When do wholesale prices equal retail prices?
Think about it for a second. When do the prices of a consumer good become so expensive that there is virtually no markup?
Here are a few scenarios that I can come up with… given what I’ve seen at the auto auctions these days.
1) Extreme shortage of product and too many wholesale buyers.
2) Most everyone buying the product is financing it to sub-prime customers who only care about ‘the monthly payment’.
3) You have enough seasonal dealers, overseas buyers, and funny money that the laws of economics no longer apply.
Now having said that, I ended up buying five vehicles at one sale recently. My purchases were…
2001 Hyundai Elantra, Silver, 150k: $850
2002 Hyundai Accent, Auto, 120k: $2225
2001 Toyota Solara SE, Cloth, 130k: $4680
1998 Saturn SL2, Base, Stick, 175k: $1150
1992 Toyota Corolla DX, Stick, 178k: $885
Were those purchase prices too high? You never know until after the fact. Cars that look like dealer queens can be riddled with gremlins. While a beaten up old jalopy may still have more life left in it than Keith Richards at an all-night party. So let’s look at the five vehicles and, based on my reasoning (or lack of), make your own determination.
The silver Elantra was supposedly an inop at a ‘trade-in’ auction that averages a bit over 100 vehicles every week. At this auction the inops are put far away from the rest of the vehicles. Quiet. Secluded. A place where few if any buyers bother to even look at them.
What was wrong with it? Couldn’t get into third gear. Oh, and the rust. My good god this thing was rusty enough! We’re talking deep shades of flake brown on nearly every part of the undercarriage. I looked at the history and found the owners had more or less sat on it for a year once the clutch started to give out.
But it looked… nice. Good enough to have it go through another sale where there would be more than a few people looking at it. The wholesale price should be around $1800 at a good sale with plenty of buyers, and I should find out by this Wednesday whether it goes through.
The 2002 Accent has new belts, good fluids, and… an emissions issue. Like most metro areas, Atlanta has thousands of people who are compelled to give up their rides due to an annoying and elusive emissions issue. I almost sold an old Camry before I got into the auction business because it had failed emissions three times and was running out of repair possibilities. Based on the Carfax history I got before the sale this Accent looked to be no different.
That old Camry only needed a bottle of ‘Guaranteed to Pass’ and a lot of highway driving. Old Accents though are known for having cheap catalytic converters . So I will likely have to spend around $150 for a new one. Given that small cars with automatics are the most finance friendly vehicles in today’s market, that shouldn’t be a bother. So long as it doesn’t need something else.
The Solara needed a new front grille. $80 on Ebay. The Saturn needed a left front quarter panel. 2nd generation Saturns have panels that are flexible to a point. But if you hit them too hard they shatter. The right color panel was found for $50 at Salvage Hunter Auto Parts, so I got lucky there.
Finally there was a blast from the past. A 1992 Toyota Corolla DX. Why get a vehicle that old? Let’s just say prior owners make all the difference. The prior owner worked at the local university, had the maintenance done at a Toyota dealership, didn’t drive very much, and managed to do everything from putting Michelins on the vehicle to keeping the (has to be second) clutch in good shape.
The paint was sun burnt to a crisp. But the interior was fine and surprisingly clean. Back in the pre-recession days $885 was about par for cost. Now it’s a steal. I ended up driving the thing to the nastier parts of downtown Atlanta and it never missed a lick.
As for other vehicles? There were some deals and many dog fights. Here’s a short list…
2000 Toyota Camry LE, No Roof, Cloth, 94K : $5600
2005 Nissan Quest SE, Loaded, 74k : $8700
2003 Toyota Corolla LE, 200k, Cloth, No Roof, Auto: $5900
2002 Ford Explorer XLT, Auto, Leather, No Roof, 109k: $5300
2011 Hyundai Santa Fe GLS, Frame Damage History, Base Options, 11k: $16,600
1999 Mercedes E320, Loaded, 126k: $5400
2005 Mini Cooper Convertible, Auto & Alloys, 144k: $6200 (came in second on this one)
So what was the best deal? Which one do you think will come back to bite me worse than Marv Albert on a blind date? As with all things in the car business, every opinion is worth telling.
i think you might get a little hurt on the solara, unless its spun on a finance deal. the saturn, richpin06a on youtube should be helpful if anything else crops up.
No roof? On two of the vehicles? Whiskey Tango Foxtrot, Lang.
No sunroof, probably.
Yes, no roof is dealer speak for no sun/moon roof.
Speaking of Whiskey Tango Foxtrot, some of those prices were steep IMO but this one took the cake:
2003 Toyota Corolla LE, 200k, Cloth, No Roof, Auto: $5900
Auto Corolla for 6K plus the fees wholesale with 200K on the clock (has to be rough with those miles) and prob little to no options (what was an option on an 03 besides roof? CD player? power mirrors maybe?). Seriously? No really, seriously? Do people really buy here pay here that? I think our country’s in a bit of trouble when stuff like that does so well. About five years ago at Manheim Butler (in Pittsburgh)I was in the as-is lane with my business partner, and a 92 Lex ES300 comes through, looks pretty clean (Red on tan leather IIRC) 133K on the clock. We started speculating on what it would do since we had earlier spent our budget, I figure around $2500 at the time. Car did $3750 which astounded us given the miles and even year (this was pushing 15yo at the time). Granted history has shown the early 90s Lex to be reasonably solid, but even at the time, what could you retail it for? I figured to the unscrupulous crowd who would love a clean Lex you could put it out for at least 5-7 but more would be pushing it when newer lower miles models (late 90s) would be had at the time for around 10 and change. I think I saw a 97 at a rivals lot with maybe 90K asking $11995 around the same time.
Actually now that I think about it, guy who sometimes let me sell on his lot had an ’02 ES300, black/gray two tone, cloth (yes [!] ) interior with 21K… he paid something like 18K, and this was in 2006. I wonder what an ’08 ES330 is doing right now with similar miles.
Not sure where this auction was, maybe in Atlanta bizarre things like that happen. I haven’t been to Manheim in about a year and a half (out of the game completely now) but 6K used to buy you a bit more. Betcha a 2003 Corolla with half to 120K miles does 6-7K (at Butler PA Manheim), the auction’s funny like that.
Yeah, $6K for a 9 year old Corolla with THAT kind of mileage is just batsh_t insanity. Particularly compared to the 2000 Camry with half the miles fetching the same price. I can’t fathom someone paying $6K + necessary markup for that Corolla. But someone probably will.
I guess it’ too hot in GA for open sun roofs most of the year?
Was the fram damaged a salvaged title? Always interested in what a beater salavge title can hold vs straight?
I think the emission issue car will surprise you in repair costs. I would have scanned the computer if allowed for codes.
I always have a scanner with me. In my business it’s a given.
But a code usually only tells you the symptom. Not the cause.
2005 Nissan Quest SE, Loaded, 74k : $8700
That’s auction price?!
Wow. Used car prices have got to be in a bubble. I don’t get it.
BTW, really enjoy your articles Mr. Lang.
Frankly, almost all of those prices make me shake my head in disbelief. (And also feel lucky for the deal I recently got on my ’08 Mazda5 with mfr’s warranty to 100K.)
I know we’ve debated the causes of these high used prices, but as much as I’d like it to be a bubble, I imagine it’s a permanent shift. Cars are more durable than they used to be. If 200K miles is the new 100K, then why should a car with 50K miles retain only half its value? If buyers believe that car has another 150K to go (instead of 50K), then its price will reflect that confidence.
The short-term surge (since 2007 or 2008, whatever) probably has many other causes (tighter lending standards for new cars, Cash 4 clunkers, recession, etc.) but durability is a big one that isn’t going away.
That said, I want to see who is willing to spend $5900 on ANY car with 200K miles and ask what he’s thinking. Insane. I vote for the ’03 Corolla.
One reason why used car prices are so high. Inflation. We are now competing globally for everything. Our best beef, apples, and other goods (including used cars) are being sold to the highest international bidder. And with our ever-plentiful US dollars (total money supply), we are coming out the losers. My $.02.
The high scrap prices help to push up the prices on running used cars as well.
“Our best beef, apples, and other goods (including used cars) are being sold to the highest international bidder. And with our ever-plentiful US dollars (total money supply), we are coming out the losers.”
We aren’t losers. Far from it. We gave them dollars in the past for products that were worth more (in real terms) than what they are buying from us right now with those same dollars. In macroeconomic terms, the United States is getting things FOR FREE from the rest of the world.
I ageee! I have 75k on my 2009 Focus from a long commute, but dealers act as if it’s 1980 and car has ‘too high miles’. I got it when it was 18 months old with 40K, at a good price. People don’t just drive 10K a year anymore, what do some expect?
Chicago Dude – I don`t buy the argument about inflation for used cars (fair point on globally traded commodities). Because these cars are not going to be sold in Europe or Japan. Probably not even Canada or Mexico.
Supply and demand is the key reason with durability, as stated by others also being key. Another point is that money is tight (and has been for sometime for lower income people) and even if a used car is only a few thousand cheaper and middle class people would pony up that “small” gap to get new (and the benefits of that) it is still a few thousand that some can ill afford.
Inflation and gas prices are hurting Americans on every single product they purchase. I noticed priced in Walmart went up on my favorite groceries by at least 19 cents.
The other big problem is that with the credit crisis still in effect, it is hard to qualify for loans so this market is a USED CAR MARKET. Dealers don’t want used cars unless they can qualify you for a new car loan. They’ll junk the old car and rarely make much money for it cause many people don’t qualify for a used car loan either.
We are normally jealous about the low car prices in the USA, especially used car prices. Sometimes it is also worth it to import from USA all the way to Europe despite the custom duties and 25% VAT. But now! I think you can buy better cars for less here!
The 1999 E320 would be my pick of the litter.
Great article — keep them coming!
Unless you live in the rust belt. These Merc around y2K rust worse than the Alfasud
2005 Mini Cooper Convertible, Auto & Alloys, 144k: $6200
Wow, I pity the poor fool who ends up with that turkey.
Steve was second for it, so it must have had some profit potential.
Profit – that’s certainly possible. I’m just talking about the eventual owner. Mini combines sky high resale value with piss poor reliability.
The ’05 base Cooper had a new auto-trans which was much more solid than the 02-04s (that were basically ticking time bombs). High mileage, but probably still some profit in it.
05/06 Coopers where the most solid of the bunch (including the newer ones), the Cooper “S” being even more reliable. Granted they rattle like crazy and often sound cheap, but tons of fun!
Seeing prices like these attached to bottom-feeder cars is quite depressing.
I suppose the intended buyers don’t really care about the real price–as long as they can make the payments for a while, everything is good!
What does “no roof” mean?
No sunroof.
My favorite of the bunch is the Solara. Of course, if Steve pops $4+ for it, it musta been really nice, so it’s a circular argument in a way.
But these are very nice and very stout cars. I’d prefer the 4cyl over the 6, though. The last of the cars Toyota built its reputation on, IMO, and just before the cost cutters went to work.
Still a lot of bread.
I believe the market for low end 4 cyl cars is hot due to 4 buck gas.
I recently put a 150,000 mile 97 Saturn on Craigslist for $2500 bucks expecting to get maybe $2200.
Had 11 calls and 3 text messages in 3 hours, and wound up with two buyers having a bidding war in my driveway.
A number of lookers had full size pickups and were looking for a cheap commuter car.
I have a 98 auto with 161K I was thinking of parting with which actually runs fairly well for its age with several newer parts I had to have changed (rad/coolant, o2 sensor, water pump, serp belt). Which city did you sell yours in?
Nissan Quests are ‘gold’ in working class communities, same with any age Corolla. That ’92 will still be on the road in 5 years.
That Elantra seems a bit rough IMHO, tho.
Agreed on the older Corollas, but saw quite a few 90s Quests and Villagers come through when I was still in the biz about five years ago, they didn’t fly off the lot. What makes them gold?
>> what makes them gold?
The drivetrain. Back when I had access to auction data, I’d see them go through — and fetch decent wholesale money — with 160, 170, 180k on the clock. Consumer Reports rates the transmission as trouble-free. Plus they’re pleasant to drive and get 25mpg+ on the freeway at 70 mph. Put-near perfect for a cheap minivan.
Downside is rust, esp. on the lower edges of the doors.
But in the South, great cars.
’92 Toyota Corolla
A bit pricey compared to newer slum carts like the 2001 Elantra, but it will probably provide the best value for money.
Sold my 2002 Buick Century, 105K miles, very nice condition, ten days ago for $4950. I had bought it in for $6800 in 2007 at 46K miles. Over the nearly 5 years I owned it I put about $1500 into it for unforseen repairs…..so the car cost me roughly $3350 for 5 years and 59K miles of driving, about $55/mo.
I put it on a local website, got several calls the next day, first guy that came drove it, liked it, said he couldn’t quibble with the price, paid me cash and drove it away…….without license plates. I was amazed.
I also own a 2004 Ford F-150 Reg cab P/U long bed I bought 2 years ago for $5500 at 75K miles. I have put only 10K more miles on it and think I could now get about $7500-8000 for it.
I have a second job at a small buy here/pay here lot. Fun job and they PAY me to goof with old cars. Though I don’t have your experience, I’ll throw my .02 in anyway.
Worst: The 2002 Accent. We have a hard time moving those (they may just sell worse in my city). Thank God we don’t also have to mess with the silly emissions testing. At the price you got it at it won’t take many obscure sensors to eat your profit margin, if there’s more to the issue than the cat.
Best: The Corolla. That would be on the lot for about two days before it sold. I imagine you have the same results with Corollas there. We’d probably have it painted before selling it.
I think of the ones Lang picked up, the 92 Corolla might be the best buy because that should be a quick sale to someone in need of a 5spd beater. Saturn’s not to bad for the same reason, as long as the engine has had more than a quart of oil on avg throughout its life. Prob put them both out for at least 2K each in this economy with minimal repairs. I’m not to keen on the other buys, but I’m not familiar with the market down south… I suppose 4 bangers right now are hot and people will pay to put up with rougher high miles. Personally I’d spend the same money on a cleaner mid/fullsize with a decent V6, 4 banger auto really isn’t going to do much better than 25MPG in town unless you hypermile, and whats a small 6 gonna do… 18-20. Somebody mentioned a Buick Century earlier… the 3100s had problems with dex cool back in the day but if you can find one that’s been fixed I can’t see a 99 going for much more than 3K around here (Western PA) from your neighborhood little old lady.
What? No Impalas? :☼]