dropped 100k, another already dropped 200k. Just the tip of the iceberg. People definitely stuck in YE2021 pricing mentality but shift is happening.
New domestic auto production rose this spring compared to 2021. The chip shortage is expected to continue.
Airline tickets are up 25% YOY. This could affect tourism. There is a pilot shortage. The airlines usually hired ex-military pilots.
Regarding the current airline pilot shortage…Senator Lindsey “Flower Petal” Graham has introduced legislation to increase the mandatory retirement age of Part 121 airline pilots from the current age 65 to age 68.
Does Lindsey still carry that fainting couch around every where he goes?
Hint: there is NOT a pilot shortage.
Air carriers/charter/air fright (no typo) mirror corp america finance
Senior (expensive) talent out, young (desperate) talent recruited (pimped & pumped) by HR.
Air carriers (re Alaska) have intuited a ‘farm team’ approach whereby the applicant signs on for a extended “plantation” stay.
Similarly to exploitative internships/student loans journey.
With 4 decades as a corp/bizjet driver: Aviation feast & famine cycles never covered in lame street media.
Mark Twain once said, “If you don’t read the newspaper, you are uninformed; if you do read the newspaper, you are misinformed.”
Food for thought: US military aviation sends 95% of their operational resources on training,
5% on mission.
US Commercial aviation spends 95% of their operational resources on mission,
5% on training.
Do not confuse aircraft acquisition as operational resources.
Good one sam, and thanks for the boots on dirt report::
Suspected this was the case, as have/had seen it many times in past when ”low cost employee(s)” were retained while older folks, many of whom had actually trained the low cost folks in the spirit of helping the next gen/newbies, were either ”laid off” and could collect UI,,,
or just fired so that they could NOT collect UI, ( and draw down the company UI account ) with most of the justification for those firings being either partial or total bull stuff…
That first graph remains one of the weirdest I have ever seen.
I agree. And we’ve seen a lot of weird stuff since 2020. It’s completely crazy.
Ah, the dreaded “S” curve. I have to deal with it all the time in stock chart analysis. The problem is I don’t know if it’s now going down or a temporary head fake to the downside and about to continue up. I’ve got to the point where I just wait until price goes above the prior high or below the prior low.
Regarding gas prices vs car prices.
Being retired I don’t really care what the gas price is. I don’t drive enough to care. I won’t say I’m happy when it goes up, but I’m not angry either… more like mildly irritated. I suspect the WFH crowd feels much the same. Now if both the retired and WFH groups feel this way how high can prices legitimately go? Is what we’re dealing with, rather than inflation, a matter of wholesalers and retailers pushing it for all it’s worth?
I think the current bout of inflation will produce permanently higher consumer-facing prices. As each class of good/service gets hit with supply / demand imbalances in turn, the pricing in that way surges, overshoots and then settle out at Nee Normal levels. New Normal isn’t / won’t be as high as current levels, but well above the prior equilibrium. It seems this is what happened in the 1970s too. Prices don’t rise uniformly b/c each market’s elasticity is different and supply/demand imbalances vary by circumstance.
Recommend buying any durable items whose price hasn’t already doubled.
1) Buyers strike vs dealers have bought these inventory at high
prices, and now are reluctant to cut prices to boost sales.
2) Manheim three waves up. In order to move higher we need a higher quarter, or two, above the previous high. Dots are not good enough. Manheim might be in a trading range, or form an a-b-c down.
3) Will a small a-b-c down be good enough, or there is more to come, more fuel in the tank.
4) Will Manheim backwardation turn into an industry depression. Buyers strike is the first round in the fight. Buyers might bend the dealers will : we cannot afford u anymore, turning the dealerships into morgues.
5) A systemic change might be coming to Tesla, because of Ilan misconduct and pickup trucks, because of the high gas prices.
6) If Ukraine war cont in 2023/24, both Lyriq EV and F-150 will pay the
price. Poetry is peak luxury.
7) The dealers might face reality, the risk is high. Cut inventory in the next few months, even with a small loss, to keep the previous period high profit, before they evaporate. Don’t expand. Sell online.
7: Depending on what you’re buying, I wouldn’t transact a car purchase online – particularly with high end vehicles. Unless I see the MSO or the title in the dealer’s name, I wouldn’t pay for the car. Too many stories of people who leave a car on consignment at these exotic used car stores and have it sold out from under them – without the car proceeds being paid to the legal owner – and now the buyer is out the money and the seller is out the car.
Despite all the hype over online sales, very few sales are completed entirely online. Too many moving parts… witness Carvana losing their dealer license in IL, and has issues in FL, NC, TX to name a few…. States don’t like not getting their fees and taxes and, sadly, the customer is stuck in the middle with a car they cannot legally drive and little recourse outside of a lawsuit.
People will have to start starving to turn this around. People have lost all anchor to financial reality. And who can blame them, based of Fed behavior?
Haven’t seen the stats on age of fleet (truckers or household) for a while. I always found the average age of the national auto stock to be informative.
Anyone have the current numbers, or better, a 20 year chart?
In terms of commercial trucks, I don’t have data.
The average age of passenger vehicles on the road gets updated annually in the summer (June). This is through June last year:
The National Household Travel Survey goes into details, but only happens once every 5 years. Next one is coming up (2023?). This is from the prior survey:
Thank you kindly!
The steady increase in age for passenger vehicles is remarkable, though I don’t really understand the reason or implications.
For trucks, the stock analysts used to trot out the age of commercial tractors on the road when they were touting the truck manufacturers (e.g. Paccar).
Vehicles have been getting a lot better, even though some folks here think that their 1989 Buick was the best car ever built, LOL. They last a lot longer, and look good even with 300,000 miles on them. So people drive them longer.
But this is the average age of vehicles on the road, and NOT average duration of ownership. People still sell a car after two years, and then the next person drives it for 8 years and sells it, and the next person drives it for four years, etc. And if the car is still registered at a DMV in the US, it counts and becomes part of the average.
50percent drop in offer
2009 Ram 120k miles dealer bid dropped as follows 1 owner no smoke good condition
Nov 2021 12k
May 2022 6k
Mileage change maybe 2000
Still have truck
I watch the Texas used truck market. Hoping to pick up at least 1 more
heavy duty for work. I think we are at our 3rd price increase this year for our services.
What’s “different” this time around? No competition now, and with the next down turn in housing…..
08 was a tidal wave that knocked a generation out of my line of work.
Prices on Craig’s list are more reasonable for use vans and sedans, but difficult to measure.
Imagine you were a very smart used car dealer with a Nostradamus like ability to predict the future. And what you saw in your crystal ball is that production problems for new cars and thus the supply of new cars would remain problematic for a decade ( or longer). What would your reaction be? If you had the money you would grab every decent used car you could and hold out for the highest prices that you could because you would know that used cars would only become more limited and valuable over time.
No, because though the supply shortage of new vehicles is real, the demand isn’t. It’s completely artificial.
To believe your scenario, someone would have to believe this fake economy can last another decade. I’ll take the “under” on that outcome.
Increasing cost of credit.
(Noticeably) Tightening credit conditions. Recent subprime credit availability for those who are actually dumpster quality borrowers is an outlier anomaly.
End of the asset mania, stocks and real estate.
are the most evident reasons it won’t happen.
Agree with SC in this case AF, though in spite of clearly consider you to be very intelligent because you agree with me, usually. LOL
At this point, having invested in a couple of ”almost antique” vehicles in contrast to much newer ones, etc.,
I have actually committed to what I am saying: ” all these younger generations are going to the dogs.”
LOL, and I hope at least some on here recognize this is allegedly what Socrates said to Aristotle,,, or
something like those old dudes saying something similar some time and some when
You’re discounting lot rot… which is very real. A relatively static hoard of used cars creates a whole other pile of challenges. Back in the day when we had cars held at the port (If it’s domestically built, but not yet moved to the shipping yard, it’s considered a “port”), you begin developing problems with batteries (the parasitic currents from the electronics that never sleep), fuel deterioration, rubber lines deteriorating, tires rotting, wiper blades, hail, acid rain, bird poop, rodents, flat spotted tires, brake fluid absorbing moisture, rusted rotors and frozen calipers…… and that’s when it’s warm.
Oh, yeah. Another favorite is “wrap guard” (the white film over the horizontal panels of the car). Leave that stuff on in the sun for a few months and see what you get (hint: it comes off in chips)
@EK – You always have something interesting to say, and I learn something from pretty much every post you make. Thanks!
I am a used truck dealer. Last recession half the used dealers went out of business. This next time will be three times worse imho. Nobody has money to buy a vehicle. Almost nobody. Bankruptcy, defaults, closings. Too much leverage, too much debt, no more cash.
I follow the Porsche market very closely. Daily. There are almost ZERO new Porsche sports cars available in the USA…unless it’s a fluke where somebody refuses delivery on a car they ordered, or a dealer “builds” a car on a build allocation hoping for a bidding war when the vehicle arrives. East and West coast Porsche dealers are still adding significant “ADM,” or “Additional Dealer Markup” on Porsche sports cars (718 and 911) and in many cases their Taycan EV’s.
Some of the flyover state Porsche dealers are adding ADM, but generally not to the extent coastal dealers are. Accordingly, many coastal new car buyers are purchasing new Porsches from out-of-state dealers and shipping them to their home, which is still less expensive than paying the outrageous ADM coastal dealerships are charging. For example, it’s not unusual for a coastal dealer to charge an ADM of $100K over MSRP for high demand 911’s such as a 911 Turbo S or 911 GT3. I’ve seen $50K ADM for a 718 Spyder. And buyers get in line to pay this in order to obtain a build allocation. Many wait more than a year to even get a build allocation, and then wait an additional six months or more for their car to be built and delivered. Many never even get a build allocation. Yes, it’s THAT bad. That’s the bad news.
The GOOD news is…in this current CRAZY MARKET you can buy one of these cars, drive it for six months or a year, and then sell it for FAR more than you paid for it on Bring a Trailer or at one of the well known televised public auctions. I did that recently with a new 911 Turbo S. Again…in the CURRENT MARKET. I believe that may change with the recent market pullback given that so many of these cars are purely “discretionary income” purchases. I.e., “the wealth effect” which is rapidly evaporating.
I wonder how Porsche will react to the pump outs (cars registered out of their market AOR) on future allocations for the “fly over” dealers? There has, in the past, been punitive actions for such behavior. Porsche might not directly reduce their allocation (but the registration data might do that anyway) for legal reasons, but there is absolutely zero liability for withholding additional allocations beyond the dealer’s base market area potential – which has large economic impact on the dealer.
Great question El Katz. As I understand it, Porsche NA has addressed this issue with dealers and in so many words, wants them to service their local markets before conducting out-of-area sales.
For example, our local flyover state Porsche dealer will in some cases not charge ADM if sold to a local patron, especially if sold to a returning customer. However they WILL charge ADM to an out-of-state customer. There are many ways to skin that cat.
Also, dealers are attempting to discourage sales to those buying and flipping new Porsche sports cars at a huge profit. In this case if you’re a known “flipper,” even a local repeat customer…you “somehow” just never seem to get a build allocation. If you get my drift. They watch carefully.
Conversely, if you’re a repeat customer at our local dealer who typically trades in your older model Porsche on a new car purchase, it’s amazing how fast you might get a build allocation, even for a HI-DEMAND 911 or 718 sports car…and probably with very little if any ADM. I wouldn’t count on that special treatment from a coastal dealership. They just operate in a very different market.
IMHO, the reason that the dealers in fly over whack their out of market customers with heavy ADM is that they will never receive any service revenue from that customer. As a result, they “pre-load” their service profit onto the price of the new car to compensate for it.
That’s why the local customers get a break…. the dealer knows their service loyalty (or not) and they pay accordingly.
Back in the day, I was standing in a service lane when a dealer I was visiting came walking by. He recognized the customer and went to greet him when he noticed that the car in his service lane had a competitive dealer’s plate frame on it.
The back story was that this customer BEGGED the dealer I was visiting to fix his car on a holiday weekend because he was going on vacation and it had broken down. The dealer opened the service department (that was in the day when they closed on weekends), brought in a tech, parts guy, and a service writer and fixed the guys car on the spot.
So, after the dealer made that gesture, the customer sold him out for a few hundred bucks on the purchase of the new car.
The dealer threw him out and told him never to come back again. His file and VIN were marked in their DMS (dealer management system) and they would offer him appointments a year out if he called to schedule service (it’s a violation of franchise agreements to refuse service to a like franchise auto).
Yep. Knife cuts both ways.
I just got invited to a Porsche event (some new SUV variant coming out). Food, music and fun. I doubt they actually have any vehicles. Not shopping for one anyway. Tossed it in the trash.
That’s wealth transfer, another word for inflation. For every boom, there is the bust. 70% are busting currently even.
Off topic, but I just finished a really informative two-parter interview with some guy named Wolf Richter on the Wealthion YouTube channel free of charge…that guy really seems to know his stuff!
Everyone should check it out.
Bonus points for slipping in a comment related to Beer Mug shortages. lol.
That guy thinks that the Fed will continue tightening in a recession. The markets disagree. Also a flash crash followed by hyperinflation looking more probable now.
You’re contradicting yourself. Re-read what you said to see if you’re smart enough to sort out the contraction. You cannot have it both ways.
An increasing number of cars on BringATrailer.com are now ending their auctions with “Bid To” rather than meeting their reserves and selling which is not a particularly hopeful sign for the high-end collectible car market.
SoCalBeachDude…Many of those BaT sellers list their cars with unrealistically high reserves, and some are literally paying BaT to “test the market” with no intention whatsoever of selling. Thus their outlandishly high reserve prices protects them from an unintentional sale.
That said, with the stock market tanking I think we’re going to see heady, hi-value collector car prices pull back. It’s always been a cyclical business. And ALWAYS fun to watch!
Collectibles and antiques are inflated due to fake prosperity from the asset mania and fake “growth”.
I’m a coin collector and it’s happening there too. It’s not because of bullion (gold is down from 18 months ago and silver is about the same as May 2008) and it’s not because this collectible field is an “inflation hedge” either.
Did you get the book that Heritage Auctions mailed out a few months ago? It shows the eye-watering prices for the typical coins but also for video game cartridges and NFTs.
1) Buyer strike vs dealers who paid too much.
2) Memo business, dealers inventory do not belong to them.
3) If your car didn’t sell, they don’t care. U might/ might not get it back.
4) If they sold it, u don’t know : it’s in a safe parking lot, because we are loaded, on memo to another dealer, who got the call, who got a customer. If they pay : 5% today/ net 90 .
5) After 90 days : the check in the mail.
6) After desperate begging, sue the dealer.
7) The willy dealer closed his business, went bk.
8) If u did collect a check, within 90 days before bk, the estate lawyers will get u.
9) If u see too many bad items, old rusty junk cars that nobody want, skip the dealer…
2. Many dealer’s own their inventory outright – especially used. Some of the larger organizations even own their new inventory outright but for a minimal amount to take advantage of the inventory insurance offered by their lender.
I think you’re referring to a consignment dealership where customers put their car on offer through a bricks and mortar shop. Even with the “contract”, it’s very risky. If you leave the title with them, you’re a dope. If you don’t check on your car almost daily (touch it) you’re a dope. If I were dumb enough to leave a car there, I wouldn’t even leave keys and put an airtag on it somewhere.
There was a dealership in Upland, CA by the name of CNC Motors. Google it and read the tales of woe from customers on both sides of the transaction. It ain’t pretty.
Keep prices up as long as possible and people will get used to it. Kind of an Overton window thing.
Defending corporate price points is what it is all about. Look what happened in 25 plus years. Everything HAD to be priced a relation to wages in the last century
Then slowly, then with new generations coming up, everything got priced in credit, and ever increasing cheaper credit. Longer duration of payments – 100 months on an 80k monster pickup. Debt slaves will always make payments and more of them.
Until they can’t.
Watch out below for all these subscriptions when everything is going to gas.
Yes, there’s that. Already happening. It went like this: Raise prices 40% yoy, (from $20,000 to $28,000), then when sales die, reduce prices by 8% to $25,999 and people think they got a deal and start buying again. And that becomes the new baseline from which inflation can sprout further.
Instead of paying a ridiculous inflated price for a used Lexus GX , I just put $2300 into my ’07 Lexus GS with 230K miles on it. Still looks and drives great. As will real estate, it’s going to take some time for the price spike to abate. ’23 or ’24 before the devaluation really starts to take hold.
Bought a new GX in 2019. Will last me indefinitely… Had an LX for 15 years with no problems. Time will tell how the newer low displacement turbocharged engines will last, but Lexus V8s are legendary for reliability. Even considering the price of gas, they are a bargain. Repairs are practically non- existent compared to alternatives. MPG is only one component of TOC.
Went by a new car dealership the other day, all the cars had been raptured, but the people were still there.
The easy marks already paid up.
The hard core vs the dealers now.
Who will blink first?
One anectdote from western NC:
I got a call from the car dealer whom I bought my 2011 Camry from in 2019. He wanted to know if I wanted to sell it back … promised me a great price.
They were awful to deal with when purchasing, and I don’t want to sell it.
I can’t help but wonder what the downstream affect is going to be on repos and foreclosures after this inflation steadies.
Imagine that if the value of these cars and houses drop to pre or even 10% above pre inflationary values, coupled with people putting the standard 5-10% down – lots of people will be under water in the matter of a couple of years. Are we heading for a major credit crisis as a result? This can’t be good in the end. I’ve been holding on to my three paid off cars as a result and refuse to be underwater. Everyone else buying cars and homes today though has me worried.
Coming from a real estate broker, theyll sell you a house or car because YOU TOLD THEM you wanted to buy. It’s your job to TRY to time the market. Do your due diligence.
And god forbid, they should call the market wrong, you’d probably sue them, their company and everyone else you could think of.
I’ll keep driving my 2008 Scion with 155K miles two or three more years until this craziness ends.