Is the Automobile Bubble Bursting?

[Out of Steam]

12 Month History of Trade-in Value

This Edmunds website shows the monthly average trade in value of a vehicle. Input year/make/model/trim/mileage and see how the value has changed over the past year.

I entered a few vehicles and the trend over the past couple of months was definitely downward. YVMV (Your Value May Vary).

My car is off less than $400 from its peak value in April 2022.

 

[googily]

I had to get a recall done on my '21 Escape, so I took of advantage of the "we want you to get this done so bad we'll come get your car and drop it back off." And I just got a text from the dealer (which is where I bought the car) asking if I'd like to get an offer on it since used cars "like [mine] are in low supply and high demand in the current market." (suburban DC) I said sure, since I'm not there in person and not a captive to waiting around while they drag their feet. But since I'm not desperate this minute to buy another car, I'll see what they can come up with and string them along a bit.

(ETA: They actually have a used 2021 Edge in stock that has everything I want except that it's white, and I have sworn to never buy another white, gray, or silver car again.)

 

[ExFlyBoy5]

There have been a number of complaints filed about Carvana. In May, their stock price was down 90%. Illinois pulled their business license for various rasons--including people not getting titles. They reinstated their license in late May, and suspended the license 7/2022 when customers continued to not get titles on purchased vehicles. There's a class action in Pennsylvania against Carvana pending too.

What you have here is a company not run by "car people." The automobile business is dog eat dog--a very competitive and tough business run by very savy businesmen that cut their teeth in the automobile business. Carvana's principal is a Stanford educated high finance individual--not a car man.

There was something said about Carmax. It is an offshoot of Circuit City electronics retailers. Circuit City got the car business going well enough to split it off and do a stock offering--then Circuit City went bankrupt. CarMax continuesin business and are trying to change with the times offering at home shopping also. And they've added some new locations recently. They seem to offer more to purchase used vehicles than the other large national retailers.

I guess you missed my Carvana post 4 above yours?

As for it not being run by a "car" guy...almost NONE of the new/novel ideas are run by people that are experts in that area, they are techies. Uber, Toro, Door Dash...so there's that.

 

[jazz4cash]

My car is off less than $400 from its peak value in April 2022.

Wow. Interesting site. It nailed the highest price I got from the online bid consolidator which came from Carvana. My value dropped 13% over 12 months.

 

[braumeister]

I found it interesting that Carvana offered me considerably more last March than the Edmunds site shows as the average trade-in value at that time. I knew they were high, but didn't know they were that high.

Back down considerably since then.

 

[ExFlyBoy5]

I found it interesting that Carvana offered me considerably more last March than the Edmunds site shows as the average trade-in value at that time. I knew they were high, but didn't know they were that high.

Back down considerably since then.

I haven't checked the sell value of our cars according to Carvana lately, but we sold two cars to them and on both occasions, they paid us significantly more than KBB published private party values. They paid me nearly $2000 more than I paid for my pickup truck I purchased a couple years earlier. Oh, and they sold it for about $2500 more than they paid me.

Edit: Carvana offered $13,124 in Feb 2022. Today, they offered $14,169...I paid $12,000 (all in including TTT) in Oct 2020. So...still seems a little crazy out there (but is it with inflation? Probably not). We have put about 6K miles on it since we bought it.

 

[Finance Dave]

Have you spoken to the friend who does detailing lately? Things were crazy over the summer, but my sense is it's changed a LOT since then.

My son just bought a used car this week. He had found several he liked, in his price range, private sale. They were still for sale days or even a couple of weeks after he first saw them. The owner he bought from didn't seem to be pushing him to hurry before anyone else bought it.

I drive by a local wholesale auction place regularly. On auction day, it had been mobbed with buyers over the summer, and the lot nearly empty. Now, the lot is just starting to fill back up but there are visibly much fewer buyers.

That's all I've got to go on. It's indirect evidence at best, but I think it's significant.

I speak with him 3x a week. I visited him in mid August....just 8 weeks ago.

 

[ShokWaveRider]

My friend just sold his car to Carvana who gave him $7k more than his local dealer offered him. His dealer said he could not match the price, even on a trade, I am not sure how they do it.

 

[Walt34]

My friend just sold his car to Carvana who gave him $7k more than his local dealer offered him. His dealer said he could not match the price, even on a trade, I am not sure how they do it.

I suspect it is one of those things where they only lose a little bit on each trade but then they make it up on volume....

 

[ExFlyBoy5]

My friend just sold his car to Carvana who gave him $7k more than his local dealer offered him. His dealer said he could not match the price, even on a trade, I am not sure how they do it.

If he goes searching in a couple of weeks, he will see why. It will be marked up quite a bit on the sale side of it.

 

[explanade]

If you want an interesting perspective on car sales, I suggest following CarDealershipGuy on Twitter. @GuyDealership. He thinks inventory of new cars will be back up next summer. Meanwhile, used car prices will drop dramatically as demand collapses starting in the next 30 to 60 days. The lack of demand is already showing up in the auctions.

Car loan interest rates must be way up?

That might take some potential buyers out of the market, unless they opt for a cheaper model than the one they wanted.

 

[jazz4cash]

I suspect it is one of those things where they only lose a little bit on each trade but then they make it up on volume....

Yup, and that’s how they may be headed for bk.

 

[JoeWras]

When Circuit City started selling used cars, I thought it was crazy. Turns out they basically pioneered the large franchise used car game.

Carvana here in Raleigh, NC lost their license for 6 months earlier this year. What a fiasco. What they were doing was having trouble getting the proper title transfer for cars. It was some sort of financial shell game. The problem is, the buyers were directly impacted by this. Carvana would give them a temporary tag/plate/registration, but it would expire. Buyers would call and get another temporary from a different state. Some buyers were on their 6th or 7th state temporary tag. It wasn't unusual to have a temporary tag from Texas here in NC.

This caused all kinds of problems with insurance, financing, accidents, police visits - you name it. It was impossible for the buyer to sell a car they didn't own. Many people were left in limbo.A real fiasco for the buyers.

 

[jazz4cash]

When Circuit City started selling used cars, I thought it was crazy. Turns out they basically pioneered the large franchise used car game.

Carvana here in Raleigh, NC lost their license for 6 months earlier this year. What a fiasco. What they were doing was having trouble getting the proper title transfer for cars. It was some sort of financial shell game. The problem is, the buyers were directly impacted by this. Carvana would give them a temporary tag/plate/registration, but it would expire. Buyers would call and get another temporary from a different state. Some buyers were on their 6th or 7th state temporary tag. It wasn't unusual to have a temporary tag from Texas here in NC.

This caused all kinds of problems with insurance, financing, accidents, police visits - you name it. It was impossible for the buyer to sell a car they didn't own. Many people were left in limbo.A real fiasco for the buyers.

That’s amazing. I know IL is another state that took legal action against them.

 

[googily]

Fwiw, the dealer offered me $29k for my 2021 hybrid Escape with 20k miles. I showed them the email offer from Carfax of $32k, and the dealer went up to $31k.

(Original sticker when I bought it a year ago was $38k)

They had the 2022 Edge I wanted at about $2700 below MSRP. They weren't feeling too interested in further haggling after I got them to move on the trade in, but they did take off another $300 to make it an even $3k below MSRP.

This is in suburban Virginia.

 

[CRLLS]

DS recently bought a brand new Denali HD dually' off the lot. He occasionally hauls a big load. He had been looking for the last year or so for a new truck but couldn't find the one he wanted at any price. The dealer gave him a great trade in on his 10-year old truck and the dealer sold him the Denali at GM employee's pricing. Well under MSRP. Best yet he got the dealer to title it in Alaska so there was no sales tax! That saved another 6%. He is in the military so it's all legal. I think the bubble has begun to burst.

 

[ncbill]

DS recently bought a brand new Denali HD dually' off the lot. He occasionally hauls a big load. He had been looking for the last year or so for a new truck but couldn't find the one he wanted at any price. The dealer gave him a great trade in on his 10-year old truck and the dealer sold him the Denali at GM employee's pricing. Well under MSRP. Best yet he got the dealer to title it in Alaska so there was no sales tax! That saved another 6%. He is in the military so it's all legal. I think the bubble has begun to burst.

Agreed.

I just sold a 3/4 ton RAM diesel & had to cut the price to what I paid for it.

 

[Out of Steam]

When Circuit City started selling used cars, I thought it was crazy. Turns out they basically pioneered the large franchise used car game.

I remember at the time that Circuit City was derided by just about everyone in the business press for moving from a good business like electronics to go into used cars with Carmax.

That used car business has now outlived Circuit City by over a decade.

 

[Out of Steam]

Carvana would give them a temporary tag/plate/registration, but it would expire. Buyers would call and get another temporary from a different state. Some buyers were on their 6th or 7th state temporary tag. It wasn't unusual to have a temporary tag from Texas here in NC.

I noticed these temporary tags from random states here in Virginia a year or two ago and figured it was a pandemic-related issue with registration processing. Didn't hear about the link to Carvana.

 

[JoeWras]

Bursting? Hardly. Not inflating? Possibly.

We have older cars. They are doing well at 12 and 14 years old. But we're a blown head gasket (Subaru, famous for them post 150k miles) away from a decision. So I've been monitoring inventory. That alone is tricky since the websites now try to force feed you "vehicle in transit/build" to fool you.

What I've seen the last few weeks is some relief in the less popular brands or models. For Subaru, that's the Outback. Most dealers have real inventory. For brands, that's something like Chevy. Toyota? Forget it... still. They had bad supply issues and they are popular. You are lucky to find anything.

Still, this is a change and the top starts somewhere. It just appears to me that the top has been reached. Who knows what the downslope will look like.

It could be steep if both interest rates and sudden supply relief overlay each other.

Then again, perhaps manufacturers will conspire to reduce supply. They keep saying they will. But will they? When the cars don't sell, will they be tempted to push them to dealers with back room incentives? That's been the story for the last 100 years, and one reason forced constrained supply (like the OPEC cartel) has never stuck.

We'll see. Here are some fresh articles about the inventory situation. I put a quote about supply constraining which I think may not pan out, but we need to see how this happens. Next year should be interesting.

https://www.msn.com/en-us/lifestyle...n-inventory-after-2-year-shortage/ar-AA14hLHD

“I think what manufacturers learned after the pandemic is that they didn’t have to have this large number of cars on the ground in order to sell a certain number of cars.”

https://www.autofinancenews.net/all...ventory-reaches-highest-level-since-may-2021/

New-vehicle days’ supply in October climbed to the highest level since May 2021, while used-vehicle inventory slightly declined amid easing supply chain holdups. Days’ supply for new vehicles reached 49 in October, an increase of six days sequentially and marking the highest level since May 2021, according to Cox Automotive’s analysis of vAuto inventory […]

 

[ExFlyBoy5]

We have older cars. They are doing well at 12 and 14 years old. But we're a blown head gasket (Subaru, famous for them post 150k miles) away from a decision. So I've been monitoring inventory. That alone is tricky since the websites now try to force feed you "vehicle in transit/build" to fool you.

What I've seen the last few weeks is some relief in the less popular brands or models. For Subaru, that's the Outback. Most dealers have real inventory. For brands, that's something like Chevy. Toyota? Forget it... still. They had bad supply issues and they are popular. You are lucky to find anything.

Still, this is a change and the top starts somewhere. It just appears to me that the top has been reached. Who knows what the downslope will look like.

It could be steep if both interest rates and sudden supply relief overlay each other.

Then again, perhaps manufacturers will conspire to reduce supply. They keep saying they will. But will they? When the cars don't sell, will they be tempted to push them to dealers with back room incentives? That's been the story for the last 100 years, and one reason forced constrained supply (like the OPEC cartel) has never stuck.

We'll see. Here are some fresh articles about the inventory situation. I put a quote about supply constraining which I think may not pan out, but we need to see how this happens. Next year should be interesting.

https://www.msn.com/en-us/lifestyle...n-inventory-after-2-year-shortage/ar-AA14hLHD
https://www.autofinancenews.net/all...ventory-reaches-highest-level-since-may-2021/

Hopefully there isn't a rail strike because that would not help the car situation. The three largest items shipped by rail (outside of intermodal trailers) are chemicals, coal, and cars. Oddly enough, there is decent chance that a strike could in just a few weeks but the news has been pretty quiet about it.

 

[HawkeyeNFO]

Hopefully there isn't a rail strike because that would not help the car situation. The three largest items shipped by rail (outside of intermodal trailers) are chemicals, coal, and cars. Oddly enough, there is decent chance that a strike could in just a few weeks but the news has been pretty quiet about it.

It became a political thing, but now the election is over. I'm hoping we don't have to see what happens if there is a strike, and how it affects inflation and the stock market.

 

[Car-Guy]

It became a political thing, but now the election is over. I'm hoping we don't have to see what happens if there is a strike, and how it affects inflation and the stock market.

If a strike is adverted (hopefully so), the current administration will certainly claim credit for it.

 

[JoeWras]

So much gloom and doom around here...

 

[ExFlyBoy5]

It became a political thing, but now the election is over. I'm hoping we don't have to see what happens if there is a strike, and how it affects inflation and the stock market.

I don't think it was really *too* political (seems like most things are these days) but the government has tools that it can and has had to use (in regards the Railway Labor Act) to work on the negotiations. They are nearing the end of the law-mandated cooling off period and it may very well take government intervention to stop a strike.

Of course whoever is the POTUS will take credit...makes no matter the party affiliation.

Sorry to derail the thread...now back to your regularly scheduled forum thread...