CNW Research’s of Brandon, Ore, is in the business of tracking “consumer confidence, new-used floor traffic, manufacturer and dealer incentives, and used vehicle sales by channel.” In their daily work, they stumbled across a disturbing trend. As every grizzled veteran of this industry remembers, when the economy is down, used cars do well, because folks can’t afford new ones. People hold on to their ride much longer, which lowers the supply of used cars. Fewer new car sales mean fewer trade-ins, which lowers the supply of used cars. Or so the wisdom of the grizzled veteran goes. This time, it’s different. Sales of used cars fell 20.7 percent in November, compared with the period a year earlier. That’s still benign compared to the 37 percent hit the new cars took. But it disturbs the veterans nonetheless.
CNW expects 2008 to come in 36.6m units sold, down 11.5 percent from 2007. That would mark the lowest levels since the 1982 recession. Whoa: November new car sales also were the lowest since 1982. Are people tired of cars, whether old or new? Have we just been catapulted back to the bad early Reagan years?
The New York Times ventures a guess: “The most prominent reason for the declines, auto market analysts said, is fear of the future.” People are not buying because of the fear of the unknown?
CNW Research has a more plausible explanation: Lack of desire, paired with a lack of dough. CNW says, used-car dealers have seen about half as much traffic in their showrooms this year. Customers that come on the lot are finding it harder to get loans because dealers are asking for more money down and demanding higher credit scores from people taking out loans.
Some friendly neighborhood used car lots resort to even more invasive tactics: ankle bracelets for cars. “To ensure that monthly payments are made, the vehicles, which are typically from three to eight years old, are often equipped with GPS devices that let the dealer disable the car’s starter if the buyer falls behind on payments,” writes the New York Times in utter amazement, having just been introduced to the netherworld of BHPH. Some gizmos will even talk to the owner who falls behind payment. Cars with on-board collection agents.
Of course, this creates a market for counter-measures. At least one market that’s up.
I can’t wait until some dealer gets sued into bankruptcy because he turned off somebodies car during an emergency or they get murdered while walking home after their car gets disabled.
The way things are going, toxicroach, you’ll probably see it soon enough. I presume you meant to say “it’ll be unfortunate when some dealer gets sued…(because)…” since I’m pretty familiar with all the B&B on here and certain you aren’t actually hoping to see someone get murdered. Just an unfortunate turn of phrase…
My wife’s a nurse, thankfully not in California, since the supreme idiots I mean courts in Californicate, just ‘declared’ that good samaritan laws don’t apply there any more.
An individual was in an auto accident, folks surrounding the car were afraid it’d got into flames, got her out – she was a parapalegic (may have been anyway, from the accident) and now she has permission to sue them.
Simply stated, if this concept moves from state to state (which it surely will), then you can soon forget having ANYONE help ANYONE for ANY reason for fear of being sued.
As is stands now, my wife and I both know that it is only a matter of time before the other laws in the west travel east; my wife works with the elderly, and once laws come into place ‘demanding’ that she put elderly folks down like lame old dogs and cats, she’ll quit nursing. We’re real Christians so she won’t be killing anyone even if it’s declared ‘mandatory’ for the ‘welfare of the state’ and ‘legal.’
Same concept here. Once the lawsuit happens because a car was turned off (due to nonpayment), then the unintended consequences will be that – if you’re a deadbeat or have been one and don’t have a nearly perfect credit score, you will be walking. Or paying saved up cash money for cars.
We all deserve the government we get. Look at Zimbabwe. Two wrongs don’t make a right. Whites used to run Rhodesia, and it worked. Nobody went hungry; it was a green and pleasant land. Mugumbe came along with his terrorists/freedom fighters (whichever way you want to look at it) and in 1980, gained ‘independence’ for Rhodesia, now Zimbabwe. Next thing you know, the blacks made the whites look like angels, and black run government essentially killed or deported the whites, stole the land and handed it over to blacks. Well, now Zimbabwe is starving to death. Mugumbe also said “we don’t want any western help, or advice.” So instead, they have 2.5 million percent per year inflation. A few weeks before my friend arrived there, Zimbabwe dropped 10 zeros from their currency. The day they got there, a loaf of bread cost 1000 Zimdollars. Next day, 5000. Next day, 20,000. Get the picture? People there stand in line 1/2 the day, at the banks, as they can only take out 5000 Zimdollars per day (it went from 1000 to 5000 in a matter of days). The bus cost 3000 to get to the bank, so you stand in line 1/2 the day and can’t even buy a loaf of bread.
A colleague was born there, went back for a church to help and showed us photos last week at work; the people are literally eating ants and leaves, and dying of AIDS left right & center (or, starvation, or cholera).
People get the government they deserve. Then they get to live or die under said government.
There is simply a massive glut of cars both new and used. Mass transit options are increasing and new business models in the form of car sharing services are taking hold. Even though fuel is once again dirt cheap, many folks have stayed with their alternative commute habits over the past year in the forms of riding bicycles and car pooling. Add in the impacts of house and 401k value depreciation plus people now reversing course to focus on general debt reduction and it will be a while till cars become an item of desire.
@menno: When you rant about Rhodesia (after a segue through the Good Samaritan Law) in a used car story, do us a favor, spell at least Mugabe and Zimbabwe right, ok?
Recently was in the market for a car and didn’t care if it was new or used. Ended up with new since given current incentives and dealer’s willingness to negotiate price the difference between price of new car and the same car 2 year old 12K miles was only about 10% (actually at one dealer a “certified”, off lease, 2 year old model was window stickered the same price as the discounted price on the same car new).
Given the uncertainty involved in owning a used vehicle the savings just didn’t make economic sense.
Used car dealers (and for sale by owners) have to be a lot more flexible on price to boost sales.
Currently it appears that the supposed 30% hit a 2-3 year old car takes in resale value is calculated off original MSRP. At this time even desirable cars are selling new for 10-15% off MSRP
Used cars are overpriced for the current market and this report doesn’t surprise me in the least.
Another factor is that many young folks (think high school age) do not seem to be interested in cars. If a kid can walk or use mass transit or ride a bike, why bother with a car? Cars just seem to them like something their parents did.
Of course there are exceptions, and there are motorheads and enthusiastic cars among the demographic as well. But when I was a teenager everybody wanted a car, now it’s much less than everybody (though I’d hesitate to pick a percentage).
This means that the demand adjustment may just be beginning. Regardless of whether it is fewer buyers or excess capacity or just the economy, there are already more cars than we need for the foreseeable future.
One more factor which has been under reported is that independent dealers are closing down left and right.
The loss of franchised dealers is well documented but from what I’ve been hearing from some industry contacts is that the credit crunch is forcing independents out of business at a much higher rate. Let’s see: floor planning is evaporating, inventory loses value at a much faster rate, customers aren’t coming in and when they do financing is unavailable. I’m actually surprised the used car sales rate isn’t down even more.
Many of the banks that used to offer peer-to-peer (FSBO) auto financing stopped this practice very early on in the current financial crisis. So while it usually makes much more sense to sell a car oneself (rather than trade it in) it’s a lot harder to sell late-model cars this way than it used to be. I’m not sure if CNW’s numbers are only for dealer sales of used cars, but in general, it’s ugly out there.
One good thing, though, at least I don’t live in Zimbabwe.
Yeah, I don’t WANT anything bad to happen because they turn the car off, but it will. And then someone should sue their asses.
Used cars are a good deal for people that can pay cash for them.
Once a used car is financed they usually require full coverage insurance, and the cost of that is naturally very high for people with bad records and poor credit ratings.
As long as these people can get into a new car it actually costs less as far as monthly payment.
As soon as proper credit is required for a loan they look into used cars and find them unaffordable also in terms of total monthly cost, unless they can pay cash.
Not to criticize Mr Lang that writes here sometimes, but he was mentioning putting someone into an 02? Explorer for like 100 a week. That’s 400 mo plus insurance and repairs for an old undesirable car. 700 a week for that? No wonder people can’t afford it.
Not a criticism of mr Lang, he calls them as he sees them. The problem is the nimrods that think the car costs them 100 a week and can’t figure out where their money goes.
An individual was in an auto accident, folks surrounding the car were afraid it’d got into flames, got her out – she was a parapalegic (may have been anyway, from the accident) and now she has permission to sue them.
I didn’t find this ruling particularly outrageous, considering we’ve pretty much gotten used to the idea that anyone can get sued for anything. The only difference was that CA actually had a law on the books prohibiting people who were acting in “good faith” from being sued. It doesn’t mean this person will be sued or that if they are sued they would lose, it simply gives the “victim” the right to sue. What’s so horrible about that?
I don’t know all the facts about the case that was used to challenge the law, but I could easily imagine scenarios where people trying to do the “right thing” just makes things worse, even horribly worse, due to their ignorance. And since when is ignorance a defense?
The two people involved in the California case were returning from a night of drinking and other recreational drugs at a friend’s house. One of them went straight at a turn and ran of the road into the side of a hill. The other one in an obvious state of intoxication thought it would be a good idea to pull her friend out of the car before it exploded, not that it was even on fire. The court ruled that the person needed to exercise ordinary care when attempting to save somebody. This lady did something that showed a serious lack of good judgement. You can still perform CPR on a person whose had a heart attack and collapsed in front of you. That sort of act would still be protected under the good samaritan law. Doing something that is obviously assinine and saying later that you were just trying to help will not be protected.
Regarding the original article.
How’s this for another view point? Maybe it’s the person’s own fault for not making the car payment that they are walking home at night? By the same logic, you could sue somebody for physically reposessing their car (you aren’t paying for it, so it’s not yours)while you’re at work. Either way, you are without a working car. Lets just make car reposession illegal.
I second the motion that young people are not as car crazy as I was/am. My kid (now 13) was given every manner of exposure, my old classic hot wheel sets, slot cars, great die-casts, rides in my ‘Vette. Basically, he could care less. I blame the Internets.
CNW Research gets it right. Lack of desire, paired with a lack of dough. Autos have always been a cause for excitement, but not when people are depressed. They lose interest in pretty much anything, as there isn’t the perceived ‘bang for the buck’. People going from 2 cars to 1, or 3 car families to 2. Reduced availability of leases too, what happens to those people when the lease expires. And cars can go much further than the short ownerships people got used to in good times where they would trade for something different, just because they could.
Why would somebody buy a car (used or new) in these times if he/she already has one? You just keep the money in case you need it for something really important. The car market is saturated, period.
I think the big cause is supply and the fact that people are buying cars based on need, if they don’t need to replace the car right now they aren’t. The buyer that wanted a new/used car just have something different is vanishing fast now if not already gone. Add in the fact that the Big 3 have been over building cars for years and everyone else tried to cash in on the profits and that leaves you will so many relative new cars with lots of life in them and it brings you back to the lack of a need to replace it.
I bet you next year the drop will be even worse, unless the economy does some magic revival, I’m not holding my breath on that one. Until all these cars that were sold and the ones flooding parking lots unsold start to wear out and bring down the oversupply there wont be any good times ahead for car sales, new or used. It will probably be mid year 2010 before supply and demand levels out, just look at how many cars are sitting unsold and all the relatively new cars driving around the country.
I have not been able to read every blog on this site so maybe someone has talked about it already.
I cannot figure out how Carmax is not dead already! They seem to always have the highest prices for used cars and they do not give incentives or discounts. The only sales advantage I see from them is that they don’t sell cars that blow either flames or snowflakes out of the a/c vents. Does that justify the extra $$$ that they sell their cars for?
I’d say that their time is coming, yet another auto industry failure waiting to happen. And if I do recall they are owned by Circuit City, which is a company that has been doing poorly for quite some time now.
Has anybody read anything about Carmax?
I was looking for an additional car to add to the garage this last Fall. First I was looking for specifically a later model used Cherokee, or even an older then that Grand Cherokee. This was after I had purchased four new vehicles that have (or had) been nearly problem free.
After test driving seven Cherokees and two Grand Cherokees over several weeks, I found:
1) People do not take care of their cars the way that I do.
2) You are bs’ing me when you say that all those scratches and dents are just from use as a daily driver.
3) Private sale owners had little to no maintenance history. All that they did was maybe an oil change at “Jiffy Lube” (as several proudly said… LOL).
4) Used car dealers pretty much take in old trades and immediately moved them to their lots without even a mechanic looking them over (like the Cherokee at a Honda dealer that had a leaky transfer case… tough one to spot there buddy!).
5) Small town used car dealers are crooks! I’m sorry sir, but even the pictures of Jesus on your office walls still won’t cover for that lie that you just told me that the brakes were just serviced when clearly that thing only stopped like a freight train!
6) Dealers marked up trade-in’s way too much for what they paid for them. And screw you, I’m not paying that!
And last… I hate used cars, and although less expensive to purchase, I don’t care to ever buy anyone’s problems ever again! So I bought an ’09 Civic Coupe instead.
Another factor in reduced used car sales may be a lack of need because cars last longer than they used to. Even the undesirable cars on the TTAC worst 10 list are capable of providing reliable transportation. Some manufacturers still have to work on refinement, but reliability is pretty good on most cars.
I plan to find a good deal on a luxury car coming off lease, but my 9 year old car provides reliable transportation while I wait for the right car at the right price. Easy to delay the purchase for months to make sure I still have a job.
I haven’t seen any evidence of people abandoning cars for mass transit here in Texas. People use mass transit to avoid parking and traffic problems downtown, but they still need to own cars. Gasoline is selling for less than $1.50 per gallon here so fuel cost is a non-issue in the ride vs. drive decision.
Has anybody read anything about Carmax?
Look it up on Bloomberg, IIRC.
Sales are down (duh). They are posting a loss (duh).
They are not sure when sales will recover (wow).
When the dust settles (MAYBE mid 2010), then you will see the (dealer) used market pick up. After eBay and CL sales/prices start to rise.
If you want to really understand where the market is headed, look at Craigs and FleaBay. This will show you the micro of microeconomics. People are trying to sell $3K grandfather clocks for $400 and they aren’t getting sold. There’s hundreds of BMW’s for sale in my little midwestern burg. They are all at panic sale pricing, at least vis-a-vis what they would have commanded a year ago.
At the risk of not blowing happy-fun-unicorn-sunshine up people’s asses, 2009 is gonna be rough. Really rough.
I’m hopeful that we will all finally acknowledge and deal with the size of the iceberg. But that will take all of next year. At best.
I was wondering if the metrics might be missing some of the market? What are the numbers based on?
Could it be that thanks to Craig’s List, private sales of used cars are more common now? And if so, are they being recorded and tracked by this firm? If they rely on dealer reporting, then they are missing a growing slice of the used car market.
The difference is that cars today are all around better than they were in the past. There’s no reason that a car built in the past 10 years can’t go for 200k miles and/or 10+ years. Of course people want a new car all the time and easy credit made that possible. Now in an economic downturn there’s no money to get new so the vehicle fleet on the road today will probably rumble on for many more years than it would have in better economic times.
I’m actually happy if teen driving is down. Teens are consistently terrible drivers and great at killing themselves while behind the wheel. Text messaging while driving comes to mind. The states respond by continually adding very confusing laws about teen driving; day/night, who can be a passenger, etc. I think the driving age should just be raised to 21, and skip all the rules.
A big part is that cars just last longer than they did years ago.
I can remember when it was time for a new car when the odometer hit 100,000 miles. My current car has 105,000 miles on the odometer, and plenty of friends also have cars with over 100,000 miles on the odometer. All of these cars are working without any major problems.
All cars (even those designated as POS by the B&B) do last far longer than the old days. I can remember my Dad trading every three years because he knew at that point the “old” Ford would be needing a ring job. When was the last time you heard of anyone needing to have this done?
Cars are built to much closer tolerances today and virtually all of them will last many years IF properly maintained.
Circuit City filed for C11 bankruptcy protection more than a month ago. They just received permission from the judge to break most of their leases and to not make severance payments. Sign of the times?
With some basic maintenance, a halfway modern car lasts longer than 10 years or 100K. In car crazy Germany, the average age of any car on the road is 8.4 years, 10% of the cars are older than 16 years. If you’ve ever been on a German autobahn, it doesn’t feel like you are in Cuba.
“Not to criticize Mr Lang that writes here sometimes, but he was mentioning putting someone into an 02? Explorer for like 100 a week. That’s 400 mo plus insurance and repairs for an old undesirable car. 700 a week for that? No wonder people can’t afford it.
Not a criticism of mr Lang, he calls them as he sees them. The problem is the nimrods that think the car costs them 100 a week and can’t figure out where their money goes.”
It was 80 a week, but I changed the terms on it. Fellow put down $2500 and I reduced the balance to $50 a week for the term of the loan at 10% interest (Sales price was $5500). Most folks in this business will try to charge 28% + bogus fees (at least here in Georgia). I don’t and never have. Encouraging up front payments, keeping the interest rates reasonable, and avoiding bogus fees is what enables me to have only one repo for all of 2008, and several families with at least two vehicles with me.
Then again, I didn’t get heavy into this until October of this year. Before that time virtually all my customers are cash customers. These days I also offer my cash oriented folks ’60 days sames as cash’. If they pay it off in cash they get a lower price. Unfortunately only one has taken me up on that side of the equation as well.
Oh well…. you’re right. Sign of the times.
It wasn’t meant as a criticism of your business.
Just used as example in a line of reasoning of why used car sales are down also. For many people the monthly expenses are up there with new cars and/or are much higher then they think.
If you are going to go used, which I no issue with whatsoever, then buy cheap, do not finance and just carry liability insurance. Costs go down to nothing.
I agree. In fact if I could turn back the clock and simply deal with cash customers (or those who can get superprime financing) I would gladly do it.
I enjoyed selling six to ten year old cars that didn’t require carrots, sticks, and other trappings that are designed to contain human stupidity. Cash customers, whether they pay $500 or $25000, are almost always far more intelligent and interesting than the ‘buy here / pay here what’s a dipstick for?’ group.
Hippo, no offense taken. Your observations are just the reflection of what I’m seeing these days. Thank God I still work as an auctioneer.
I’m curious – does CNW Research only look at retail sales?
As someone who has four vehicles and two teenage drivers, with the third about a year away, I tend to find used cars on CraigsList.
I also have sold my last several vehicles using this, as well as my hobby vehicles, old motorcycles that I buy, restore and sell (except for some that I believe are good long term investments).