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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mstyle's picture

Excellent. I shall wait a little longer before purchasing a used vehicle

Arrow4Truth's picture

Read last week that tax collections are down significantly from the same time last year. Maybe more of the slaves have decided to withdraw their consent, and not allow the criminals to re-venue money into their pockets.

brianshell's picture

It makes sense. When the SHTF, what would you rather have, a pickup or a prius.

hedgeless_horseman's picture

 

Ummm, neither.

If/when the SHTF, you won't find me on any road.

Small arms fire goes through an F-450 just as easily as a Prius.

http://www.zerohedge.com/news/2016-12-16/hedgelesshorsemans-nearly-annua...

  • Contact! A Tactical Manual for Post Collapse Survival, by Max Velocity $27
JRobby's picture

Point well taken!

Billy, holding his side with 2 bleeding bullet wounds: "But my H2? Doesn't the Army use Hummers?"

hedgeless_horseman's picture

 

Who coulda node
an ambush
on a road?



Chupacabra-322's picture

But they never get shot in the Movies. By the way, cars don't blow up from getting shot either.

translator zero's picture

Nobody could have seen this coming.

cbxer55's picture

Looking a lot like that movie, No Country For Old Men.

Drug deal gone south?

N2OJoe's picture

Speaking of which, the guy above talking about police auctions inspired me do a quick search and found 2 turbodeisel armored vans f/s near me at $200 ea. Then the fine print, for sale to police and military only.

Anyone got a po-po ID I can borrow?

PS: WTF? Fucking fascists not only trample our Second Amendment but now we can't even obtain PASSIVE DEFENSES while being disarmed?

ReZn8r's picture

Time to find a piece of ground and start our own towns/villages/municipalities. Incorporate be the Mayor, Police Chief and Dog Catcher and OWN an MRAP for pennies.

NEOSERF's picture

Amazing isn't it?  Seeing ads on cable for 72 month zero interest on furniture and cars.  2 companies have popped up renting dresses to fat people because they can't afford a $300 outfit.  So now to live in this country, you rent your housing, your ride, your furniture, your education and your clothes...the only thing left for the "middle class" to rent - their dignity or ethics and morals.

BandGap's picture

And lawn tractors and mattresses.

WTF.

I paid over 41K in federal income taxes in 2016. Taking the fucking year off in 2017.

ReZn8r's picture

and just what did you get for all that money?

Sick Underbelly's picture

Yes, renting your asshole (or others) is pretty undignified, unethical and, well, "un"moral. 

Gorgeous's picture

Did that guy just take a piss?

peippe's picture

Well, if the battery power is down to 45%, & the washer fluid reservoir is dry-

time to swap rides.

Uncle Sam yay.

GhostofBastiat's picture

Looks like I need an upgraded Protective detail Chevy...Suburban baby!

Consuelo's picture

 

 

I remember when that thing first came out...   The then CFO of Sun Micro had just purchased one from Ferrari of Los Gatos - was there to see him fire it up and drive away...

 

Good times.

Justin Case's picture

The Lambo and Ferrari dealers in the Hamptons are folding like a cheap lawn chairs. House prices are getting walloped.

JuliaS's picture

Yet Tesla's are still open. Can't wait till those scam shops begin folding.

Raffie's picture

If you have people you don't like, convince them to buy that Esclade or other $60k+ vehicle.

Stickem' good.

hedgeless_horseman's picture

 

If you really dislike them, talk them into becoming an F&I slaver at a car dealership.  They are guaranteed to spend eternity in hell.

Raffie's picture

Ofc... they should get the longest loan because things are well and will have it paid off with no issues 6+ years from now.

Justin Case's picture

"Stickem' good."

Tesla is moar efficient.

JRobby's picture

They still use bolts!?!? I thought it was all plastic "fasteners" now?

dogismycopilot's picture

I had a chance to buy an F-40 about 11 years ago for $150K. I have been kicking my self in the nuts on a daily basis for being afraid to pull the trigger. Last time I checked, F-40s were going for north of $800K in any condition.

Bill of Rights's picture

Anyone can have anything they want as long as you pay, you don't pay they take it...so what. The you go out and get another....and so on and so on.

small axe's picture

and you'll never own anything except the depreciation.

Justin Case's picture

The maintenance visits are where the dealers make the money. It's a condition of the lease.

quartshort's picture

I've looked at mine. First one at 10K mi. $78. 400hp twin turbo car. Things have changed.

I'll visit them 4 times before they get the keys back.

Only thing I'm doing is takining the $450/ea run flats off so I can hand it back with original rubber. Full set of sumitomo gtz3 $540 delivered.

Duty Chief's picture

Anecdotally, back in my Navy days I new a guy who went to the dealership for tires.  He could not afford the $100 or so dollars for 4 tires, but he could get approved for a brand new car so that is what he got.

BlindMonkey's picture

True story....KEK.  

 

I think I knew that guy too or it is just common AF.

_ConanTheLibertarian_'s picture

He got his new tyres...with a new car around them.

El Crusty's picture

I'm a tech at a new car dealer, this still happens a LOT today. It's actually cheaper out of pocket initial cost wise to just sign on the line for a new car than buy $800 in tires or brakes that the car has to have to still be drivable.

It happens a LOT.

woody188's picture

This is why I bought used tires. Check them out really well because there are scammers. I can get a set of 4 tires mounted and balanced for $120. Mostly they are accident pulls, nothing wrong with them unless you are superstitious.

JackieG's picture

Manufactures have 0 interest in financing used vehicles.

It is risky business to finance used cars. No one to sell the paper to.

Obadiah's picture

buy here pay here FTW

devo's picture

Yeah, but that new car becomes a used car that nobody has money to afford...the second it drives off the lot.

Couple that with a 40% hit when driving it off the lot, and it makes it the 2nd worst purchase in history, with only bitcoin trumping it.

BlindMonkey's picture

DB is gravely concerned??

 

They have A LOT to be worried about and used cars are just a drop in the bucket.

Farmer Joe in Brooklyn's picture

I've got $15-20k earmarked for a nice, low-mileage, used truck or SUV.

Patiently waiting...time is on my side..

flaminratzazz's picture

keep the year under 2004 to keep from being hacked.

Apeon's picture

I like my 2001 Expedition-----it owes nothing.

Erek's picture

My Maserati does 185, I lost my license now I don't drive -- Joe Walsh

American Psycho's picture

How are prices for a 96 Nissian Maxima trending?  Car has over 215k and I'm curous about trade-in value?  On second thought, with my monthly insurance below $30 and getting about 320 miles per fill, I think I'lll keep her until there is blood in the streets of the auto industry.