Tale of Two Used Car Markets - What is Real vs. Fake? (luxury, vehicles)
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Yesterday, Bloomberg published this article on imploding used car values. However, the Manheim used car value index is at a new post-recession high? Who is right and who is fake news? One has to be wrong and my impression is the attention grabbing bad news article is fake.
If we are going on the basis of "news", then Bloomberg is real news. Manheim's report is a press release used to market it's services.
Manheim uses data from their own auctions and that data is massaged to create it's index value - it's not an absolute number. Further, Manheim uses that index value as a marketing tool in order to convince dealers to use it's auction service instead of another.
Bloomberg is using data from three different sources (Black Book, Edmunds, and KAR Auctions.) They are simply reporting a trend using information from 3 sources.
I think in some cases those #'s are a bit low/conservative on the depreciation values.
I've seen relatively low mileage CPO Camaro 2SS v8 Verts going for $35k with an MSRP of $52k and only 1 year old. That's a 33% hit in 1 year; possibly an outlier but still ouch....
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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Quote:
Originally Posted by notnamed
Sedans, especially luxury sedans are where the deals are in the used market. SUVs/Trucks/Crossovers may as well buy new in many cases.
Yes, in fact I have been looking at the new trucks and they are offering deals at as much as $12,000 off the MSRP right now on 2017s to make room for the 2018s. I see used trucks 2-3 years old with 20-30,000 miles for more than the discounted new price.
The subprime auto-lending world for new cars has driven down the marketability appeal of a used car by a large margin. Vehicles are depreciating assets (unlike real estate), so "creative" financing is more prevalent for the new car than the used, and has gotten out of whack over the past 18 months. This isn't speculation or whatnot, it is fact. I'll give you an example (and why I have 2 instead of just 1 car now).
In 2010, I purchased a 2007 CPO'd VW GTI w/ 40k on the clock for $18,500. Loved that car so much, that at 60k and a move to DC from Chicago, I decided I wanted a new one in 2012. I traded that car in for payoff at $14,750 with 60k miles for a new 2013 (fully loaded) for $30k. I was at the dealership in March 2015 for routine service (40k miles) when I noticed a brand new one (current body style) sitting there, fully loaded, in my favorite color (white), for again $30,000 +/-. I traded my 13' in for the 15' on the spot. Dollar for dollar trade, no increase in my payment whatsoever. I believe the balance on my loan was around $22k. Not a problem whatsoever.
This past June I decided I was ready for something a little more cruiser-friendly, having been driving a GTI every day for the past 7 years. Wanted a Toureg Executive, new, and they had one I loved at the right price (steep discount from $63k to $50k). All was going smoothly as usual, ready to sign the check. But....
My 2015 GTI with 36k miles, fully loaded, current model, prestine condition, not modified or tinkered with, new Michelin tires, etc... worth only $15k +/-. And that was in the "very good" to "excellent" condition bucket. I was stunned that after two others I had traded in before, both with higher mileage and neither in as good condition and both an older style, that this version was worth so little (and by all accounts, is far better than the other two ever could hope to be). I told the guy "no way am I going to just give you this GTI! I love this car, I'm not 100% excited about giving it up, what's the problem here?"
That's when he explained to me what subprime has been doing to the car business. He wasn't BS-ing me, I know this guy well. He and the manager were very open an honest, and showed me transaction after transaction after transaction to support this.
So, I said "thanks, you've made up my mind and pointed me in the right direction." Three weeks later I bought a 2014 Mercedes Benz E350 CPO with 22k miles for a tick over $32k OTD, and kept my GTI. The MB sold new for $63k. So, for less than one heavily discounted new Toureg, I have two used cars instead in flawless condition.
The Toureg wasn't discounted because it was a problem car, but (as we know now), VW decided to stop production on them for 2018 and they were clearing the lots to make room for the new Atlas and revised Tiquan.
Yes, in fact I have been looking at the new trucks and they are offering deals at as much as $12,000 off the MSRP right now on 2017s to make room for the 2018s. I see used trucks 2-3 years old with 20-30,000 miles for more than the discounted new price.
My local dealer recently had a 2013 base model 1500 GM pickup for 21,000......granted it only had 4500 miles on it. I bought that identical truck brand new in Dec 2013 for $18,500! MSRP was 24K.
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