Used Vehicle Prices Plunge Signaling End Of Auto Party

Tyler Durden's picture

As channel-stuffing shifted from the US (here) to China (here) and Europe (here), so the new vehicle sales data has disconnected from a number of realities. Whether it is economic growth or Ford's share price, things look a little over-cooked in the land of if-we-build-it-the-government-will-buy-'em. However, there is one index that tends to see through all the unreality much more clearly than our analysis above, that is the Used Vehicle Price index. Each time this index has dropped and broken below its two-year average, the auto industry has tended to fade rapidly. After yesterday's comments on the lowering of collateral standards for subprime auto lending, it would appear we are setting up nicely for some whocouldanode moment in the manufacturing sector's most critical industry.

Each time Used Vehicle prices (black) have dropped plunged below their two-year average (red dots) signaling a slowing of momentum (which Bob Shiller noted yesterday was critical to major credit-driven purchases), so the auto industry (e.g. Annualized vehicle sales and Ford share price in the chart) has weakened notably...



(h/t Last Crusader)

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q99x2's picture

You can get a new car for less than a junker.

malikai's picture

Cash for clunkers part deux?

Hype Alert's picture

Exactly, let's destroy some more assets with the Broken Window economic model. FTW

Biosci's picture

It's the same as the Let's Have A War stimulus plan, but requires only one player.  Harder to get people excited about it, though.

TruthInSunshine's picture

"Free market participants" (i.e. anyone not backed by Big 'Sis and the New York Branch of the Whore Mother Ship Federal Reserve 'Bank') desperately trying to earn a real rate of return of that's not negative in the era of ZIRP/NIRP are ignorantly letting The Big Bang Bernanke pressure them into buying chattel paper securitized by 14 year old/110,000 mile Hyundai Excels bought by 440 FICO score purchasers.


This will end well.

No one could possibly see what's coming.

aerojet's picture

I agree mostly, but the one reason it isn't 100% broken window is if you try to price in the environmental impact that removing all those "clunkers" had.  Basically, the only silver lining of CFC is that it replaced a lot of fuel-inefficient vehicles with more modern, less polluting ones.  That is the only good outcome from CFC and it came at incredible cost to US taxpayers.

Panafrican Funktron Robot's picture

Yes, because manufacturing cars, with insanely toxic batteries, that's what's good for the environment.

hidingfromhelis's picture

One of the (many!) things that irks me about these bogus stimulus programs is the BLS'esque assumptions they make up and tout.  Most of the "clunkers" turned in probably weren't even being driven daily anyway, and few would come close to the 12,000 annual mileage assumption.  Requiring the engine to be destroyed takes away the ability to recycle it into another vehicle that would probably be well maintained.  Let's destroy more productive or potentially productive assets!

This would be like forcing farmers to slaughter all their pigs and subsidizing raising cattle or burning all the soybean fields and subsidizing corn planting in the name of alleviating hunger while at the same time mandating and subsidizing ethanol production.  Oh wait, they already do stupid shit like that.

A Nanny Moose's picture

...a mere 10 years after CONgress passed and Bush signed into law those wondergoddamedfuckingful tax breaks for Hummers, and Ford Extinctions.

Mind the unintended consequences. Beware gummint "solutions"

onelight's picture

Yeah...that...and cash-for-thingamajigs...can't forget that one...

This is the state of our union, alas

flacon's picture

Don't be so cocky. "You didn't build that thought!"

john39's picture

you didn't build that thingamajig.

Dr. Engali's picture

I was reading about that yesterday,and the article didn't even include the finance charges. If you include the finance charges an a new car verses a used car it's a lot cheaper to buy a new car.  

Hype Alert's picture

Go long unions!  Er, voter base.

Hey, can we get some more channel stuffing in here?  It makes the labor numbers and GDP look good.

viahj's picture

sure, there are still a few empty spots on the dealer's lots that we can fill with "sold" inventory.  then when a hail storm comes blowing in, more damaged captial.  all bullishit.

Slim's picture

I came to the same conclusion last year.  I'm not a big "lease" fan and typically buy a car a few years old then treat it well as I own them a long time (this is almost always the best way to go baring certain situations).  However, the new car and even lease deals were so good I sold out of my vehicle at a premium price and decided to grab a lease.  I know a few others who came to the same numbers over the last year too.  I haven't seen decent lease deals since the early 1990s but this worked for me.

Oh - disclaimer here before someone thinks I'm pumping the lease market or endorsing the "ever rent" strategy. Do not ever ever use a lease to drive a car you couldn't otherwise afford (unless it's straight up cheaper than options you can afford which is very very rare in any market).  I'm not endorsing that at all despite the success of foreign luxury autos getting people into this insane strategy.  Just run the numbers and see what is the best option for your situation and remember that a car is consumption not investment (hence depreciation).  At the end of the day you need to be prudent in the use of your resources, sometimes renting is cheaper than buying (a la 2004-2007 no brainer on homes) and sometimes it can make sense in a vehicle too but these times are rare and require either high resale assumptions on return (right now - linked to used car prices) or your own ability to depreciate the vehicle for business purposes (pretty constant).

Neethgie's picture





ZippyBananaPants's picture

What will I use to have 'DINNER WITH BARACK'?


machineh's picture

A plastic knife, obviously. 

Cuz the Secret Service don't let mundanes anywhere near the prez with metal forks and knives.

ZeroAvatar's picture

Someone needs to turn the handle into a knife, thus the 'knispork'. (Hey, waddaya gonna cut it with?  Your sharp wit?)

GolfHatesMe's picture

Unless a Hooker brings them in

otto skorzeny's picture

according to the Chi Sun-Times he is throwing himself his own birthday party at his home on S. Side and for just $40K a plate you can go too. for that kind of dough Michelle better sit on my face.

SokPOTUS's picture

^^^^^That comment was NSFW.  Or anywhere else for that matter.  Ewwww.  (*shudders*)

derek_vineyard's picture

i wouldn't even let her blow me for free

Likstane's picture

I'd rather stick my face in a pail full of warm elephant piss.

WonderDawg's picture

I'd rather shave my head with a cheese grater and chew on a wad of tin foil. I wouldn't let that skank give me a hand job.

Gavrikon's picture

No one mentioned going down on her, er, him, er whatever.

neilhorn's picture

An Irishman friend of mine once said, "I guess it  all depends on what you are accustomed to doing".

BigMike's picture

and suck a few jagon's too...

Meesohaawnee's picture

wait .. a ZH er reading chicago tabloid for the stupid? or better yet King Rahms PR dept.. wow. my condolences.

JohnG's picture

Don't care for gorillas, thank you.

Gavrikon's picture

Especially if they're males.

ZeroAvatar's picture

What exactly WAS Chewbacca, anyway?

azzhatter's picture

you'd have to push Jarrett out of the way

Winston Churchill's picture

I just got the last lot of coffee out of my keyboard.

Have do it again,right after washing my brain out with battery acid.

Itch's picture

What about this for a party...Hillary slow grinding with an African. Maybe the African woman thought Hillary had something beneath those trousers and thought she would find out.

Conax's picture

She looked stylish in her metal flake blue Chairman Mao get up.

Cornfedbloodstool's picture

Sweet Jeebus! I haven't seen less rthym since my wedding.

machineh's picture

Time for another 'junk some clunkers' program.

This 'market' thingy is getting bloody annoying. 

Why doesn't Congress just outlaw it? /sarc

Neethgie's picture

Who keeps making all theese cars, because im reliably informed it wasnt me.

TwoJacks's picture

wow.  convincing

Cursive's picture

Still got a long way to go.

otto skorzeny's picture

don't tell Phil LeBlow on CNBC

Cognitive Dissonance's picture

Don't worry. He's too busy blowing Boeing to notice.

<Was that my out loud voice?>

azzhatter's picture

Phil Lablow must have iron lips, that guy sucks off entire industries