Wholesale heaven used to be a crowded place at the dealer auctions. There were Taurae aplenty. Neons, Stratuses, Sables, Sebrings, Optimas, Milans, the names were as endless as the need to keep all the factories humming. Even in the ‘somewhat’ good old days of 2004, the average vehicle that sold for $5,000 at a sale usually had only about 70 to 75k on it. But now it’s a different auction world.
In 2010 we’re surpassing the 100k mileage mark for the $5,000 vehicle… wholesale. This is according to the folks at Manheim Auctions who are pretty much the 800 pound gorillas of the auction industry. There are new constraints in price, selection and even access to the vehicles. None of which are a good thing for those looking for ‘the deal’. Here are just a few of the major forces coming straight for the dealer’s jugular from the wholesale level.
Rentals: 1,000,000+ fewer vehicles are being brought to the dealer auctions. Last year it got to the point where the average rental car was being kept for 16 months. Think about that for a second. In an industry where a 6 to 9 month average was considered to be the norm only two years ago, you now have a doubling of the rental period. That segment represents a far larger portion of the late-model inventory than anything outside of the manufacturer’s online inventories… which are often first offered only to the franchise dealers. A surprising number of cars that were once the auction’s bread and butter are now simply shucked online at a far lower cost.
And yes, it gets worse… for the auctions. A lot of these rental companies are trying to retail these vehicles themselves. No need for auctions. No wholesalers. No bulk purchases from large buy-here pay-here dealerships to drive the ‘per vehicle purchase price’ down to a four figured loss. Rental companies have less access to capital to replace their fleet so they simply aren’t buying as much. They really don’t need to. In these days of repos aplenty… the rentals now command a price premium at the wholesale and retail level.
Manufacturers: GM and Chrysler are far less concerned about capacity utilization due to bankruptcy. I’ll avoid the ‘laissez-faire vs. lazy shit’ argument and simply say that both companies are now far more competitive on the balance sheet. There are no longer as many union contracts, pensioners, dealers or brands. That’s old news in these here parts. But the real shocker is… nearly everyone else has the same exact attitude.
Thanks to ‘Cash for Clunkers’ new car inventory levels quickly reached their lowest point in 35 years. They have come back up.. a bit. But not anywhere near to the point of 2007 and 2008. So far this year retail has only gone up 12% from the abyss that was 2009. But manufacturers are no longer trying to cram every space at the dealership with vehicles. Is this due to a newfound belief in retail business vs. fleets? No. The market has become far more risk averse and the surviving financial firms along with the manufacturers that once rubber stamped the inventory are now adjusting to it’s expectations. This means you will likely see far more leasing in the next few years… and far fewer models.
Consumers: You may believe that the discriminating John, Jane or Jim would be getting the better deal today. It is a recession after all. But nope. Not even close. The used car are simply trying to make the older vehicle look like the better one. Remember the 100k car at the auctions? It’s now getting a lot more repair and detail work. Reconditioning costs have more than doubled since 2007 which means that a part or two in your next ‘pre-owned’ car may be newer. But you are having to pay more for every recently detailed part attached to it.
Used car dealers have been able to pass on most of these costs due to the fact that the supply side has constrained considerably while demand has remained strong. The 2.5 to 1 ratio of used cars vs. new has ballooned over the past year to 3.4 to 1. There is no longer any social stigma in buying used, which means that dealers are trying to keep every good used unit they can get.
Yet there are fewer cars and far fewer ‘strong’ buyers. Fewer trade-in’s. Fewer cash buyers and those with decent credit.. Fewer rental and off-lease vehicles. Fewer of everything… except repos. But the auctions don’t always see those vehicles anymore either.
Finance companies are trying to reward dealers with access to their ‘repo’ inventory. The more paper you generate for the finance company. The better choice and availability of vehicles you will have in the end. This to me is interesting because it shows a lot of these companies believe that forming alliances with specific dealers is more profitable than the free markets that are at the auto auctions. In the case of the finance companies and dealerships… these alliances are strictly voluntary and synergistic. With the dealer and consumer? Anything but… because a surprising number of consumers are screwing themselves into a credit corner.
A lot of folks are simply taking the ‘$399 down and 48 months’ package of the ‘buy-here pay-here’ dealerships because they simply believe they must have a ‘reliable’ late model vehicle. In many cases I’m seeing finance terms as long as 72 months with $250 monthly payments for vehicles that often go for the $6k to $7k level wholesale. That’s madness. Six years of servitude for a vehicle that is often already five to seven years old. No wonder why our country is going to shit.
Buy in cash, or come with a big down payment and finance for as short a time as possible (like 24 months, if that). 72 month financing on a five year old car is insanely stupid…
X2… he summarised it quite well
“No wonder why our country is going to shit.” And US is not my country.
A lot of people very simply do not have the disposable income to buy a car outright. There’s a good reason: for the most part, they aren’t paid much, many goods are much more expensive and what wealth they did have was recently wiped out.
I don’t think many people really appreciate how easy it used to be (and how hard it is now) for anyone to get a well-paying job without much education or experience, especially in blue-collar.
It’s all well and good to pass judgement, but when median income has been more or less stuck for decades while cost-of-living hasn’t, something has to give.
And the solution is borrowing? The solution would be to spend less money. I tell my Finacee all the time my new Subaru is a luxury, if I needed wheels I could find a car for a couple $k cash to get me around. Granted I can take care of a car myself, but that is life, if you can’t afford to pay someone to do things for you, you figure it out for yourself.
I had an old Mazda for years that I paid less than $2k for and took care of myself cheaply. And even that was a luxury, it was a turbo Mazda, I could have made do with less.
I had 2 cars at one time when I washed dishes in a restaurant and they were all worth less than $10k together. And one of those was a freaking Turbo Buick Regal yee-hah. I sold it so I could get some learning so I didn’t have to wash dishes. I still had the other car to drive.
I have it better now but I don’t forget to do what I have to do when I don’t have it so good.
Same shit different consistency, falling from more or less the same height. With the same people underneath.
— Edit to add: People trying to buy stuff they can’t afford will never come out of the system intact…
I’ve already sworn to myself that I’ll never finance a new vehicle or CPO vehicle for longer than the included warranty, which has become my standard for judging when I can afford new. Used no CPO? Figure out what payment gives you room to budget for repairs/upkeep and how long you can realistically expect to hold on to the vehicle. Get the shop manuals, repair books, and up your skill set. Having said that, thank god cars are getting better built. Reaching 250,000 miles is nothing now a days, but I still won’t buy a used car with more than about 75,000 miles.
BTW I prefer my chassis classy. Although I wondering how someone got ahold of a picture of my high school best friends father (second picture from the left), the only used car salesman I’ve ever known personally.
I note that the used car salesman is the only one shown who appears to not have a car to sell.
Apocryphal?
Snake Plissken gets around.
Snake Plissken…I heard he was dead.
Related: I got some extreme sticker shock looking locally for a replacement for my 10 year old Camry. This is strictly point-A to point-B stuff, but I wanted something newer, possibly with a manual transmission. Figured I should be able to scrape together some decent, safe, 4 door car with a stick for $5k.
Yeah, not so much.
Found plenty of cars with 200k on the clock (or more…highwater was 348k on a Mazda Protege) going for $5k. Used car values (at least retail…no idea on private party) are very stout these days.
Ah, the movie poster for “Used Cars”. My dad and I saw that when I was 14 back in 1980. Kurt Russell was in true form in that movie. It was filmed in and around Phoenix, so it’s a good time capsule for what Phoenix looked like 30 years ago. Every stereotype about used cars were exaggerated (sp?) for comic effect.
Yes, I remember that movie, too. I was 17 and had met a new girl at our church and wanted to take her out on a movie date. Her family was a very(!) strict Catholic family, and frankly, she was rather sheltered.
She didn’t have a preference of which movie to see, and since I liked cars and it was a comedy, I thought this would be an OK movie. Hey it had Kurt Russel in it, (former Disney star) how bad could it be?
Oh baby.
I never imagined the amount of swearing in that movie, it seemed like every third word was f*ck or d*ck or sh*t. This poor girl turned 15 shades of red and (ostensibly) spent a lot of time in the restroom, but we got through it OK.
Long story short, that was the end of my dates with her.
But, the movie *was* funny as hell. One of my all time favorites.
Seven years later, at 21, I also watched this movie with a date from college on the VCR. She was NOT at all impressed with it. She kind of liked me up until then and was really nice to me – until that movie. Then she wouldn’t give me the time of day. Used Cars is kind of like Ultraman, Star Trek, and the Three Stooges. It’s a guy thing.
Probably the scenes with the strippers dancing atop the cars, and the commercial where the car hood was employed creatively. Most dates would not like.
Great half a movie, began to drag toward the end but still one that brings a big smile.
Glad to see that I wasn’t the only one who’s romantic intentions were thwarted by Kurt Russell and Jack Warden…
Prior to carmageddon in 2008, I noticed that SUVs with 80-100K miles were being advertised by private sellers at $20K plus. You knew then and there that the market was going nuts. Sure, they still looked like new, but they still had a lot of miles.
Recently had the infamous B7XA automatic rebuilt on my 99 Accord. The current high price of used cars seems to have increased demand for major repairs. Saw lots of the usual suspect cars with weak transmissions getting repaired. Cars recycled whole instead of recycled as junk yard parts.
Steve, roughly what is the current minimum price for a beater that can pass inspection? Curious if people can still buy a car capable of short commutes that can pass pollution and safety inspection for a price under $1000?
Between the economy and the C4C deals from last year, the amount of used cars has shrunken, and the prices have definitely gone up.
I can’t believe what some dealers or privateers are asking for used cars, so much so that I have put any ideas about buying a “cheap” used car out of my head for a while.
I had been toying with the idea of purchasing a fairly new PT Cruiser or HHR, but for anything I would consider buying, I’m going to need at least $8,000, and this is for cars well north of 100K miles. And even more if I want something with lesser miles.
I think I will sit this out for a while.
A friend of mine has a used car lot. Everything in his inventory is 100K + miles. Now I guess I know why.
Speaking of selling used cars, I’m kind of sick of Craiglist, since I keep getting bumped off the top of the page, and after that people seem to assume its sold, or don’t look that far.
Is autotrader a good place for an ad? Would I get a decent price out of Ebaymotors? Help please.
You might try your local paper. I’ve never listed a car on Ebaymotors, autotrader or craigslist myself but my friends have had good luck with buying and selling cars on craigslist. You could also try parking it in a visible location if you feel comfortable with that. I hope that helped and Good luck!
I tried to sell my 2003 S-10 on Craigslist for over a month and got nothing but E-mail spam for my aggravation. I finally put it up on Autotrader and it sold in less than a week to a couple from Florida. I recommend Autotrader if you’ve got a decent car ($10,000+) for sale. I think Craigslist works better for junkers under $2,000.
We have never had those issues, and the car my neighbor purchased has been great. You can get bad cars from anywhere if you aren’t careful.
Kijiji is a much better classifieds site than Craigslist, especially for automotive sales. It’s very popular here in Western Canada. I don’t think it has caught on as much in the U.S.
Here in Southern Ontario I see the new car dealers keeping a much larger inventory of used cars. Five years ago it was rare to see a four year old car at a new car dealer. My former boss,now retired just bought a 2000 Suburban from the local Chev dealer. I drove him over to pick it up. The used car manager told us “we will keep anything, in any condition,if we think we can sell it”.
Tell me about it. It’s even worse for used trucks, those that have any capability. My farm/dump/hay truck is on its last legs and I’ve been looking for a replacement for several months. My only real requirement is that it can tow 5500 lbs. F150, Silverado, whatever, I don’t really care as long as it’s in halfway decent mechanical shape and can tow my hay trailer. I tried the dealer route but quickly found they really don’t want to deal with cash buyers, clearly finance is where the money is. I’ve even had dealers tell me they lost the keys to the truck I want to drive, after I tell them I’m a cash buyer! I started looking at trucks parked in visible places and it turns out they are mostly being sold by unlicensed dealer scammers trying to pose as private sellers. Craigslist sellers are proud of their vehicles too. Sigh.
Xyzzy,
One tactic you can use with dealers is to not mention you are a cash buyer until the price is agreed. Often they will agree to a reasonable price if they believe they’ll make big bucks on the financing.
Now, I’m not advising you to lie, only to keep that wad of cash in your pocket hidden for a couple of hours…
poor americans. now they have to buy used. for life.
cry my a river.
I don’t think that the point is that “poor Americans, now they have to buy used”. It’s that they always did, but now it’s considerably more expensive for them.
@srogers
well, it’s supposed to be more expensive.
all things should be more difficult to acquire.
long enough have you been living on UNEARNED easy credit.
tighten the belt. and pay back the borrowed.
then i’ll show some empathy.
oh, and btw, if you guys think this is bad,
worse is yet to come. you waisted around $800billion
on TARP yet no jobs were created. you’re $13trillions in debt,
that’s around $44k for every man, woman and child.
and that’s just public debt. what more to say.
And they still look good in comparison with some European countries. Go to the CIA fact book and check the debt/GDP ratios of some EU countries.
In America we have an expression, “If you have nothing nice to say, say nothing at all”. This is especially true when you have nothing constructive to offer.
Yes, we do have that expression, but nobody around here follows it either.
The smart, patient buyer is always gonna be OK…the impatient, gotta-have-what-I-want, emotional buyer is always gonna pay for a car saleman’s bad sportcoats, toupees and child support…
There’s still a sweetspot of great used vehicles out there between $9k and say $14k, variety, reliability and condition.
Wow, after reading all that, I should consider myself lucky for picking up a month ago one owner, no rust 01 Taurus SE with 80K miles (130,000km), new springs, shocks and brakes for 2K (Canadian) cash.
I don’t know how many dealers read TTAC, but most of them with any experience will tell you the irony is that you’re quoting Manheim statistics — yet they and Adesa are largely to blame for the rise in auction prices. Basically during the past decade or so, they pulled a WalMart-style screw job on the car business. They severely undercut the traditional wholesaling market until it literally vanished, and now the auctions are a sea of hidden fees and costs.
I buy from both, as well as others nationally, as well as heavy equipment auctions, and frankly I don’t know how the corner hometown used car guys can even stay in business.
I’ve noticed the same thing lately. I’m sure there are a lot of factors, like all the perfectly good cars that got destroyed as part of the “Cash for Clunkers” program. One evidence of this is the letters I keep getting from dealers wanting to offer me maximum dollars to trade my car in for a new one. I talked to one dealer and he said they are having a hard time getting quality 3-4 year old cars, because people are keeping them instead of buying new and trading in.
This is bad news. My little bro is looking for a car, and I am too, and it sucks now that used cars are getting expensive.
Luckily for both of us I am pretty handy with cars. He can get any kind of reliable heap, maybe an old Sentra/Altima. I have my eyes on a 95-99 Maxima. Keep the engine healthy and the rest of the car will run forever.
I am glad to see people getting smart about buying cars. It’s crazy how many new cars are bought each year here, given the availability of perfectly good used cars.
I recently bought a used 2003 Taurus SES from Verizon off a used car lot.. 160k miles, full service history, new transaxle, new water pump,etc….full leather interior,24 valve engine, fair paint, no dents.
I think I stole it for 2700 bucks.
I did a Carfax and the used car guy never looked in the glovebox where I found all the records and had no idea where the car came from or the full service history.
I’ve hit several dealers looking for CPO’s recently. There are not a lot of deals to be had. I have always paid cash, and there is no easier way to observe the folly of overspending than to look at lease-trader. I am shocked at what some people pay per month for a car. Others in my income bracket are leasing expensive German cars, and yet I can’t bring myself to even pony up for a used 528xi, when I can get a used Acura TSX for so much less.
A current generation Honda Civic is a fantastic car when compared with almost anything from 15-20 years ago. ABS and air-bags used to be luxury items, hell even A/C, CD players and power windows were “luxury” items. Now every Kia has those standard. We’ve become spoiled and I cringe when I see kids just out of college wasting money on a 3-series lease instead of buying a used Scion and saving.