The Used Car Market Will Crash

[JST]

There’s a little more inventory even on the lower end than there has been. Was told there was a waiting list for Integras but that changed to “you can have the next car we get” pretty quickly. There are a fair number of Jettas around and a smaller number of Civics, too.

Used car prices on the low end still are insane, though.

Will have more to share on this in a bit.

[zach]

Originally Posted by SARAFIL

It seems like it’s in a point of transition, but it depends on the car.

High end luxury cars are starting to cool - people either a little scared to spend the money or strained on what they can afford with rising rates. There is also still a disconnect with dealers sitting on aged inventory that they bought 60-90-120 days ago at inflated prices and they are hesitant to take the loss, but if they had to cash out at auction they would take a blood bath. Fresh inventory does feel like it’s coming online at slightly lower prices. No longer seeing a lot of these cars listed at original MSRP for 2-3 year old models though like we saw earlier this year.

(Case in point, have been watching 2020 X5 prices since I paid off my lease earlier this year. Several comps for my car still listed at $70k+ but most have been on lot 60+ days and I’m not sure they will ultimately sell with a 7 in front at retail. I’ve also been tracking cash offer for my car and it’s been slowly dropping every month, but the bottom hasn’t fallen out either - still easily $10k+ above where my lease payoff would have been)

Cheaper cars, EVs, etc. still really strong - not seeing any signs that market has cooled yet.

The market definitely appears to be softening. I keep an eye on 991.2 prices and X7s once in a while - seeing more "reduced price" tags on autotrader. Our 2021 X7 M50 was worth about $100K earlier this year with 18k miles on it. Probably only worth about $90K right now. As Josh notes, the lower end of the market is still nuts.

[lemming]

I’m waiting to read more. I love to see your collective thoughts on this issue.

What is lower end? And why is it so insane still? Is this new car supply constraints still?

[SCA]

Having very recently sold an EV that was bringing $130k+ 60 days prior, we have definitely seen the Rivian pre-owned supply significantly increase while the demand is still rather strong. Individuals have clearly decided to no longer pay the excessive “going rates” as they are now pulling what the newest MSRP is after the most recent, unannounced price increase.

I have noticed that those that have 997.2 inventory, especially manual cars at highly inflated prices are now sitting on them where just a few months ago they would have sold within 24-48 hours.

[lemming]

Originally Posted by SARAFIL

It seems like it’s in a point of transition, but it depends on the car.

High end luxury cars are starting to cool - people either a little scared to spend the money or strained on what they can afford with rising rates. There is also still a disconnect with dealers sitting on aged inventory that they bought 60-90-120 days ago at inflated prices and they are hesitant to take the loss, but if they had to cash out at auction they would take a blood bath. Fresh inventory does feel like it’s coming online at slightly lower prices. No longer seeing a lot of these cars listed at original MSRP for 2-3 year old models though like we saw earlier this year.

(Case in point, have been watching 2020 X5 prices since I paid off my lease earlier this year. Several comps for my car still listed at $70k+ but most have been on lot 60+ days and I’m not sure they will ultimately sell with a 7 in front at retail. I’ve also been tracking cash offer for my car and it’s been slowly dropping every month, but the bottom hasn’t fallen out either - still easily $10k+ above where my lease payoff would have been)

Cheaper cars, EVs, etc. still really strong - not seeing any signs that market has cooled yet.

I was wondering where the breakpoint would be. We have become so inured to the cost of things in the past 18 months, I was wondering if we would get a true pricing correction. I guess we are seeing it now. But the new baseline pricing is basically MSRP for a 3yo car instead of MSRP plus a premium.

[Josh (PA)]

My own anectodal evidence. I placed an a for sale ad on CL and FB this morning at 6am for my daughter's 2005 Hyundai Elantra. By 9am I had twelve people asking to see it. I got a firm offer at noon for my asking price. I expect it will be title transferred by 4:45pm today.... so yea, the used car market is still pretty hot.

[wdc330i]

Originally Posted by Josh (PA)

My own anectodal evidence. I placed an a for sale ad on CL and FB this morning at 6am for my daughter's 2005 Hyundai Elantra. By 9am I had twelve people asking to see it. I got a firm offer at noon for my asking price. I expect it will be title transferred by 4:45pm today.... so yea, the used car market is still pretty hot.

The market is certainly still starved for low-mileage, reliable teen cars.

[robg]

Originally Posted by lemming

I was wondering where the breakpoint would be. We have become so inured to the cost of things in the past 18 months, I was wondering if we would get a true pricing correction. I guess we are seeing it now. But the new baseline pricing is basically MSRP for a 3yo car instead of MSRP plus a premium.

Probably about right for 911s unfortunately. Based on lease residuals, 911s typically hold about 65% of their original MSRP after 3 years. Add about 16% for inflation, then a 20% dealer markup (vs wholesale), plus a premium for lower mileage and a manual trans...and yeah it probably comes out to roughly original MSRP for the cars people here would be interested in.

[Alan]

Originally Posted by robg

Probably about right for 911s unfortunately. Based on lease residuals, 911s typically hold about 65% of their original MSRP after 3 years. Add about 16% for inflation, then a 20% dealer markup (vs wholesale), plus a premium for lower mileage and a manual trans...and yeah it probably comes out to roughly original MSRP for the cars people here would be interested in.

I lost about 27% on my 9 1/2 yr old 991 which is unbelievable to me.

[Josh (PA)]

Manheim prices are coming off peak, but still way higher than anything we've seen before.