We reported earlier that the smart money is getting out of OEMs and into parts and used sales. Business Week confirms that while new car sales are tanking, used car sales are on the rise. A Wachovia survey of 40 vehicle retailers shows an increase in used car sales; 28 percent of dealerships indicated that their used car sales were above expectations. Dealers are also reporting greater inventory pressure for used cars, along with greater than expected demand for pre-owned vehicles. Online research companies are also showing significant increases in searches for information about used cars. "Although there was some seasonality, we believe many dealers have lowered their expectations and new car intenders maybe switching to used cars," says Wachovia's Richard M. Kwas in a letter which accompanied the report. "In general, dealers conveyed that prospects are more interested in used vehicles over new." Good news for some, bad news for others.
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’99 Maxima, here I come!
-Matt
As someone who sees 40+ dealers every 2 weeks when delivering their courtesy copies of the one of the local ad books they advertise in, I’ve noticed that they can’t keep CARS on their lots but are overflowing with big trucks and SUVs.
Another thing I notice is that in the Mexican neighborhoods, the old “dustbuster” GM minivans reign supreme. If Lutz was 1/2 as smart as he thinks he is, he’d put out an updated version and advertise it bi-lingually. The lambda platform didn’t need a 4th overpriced, overweight CUV built on it, it needed a Chevy Lumina APV sold at a bargain price.
I’m surprised that this is a…surprise.
Its nice to drive a brand new car, but the initial costs are ridiculous. You lose at least $2k of the value as soon as you drive it off the lot, no matter what it is. And if you don’t plan to keep the car for more than 3-5 years its a waste of money.
Why pay $37-38k for a G37 when you can wait a year or two for leases to end and get one with some 5-10k miles on it (essentially broken-in) for $5k less?
I hope this is the last time I bring up my ’07 Sonata, but I bought it for $14k and it had 13.5k miles on it. That is with the 3.3l motor, 17″ wheels and a sunroof. $14k won’t even get me into brand new Focus! And who wants that?
zenith,
It won’t be new minivans replacing those minivans, it will be used CUV’s and SUV’s. They buy value (and those used minivans are really cheap), not new. Luckily for GM, they will likely still be GM because those folks find value in sticking with what they know how to repair.
New cars have so many gimmicks and useless crap on them today, who wants to pay for all the nanny-state requirements and electronic gizmos that appeal to only a limited number?
I got out of the buying new cars a number of years ago – it makes no sense no matter how you may examine it, if based upon logic.
I’d buy new only if the car was unusual and going away – say like a body on frame Crown Victoria.
I agree used cars a great bargains. I’m surprised new cars sell as much as they do. I think used cars are a well kept secret. Seems like word is spreading faster.
I think saying used “cars” is very accurate; around here, the few dealers that specialize in trucks and SUVs have either gone out of business or are about to. Drive by any local used dealer and see the same line-up of trucks and SUVs for weeks. The cars usually don’t last, though, save for the few “luxury” models they keep trying to get an extra 3-6K out of.
It seems a lot of former new car buyers are switching to used.Personaly I’ve bought my last new vehicle.I kind’a like the latest generation Yukon and its interesting to watch the price drop monthly.Instead of me taking the hit some other poor soul is.Thats why I,m a former new car buyer,and I’m not alone.
Hmmm… have bought eight vehicles in the last two days. Not a single one was an SUV or truck.
The lack of trucks and SUV’s is not unusual for me. But for some reason the market is starting to become a rather nice one and some of the higher end models that have been struggling are selling quite well.
For instance, I sold a 1998 Volvo XC70 owned wagon by two grandamas and had 85k for $7900. It was actually a car I bought from my mom and gave to her for West Palm Beach. Even after five months I still did exceptionally well and the folks who bought it got a truly fantastic vehicle for the long haul. That along with a T5 Volvo, a VW Passat, and a Buick made up the bulk of my higher end sales for this past week.
Purchases this week thus far…
2002 Volvo XC70, 111k – $6200
1996 Saturn SC2 – 109k – $750
1997 Town Car, Silver, Signature – $2100
1995 Volvo 850 Turbo, TMU – $700
1997 Mazda 626, Leather, 105k – $1450
1992 Lexus SC300 – 170k – $1750
2001 Pontiac Grand Prix SE – 150k – $2000
1998 Nissan Quest XE, 159k – $2050
2000 Dodge Neon Highline, 165k – $1300
2000 Olds Intrigue Leather – 180k – $1100
I am right now buying more vehicles on the side than I ever have in the past. Ever. A lot of my buyers are folks who can no longer afford the payments on their car and need to scrounge up enough money to get a ‘beater’ before their car gets repo’d. The flip side of it is that it seems in Atlanta that immigrants are also becoming a much larger portion of the ‘cash’ side of the business. It’s not too surprising since they have actually formed the foundation of most public auctions here for nearly a decade now.
The golden combination for most cars in demand seem to be…
1) Luxurious
2) Foreign
3) Cheap (Either to buy or cheap on gas)
If you get any two of the three, your car will sell at a reasonable profit since it’s tax season. With that in mind once we get to July and August, the used car market may start turning ugly. Election years are usually a bastard when it comes to big ticket purchases and with a recession to boot, we’re in for some strong volatility.
2 grand for a 150K mile Pontiac!? You must be an optimist…
Every time I see some vehicle driving around that has for sale written on the window, it’s something truckish that doesn’t get good fuel mileage. When I see an abandoned parking lot full of vehicles for sale, all suv’s and trucks.
The Ford and Chrysler dealers close to my home are almost indistinguishable from a used car lot, save for the signage. The Chrysler dealer has a few token new vehicles in a row six wide in front of the showroom, while beside the showroom us the used lot that has close to 100 cars.
The Ford dealer is no better, in fact, their used lot might be even bigger. Orphan, unloved vehicles can be had for a song these days. They have a 2005 Rendezvous (which is a pretty good family vehicle) without a scratch on it that has been sitting for 8 months. And Ford Five Hundreds with low mileage can be had for a 25-30% of sticker after 2-3 years with low, low mileage.
Now I just need to the price of a good used Bentley Continental GT to drop to 10% of it’s original sticker and I am laughing.
I quit buying new quite a few years ago and have found the “almost-new” market to be the best way to go. Let the other guy take that first depreciation hit, I wind up with a lot of savings on an upscale vehicle.
My last 4 vehicles were bought in November, seems that Nov-Dec are pretty good times to buy.
So, SOMEBODY has to buy these cars new before they can be used cars. Once a lot of people start buying used instead of new, the used car prices will go up, and new car prices will come down (as much as they can).
Perhaps it’s Hertz, Avis, Enterprise, etc. buying a lot of these cars. Of course, with GM, Ford and Chrysler trying to wean themselves off so many low-profit sales to rental companies, it seems that Hyundai, Mitsubishi, etc. will take up some of the slack (and be the losers instead).
Maybe the Chinese aren’t crazy after all.
A brand new “foreign” “luxury” and “economy” for about 3/4 of the price of South Korean or US (read: Mexico manufactured) vehicles might just resonate with some buyers sick of repair bills larger than a prospective new-Chinese-car payment.
My advice if you’re in the market for a used car is to still avoid dealerships. A used car salesman is just as likely to attempt to bend you over as is a new car salesman.
My last 2 purchases have been from elderly folks who had the cars serviced every 3000 miles whether they needed it or not. Private parties are the way to go!!
Buying a new car is truly a losing proposition. Since strugglig to clean up my debt, one of the big things I’ve decided never to do again is to purchase a new car and finance it. Given the depreciation and interest you pay in financing, I can’t see it anymore. I did (and won’t again) finance our 2003 Jeep Liberty when we bought it in 2006, but the only saving grace there is we bought it for nearly half of the original sticker, so the payment isn’t “too” bad. Still, the car is worth even less today and being only two years into the note, we owe more than it’s worth. Now that my son is about to inherit my trusty 1997 Toyota Tercel, I’m starting to look at a second (actually, third) car. While I’m severely tempted to buy a five year old Wrangler, that would necessitate financing, and I just can’t stomach stroking another check to yet another financial institution (thanks, Dave Ramsey!). So, I’ll more than likely look at buying a $3000 or so commuter come August. Good thing about cars like that…if maintained properly, you can almost resell a year or two later for close to what the purchase was for (witness again my Tercel…bought for $2500 almost three years ago, and could probably sell for close to that today). In the spectrum of auto purchases, my take is to buy used for cash.
Raskolnikov, I have to disagree:
My advice if you’re in the market for a used car is to still avoid dealerships. A used car salesman is just as likely to attempt to bend you over as is a new car salesman.
We just bought a low mile used from CarMax for our daughter. They don’t pressure sale, put everything on the window, and have a great warranty to back up their cars. I have finally convinced my wife that this is the way to buy instead of throwing it away on a new vehicle. We are in the process of getting her a 2006 Mini-Cooper, loaded with low miles, from CarMax for a great price. Like someone said earlier…you can’t get this good of a car, new, for the price.
I will never buy new again!
threeer,
You are absolutely right. And because of the loan requirements, buying used can be an even worse deal than new when financing. Combine that with the fact that the used salesmen are usually the better negotiators and you can be upside down in a month.
People really need to get over their fear of buying a beater. It takes work to get ahead. Do your homework whenever makinig a major purchase. Also, do lots of homework and networking to find a mechnanic and/or learn to fix it yourself. Try the community college or leisure learning.
Also, private party is plagued by cheats as well, caveat emptor.
Menno,
Don’t worry, someone will always buy new cars. It will be a long time before our population figures out the cheapest time to own is AFTER 80k.