Every year over ten million vehicles pass through U.S. auto dealer auctions. This decades old free market has always been dependent on you, the consumer. Dealers will bid up those models that are popular with buyers, while those with a limited audience are stuck in what’s commonly called ‘wholesale heaven’. This is a place where thousands of unappreciated and unloved models go until the market dictates otherwise. Over the course of time, consumers dictates the winners… and the losers.

Over the last few years, The Big 2.5 have been downsizing their domestic production capacity to match falling demand, and compensate for their decision to wean themselves from low-profit fleet sales. Enormous assembly plants that once produced hundreds of thousands of new vehicles are now shuttered. The theory: as production sinks, new car prices will eventually hold firm and profits will follow. Unfortunately, the latest patchwork of new product has already come apart, and the domestics' market share continues its seemingly inexorable slide.

There are three main causes for today's used car glut. First, the manufacturers shut off the supply spigot late in the game. Thanks to restrictive union contracts and timid management, carmakers failed to ‘chase down’ falling demand early or aggressively enough. The failure created an ongoing surplus of used cars.

Second, again, The Big 2.5’s market share for new cars is still falling and they’re still failing to match supply to new car demand. Banking unsold inventory and embracing badge engineering has lead to hundreds of thousands of vehicles that consumers do not know or care about.

Finally, Toyota, Honda, and Hyundai have remained fiercely loyal to the idea of building brand identity and limiting supply when the market dictates. This devastates the profitability of the domestics, who are stuck with an over-sized dealer network and a “stack ‘em high and sell ‘em cheap” sales strategy.

This endless stream of unpopular and largely unknown new cars– and the sales incentives that inevitably follow– has created a significant benefit for the U.S. consumer: a depreciation curve that makes lightly used cars a fantastic deal.

In the early days of zero percent financing (late 2001), experts estimated that every $1k in new car sales incentives resulted in a $400 decline in the price of a two-year-old version of the same vehicle. By the time employee pricing came to the forefront (the following summer), the hit to used car prices was closer $600.

Many dealers peg the current depreciation rate at around $750 per $1000 in new car incentives. For your neighborhood used car dealer, their late model inventory now has a depreciation curve that’s nearly as steep as a new car vehicle’s. As a result, there are literally tens of thousands of unsold low mileage cars churning from dealership to dealership. 

The bottom line: a brand new Mazda Miata with all the options sells for around $27.5K. As of April the eleventh, the Average Auction Wholesale (AAW) on a 2006 Chrysler Crossfire with 3,945 miles was also $25k. Not that many consumers would cross-shop the two roadsters, but a Crossfire that stickered for over $45k a year ago now costs the same as a new Miata.

In the last 60 days, a savvy buyer could also pick up a low mileage 2005 Mercury Milan, Pontiac G6, Mercury Grand Marquis, Cadillac Catera, Buick LaCrosse, Ford Freestar or Volvo V50 for around the same money as a brand new, 2007 Kia Rio. That’s cheap.

You may notice these models are the unloved off-spring of over-stretched or neglected brands. The selection and price reflects a new reality: manufacturers have created a perfect storm of overproduction, fleet sales, model inflation (dozens of new nameplates debuting every year), limited marketing resources and bad branding. Though they’ve been available for years, models like the LaCrosse, Montego and Outlander are falling through the cracks, and into used car depreciation Hell.

Plenty of consumers “get it.” As vehicle reliability has increased, more people are buying used– but still not enough to outstrip supply. And yet still, the new cars keep coming.

Smaller new car dealers in larger metropolitan areas are getting whacked by these economics. For every Carmax, Team (formerly AutoNation) and Sonic Automotive Group that expands its operations, a dozen independent dealerships fall by the wayside. Never mind the mainstream manufacturers’ decisions to “rationalize” (i.e. cut) their dealer networks. The growing used car market is forcing hundreds of family-owned new car dealers to either accept competitor buyouts or simply close shop. 

For TTAC readers who understand that depreciation is the single largest cost of automobile ownership, or who simply want as much car for the money as they can afford, used cars rule.

As for what you should pay, go to the “completed items” section on Ebay and look for a car that’s roughly equivalent to the apple of your eye. You’ll find a price that’s usually a bit higher than wholesale, but lower than the inflated retail values you’ll find at Edmunds and Kelly’s Blue Book. There’s your starting point.

Call or email a few dealerships and bargain hard. You’ll soon see that the old 80/60 principle for a two-year-old model (80% of the life for 60% of the original selling price) is now closer to an 80/40 split. 

It’s proof positive that the free market has spoken. Until and unless mainstream manufacturers can better match supply to demand and learn to produce fewer, more distinctive models, their new cars will continue to make one to two-year-old models cheaper and better values. It’s a virtuous circle– for you.   

This wasn’t the first time I’d opted for European delivery. In fact, after counting all the license plates I’d collected from these international adventures, I discovered I was on my eighth visit. Normally, when my wife learns I want to go to Stuttgart or Munich, she digs in her proverbial heels. So I had to package my automotive connection with a week in Paris. I made the arrangements to pick up a BMW 335 at the Munich factory. Here’s how the deal went down…

My local BMW dealer booked my order, and then faxed my specifications and delivery date to the Fatherland. After factory approval, I filled out some simple forms, made a copy of my passport and faxed ze paypaz to Germany. In exchange, I received a five percent discount off the U.S. list price (the dealer is free to discount further). Done.

European rental cars are dull and expensive; figure that’s another $2k saved. Oh, and you also get to ignore the break in period and drive as fast as you dare on unrestricted segments of the Autobahn. As the MasterCard voice-over guy says, priceless.

As this was my fourth visit to BMW’s Munich HQ in two years, the staff treated us like old friends (i.e. they treated us with a certain awkward formality that would have instantly disappeared whilst imbibing local beer in a neighborhood rathskeller). After signing the inevitable insurance form (the European delivery package includes two weeks of “free” insurance), my hosts demonstrated a raft of electronic features I’ll never use, handed a picnic lunch and wished a safe journey. 

Our first destination: the Rhine River, about 300 miles distant. As we were motoring during harvest time, I wanted to stop en route to let my wife could experience Federweisser. That’s the German wine made from the first press of the grapes (like Beaujolais but nowhere near as frivolously named), traditionally served with a kind of onion quiche.

We stopped at the first decent looking town along the Neckar river: Bad Wimpfen. Meine Deutsch was good enough to accomplish the task at hand. Our appetites sated, we spooled-up the twin turbos and headed to Stromberg for Johann Lafer’s reknowned kitchen.

Cruising at 110mph on the Autobahn, you soon realize why German car makers couldn’t give a rat’s ass about cup holders. Who’s got time for coffee when the slightest mistake would take a half mile to conclude.

We arrived just before dark, just in time to unclench my hands from the wheel and freshen up for dinner. Our room was in an old castle tower, three stories tall, on the hotel’s third floor. For those of you keeping track, the bedroom was five floors from the restaurant. Excessive consumption of wine was… problematic. Fortunately, I was served the finest steak I’ve ever eaten (from Austria, no less) and, um, rabbit.

The next day we crossed into Luxembourg. I was only able to average 24 mpg in Germany. Restricted to a maximum of 80mph, I achieved closer to 30 mpg. Good thing too, since fuel cost upwards of seven bucks a gallon.

I wanted to go to Luxembourg, if only because I don’t know anyone who’s been there. We enjoyed a world class museum designed by I.M. Pei (not I. R. Baboon) and flaming garlic shrimp (Portuguese style) from Chez Bacano. Our third day included a jaunt across Eastern France, with pit-stops at Nancy and Metz, before settling in for the night outside of Reims.

I enjoyed the three finest glasses of wine of the entire trip: a 1999 Deutz Blanc de Blancs Champagne, a 2003 Puligny Montrachet and a 1999 Phelan Segur Bordeaux. My wife, who does not drink, savored every last drop of the Bordeaux. Of course, three or more ducks relinquished their livers for our gluttonous gustatory satisfaction.

The next morning we drove to the Charles De Gaulle airport to drop off the 335 at the shipper: TT Car Transit (easily located by Terminal 3). Unfortunately, the gentleman who normally handles my paperwork was delayed in traffic. As I had a plane to catch, his assistant located the Main Man via cell. He talked all three of us through the procedure.

Six signatures later, I removed the front license plate as a memento of the experience, handed over one of the car keys and let the nice lads at TT whisk us off to my departure terminal. Six weeks later, I picked up my ride, safe and sound, at my local dealer.

If you’re leasing your new Bimmer, you get one free month; so you pay for the car without possessing it for a couple of weeks. If you pay cash, payment in full is required 30 days prior to pick up. The warranty expires in four years, but the memories last forever.

Consumer Reports has released the 2007 edition of its “Annual Auto Issue.” For the second year in a row, all CR’s “Top Picks” come from Japanese makes. For some industry observers, that’s a problem. They believe the magazine’s results indicate a hidden bias, especially against vehicles produced by domestic manufacturers. Which both is and isn’t true.

Consumer Reports’ road test engineers subjected every test vehicle to a thorough evaluation, using a pre-established set of criteria and weights. For example, emergency handling might get ten points, front seat comfort might receive eight and “feels like a Honda” might be worth 37 (just kidding— I hope). Whatever the formula, when the magazine totaled-up the points, they ended up with a list composed entirely of Japanese cars.

This process leads to an obvious question: what criteria and weights– what formula– does Consumer Reports use to rate any given vehicle? The press and Consumer Reports have a policy in this regard: don’t ask, won’t tell. 

At the last Detroit auto show, I asked a Consumer Reports road test engineer why the magazine doesn’t publish its formulas. After all, nearly every enthusiast-oriented magazine does when conducting a comparison test. “It’s policy,” he replied. He went on to suggest that he didn’t make the policy, he didn’t necessarily support it, but as a Consumer Reports employee, he had no choice but to follow it. 

It's time for Consumer Reports to declassify its formulas. Two days ago, someone made the same request on their forum. The moderator’s response was revealing (or not):

“Thank you for your comments. These forums are designed to help subscribers in selecting and buying a car. They are intended to be primarily peer to peer, with our Auto test experts helping out when available.“If you find errors we will be glad to look into them and make corrections, but we just don’t have the time or resources to engage in lengthy debates here.

“You can channel your inquiries through Customer Service. There is a link on the bottom of every forum page, and at the top of every CR on-line page. You are also welcome to visit our facilities when we hold an open house and speak directly with our test staff at that time.”

As an automotive data provider, I find Consumer Reports’ arrogance, intransigence and unaccountability completely unacceptable. Any company that depends on the public trust must strive for transparency. If you have nothing to hide, you hide nothing. That’s why I respond to any and all questions about TrueDelta’s methodology. Besides, engaging in open public debate can teach data providers better ways to do things.

The Consumer Reports moderator’s non-response indicates that the magazine doesn’t see how knowledge of its overall score formulas could further improve anyone’s ability to find the right car. These formulas are divulged on a need-to-know basis, and as far as they’re concerned car shoppers don’t need to know.

Sorry, but it just isn’t so. To keep things simple, let’s assume there are only two criteria, ride and handling. Let’s further assume that Consumer Reports’ editors have decided that ride quality is twice as important as handling when evaluating a minivan. Keeping the overall score formula secret implies that any reasonable minivan buyers should also weight ride quality twice as heavily as handling.

This is just plain wrong. There is no objective way to arrive at one best formula for everyone. For some minivan buyers handling is twice as important as ride quality, and there’s nothing inherently superior about either set of weights. These are necessarily subjective value judgments. The Toyota Sienna is Consumer Reports’ “top pick” among minivans. But a buyer who values handling above ride quality will be happier in a Honda Odyssey.

This is not to say that overall evaluations are necessarily useless. If the formula was provided, our minivanista could determine that giving extra weight to handling would tip the decision in favor of the Honda.

But the formula is not provided, so there’s no way for minivan shoppers to know how closely Consumer Reports’ criteria and weights match their own or how adjusting these might affect the decision. By withholding its formulas, Consumer Reports takes the stand that readers should let the Yonkers mob decide for them what matters most– and least– when choosing a vehicle.

It’s true that many, even most car buyers are intimidated by the process– to the point where they want an authority figure to tell them what to buy. But buyers truly interested in finding the best fit for their personal tastes are going to have to put forth more effort. Currently they’ll have to rely on sources other than Consumer Reports, since the magazine withholds information needed by people who want to think for themselves.

[Michael Karesh operates www.truedelta.com, a vehicle reliability and price comparison website.]