Used Car Prices Crash Most Since 2008

Discussion in 'In the News' started by ALS, Mar 20, 2017.

  1. ALS

    ALS Super Moderator Staff Member

    According to NADA Used Car Guide, wholesale prices on used vehicles are getting crushed. Let’s take a look at the details.

    [​IMG]

    Used Market Update

    In a reversal of what typically occurs in February, wholesale prices of used vehicles up to eight years old fell substantially last month, dropping 1.6% compared to January. The drop was counter to the 1% increase expected for the month and marked just the second time in the past 20 years prices fell in February (last years’ scant 0.2% being the other instance).

    NADA Used Car Guide’s seasonally adjusted used vehicle price index fell for the eighth straight month, declining 3.8% from January to 110.1. The drop was by far the worst recorded for any month since November 2008 as the result of a recession-related 5.6% tumble. February’s index figure was also 8% below February 2016’s 119.4 result and marked the index’s lowest level since September 2010.

    Full story: http://www.zerohedge.com/news/2017-03-20/used-car-prices-crash-most-2008
     
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  2. xcel

    xcel PZEV, there's nothing like it :) Staff Member

    Hi Al:

    This is actually worrisome regarding the economy more so than just used car values. What is your take?

    Wayne
     
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  3. ALS

    ALS Super Moderator Staff Member

    I've read the biggest reason we're seeing this is that a higher number than usual of Leases coming due this year.

    Leasing has never been this popular in our lifetimes.

    When a local used car dealer who has a half hour radio show on Saturday morning
    is telling people that you don't buy new, you lease, and if you want to buy, buy used.

    BTW he sells mostly luxury vehicles that have come off leases

    Look at the deal Chevrolet has for a 2017 Malibu LT. Notice the deal you get if you're already a lessee, $6,265 over three years. Who would buy new with a deal like that?
    The car would depreciate one and half to two times that amount over a three year lease.

    The local Autotrader is showing a 2017 Malibu LT running around $28,500 for a reference.

     
    Last edited: Mar 21, 2017
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  4. xcel

    xcel PZEV, there's nothing like it :) Staff Member

    Hi Al:

    10k miles/year is going to catch most...

    In any case, with the large new car incentives on the hood on most new models from most manufacturers, at some point they have to run into non-profitability. I am not sure how Hyundai, Nissan, Ford, FCA and GM do it while still holding onto 5 to 8 percent margins?

    With the push to move new metal, I thought the massive new car discounts would be responsible for low resale values but discounting has been part of the new car game for over two years and the graph is showing the fall off happening rapidly just recently. In addition, with GM and Ford backing down their Fleet giveaways, I thought their residuals would slowly come back as Rental Fleets would not be mass dumping cars with three years and < 30k miles on them like in the past since they are paying much closer to dealer invoice instead of $10k off Ford Taurus', Chevrolet Malibu's, and Chrysler 200s as just three examples?

    Wayne
     
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  5. 08EscapeHybrid

    08EscapeHybrid Moderator

    Here's my take... The sales boom from 2008's Cash for Clunkers. There's a lot of 10 year old vehicles on the market, and that's bringing everything down. The fact that the OEM's are throwing cash on the hood to get new models out the door isn't helping.
     
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  6. Carcus

    Carcus Well-Known Member

  7. Blackbelt

    Blackbelt Well-Known Member

    I agree with Al, i think the culprit is a glut of off lease late models. There are so many of them going through the auction block, the prices are coming down.
    When i turned in my 2014 RAM 1500 last year after a 2 year lease, the truck had a $40K sticker and a $28K residual. Since i had only put 8500 miles on the truck, i thought it would be a great truck for the dealer where my brother works to buy and sell on their used lot. He told me that 2014 RAMS' were going through the block for around $21K, because there was just so many. Look at the pricing on the Leaf. Dealers are picking them up at auction for $5K or less, and selling them for $8K.
    The reason i leased the truck and now lease my Compass is that i don't want to take that kind of depreciation hit. I took a $10K hit on my 2013 Fiat 500 when i sold it after 3 years and 35K miles.
    How much of a hit did Toyota take on my Prius C that was previously on a 2 year lease that i paid $13K for? My guess is that Carvana got it at auction for around $10K at auction. I would guess they were selling new for around $20K?
     
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  8. 08EscapeHybrid

    08EscapeHybrid Moderator

    When I bought my FEH it was off lease. 3 years old with 52,000 miles. I bought it for $17,500 which was almost half the price of a brand new FEH 4wd at the time.
     
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  9. kbergene

    kbergene Member

    Yeah I think this is the driver of used car price drops. Both new and used car sales have been propped up by generous, lenient lending practices. Even the potential for credit tightening is a warning sign for dealers to trim used car inventories ... nobody wants to be holding the bag when the cycle turns.

    Stay tuned, I think things get worse before they get better.

    On the other hand, its one good (last?) chance to get a favorable lease before residuals get repriced to more realistic levels.
     
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  10. ALS

    ALS Super Moderator Staff Member

    Remember one thing about monthly automobile sales numbers, those are not vehicles sold or leased to the consumer, those numbers are for vehicles sold to the dealer.
    So all that new inventory sitting on the automobile dealer's lot are the manufactures SOLD inventory, not the dealers.
     
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  11. wick1ert

    wick1ert Well-Known Member

    The local Chevy dealer near me is offering 27 month leases on the TRAX for $49/month (assuming you get all the discounts, include a $3k asian competitor lessee rebate) and the Equinox for $69. Or you can purchase at 14k and 18.5k respectively. That'll put another glut of off-leases into the market in 2 more years.
     
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  12. Blackbelt

    Blackbelt Well-Known Member

    Is that $14K Trax and AWD model? Would love to see the details on THAT deal!
     
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  13. BillLin

    BillLin MASS: 2016 Crosstrek, 2012 PiP, 2014 C-MAX Energi

    probably this one in Delaware, FWD...

    temp.jpg
     
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  14. wick1ert

    wick1ert Well-Known Member

    http://www.porterchevy.com/

    Interestingly, they just launched a re-designed webpage and the details are no longer in their scrolling advert part. However, I am pretty sure I recall it being FWD and not AWD for their special.
     
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  15. BillLin

    BillLin MASS: 2016 Crosstrek, 2012 PiP, 2014 C-MAX Energi

    Big mistake thinking I was so clever... the one I found was "near" Delaware, but actually in Maryland. :D
     
  16. BillLin

    BillLin MASS: 2016 Crosstrek, 2012 PiP, 2014 C-MAX Energi

  17. Blackbelt

    Blackbelt Well-Known Member

    Wow Bill That's a smokin price. I too wonder if it's legit. Not that i am in the market. MOst of these little CUV's are, IMO, overpriced. I won't spend over $20K for a new one. As to getting one with FWD, IMO SUV's are a compromise, and the one thing that makes them worth compromising is AWD. Without AWD i would much rather have a car.
     
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  18. MaxxMPG

    MaxxMPG Hasta Lavista AAA-Vee Von't Be Bach

    From the cars.com link above:

    Price includes:
    $500 - GM Lease Loyalty Private Offer. Exp. 03/31/2017,
    $1,500 - GM Targeted In Market Lease Cash Private Offer. Exp. 03/31/2017,
    $1,000 - Chevrolet Down Payment Assistance Program. Exp. 03/31/2017,
    $2,000 - Chevrolet Select Model Bonus Cash Program. Exp. 03/31/2017,
    $500 - Chevrolet Select Model Retired Courtesy Transportation Bonus Cash. Exp. 03/31/2017,
    $500 - General Motors Consumer Cash Program. Exp. 03/31/2017, $1,500 - GM Competitive Lease Private Offer. Exp. 03/31/2017,
    $500 - Chevrolet National Purchase Bonus Cash. Exp. 03/31/2017

    That's $6500 in various offers, but only the dealer knows which offers are compatible. For example, it is common for dealers to quote a "price" on a vehicle while including $1000 Loyalty Cash (you own the same brand) and $1000 Competitive Brand Cash (you own a different brand) - but only one or the other can be used. They are not compatible and so cannot be used together.

    They may also lump in the "college student" discount with the "AARP bonus", and squeeze in the "FFA agricultural farming rebate" and "Uber driver discount" all together just to knock off an extra few grand. It's amusing to see how many insane rebates there are and how dealers magically heap them all onto an ineligble car.

    The "retired coutresy transportation bonus cash" program makes me think it was a service shuttle or loaner and it has less than 5k on the ticker but is not "new" outside of the context of not having been titled yet.
     
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  19. MaxxMPG

    MaxxMPG Hasta Lavista AAA-Vee Von't Be Bach

    The Trax is a Sonic underneath, and the Sonic is one of those cars that they're slashing by 20% to try to tempt people into buying one. The Compact Crossover Craze is just getting warmed up, with Ford's EcoSport (Fiesta on stilts) coming in a year and Hyundai/Kia's entries (Accent/Rio in Outback halloween costume) not long after. The H/K crossovers, so far, have the most unfortunate names - Creta (like "Cretin") and Stonic (like "Stoner"). Here's hoping these names are just a red herring to provide a false sense of confidence to the competing automakers.

    My dream crossover would have a dangerously Atkinsonized 1 liter engine, super skinny P165/80R15 tires off an old rear engine Beetle, and a name that flaunted the low power rating. Something like Gutless Supreme. Sounds catchy! Make mine the Grand Squire Royal Crown Brougham trim level with simulated woodgrain vinyl applique, padded elk grain (never knew elks were made of wood) vinyl roof, simulated wire wheel covers, opera windows, opera lights (remember those?!), and a hood ornament featuring the likeness of a dead bird or perhaps a lucite crystal.
     
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  20. BillLin

    BillLin MASS: 2016 Crosstrek, 2012 PiP, 2014 C-MAX Energi

    I don't like those practices currently being played by the dealerships. In my mind, it is like (not the same of course) bait and switch. The switching is in the terms of the sale, as opposed to the merchandise. They just want you in the door or visibility when sorted by "lowest price" in the apps or on the web sites. You can see by the number of views of the specific listings.
     
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