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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Obadiah's picture

i could buy that car at the auction for 200 buck or less

i kid you not

Bigern's picture

Auctions are where it is at. If you can do basic to intermediate work, you are golden.

Justin Case's picture

"I'm curous about trade-in value?"

Same as a pop can. Threaten the dealer you'll trade it in and they'll pay you not to.

Slingsby's picture

Had a 98 Maxima. Best car I ever owned. 300k on the original engine and trans. Was still running when I sold it a little over a year ago. Nissan VQ series 6 cyl. is about as bullet proof as it gets.

City_Of_Champyinz's picture

I got 260K out of my first straight 6 Jeep motor, it was still running strong when I sold it.  I now have an 06 Wrangler TJ with the same motor that was babied and has less than 77K miles on it.  Hope it is my last Jeep...

shovelhead's picture

My 98 Maxima is getting costly to run.

$25 for hood lifts and $22 for a new power antenna mast. It's freaking me out.

Then there was that oil change and filter last year...

Friggin junk.

GhostofBastiat's picture

One of those black ones with the flashing lights in the grille! Avoid the white ones with cloth interiors and DHS stickers peeled off...

Seasmoke's picture

Cash for Non Clunkers.

Consuelo's picture

 

 

Kars for K!kes.   I mean --- 'kids'...

A Nanny Moose's picture

What does a baby goat need with a car?

Row Well Number 41's picture

Chew toy, Goats will eat anything.

Adahy's picture

Good. Maybe I'll snag up another 90's model invincible Jeep 4.0. Tough as a steel ball and has more longevity than Hillary at a pizza party.

Joe Sichs Pach's picture

Just remember to change the oil frequently.

...in the Jeep too.

Consuelo's picture

 

 

Did you know....?

 

The bullet-proof in-line 6 in that jeep was a Chevy...?

Justin Case's picture

They used the 292 in-line six in the tow trucks, b/c of the low end torque it put out.

Jubal Early's picture

I recenty sold a 1968 Chevy K20 4x4 with the 292 to a couple of Germans.  They arrived in a hot Mercedes and drove it home on the Autoahn.  an hour later they called me up saying the engine had blown.  It turned out they blew the head gasket drive WAY too fast.  The thing was only good to about 50mph.

Justin Case's picture

Are you sure it wasn't the 250 CID six?

C20 or K20 models came be equipped with a 127 in wheelbase with a 8 ft. cargo box available in Fleetside or Stepside models. Also available was the Chevy Longhorn with a 133 in wheelbase and an 8.5 ft. cargo box. Standard engines included a 155 hp 250 6-cylinder and a 200 hp 307 V8.

Jubal Early's picture

It was definitely a 292.  It was a chassis-cab shipped to GM in Beil in Switzerland and converted into a fire truck. The only options were heavy duty radiator and heavy duty suspension.  4sp with a granny gear. 

It was really cool because it was a 4 door with seating for 8 (4+4) and a 6 foot covered bed.  There are actually loads of similar fire department truck from the US from the same era here, and they usually have very low miles.  This one had only 30k on it and I sold it for $5000.

Cardinal Fang's picture

Jesus Christ...

68 K20 with 30k for $5k?

Drooling....

Although I should be happy with my 58 Apache 36 4x4 long bed.

Yup, I'm happy.

Jubal Early's picture

Nope, that is an AMC 232 inline 6.  Same engine as in a Rambler, Gremlin and even Pacer! But it is a very robust but thirsty engine.

ToSoft4Truth's picture

A nice EMP would settle the score. 

flaminratzazz's picture

I am still looking for the Mad Max rig with the blower..

A Nanny Moose's picture

LOL. Blowers when gas is so scarce. Only in Hollyweird?

Zero-Hegemon's picture

Point taken, but in a lawless society (such as depicted in Mad Max) the spoils went to the fastest, i.e., horsepower.

BTW, the first two were Outback Indie productions. But Thunderdome WAS Hollyweird.

"Who run Bartertown?"

just the tip's picture

you want obama on your hood?  what the fuck is wrong with you?

Zero-Hegemon's picture

Cash for Clunkers II, coming soon

BigWillyStyle87's picture

I get tired of these faggots that are "gravely concerned" with prices going down. As if paying $65k for a fucking pick up truck is a forgone conclusion and anything less is a disaster. FUCK YOU

One Ton Lady's picture

you pay all that money for a new truck and it has many issues.   it is crazy.  whoever told us it was a good idea to pay this kind of money for trucks.  

gmak's picture

Whoever came up with the idea of leasing for masses that pushed prices up, coupled with low low interest rates that did the same, as a double whammy.  Increase demand by making cheap money available with no commitment in cash and prices have to rise.

Peterman333's picture

A truck you're goinig to take to Home Depot and load lumber in, you'll do it as carefully as possible but inevitably scratch something, it's a truck who cares? Well, sh*t, if it's $65k I won't even want to take it out of the garage much less load it with lumber.

PrivetHedge's picture

Get a trade account with a building supply place and just have it delivered on a phone call.

bestiae fame's picture

Pretty sure my ancient F-250 won't give a fuck about what I do to it.  If it breaks, I go to the wrecking yard, spend $10, and fix it. 

jughead's picture

I do miss the days when I could pick up a good engine from the junkyard for 50 bucks.  But them days are way over, unfortunately.  

Joe Sichs Pach's picture

They're over 100% due to cash for clunkers

post turtle saver's picture

thank you for stating what the true problem is... vehicles across the board are over priced... used or new... especially half ton pickups where things have become absurd... I have no intention of putting down $30k for a regular cab short bed 2wd pickup (don't believe me that this is what they cost? go on line and price them out in work truck trim, you'll see...)

jughead's picture

My brand new GMC Canyon, 4WD short bed listed at about 31k. When it was all said and done I paid 11k out of my pocket.  No financing.  Find something used you can pick up for 11k with 0 miles on it, a decent warranty and no wear and tear.  

That said, IT IS TOTALLY FUCKING STUPID THAT WE CAN'T FIND BASIC NEW VEHICLES IN THIS COUNTRY FOR LESS THAN 5K!  I don't need half the bullshit they put into this pickup - XM radio, onstar, backup cameras, wifi hotspot, etc.  Give me a nice basic pickup like my first 60s Ford and I'd be perfectly happy. 

buttmint's picture

...I had an all-stock 1979 Ford F-250 4wd 351-M manual tranny (Borg-Warner).

Damn truck hadda suspension that would snap your neck on a crappy road. Amazing truck---it taught me the value of "mpd vs mpg."

Miles PER DOLLAR and my F-250 was easily the most economical vehicle I ever owned---hadda biz, built houses, hauled firewood, etc. Finally sold my old truck to a Pro Bump Shop that dutifully restored the truck (Candy Apple Red) to its former glory.

 

Then I bought a used F-150 V6 with 5speed manual overdrive tranny---$8200 USD with 11k on the odo. I still have this truck---daily driver. Gets about 16-21 mpg.

jughead's picture

I have a 94 Dakota 318 4wd with 180k that I still drive...it's my "work" truck...as in the truck I use when I need a truck, not a glorfied car with a bed. ;-)

Buit I just spent 800 bucks to rebuild the danged transfer case...and that is why I like to keep a nice new vehicle for commuting, vacations and such...because the laws of physics dictate that a vehicle with few miles will require a lot less unscheduled, unwarrantied major repairs than one with lots of miles.  It sucks that we have to depend on motor vehicles, but until we get EMP'd back to the stone age, it is what it is, and I fucking HATE getting stuck away from home with a broken vehicle.  

X- x3's picture

Hey Jughead, do you mind me asking where you bought it & model#, date of production?

X-

jughead's picture

2017 Canyon SE bought in Ohio

X- x3's picture

Thanks for the info.

:)  X-

post turtle saver's picture

you got a good deal on that Canyon, would be hard to walk away from that... I agree, I don't need all the junk they put in trucks these days... I'm buying it for work, not to be a boulevard cruiser SUV with a bed...

Abbie Normal's picture

So, are you a great wheeler-dealer, or did you have a big$ trade-in?

Kickaha's picture

Gotta love that DoucheBank.  "It's a crisis...a crisis, I say...the value of the collateral backing my loans is precipitously declining...we implore the government to take action to protect asset values".

What a mess_man's picture

Yep - ad in paper today for a '17 Ford Raptor.  Nice looking truck.  Base price $49K. as tested $62K! For a sport pickup!

VWAndy's picture

 Just picked up an 86 jetta for 200$ clean no rust AC works great new clutch too. Some pro shop screwed up the trans doing the clutch job. So I put my 50 mpg trans on it and dialed it in. The wife is one happy camper.

BlindMonkey's picture

I had a 2002 TDI Golf I put in a taller 5th gear in.  I broke that gear going up a hill in Canada.  Prior to that, I didn't know that could even happen.  Downshifting is your friend.

VWAndy's picture

 I coulda told ya that would happen. I found out the very thing the same way.