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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BlindMonkey's picture

Well, the fact that I am not the only dumb ass monkey makes me somewhat relieved.    Hehehe

VWAndy's picture

 The gear did pay for itself before breaking so its all good.

Jubal Early's picture

I am driving a 2.0 TDI VW Caddy 4x4 with a Steyr live axle in back.  Seats 7. Been averaging over about 6l or over 40mpg.

My next project is a 73 Kübelwagen.  Of course I will put a confederate battle flag on the bumper even though the Yurps have no idea what it stands for except "racism".

VWAndy's picture

 My other one is kinda neat. Its 69 fastback with a 1.6 L turbo diesel swaped in. Its half Buck rodgers and half Buck toothed.

Jubal Early's picture

I love those fastbacks but swapping an aircooled boxer for a watercooled inline diesel sounds a little iffy to me.  But I have no doubt you are a better mechanic than me, I have been in IT for 35 years.

Have you tried running that diesel on cooking oil yet?

VWAndy's picture

 Yes biodiesel is ok but its kind of a pain. The most interesting fuel I ever tried was some F/T diesel. Thats some kick ass fuel.

  The Fast back needs a better trans to work correctly by my standards. First and second gear are way to slow. 3rd and 4th rock pretty good.

 

A Nanny Moose's picture

LOL @ The Thing!!! Don't see many of those anymore.

Jubal Early's picture

This one is a later German model with limited slip differential (rare) and high gears.  There are some rust issues though...

Ecclesia Militans's picture

You should see the Confederate Battle Ensign (14th VA) that I purchased from CS Arms in Upperville, VA about 2 years ago.  It graces our great room (my wife is both a Daughter of the Confederacy and the American Revolution) and when company comes over, it consistently draws attention, polite inquiry, and an opportunity to show a short clip of General Lewis 'Lo' Armistead leading the 14th to their deaths at the Angle in Picket's charge from the Battle of Gettysburg movie that came out about twenty years ago.

To quote General Pickett: "That's the style!"

https://www.youtube.com/watch?v=JUHnL6R39VM

Jubal Early's picture

Isn't that just a confederate battle flag with a white fringe?  I need it as a bumper sticker.  I have a few battle flag bumper stickers in my inventory from before the battle flag holocaust.

My wife is Swiss, but my Grandmother was from Little Egypt (cairo) and her family lost some loved ones to the yankees.

Isn't that the (((Ken Burns))) gettysburg movie?  It is totally jew-washed, I would never pay a dime for their lies and filth.

stormsailor's picture

all my family, great great greats were in the 14th nc.  they chewed a lot of dirt with jubal.  they were in rhodes division, ramseurs brigade. and fought with them the entire war.

they kicked the yanks out of gettysburg.  out of the muleshoe, and took the clearing at hazelgrove at chancellorsville.

 

held off burnsides entire corp at the wilderness.

 

held off mcclellans army at south mountain for a day and a half, most of the pictures of dead in the sunken road at antietam are the 14th nc.

Jubal Early's picture

I think the statistic is that 60% of the young southern males were killed.  At the end it was a war of genocide, very similar to what the judean world empire did to Germany in 1945 (they declared war and started an international boycott against Germany in 1933).  The Yankess have repeated the formula for 150 years under their jewish masters and that is exactly what they are doing to Russia now.  Just like the Germans in 1939 and the Japanese in 1941 the south did not want a war, but in the end the Yankee's and their jewish owners forced on the south.

shovelhead's picture

Just watched a doc on that last night.

The actual photos of the sunken road are beyond gruesome.

Benito_Camela's picture

How do you break a higher gear going up a hill? 

VWAndy's picture

 A big pile of torque will do that.

BlindMonkey's picture

It was just the additional stress of going up the hill that did it.  The motor was lugging a little and then just "spun".  OEMs select their ratios for a reason and max economy isn't the only reason.

 

The best life lessons usally have blood or money associated with them.  Live and learn I guess.

VWAndy's picture

 Im thinkin about doing a few tweeks to it. A more modern three way cat and either steam or water injection. Should make that thing boogie and run clean as can be.

One Ton Lady's picture

If they start the two for one thingy again

I am in the mood. 

flaminratzazz's picture

It is a sad day when we no longer care what size engine we have but instead look for the largest gigabytes.

E.F. Mutton's picture

I recently paid off my 2010 Dodge Truck which runs like a top.  About 2 months before, the dealer called and gave me the marvelous opportunity to take on 5 more years of debt by trading it in for a new one.  I actually snorted when I laughed and asked him if he was serious.  How rude of me.

flaminratzazz's picture

Seriously? a Dodge?

 

oh fvk me//NO!!

Peterman333's picture

If he's got it and it runs like a top then good for him but no I personally wouldn't buy a Dodge or Fiat anything though their little micro euro cars are kind of cool.

flaminratzazz's picture

I finally gave up on Dodge after too many left me stranded. My 1969 Plum Crazy Superbee is sorely missed tho!

I sure as hell wish i still had that one!

Thinkpad's picture

Exactly the above data confirms folks should be buying a used car if they need one. I have no debt only pay cash I'm not going to be anyone's slave to wages in order to avoid debtor's prison. There is a fixation with everything new and shiny and latest when it comes to technolgy when last year's model is fine.

Thinkpad's picture

Correct as does most of the animal kingdom including monkey cousins homo sapiens. However humans should comprehend anything despite its age can be shiny with a smidgen of elbow grease and a minor dent does not require trading it in and adding another 10,000 or so of debt. Has the word repair been deleted from the dictionary?

Peterman333's picture

Shhh, don't let the sheeple who like new and shiny know the game, it ruins it for us who only buy slightly used but like now and steeply discounted. 

Thinkpad's picture

You're right I buy gently used everything I have a Thinkpad 410s that rocks my world I got from my secret used dealer here for 180 USD. Sure when at Starbuck's no one thinks I'm cool cause I drink french roast add cream with one splenda, don't have Mac Book Air instead IBM Thinkpad and Samsung instead of Iphone. Oh and I never wear clothes with s strangers initials emblazoned on them nor logo. I'm pretty happy as hard as that is to imagine lacking all those serious affectations. Did you know that 70% of sunglasses are made by one manufacturer? I'll stick to c.lassic Wayfarers you can pay up for whatever the latest must have sunglasses with some idiots intials on the side.

Peterman333's picture

Aldi had a big box of fishing sunglasses for $3.00 each, bought four pairs, care a less how I Iook they block the sun here. Also bought a refurb dell laptop, re paste the proc, ssd, more memory, perfect.

Jubal Early's picture

My wife has an old 410 that runs like a champ.  Unfortunately I spilled some beer on the keyboard and now it has a crunchy keyboard.  I have tried cleaning it with various cleaners to no avail.   I have offered to buy her a new one but she wants to keep her Thinkpad (mosty because she wants to stay on Windows 7).

SubjectivObject's picture

CraigsList FTW

Somebody visitor here expressed amazement that people use craigslist.

Took him on a tour of the house and every where I pointed there was a CL find.

He was also amazed that I could be 6 months out of work and spend my time renovating the house.  Connect the dots there.

Next CL item should be an out of state 04 RSX in minty cond w 48kmi for 7k$ if I can keep the seller comfortable with the transaction/title/transport details.

jughead's picture

Why do you have to buy used if you pay cash?  I pay cash for a new vehicle every 5 years or so, trading in the last one.  Get a much better deal on the price, no debt and I always have a newer car that is more reliable and under warrantly for most of the time I have it.  

Jubal Early's picture

Especially if you are making long trips and don't want to risk being stranded while the replacement parts get delivered.

northern vigor's picture

I do 18,000 miles a year and buy new every three or four years. 13 trucks in 40 years. I've never sat on the side of the highway waiting for help. 

I'd be out of business quick if it happened. Some guys can afford used...I cannot afford to not have new.

When I was a kid I hunted with a retired guy. I asked him one time how he can afford a new truck every three years and he said..." I cannot afford not to buy new". It was ten years later before I figured out what he meant.

Jubal Early's picture

A while back I spent 3 days waiting for parts in the basque region of No. Spain when the front wheel bearing went out on my ex '88 VW LT3200 Sven Hedin.  We had no toilet and I don't enjoy searching for a remote tree with a loose rock to cover the crap when I am finished,

PTR's picture

When I look at the technology that's getting installed into cars as standard features...I'll take the used car minus the Hal, TYVM.

Farmer Joe in Brooklyn's picture

Dad...is that you? 

Didn't know you were a ZHer.

Thinkpad's picture

Son Farmer Joe go back to tending to the sheep and milking the cows like I asked you nicely last week. Leave the heavy mental lifting to us grown ups. You're too young to be on a grown up site like ZH. Can I trust you not to visit sites such as this or must I use parental controls?

just the tip's picture

i'm driving my 1990 jeep cherokee with, let me go outside and check, i'll be right back

 

                            with, 358,846 miles on it.  i haven't had a car payment since 1993.  i haven't figured out yet what i'm going to post here.  so i'll come back and do an edit.  or something like it.

jughead's picture

We just traded in our 2012ish vehicles on new 2017s...didn't make payments on the old ones, have no payments on these.  Pay cash, drive to 60k, trade in and repeat...been working for me for years. Aways have a reliable car, rarely have big repair bills, no freakin debt to worry over. 

Honest Sam's picture

You aren't buying Toyotas, which will double your miles, and therefore years, and STILL leave you with less maintenance. Reliable, and 5 years or more, without debt. Or cash out.  

The Toypota V6 has to be the most maintenance free engine on the planet.

Unless y'all have had a differenet experience, I'm on my fifth USED toyota, and have no fear of buying one with 40-100,000 miles on it. 

SubjectivObject's picture

Watch out for the sellers who think they're so good that they're maintenance free.

morongobill's picture

My company has about 6 of the Prius(how is that spelled plural?) and every damn one says maintenance required. This is because they always go 10k miles over before changing the oil. They just dumped one which had 450k miles. Another has over 250k. They just keep going and going. Ran hard and put away wet.

Starting to think maybe I should get a used one, if I can jew somebody down that is. Prices pretty high here on the left coast.

83_vf_1100_c's picture

  You must be rich and don't mind the depreciation hits. I am comfy because I am frugal. I am also mechanically inclined and don't mind throwing a $100 and a few hours turning a wrench now and then. I save money and my used vehicles are drive cross country dependable.

cowdiddly's picture

What? But this little one owner Cream Puff was driven by a little old lady only to the post office and church on Sunday.

Why do I get the feeling salvage prices at the crusher are going to be in the basement this summer?

Gone are the good old days like in 2004-6 when I could buy worn out beater cars at the auction for 200-250 bucks and drive it 8 miles across town to the crusher and sell them for 475 same day.

And boy did I put a lot of POS clunkers out of their misery.

smithmorra's picture

I WOULD RATHER "PICK-UP" A CACHE OF GUNS READY FOR ACTION!!!  THE PERFECT TOOL FOR ANARCHY AND MAYHEM WHEN TSHTF!!!  THEN WE COULD ALL DRIVE OVER TO THE LOCAL DEALER WITH BLACKED OUT LICENSE PLATES WITH STOCKINGS OR SKI MASKS PULLED DOWN AND GET AWAY WITH OUR CHOICE!!!!!!!!!!!!!!

morongobill's picture

To the NSA monitoring this- he's kidding!

Latitude25's picture

I expect vehicles that can spy on you to lose value even more quickly.  Seriously, who would own one?

jughead's picture

We just traded in both our 2012ish vehicles on new ones (paid cash).  To spy on you the vehicle has to be connected to the outside world...I took care of that shit right off the bat...it ain't rocket surgery if you are half-assed knowledgeable and competent with cars.  

JRobby's picture

And the secret is? Mr. Amazing?