Is Covid-19 a used car buying opportunity?

Is Covid-19 a used car buying opportunity?
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Several sites and researchers have claimed the used car market is cratering. How to take advantage of this? I’m in the market for a car and I’m not seeing any price decline among local dealers or private parties.
I’ve seen some deals on used rental cars which seem to be well below book, but not much else at this point.

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My guess is that you need to give it a few weeks.

There are lots and lots of folks who feel this problem will only last a few more weeks. I’m betting those folks are wrong and when they start to worry that a financial recovery might take longer than they expected - those car prices will start to drop.

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Yeah I don’t see significant change in prices yet.

Here’s a measure that tracks prices daily and they’re not showing much movement :

https://www.cargurus.com/Cars/price-trends/

And then this article :

" while overall retail sales have fallen dramatically, actual retail prices have remained quite stable, with Dealertrack showing a decline of less than 1% since March 16. Then there are rental risk units sold at auctions, where prices were down 18.5% compared to last month."

This is the Manheim index which is down ~10% :
https://publish.manheim.com/en/services/consulting/used-vehicle-value-index.html?mod=article_inline

But that index appears to be wholesale prices.

Seems that wholesales prices are already down steeply but this hasn’t yet been seen at the retail level.

People are shopping less and maybe dealers at the retail level haven’t had to drop prices or felt they couldn’t even though the wholesale prices are down.

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Auto manufacturing is also basically all shut down. So there’s less demand but at the same time there is no incoming supply at all (for new cars).

Makes sense that there’s still incoming supply for used cars from rental fleets, etc, that you pointed out, I’m assuming the car rental companies are in a similar situation to airlines. With near 0% carry costs, not sure what would be pushing dealers to lower the sale prices though for used cars (yet).

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The other part of the used car supply is leases expiring and some people not getting a new car because they don’t need a new one just yet or cannot afford to get a new one temporarily due to cashflow.

But yes all the indicator is for the supply of cars to keep getting bigger until economic activity returns fully to normal. Which is why the forecasts I had read were for the worse to be over the summer or early fall. Long time from now obviously with the evolving COVID-19 crisis so hard to tell what projections they used for those forecasts.

The US has lots of rigged datapoints. To give you an example, the companies that own some of the “book value” determining companies also own car dealerships. They have a vested interested to rig the numbers.

Right now, dealers are trying to offer minimial discounts. Wholesale prices are down 10-15% but the retail dealership prices aren’t down at all. How does that make any sense? If wholesale fell, then retail will eventually fall too.

There are also going to be a lot of returned lease cars and repossessions that happen in the next few months.

Car manufacturers will also be offering incentives that will make new car prices lower which should also cause used cars to go down (all else being equal, people want new rather than used).

Auto lenders are also siezing up and not loaning money. People are losing their jobs and not repaying their Auto loans. Meaning the buyers are going to be disappearing at the same time inventory is coming into surplus. Americans don’t really have any savings so the only way they can buy a car is with debt. If that debt is drying up then they can’t buy a car.

If you want a deal you’ll probably have a wait a while for these dynamics to play out and for sellers to begrudingly admit that these cars lost value. They’ll probably have to collect dust and have surplus cars sitting on the lot first for that to be proven to them.

I think the housing market is going to go down also but it will also be a slow process due to the delayed forclosures.

don’t bet on it. During the last recession the used car $ actually went up because people weren’t buying new.

Yeah they took lots of perfectly good working cars and ran polluting sodium silicate through the engine to destroy them in an effort to prop up the auto industry. That enabled used car prices to go up.

Hopefully we don’t ever see anything that dumb again our lifetimes.

Not really. Dealers are just playing the spread, no matter how high or low the book says.

https://www.nber.org/digest/feb11/w16351.html

“Cash for Clunkers Had Modest and Short-Lived Effects”

So Hertz is going bankrupt

They have about 70,000 used cars for sale nationwide right now.

There are nearly 800 up for sale within 50mi of Portland. Autotrader shows an inventory of about 15,000 available The Autotrader inventory also includes at least some of Hertz cars I see too.

They are quoting their prices seem at the bottom end of the KBB ‘Fair Market Range’.

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HTZ creditors are playing hardball, expect to see a big chunk of the USA fleet liquidated in the coming months. Hearing 400k vehicles or about 2/3 of their fleet could be on the auction block.

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400k vehicles sounds like a LOT of cars for the market to absorb. That could really tip the scales towards lower used car prices if there’s a glut in supply.

Maybe the 400k vehicle selloff rumors will spook other rental companies and dealers to get ahead of the storm and start discounting their own inventories. From what I’ve seen so far, most all of them seem content to maintain their old prices and try to ride out this period of low demand.

I haven’t seen much softening of the market. Been keeping my eye out for a short range EV but there are almost no private sellers. I know the advice is to not buy from dealers but there are almost no private sellers out there. I just don’t get it. I sold three cars and it wasn’t that much of a hassle and I got tons more $ than trade-in.

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I can only speak personally… although I know I could get more in a private party sale, I always dump my old cars at a dealer. That’s because fraud is so easy in these transactions - you really have to go to the buyer’s bank and get cash to completely avoid being ripped off as a seller. Then there’s dealing with people that want to inspect your car, test drive it without you… it’s a lot of hassle and not without risk. The paperwork is also annoying - you don’t want them driving around with your plates so at least here, you want to stop at the DOL with them so they can get their own plates.
They can also come after you if they “find” something wrong with the car.

At a dealer, the transaction is just done and you don’t have to worry about any of this. That’s worth some amount of money to me.

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Relatively few car sales are simply a sale, a majority includes purchasing a replacement car as well. And in a lot of states, trade-in values get credited off the sales tax charged on that new car purchase. Which means the trade-in value can be as much as 6-7% less from a dealer but you’re still coming out ahead.

You cant just compare a single line item to determine the more beneficial route, you need to see the end result of the whole equation.

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400k isn’t that much. In a typical year, there are around 40 mil cars sold of which about 16mil is brand new. Basically the supply is increasing a few percent.

I think demand is more of a concern. Also a lot of cars may get repoed as people that have been buying new cars really can’t afford them especially now that they don’t have jobs.

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400k used cars would be a lot to be dumped on the market at once.
If that were to happen. But one might expect whomever is in charge of selling all those cars in the bankruptcy would have enough sense not to flood the market for their own product all at once.

Also the cars being sold are all 1-4 years old. A lot of the 40M cars sold are older and not really in teh same market as the cars Hertz will sell. I mean there has to be good 20M used cars sold that are 5+ years old and thats not directly competing with whatever Hertz will sell.

Also they’re mostly mid range sedans. The Hertz cars won’t impact the truck market or luxury market at all.

So this will have much more impact on cars in that range. A flood of 2-3 year old Nissan Ultimas on the market will really hurt the resale price of similar age Ultimas and also competing brands.

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