Used Car Prices Crash Most Since 2008

Tyler Durden's picture

Authored by Mike Shedlock via MishTalk.com,

According to NADA Used Car Guide, wholesale prices on used vehicles are getting crushed. Let’s take a look at the details.

Used Car Prices Since 1995

Used Car Prices by Type of Vehicle

Used Market Update

In a reversal of what typically occurs in February, wholesale prices of used vehicles up to eight years old fell substantially last month, dropping 1.6% compared to January. The drop was counter to the 1% increase expected for the month and marked just the second time in the past 20 years prices fell in February (last years’ scant 0.2% being the other instance).

 

NADA Used Car Guide’s seasonally adjusted used vehicle price index fell for the eighth straight month, declining 3.8% from January to 110.1. The drop was by far the worst recorded for any month since November 2008 as the result of a recession-related 5.6% tumble. February’s index figure was also 8% below February 2016’s 119.4 result and marked the index’s lowest level since September 2010.

 

Incentives Jump by 18.1%

Automakers grew incentive spending once again in February, making it the 23rd month in a row where spending was increased. On average, spending reached $3,594 per unit versus $3,043 per unit in February 2016 according to Autodata.

 

Among the U.S. Big Three, GM raised incentives by 27.4% in February to an average of $5,125 per unit. Spending at Ford Motor Company rose by 20.9% to $4,012 per unit, while FCA increased incentives by 10.6% to $4,365.

 

As for Import automakers, Toyota Motor Sales raised incentives by 7.9% in February, reaching an average of $2,267 per unit. American Honda grew incentives by 26.6% to $1,886, while Nissan North America increased spending by 20.1% to $4,080 for the month.

 

Inventory Falls to 74 Days

Compared to January, days’ supply fell by 11 days in February, landing at 74 days for the period. Looking back, February 2016 saw a supply of only 69 days according to Wards Auto.

 

GM’s supply reached 91 days over the month, due largely to Buick’s industry high 167-day inventory. Ford Motor Company’s supply fell to 78 days, while FCA’s inventory dropped to 83 days.

 

Toyota Motor Sales’ supply decreased to a lean 67 days, matching Nissan’s figure for 67 days for the month. Meanwhile, inventory for Honda fell to 74 days. Subaru’s 38 days of supply remained lowest in the industry.

 

As for luxury automakers, BMW’s inventory fell to 46 days, while Daimler inventory remained unchanged versus January at 44 days’ supply. Cadillac’s inventory of 107 days was the highest in the luxury sector, while Tesla’s two days was the lowest.

Desutche Bank is gravely concerned...

We’ve grown increasingly concerned about U.S. Used Vehicle Pricing down 7.7% yoy during February, per NADA. A decline in used prices has been widely anticipated given a significant increase in used vehicle supply (off-lease vehicles). But the magnitude of the recent drop was nonetheless surprising (February’s drop was largest recorded for any month since Nov. 2008). NADA cited a number of factors contributing to the drop, including an increase in late model auction supply from rental fleets, and delayed tax refunds. Used prices have a significant impact on New Vehicle demand/pricing through their effect on affordability (most new car purchases involve a trade-in).

 

 

New/Used Vehicle Pricing & Demand Relationship. Some consumers shift from New to Used when Used Vehicle prices become relatively more attractive, negatively impacting New Vehicle demand. Used price deterioration also has an impact on credit, as lenders watch loan loss severity (and frequency), and tighten when this stat. weakens (potentially creating a negative feedback loop). At a more macro level, used vehicle price weakness is also seen as an indicator of aggregate vehicle supply/demand imbalance in the economy–caused by new vehicles entering the parc significantly faster than the rate of scrappage and net new licensed driver growth. This situation should ultimately self-correct as new car sales come under pressure. That said, the biggest fear for investors is that Auto OEMs become incrementally more price aggressive to support New Vehicle sales. Historically, every 1% decline in Used Vehicle prices has corresponded with a 0.2% decline in New Vehicle prices.

Fundamentally Speaking

NADA partially blames late tax refunds for some of the declines in March.

While it’s true the IRS slowed claims for the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) to combat fraud, late refunds in 2017 cannot possibly explain an eight-month trend.

Yet, based on tax refunds, NADA expects a rebound in used car prices in March.

With massive incentives on new vehicles, I say, let’s see. Regardless, it’s pretty clear that car sales are slowing, and it takes bigger and bigger incentives to push them out the door.

Recall that on March 7, GDPNow 1st Quarter Forecast Plunges to 1.3% Following Vehicle Sales and Factory Orders Reports.

Also recall that the FRBNY Nowcast did not take auto sales into consideration.

On March 15, I reported GDPNow Forecast Dips to 0.9%: Divergence with Nowcast Hits 2.3 Percentage Points – Why?

Is this all related to slow tax refunds? We will soon find out.

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Erek's picture

Noboby has any money left to buy a used car. But, a loan for a new car is as easy as 1,2,3!

Nothing down. No credit check. 500 monthly payments. Easy credit!

knukles's picture

Just when I was gonna trade in my antique restored F-40 for a brand new Chevy Bolt ....

hedgeless_horseman's picture

 

Many of these used cars are from government fleets.

No self-respecting public servant would be caught debt in a 4 year old vehicle.

When the taxpayer is paying, everyone rides in style.


Shocker's picture

People are pretty much tapped out. Looks like we need to move to 10 year loans

Layoff List: http://www.dailyjobcuts.com

.

The_Juggernaut's picture

This is just the tip of the iceberg.  Rental car companies are going to implode when they can't get shit for their used cars.  You'll be able to pick something up foir next to nothing in a few years.

Haus-Targaryen's picture

I have the feeling you're going to be able to pick everything up for nothing in a few years. 

I've got my eye on a nice Lexus IS 300h.  Low miles; 65+ MPG; last forever and look good. 

That and a ton of real estate and I'll be set for life I hope. 

Pinto Currency's picture

These crashing prices must be why Yellen raised rates last week.

manofthenorth's picture

"CASH FOR CLUNKERS 2.0"....

ANYONE ???

ANYONE ???

a Smudge by any other name's picture

Seriously. I'm surprised to find that phrase missing from the article. Cash for clunkers appears to have did it's job to support used car prices (with the intent of forcing buyers into new cars or more commonly leases). But it happens to be one of the single meanest things you can do to the poor. Transportation has become a requirement for any kind of economic participation.

canisdirus's picture

Agreed. They should let it "crash" back to normal depreciation and it'll help the poor people that were screwed out of cars with that stupid program.

Interestingly, this is likely going to increase economic activity because people that are poor and need cars will be spending less for them, leaving more to be spent in the market.

Mano-A-Mano's picture
Mano-A-Mano (not verified) canisdirus Mar 20, 2017 7:59 PM
stizazz's picture

America has shed too much blood in foreign entanglements.

shovelhead's picture

I gots a right to a new Escalade, bitch.

post turtle saver's picture

'cash for clunkers' is the broken window fallacy writ large...

boattrash's picture

Cash For Clunkers, keep in mind the two-fold benefit that was for car companies....They sold shitloads of new parts, due to the stipulation that the trade-ins be destroyed, not salvaged...Cocksuckers.

Stuck on Zero's picture

I'm happy to report that my 20 year old Jeep just gets more and more valuable every year.

gatorengineer's picture

Its a nice article, but it doesnt match what I am seeing.  I see a crap ton of 60k plus rides, brand new on the road, the 700-800 lease payments, and dont get me started on the number of high end quad cab 4x4 pick em ups that are 60k+.....

No I dont don think Mr Autosales is hurting....

Chupacabra-322's picture

@ Hats,

Agreed. However, I'm in the market for a Cadillac CTS-V. They're overpriced right now. Second Gernerations are going for $30,000 +. Insane. Expect even cheaper prices.

Haus-Targaryen's picture

Its a GM product, which makes me think "driven by street rats in 10 years" 

Why not get yourself into an M4, or if you want something a bit more exotic the 2013 ISF is a beast of a car. 

Chupacabra-322's picture

Maintenance. Plus, just a personal preference. I'd like to buy American. Never have. With the CTS-V you're actually getting two cars in one. A Vette with a back seat.

Performance, style & family sedan.

11b40's picture

Wife has an STS W/big V8 & every option. It's like a bottle rocket. I have a DTS and been driving Devilles for 25 years. Also a personal fan of those Northstar 32 valve engines. There is no better ride for long hauls, that have to be made in all seasons for comfort, space, and power.
I hope you get the Caddy you want.

Rukeysers Ghost's picture

Those Northstars are really swell when they inevitably blow a head gasket and you have to drop the engine from the under the car to fix it.

11b40's picture

I have put at least 180K on every one.  Over 750K total and on the way to 1Mil.  Only large issue I ever had was dropping a transmission at around 175K on a 1994 model.....and I run them hard.

ZRizzo's picture

Still driving my IS350 but always dreaming about the ISF.  As usual, college bills for the kids eating up that dream.

83_vf_1100_c's picture

My k8d is a pro mechanic and a Chevy truck fan. He says stay away fron the caddies.

Joe Sichs Pach's picture

What's the big reason why?
I've read the former 3.6l six cylinder was a huge headache but apparently 2010 and newer seem to be ok. Can that be confirmed by anyone?

83_vf_1100_c's picture

Overly complex, wiring bundles as big as an elephants dick, more computer modules than  IBM.  His opinion and he has had to work on a few is they are expensive to repair. I personally like them but I don't expect to see many 20 yr old CTS type caddies on the road later on.  Just one opinion from a 26 yr old mechanic.

STP's picture

A coworker had one and he had problems.  THe wheels are Italian made and some kind of defect popped up on them and they are over $1K apeice!   If you get one, get one with a warranty.  Great looking car, awesome performance, but I'd look into the quality issues, before buying.  I have two Corvettes, a '74 Stingray and a '95 Corvette.  Neither one, is easy to work on!

Chupacabra-322's picture

@ STP,

Perhaps, however it all depends on the driver or the way one drives the car. I personally don't beat the shit or race any vehicle. And, the numbers of past owners & maintenance history of the vehicle.

A good well maintained vehicle which has had its regular scheduled maintenance will run forever.

There many adult driven, stock cars out in a market which is over priced IMHO.

Manthong's picture

I paid $33K for my model year 2000 Grand Cherokee… at the end of 1999.

Still have it and sometime within the next year it will turn over 50K miles,

Shove that up your used car market.

.. BTW.. it cannot be hacked by anyone and I can drive it over most road obstacles.. you know like curbs,

belligerent Trump protesters and such.

 

edit

heh heh,,,

minus one, you are so less than zero for your idiotic dig that hell is an upgrade for you.

 

OK put'em up schmuck..

..this is fight club and I am up for it.


you have no idea what it will be like when your mental puffy belly comes across this.

 

 

 

BlueShirt's picture

You are boasting about laying out $33K in 2000 for a freaking car that you drive 2500 miles per year.  What a bozo - I got some land to sell you.

cue in cue's picture
cue in cue (not verified) BlueShirt Mar 21, 2017 8:16 AM

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://bit.ly/2jdTzrM

JRobby's picture

I guess "Dealer Fees" on "Pre-Owned" will have to rise?

("Laugh Track Deafening !!!!")

"Here's a great deal at $8,200 with and $895 Dealer fee and a $175 document prep fee, you won't even notice that fist up your ass with a 48 month loan!!!!!"

Joe Sichs Pach's picture

Let me correct that dyslexic typo you got there:

 

"84 month loan!!!"

Manthong's picture

I thought they were up to 120 months by now.

Sick Underbelly's picture

Plus...the basic "warranty" extension/protection, because you just gotta have that!   Instead of the mere $3,500, we'll give it to you for the special price of $4,500 and just shave off a percentage point or so, if you go with in-house financing!

JRobby's picture

You might get 1/2 price off of wiper blades that cost 3x what you can get them for at a auto parts store if you are nuts enough to go to the dealer for them (or anything else!!!) 

froze25's picture

I have a buddy of mine that is a new car salesman, we go way back so I do trust him. He told me one thing and said never forget this. "always get the 3 year extended warranty" I said why? "Because the manufacture will reimburse us for everything we do under that warranty, we will practically rebuild your car/truck if you bring it to us before it expires, just leave us a little wiggle room like 3 months before it ends and say something like, it making weird sounds and isn't driving like it should be".

JRobby's picture

"making weird sounds and isn't driving like it should be"

And the wizards will zero in on the problem in a few seconds............................

shovelhead's picture

Don't forget the FREE FLOORMATS!

Bigern's picture

Already can at police tow auctions. So many people getting arrested or illegally parked and just leaving their vehicle versus paying fines. I've seen perfectly functional cars going for five hundred. Saw a 2008 impala sport go for eight hundred, with no visible defects. There was an 06' Charger with the hemi that went for about 2k. Only thing I saw with it was a bullet hole in driver door handle.

cowdiddly's picture

Honest to goodness Geneywine bullet hole? that just makes the resale go up. People even buy stickers to get that look.

Sick Underbelly's picture

Where do you find police tow auctions?

I wanna start flipping cars!  Make me sum munney to buy more PM.