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What’s Going On in the Used Car & Truck Market?

By MisterLefty following x   2018 Aug 9, 4:04pm 1,126 views   25 comments   watch   nsfw   quote     share    


As “affordability challenges” hit new vehicles, consumers switch to used, prices spike to record, inflation psychology sets in.

For a brain-twisting phenomenon, amuse yourself for a moment with the Consumer Price Index for used cars and trucks. It shows that there has been 0% inflation since 1994 in used cars and trucks, despite actual prices having soared. So, yes, the CPI for used vehicles in June, as reported by the Bureau of Labor Statistics, fell 0.7% from June a year ago and is where it had been in April 1994.

This absurdity of 0% inflation since 1994 is caused largely by the BLS’s relentless and passionate application “hedonic quality adjustments,” which adjust prices for the costs of a model’s new equipment and quality improvements, such as, to quote: reliability, durability, safety, fuel economy, maneuverability, speed, acceleration, deceleration, carrying capacity, and comfort or convenience.

For a more sobering sense of reality, let’s head to the Manheim Used Vehicle Value Index. Manheim is the largest auto auction company in North America. Annually, about 8 million used vehicles – rental cars, lease turn-ins, repos, etc. – are sold at its physical and online venues. This index, based on these wholesale prices, is adjusted for mix, mileage, and seasonality.

On this basis, used vehicle prices jumped 5.1% in July from a year ago. The index, at 136.9, hit “the highest level ever for the series,” Manheim said. And look at that spike:

The index is up 16.4% from January 2010. Over the same period, the CPI for used cars and trucks, pictured at the top, fell 4.3%.

The index stayed in the same range between 2010 and April 2017, and suddenly, in May 2017, BAM. This was before the hurricanes. Then in late August and September, Hurricanes Harvey and Irma created a lot of “replacement demand” at auctions around the country. But that petered out sooner than expected, as there was less replacement demand than hoped for. And by November last year, auction prices were beginning to revert to the mean (the sharp drop in the chart above).

That drop bottomed out in March 2018, and prices have been spiking since. The increases in April and May were ascribed to seasonality, but then came June and July. Manheim:

[T]the abnormal summer bounce that started in June continued and strengthened in July. Correspondingly, the best-selling cars at Manheim are worth more today than a month ago, and many vehicles are worth more now than a year ago. Price comparisons to last year will be tougher through the rest of the year; but recent weekly increases were higher than last year, keeping current price performance ahead of last year.
And here’s why: High prices of new vehicles – “affordability challenges,” as Manheim calls it – trigger substitution:

The strange summer price appreciation in used cars is partly a function of a strong economy at its peak, with mounting affordability challenges for the consumer that favor growth in used vehicle sales at the expense of new. These conditions have supported strong used vehicle prices for over a year.

And inflation psychology is setting in with consumers:

The catalyst for even stronger price movement this summer is the fear of import tariffs’ leading to higher prices in the future. Higher prices and the related declining level of supply create a psychological feedback loop for consumers, encouraging buying now with the expectation that prices may be higher later.

The price increases differ by market segment, but according to Manheim, “more affordable vehicles are seeing the greatest increases in values.” Compact cars and midsize cars had the largest price increases, while prices for luxury cars were just barely in the positive.

Year-over-year price changes by major market segment:

Total: 5.1%
Compact cars: 5.2%
Midsize cars: 7.2%
Luxury cars: 0.2%
Pickups: 3.3%
SUV/crossovers: 4.5%
Vans: 3.4%
In terms of sales at the retail level, by dealers as well as private parties, July was up 3% year-over-year, Manheim said, citing estimates by Cox Automotive, which owns Manheim, Kelley Blue Book, Xtime, and Autotrader.com. It estimates that in July the seasonally adjusted annual rate (SAAR) of sales was 39.2 million vehicles – meaning that at this pace, total used vehicle sales for the 12-month period would be 39.2 million – “the strongest July reading in six years.”

This contrasts with new-vehicle deliveries, which fell 3% in July from a year ago, and were running at a pace of 16.7 million SAAR, according to Manheim’s estimates.

The industry now has to “estimate” monthly new-vehicle deliveries after GM stopped reporting its deliveries in April; GM accounts for over 17% of the new-vehicle market. And as of April, the industry has to fill that hole with estimates. Hence Manheim’s “estimates.”

The new-vehicle market, in terms of the number of deliveries, peaked in 2016 and declined in 2017. The earlier part of this year was slightly stronger, but now the market is losing steam again, as more and more consumers – including many subprime borrowers that are getting locked out of the new vehicle market – switch to used vehicles.

GM, Fiat Chrysler, and Ford all got ugly in unison, in one day, something we haven’t seen since the Financial Crisis. Read… Carmageddon in Detroit

https://wolfstreet.com/2018/08/09/whats-going-on-in-used-car-truck-vehicle-market-prices/

1   APOCALYPSEFUCKisShostikovitch   ignore (38)   2018 Aug 9, 4:46pm   ↑ like (5)   ↓ dislike (0)   quote   flag        

Two words:

Police Auction.

Only place you need to go for an affordable car
2   HEYYOU   ignore (25)   2018 Aug 9, 5:42pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

BLS- Bureau of Lying Shits

MisterLefty says
For a brain-twisting phenomenon, amuse yourself for a moment


Love it!
3   Evan F.   ignore (0)   2018 Aug 9, 5:51pm   ↑ like (2)   ↓ dislike (0)   quote   flag        

APOCALYPSEFUCKisShostikovitch says
Two words:

Police Auction.

Only place you need to go for an affordable car

Police auctions are shady AF. You don't know what kind of bullshit those cars have been subjected to. I do think fleet auctions are worthwhile though. Got our Sienna for like $6k under market that way.
4   Booger   ignore (2)   2018 Aug 9, 5:52pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

MisterLefty says
For a more sobering sense of reality, let’s head to the Manheim Used Vehicle Value Index. Manheim is the largest auto auction company in North America. Annually, about 8 million used vehicles – rental cars, lease turn-ins, repos, etc. – are sold at its physical and online venues. This index, based on these wholesale prices, is adjusted for mix, mileage, and seasonality.

On this basis, used vehicle prices jumped 5.1% in July from a year ago. The index, at 136.9, hit “the highest level ever for the series,” Manheim said. And look at that spike:

The index is up 16.4% from January 2010. Over the same period, the CPI for used cars and trucks, pictured at the top, fell 4.3%....


Even that 16.4% price increase over more than 8 years seems low.
5   Tenpoundbass   ignore (13)   2018 Aug 9, 5:53pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

The used car market is 1000 times better than it was back in 2014.
A total shit box that was going to blow a motor next month was going for $4500.00

https://miami.craigslist.org/search/mdc/cta

There's plenty of affordable cars if I needed a car today, and didn't have much money.

After Cash for clunkers There wasn't much incentive to buy a 5 year old car vs a brand new one. There were $18,000 5 year old Sedans on every Used car lot. Of course the junk yards were paying $1200 for junked cars. A junked car in your drive way was enough equity for a down payment for a car. Today it's back to you're lucky if they give you $35-$75 for it. Also cash for clunkers cleared out all of the cheap cars, now there's a new huge inventory. I've been leasing a new car every two years as most car buyers the last 10 years has been doing. I contributed at least 3 more used cars to the market than I would have if I was buying new cars.
I wonder how the tariffs are playing out in the new junk prices I haven't looked in a year.
6   MrMagic   ignore (11)   2018 Aug 9, 5:57pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

MisterLefty says
On this basis, used vehicle prices jumped 5.1% in July from a year ago. The index, at 136.9, hit “the highest level ever for the series,” Manheim said. And look at that spike:

The index is up 16.4% from January 2010.


Can you say "Used Car Loans up to 84 months"?

People buy "payments", not "cars". Make the payments more affordable by extending the number of payments, and you can jack up the actual prices.

The "sheep" are really stupid and can't do math.

Hmmmm, I wonder what other major market operates the same way?
7   BayArea   ignore (1)   2018 Aug 9, 9:20pm   ↑ like (2)   ↓ dislike (0)   quote   flag        

Not just used cars...

Houses, cars, sandwiches, jeans, fruit, everything has gotten out of this world expensive in recent years.
8   APOCALYPSEFUCKisShostikovitch   ignore (38)   2018 Aug 10, 3:02am   ↑ like (3)   ↓ dislike (0)   quote   flag        

Evan F. says
Police auctions are shady AF.


Yes and the cars are often stolen cars so fucked owners have abandoned them, meaning you don't want to pay more than a few hundred bucks, or about what a car is worth and should be priced new anyway.

Might as well be honest about it and achieve efficiencies of cost per mile by killing the acquisition cost of the vehicle. After saving $5000 to $30,000, does anyone need to pay attention to quaint ideas about mileage?

A car with no passenger side doors and "DIE! JOEY! YOU! CUNT!" spray painted on it will also get you respect and space on the freeway.
9   HEYYOU   ignore (25)   2018 Aug 10, 7:18am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Just like housing,one should only pay 10% of asking price.
U.S.A.! U.S.A.! U.S.A.!
We are free to overpay to satiate our egos.

APOCALYPSEFUCKisShostikovitch says
quaint ideas about mileage?



You crazy! ;-)
10   ThreeBays   ignore (0)   2018 Aug 10, 10:15am   ↑ like (0)   ↓ dislike (0)   quote   flag        

New cars had a boom earlier, and now used cars. IMO, just another sign of the growing economy with the top having peaked first.
11   anonymous   ignore (null)   2019 Feb 7, 5:59pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

New Trucks are Hot, Prices Surge. But Cars Face Carmageddon. And Total Sales Fall

Americans love paying big profit margins for big equipment, and automakers love them for it, but total sales are declining, and something doesn’t add up.

The average transaction price of the vehicles sold by Fiat Chrysler jumped 5% in January compared to a year ago; for vehicles sold by Ford Motor Company, they rose 3.4%; for GM 2.4%; for Subaru 5.4%; for Toyota 3.0%.

For the industry as a whole, the average transaction price in January, according to estimates by Kelley Blue Book, jumped by $1,481, or by 4.2% from a year earlier, to $37,149. These are based on prices paid by retail customers before factory incentives are applied. The average transaction price for full-size pickup trucks jumped by 5.3%, or by $2,500 from a year ago, to nearly $50,000. But Americans spurned the $16,000 small cars.

This has been the theme year after year: higher, and sometimes much higher dollar amounts for new vehicles, particularly trucks, even as the overall number of new vehicles sold has declined.

New vehicle sales in the US peaked in 2016. For the three US brands, for Toyota, and some other automakers, they’d peaked in 2015. In 2018, new-vehicle sales, at 17.3 million vehicles, where below where they’d been in 2015 and below where they’d been in 2000.

While this has caused a bunch of gray hairs because over the longer term, this is not the way to go, automakers have focused on what Wall Street wants to hear – particularly Ford, whose sales dropped back into the 2013 range: We’re selling fewer vehicles but we’re charging more money for each of them, and so we’re not worried.

There are two factors at play in these rising average transaction prices.

Americans shift to “trucks” & love paying extra

This shift by US consumers away from lower priced and lower margin cars to higher priced and higher margin “trucks,” meaning compact SUVs (crossovers, which are based on cars), pickups, and SUVs, is not new. This trend has been going on for years. But it has reached a critical mass to where automakers are now shutting down car production plants in the US, to focus on making what sells.

And American consumers, often assumed to be astute and price sensitive, are favoring and buying the vehicles with the fattest profit margins: full-size pickups, which include the top three US bestsellers in 2018 with combined sales of over 2 million:
•#1 bestseller: Ford F-series, 909,300 trucks sold
•#2 bestseller: Chevy Silverado, 585,600 trucks sold
•#3 bestseller: Dodge Ram, 537,000 trucks sold.

The next three bestsellers are compact SUVs (“crossovers”):
•#4 bestseller: Toyota Rav4 (427,200);
•#5 bestseller: Nissan Rogue/Rogue Sport (412,100);
•#6 bestseller: Honda CR-V (397,000).

You have to go down to seventh place to get a car, the Toyota Camry (343,400), followed by the Honda Civic (325,800); and by the Toyota Corolla (303,732). Note that Ford sold three times as many F-series pickups as Toyota sold Corollas.

More including charts and other data lists: https://wolfstreet.com/2019/02/05/new-trucks-are-hot-prices-surge-but-cars-face-carmageddon-and-total-sales-fall/
12   MrMagic   ignore (11)   2019 Feb 7, 8:19pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

Kakistocracy says
Americans shift to “trucks” & love paying extra

This shift by US consumers away from lower priced and lower margin cars to higher priced and higher margin “trucks,” meaning compact SUVs (crossovers, which are based on cars), pickups, and SUVs, is not new. This trend has been going on for years. But it has reached a critical mass to where automakers are now shutting down car production plants in the US, to focus on making what sells.


See that. Trump has increased wages and put more money in people's pockets. Instead of buying a Toyota Yaris, they can afford to buy SUV's and Trucks!

@Kakistocracy , Isn't Trump amazing?
14   AD   ignore (0)   2019 Feb 7, 9:17pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Ramsey is a media treasure. He has helped countless people from making dumb financial decisions.

I am surprised though that used cars would increase in price. I thought the younger generations do not want to own a car. Most choose to live in an area with public transportation, as well as use Uber or use ZipCar.
15   Hugolas_Madurez   ignore (4)   2019 Feb 7, 9:18pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

MAGA says



OK, the truck is stupid, but what's wrong with $175K house on their $55K income? The monthly payment is what - $600?
16   AD   ignore (0)   2019 Feb 7, 9:23pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Hugolas_Madurez says
OK, the truck is stupid, but what's wrong with $175K house on their $55K income? The monthly payment is like $600?


Sounds like a good opportunity to read The House Trap by Patrick, as well as use the NY Times rent-or-buy-calculator (https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html).

I've been listening to Ramsey a long time on the radio, along with Bob Brinker (who retired recently), and I think Ramsey said to not buy a house where the monthly expenses are more than 25% of take-home income Ramsey is very financially conservative.
17   MAGA   ignore (1)   2019 Feb 7, 9:26pm   ↑ like (3)   ↓ dislike (0)   quote   flag        

I rent and do not plan to buy another house unless it's a deal I can't refuse. I have most of my estate going to charity, when the time comes.
18   MAGA   ignore (1)   2019 Feb 7, 9:35pm   ↑ like (3)   ↓ dislike (0)   quote   flag        

Current ride: 2016 Honda Accord LX. It may be the last car I ever buy. I drive less than 15,000 miles a year.

Paid cash.
19   AD   ignore (0)   2019 Feb 7, 10:29pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

MAGA says
I rent and do not plan to buy another house unless it's a deal I can't refuse. I have most of my estate going to charity, when the time comes.


MAGA, you are going to have to then get a home at a fire-sale price like back in 2010-2013, and likely it will require some renovations and repairs.

I suspect you are careful to spend within your means and strive to reach (if not already) "critical mass" as far as savings (i.e., Bob Brinker strategy).
20   APOCALYPSEFUCKisShostikovitch   ignore (38)   2019 Feb 8, 12:04am   ↑ like (1)   ↓ dislike (0)   quote   flag        

HEYYOU says
You crazy! ;-)


Think about it. The Buick Electra 225 cost you $144 at the police auction. No one else went near it. You showed up with a pair of channel locks and a charged battery, total cost of $50. Fucking thing starts and goes into gear. Do you really give a fuck that it costs you $60 to fill the tank instead of $34.

FUCK! NO!

Pry one of the passenger side doors open if you can and deposit wife and M134.

Good to go!
21   MAGA   ignore (1)   2019 Feb 8, 2:44am   ↑ like (1)   ↓ dislike (0)   quote   flag        

APOCALYPSEFUCKisShostikovitch says
Buick Electra 225


Sounds like a perfect car for a Realtor.
22   joshuatrio   ignore (0)   2019 Feb 8, 5:52am   ↑ like (1)   ↓ dislike (0)   quote   flag        

My wife's car: 2019 Toyota Highlander XLE - paid cash for it.

My car: 2009 Honda Civic. Keeping for 5 more years before I pass down to my kid. In which case, I'll buy another Civic.

I don't give a rip about what I drive, but I like to keep my wife in something relatively nice/reliable. Her last car was a CR-V, which was a noisy, tin can. We had it 10 years before moving up to the Highlander. It was a chunk of change, but we enjoy it. Sure, we could have used the $35k on something else, but our house is paid for, and our retirement accounts are fully funded.
23   Ceffer   ignore (1)   2019 Feb 8, 6:06am   ↑ like (2)   ↓ dislike (0)   quote   flag        

Police are so stupid. Sometimes the police auction cars have all the hidden heroin and cocaine still in them, and you can turn a tidy profit.
24   Tenpoundbass   ignore (13)   2019 Feb 8, 6:59am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Hugolas_Madurez says
OK, the truck is stupid, but what's wrong with $175K house on their $55K income? The monthly payment is what - $600?

It would be more like $850 to $900, but with the escrow payments for Tax and Insurance and PMI it would be over $1500 a month.

The average house should still be around $120K for a crappy 1200 - 1900 sqft Burbdale Ranchero house.

When a Politician finally figures out the only way to bring back America's middle class and our high standard for quality of life, will be to build 10 to 20 new major cities between NYC and LA. Housing affordability and availability will fall back line with the wages. Either wages will sky rocket to make it seem like Houses are $120K or the value of houses will actually fall to $120K and we'll see the return of the $3.00 Chicken, and 3 for $1 snack crackers. Which are damn near $5.00 a box now.
25   zzyzzx   ignore (1)   2019 Feb 8, 7:00am   ↑ like (0)   ↓ dislike (0)   quote   flag        

joshuatrio says
In which case, I'll buy another Civic.


Which version?

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