Posted on 11/07/2022 10:23:10 PM PST by SeekAndFind
With soaring borrowing costs, the Federal Reserve has slammed the brakes on the once-booming used car market. The latest data on wholesale used-vehicle prices show October's decline on a year-over-year basis was the worst since the financial crisis over a decade ago.
The Manheim Used Vehicle Value Index for October declined to 200, or about 10.6%, the worst decline since December 2008 when the global economy was melting down (and the 5th largest decline ever)...
The Fed's rapid pace of rate hikes this year is slowing demand, as Edmunds data showed the average annual percentage rate on used-car loans was a staggering 10% for some borrowers.
Average financing rates right now:
New cars: 6.27%
Used cars: 10.33% !!!!(source: Edmunds) — CarDealershipGuy (@GuyDealership) November 2, 2022
The index that tracks the price of what car dealerships pay at auto auctions has slid for 8 of the nine months and declined for the 5th straight month.
Since the Fed hasn't blinked (yet) and borrowing costs continue to skyrocket, wholesale used-vehicle prices could cool significantly more.
The slump in wholesale used-vehicle prices could be a harbinger of when the Fed begins to hike interest rates at a slower pace.
"Used car prices, once considered the barometer of how bad inflation has become, are now moderating. In fact, they have been dropping for a year. As supply-chain shortages moderate, this closely-watched gauge will likely continue to decline, helping curb overall inflation. The move may also support the narrative that the Fed can scale back its rate increases, boosting stocks," Bloomberg's MLIV Vincent Cignarella wrote.
The bad news about sliding wholesale used-vehicle prices is when they crush the retail market, there will be so many new buyers underwater in their vehicle loans.
Signs of distress are already materializing for consumers with subprime and deep subprime credit scores, according to Mish Talk.
As delinquencies rise and the layoff cycle begins, the repossession wave has already started.
The Car Market Is Collapsing 🚨 🚨 🚨
🔊sound ...🧐 pic.twitter.com/apxRchrNwE — Wall Street Silver (@WallStreetSilv) November 5, 2022
And the used car bubble could cascade into the structured product segment of the financial market as big banks hold a lot of consumer debt.
Bullish for CLOs... pic.twitter.com/mrd5XtBjPq — Wall Street Bearish Bull (@govadm) November 7, 2022
Meanwhile, shares of Carvana crashed 24% Monday after the company missed Wall Street's top- and bottom-line expectations for the third quarter as the demand for used cars plummeted.
Last month, the largest US chain of car dealerships, AutoNation, whose CEO, Mike Manley, warned the used car market showed signs of imploding.
Separately, Hertz Global Holdings reported its third-quarter earnings that showed depreciation costs were rising due to its used car prices at auction fetching lower values.
Readers may recall it was back in April when we asked a straightforward question: "Are Used Car Prices About To Peak For Real This Time?"
... and with a little bit of time, we were right. We expect deals, especially in the used car luxury segment, to materialize in 2023.
It’s ironic, but when I was poor I purchased new vehicles. Then, as time went on and my situation improved, I bought used ones. I must have learned something along the way!
Good quote!
OR the Democrats do even more damage to blame it on - the midterms. /shiny side out
I take nothing for granted.
BUT I’m hoping for a big red wave on Tuesday. To at least buy us some time.
I considered whether I should sell my used cars while they were high and hold on to the money waiting for BidenDepressionII2023.
Yes, but she wanted an SUV, since easier for her to get into/out of, and latest cameras. So overpaid for that
Thinking about selling my 1998 Infinity. In great shape, put a lot of $$ into it but I just don’t drive that much any more. Can walk to four grocery stores including Trader Joe, a pet store, drug store, etc. Filled the tank three months ago and it’s still half full. Someone’s kid might like it for a going to college car. Maybe $2600. I don’t know whether dropping used car prices would affect a car like this.
Then more people will have cars to live in.
“ It seems that few people can afford a car used or otherwise.”
And in a few years Americans will only be able to buy new cars that are electric that will be so expensive that only rich liberals will be able to buy them. That is when used gas driven cars will be in extremely high demand by the vast majority of people who will never be able to afford a new electric vehicle or even a reliable used one with a half way decent battery. Why are we electing politicians who care so little about the welfare of decent hard working honest citizens who are just trying to make ends meet and keep their family safe in a world gone insane? Wake up people! Today may be your last chance to do something about it. Get to your polling place and vote straight GOP! Remember, any Republican is better than any Democrat!
OF COURSE my car had to die in January forcing me to buy at the peak of the market and pay a peak price. *grumble*
Since they stopped making the car I wanted in stick 2 years ago, that meant I was guaranteed to get a used car instead of a new one.
might have something to do with a glut of used cars suddenly on the market from flooded Florida.
Yep, I’ve noticed exactly the same thing happening with used Honda Accords. Pretty much exactly the same pricing relationship, since they’re a direct competitor to the Camry. And you’re lucky if a dealer has more than a tiny handful available on the lot, whether used or new. A little over a year ago, I bought my wife a new Honda CR-V. Didn’t want to because I knew how terrible the timing was, but her Santa Fe was on its last legs. Every dealer I checked had anywhere from zero to at most four new CR-Vs available, and used inventory was similar.
I had intended to buy used, but there was no incentive to do so as they all had significant miles, were often two or even three years old, and yet were barely cheaper than new. That was a no-brainer. At first I was surprised the used cars were priced so close to the new pricing, but then realized that it was so hard to grab a new car before it disappeared, or they might not have one equipped the way that you want, that some people would pay an absurd premium for used just to get a car at all. We got lucky and saw exactly the model we wanted, in the right color and the the right options, when we drove up. We grabbed it right away, and while they were writing it up and even though they had brought it inside, other people started climbing all over it and trying to buy it. It was a feeding frenzy.
I have a 2005 Acura TL with about 210,000 miles that still runs perfectly, but is developing cosmetic issues with the paint and trim. I’m not letting go of that thing until it blows up, and I’m so thankful that I bought such a reliable car. It’s also great still having a V-6, because due to the libs‘ fuel-mileage mandates it’s hard to find anything now that doesn’t have a 4-cylinder or at best turbocharged 4 in it. The VTEC engine in my TL is still amazing. Bulletproof reliability, 270 hp and averages 26 mpg with mixed highway and city driving. On a road trip it will average a little over 30 mpg. The stupid little 4-cylinders they’re putting in cars now don’t do much better on mileage, and sometimes actually worse, and can’t come close on torque or horsepower.
The article can’t be right. I just traded in my 5.5 year old car a week ago for very good trade in value.
I think the best of both worlds, at least in a normal market, is to buy someone’s leased car they traded in. The first owner payed for the biggest depreciation. I got a used, nice, solid mid-range car (not an econo box, not luxury) for less than some little new car you would not want to take long trips on the highway in.
There are acres of open space at the local dealerships. If you go online and dig around, there are big shortages of many models.
I have always been wary of cars that have a little 4 cylinder engine that is turbo charged. My impression is that such an engine runs at close to its design limits most of the time, and an engine like that is unlikely to make it past 100,000 miles without expensive repairs or replacement. My car has a 4 cylinder engine but it is the base model that isn’t turbo charged. The engine runs at well below what must be its limits - it accelerates fine but not like a sports car. The engine has a reputation for reliability so I’m hoping to get a lot of use out of it.
Why are we electing politicians who care so little about the welfare of decent hard working honest citizens who are just trying to make ends meet and keep their family safe in a world gone insane?]
Oh, you mean Democrats.............
I’m curious if this article is talking about used cars as in “fleet” vehicles, including POV’s that are being sold as used?
Or, does that also include the multitude of backlog vehicles sitting in lots that have never sold?
Yes, that is classic commodity bubble behavior. When there are no or much fewer buyers the bubble collapses and the race to the bottom begins. A similar ‘readjustment’ in real estate bigger than 2008 is earnestly to be hoped for.
My 2013 Honda CRV is still going strong (my third CRV since 1999 and never had a minute’s trouble with any of them). Since I’ve retired, there’s no more weekday commuting miles anymore. I can’t imagine getting another car and hopefully will never have to! I’m hoping for a big win by the Republicans today and a quick boost to the economy because of it.
Biden train wreck
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