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My question is, how come these claims of a "decimated used car market" never seem to make it over to actual customers. I'd sure as shit buy a car at 40-50% les

My question is, how come these claims of a "decimated used car market" never seem to make it over to actual customers. I'd sure as shit buy a car at 40-50% less than it was 3 months ago.

cepth 6y ago
The margins for used cars aren’t high enough to support that kind of discount (https://jalopnik.com/how-to-negotiate-for-a-used-car-5570813 https://jalopnik.com/how-to-negotiate-for-a-used-car-5570813 and https://www.autonews.com/article/20180428/RETAIL04/180439997/losing-money-on-used-cars-yes-and-no https://www.autonews.com/article/20180428/RETAIL04/180439997...). Think of it this way: there isn’t nearly enough demand right now, regardless of whether you (the dealer) discount your inventory or not. I.e., you will not move enough cars to pay for fixed costs like the mortgage on your building, financing the inventory on your lot, etc. The Fed has done various studies on household savings account balances and/or net worth (https://www.valuepenguin.com/banking/average-checking-account-balance https://www.valuepenguin.com/banking/average-checking-accoun... and https://abcnews.go.com/US/10-americans-struggle-cover-400-emergency-expense-federal/story?id=63253846 https://abcnews.go.com/US/10-americans-struggle-cover-400-em...). The vast majority of Americans would have to finance a car purchase, even for something like a 10-year old used car. Yes interest rates are low right now, but does it make sense for a consumer to buy a depreciating asset and increase their monthly interest costs at this point in time? To the car dealer (or rental operation like Hertz), the question is does it make sense to have a fire sale on your inventory now (at prices that will almost certainly lead to an accounting loss), or do you take your chances in bankruptcy court? If you believe that in the next year or two that the market for used cars recovers somewhat, you can sell those assets off during bankruptcy proceedings to pay off creditors etc. There’s a strong case that taking this approach will leave the company as a whole better off in 3-5 years, though equity holders will certainly be taking a huge hit.
- icelancer 6y ago
  Pretty much this. Depreciation is outpaced by the slashing of the margin you'd have to incur to sell today in any sort of reasonable quantity (especially if it is a cash transaction).
- metaphor 6y ago
  > Yes interest rates are low right now, but does it make sense to buy a depreciating asset and increase your monthly interest costs at this point in time? At what point do you suspect the "vast majority of Americans"--who apparently can't afford to purchase a 10yo used car outright--start genuinely contemplating the financial impact of asset depreciation and overbearing interest in a strategic manner before signing a purchase agreement...you know, the one with all those legal words for lawyers and such? Call me impractical but...$1,201 just chillin' in the bank, yo!
  - cepth 6y ago
    In boom times, it’s probably true that people can develop irrational exuberance e.g., taking out a big mortgage because hey, housing prices are going up everywhere. When things are good, maybe you don’t budget so precisely. I know I don’t! But when ~20% of working age Americans are living off unemployment benefits, and millions more who work in industries like restaurants, hospitality, and travel facing the possibility that they will likely never have a job to go back to, my guess is that you’d have to be pretty well off (or very optimistic) to take on an additional $100/month car payment, not to mention adding a car to your insurance policy etc. :)
    - metaphor 6y ago
      I don't know man...I mean $1,201 is lot of presidents just waiting to be put to work! That's like downpayment on a practically new set of wheels and enough herb to last until facebook says the unemployment website is fixed. Might not have another global panedemic like this ever again, and as the old saying goes: you miss 100% of the shots you don't take. Opportunity's callin' my name! Jokes aside, people who live life along this asymptotic approach are real, where the only conditional that registers is, "the current number in my bank account is still bigger than the number on this bill...which is completely optional 'cause repo ain't gonna find me this time, ha!"
      - RussianCow 6y ago
        You're getting downvoted, but it's actually quite staggering how many people live this way, even when they really can't afford to. A UPS warehouse worker I know just bought a $60k car because he got a "really sweet deal", even though the monthly loan payment is significantly higher than his rent.
lmilcin 6y ago
There is an important difference between prices and volume. To make a living you either have to get decent margin or huge volume. When both the margin and volume drops you have a problem.
borkt 6y ago
I went to Nevada a few weeks ago from the Bay Area and bought a very clean car at about 60% of what I would have paid for a similar Craigslist listing here in the Bay Area. If you are willing to travel a bit the deals are out there to be had.
- achillesheels 6y ago
  On that note, back in 2015 I found a nice gentlemen in Los Angeles who was a Prius enthusiast who would drive over to Phoenix/AZ and buy used ones, drive them over to LA and privately re-sell them. The Prius I bought from him (2005 model) is still being driven by my father five years later.
- e15ctr0n 6y ago
  Where exactly in Nevada? Close to the border at Lake Tahoe or further in some really small town?
dkdk8283 6y ago
You used to be able to buy older cars with plenty of life left before cash for clunkers. This effectively killed the cheap used car market

My question is, how come these claims of a "decimated used car market" never seem to make it over to actual customers. I'd sure as shit buy a car at 40-50% less than it was 3 months ago.

cepth 6y ago

The margins for used cars aren’t high enough to support that kind of discount (https://jalopnik.com/how-to-negotiate-for-a-used-car-5570813 https://jalopnik.com/how-to-negotiate-for-a-used-car-5570813 and https://www.autonews.com/article/20180428/RETAIL04/180439997/losing-money-on-used-cars-yes-and-no https://www.autonews.com/article/20180428/RETAIL04/180439997...). Think of it this way: there isn’t nearly enough demand right now, regardless of whether you (the dealer) discount your inventory or not. I.e., you will not move enough cars to pay for fixed costs like the mortgage on your building, financing the inventory on your lot, etc. The Fed has done various studies on household savings account balances and/or net worth (https://www.valuepenguin.com/banking/average-checking-account-balance https://www.valuepenguin.com/banking/average-checking-accoun... and https://abcnews.go.com/US/10-americans-struggle-cover-400-emergency-expense-federal/story?id=63253846 https://abcnews.go.com/US/10-americans-struggle-cover-400-em...). The vast majority of Americans would have to finance a car purchase, even for something like a 10-year old used car. Yes interest rates are low right now, but does it make sense for a consumer to buy a depreciating asset and increase their monthly interest costs at this point in time? To the car dealer (or rental operation like Hertz), the question is does it make sense to have a fire sale on your inventory now (at prices that will almost certainly lead to an accounting loss), or do you take your chances in bankruptcy court? If you believe that in the next year or two that the market for used cars recovers somewhat, you can sell those assets off during bankruptcy proceedings to pay off creditors etc. There’s a strong case that taking this approach will leave the company as a whole better off in 3-5 years, though equity holders will certainly be taking a huge hit.

icelancer 6y ago
Pretty much this. Depreciation is outpaced by the slashing of the margin you'd have to incur to sell today in any sort of reasonable quantity (especially if it is a cash transaction).
metaphor 6y ago
> Yes interest rates are low right now, but does it make sense to buy a depreciating asset and increase your monthly interest costs at this point in time? At what point do you suspect the "vast majority of Americans"--who apparently can't afford to purchase a 10yo used car outright--start genuinely contemplating the financial impact of asset depreciation and overbearing interest in a strategic manner before signing a purchase agreement...you know, the one with all those legal words for lawyers and such? Call me impractical but...$1,201 just chillin' in the bank, yo!
- cepth 6y ago
  In boom times, it’s probably true that people can develop irrational exuberance e.g., taking out a big mortgage because hey, housing prices are going up everywhere. When things are good, maybe you don’t budget so precisely. I know I don’t! But when ~20% of working age Americans are living off unemployment benefits, and millions more who work in industries like restaurants, hospitality, and travel facing the possibility that they will likely never have a job to go back to, my guess is that you’d have to be pretty well off (or very optimistic) to take on an additional $100/month car payment, not to mention adding a car to your insurance policy etc. :)
  - metaphor 6y ago
    I don't know man...I mean $1,201 is lot of presidents just waiting to be put to work! That's like downpayment on a practically new set of wheels and enough herb to last until facebook says the unemployment website is fixed. Might not have another global panedemic like this ever again, and as the old saying goes: you miss 100% of the shots you don't take. Opportunity's callin' my name! Jokes aside, people who live life along this asymptotic approach are real, where the only conditional that registers is, "the current number in my bank account is still bigger than the number on this bill...which is completely optional 'cause repo ain't gonna find me this time, ha!"
    - RussianCow 6y ago
      You're getting downvoted, but it's actually quite staggering how many people live this way, even when they really can't afford to. A UPS warehouse worker I know just bought a $60k car because he got a "really sweet deal", even though the monthly loan payment is significantly higher than his rent.

lmilcin 6y ago

There is an important difference between prices and volume. To make a living you either have to get decent margin or huge volume. When both the margin and volume drops you have a problem.

borkt 6y ago

I went to Nevada a few weeks ago from the Bay Area and bought a very clean car at about 60% of what I would have paid for a similar Craigslist listing here in the Bay Area. If you are willing to travel a bit the deals are out there to be had.

achillesheels 6y ago
On that note, back in 2015 I found a nice gentlemen in Los Angeles who was a Prius enthusiast who would drive over to Phoenix/AZ and buy used ones, drive them over to LA and privately re-sell them. The Prius I bought from him (2005 model) is still being driven by my father five years later.
e15ctr0n 6y ago
Where exactly in Nevada? Close to the border at Lake Tahoe or further in some really small town?

dkdk8283 6y ago

You used to be able to buy older cars with plenty of life left before cash for clunkers. This effectively killed the cheap used car market