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A glut has used-car depreciation accelerating

bloomberg.com

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Re: A glut has used-car depreciation accelerating

#31

Post by ghaff »

rawrmaan wrote: post #17

Interesting that this has nothing to do with ride sharing (or at least the article doesn't cite that as a reason). I think autonomy and ride sharing will drive used cars nearer to the value of scrap metal within the next 5 years.

Uber/etc. make a difference at the margins but don't drastically reduce car ownership. I'd believe the effect is greater with those who don't buy new cars but still limited effect.

I expect full autonomous driving to be much further out. Where it could have an effect though is this. To the degree that new vehicles become much more attractive because of new sensor and software features, that would likely drive used car prices down. These could certainly increase the perceived value of a current model year car vs. one from five years ago.

Re: A glut has used-car depreciation accelerating

#32

Post by grecy »

With many countries tabling laws to outlaw the sale of diesel and gasoline cars around 2030, this is going to accelerate extremely quickly.

In 5 years (2022), everyone will know it will be illegal to buy a gasoline car in just under 8 years.

I think there will be very little demand for the regular old gas powered car. (excepting maybe exotics, or "pleasure drives", which much be a tiny fraction of overall sales)

That car you have to fill with liquid cancer is going to be worth extremely little, very soon.

Re: A glut has used-car depreciation accelerating

#33

Post by Jach »

hkmurakami wrote: post #18
Glyptodon wrote: post #7

Thank the gods we're no longer in that weird bubble from a few years back where decent used cars were basically more expensive than new ones.

Could you tell us more? Was this in some niche segments of discontinued but popular models (like certain Subarus) or were run of the mill cars also like this?

Essentially the cash for clunkers program took a lot of serviceable old cars off the market permanently by destroying them. Here's a write-up I found on some of the issues with links to more details: https://www.bostonglobe.com/opinion/2014/08/31/cash-for-clun...

Re: A glut has used-car depreciation accelerating

#34

Post by digitalneal »

adventured wrote: post #3
sbierwagen wrote: post #2

The average used car costs $15,300? That seems pretty wild. Are the classic Porsches that sell for $10 million dragging the average up?

No, that's about right. Take some time and go through autotrader.com. $15k isn't unusual for a used mid-value sedan with ~25,000 to ~65,000 miles. For example, look up Hyundai Sonatas, 2013, with that mile load, you'll see prices around $14,000 to $18,000. Or check out Toyota Camrys, 2012 model year. You'll typically pay around $14,000 to $16,000 to get into one with 40,000 to 60,000 miles. So that's a 5+ year old ca…

You will get a much better idea of what real used cars cost when you look at the manheim numbers. Going to a retail website like Autotrader or cars is going to add a few grand to the price at least. Manheim is what the dealers pay at auction. True used car prices.

Re: A glut has used-car depreciation accelerating

#35

Post by guy_c »

sbierwagen wrote: post #2

The average used car costs $15,300? That seems pretty wild. Are the classic Porsches that sell for $10 million dragging the average up?

Need to also be careful how they've defined 'used'. Dealers will sometimes buy the cars themselves to hit sales targets set by the manufacturer. They then sell off those cars 'used'.

Re: A glut has used-car depreciation accelerating

#36

Post by olivermarks »

ProfessorLayton wrote: post #22

Its looking even worse (Or better for a buyer) for electric cars. A cursory craigslist search shows a 2014 Fiat 500e for ~7.5k @33k miles and Nissan Leafs for as little as ~5k @42k miles. All with clean titles. A used Model S 60 (2013) can be found for ~40k @60k miles, which I think is good but not great, especially considering the quality issues early on. I'm waiting to pounce on 1st generation electric cars that wi…

Production of the Chevrolet Bolt has stopped due to lack of demand and bulging inventory, part of the overall problem discussed on this thread http://fortune.com/2017/07/17/gm-shutdown-chevy-bolt-supply/

Re: A glut has used-car depreciation accelerating

#37

Post by james-skemp »

afinlayson wrote: post #23

This may be temporary, as services like Uber/Lyft increase, and the possibility of Autonomous Vehicles driving down the cost of those services. This would cause the volume of new cars needed to dramatically fall, leading to increased cost of those new vehicles. This would increase the value of used vehicles that are currently priced in. Would love to hear differing opinions :)

> This would cause the volume of new cars needed to dramatically fall [...]

I don't disagree with you, but when reading the article you'll notice that the auto industry is pushed to sell more cars, year after year. Like a number of industries, now that they've had years/decades of growth, I'm not sure how they would handle significant loses.

Heck, even stabilization. I'm over 35, but consider myself young; was there even a time when the majority of companies didn't care so much about year-over-year growth, and weren't seen as weak if they were stable/flat?

Re: A glut has used-car depreciation accelerating

#39

Post by xutopia »

jrs95 wrote: post #25
ng12 wrote: post #5

Actually it's not because I don't think about the value of my car. It's not an investment, it's an expense.

This is true, but the value of your car plays an important role in that expense. And expected depreciation is an important factor to consider when buying a car.

Not if you plan to run it to the ground. Then it's simply about upkeep until it dies.

Re: A glut has used-car depreciation accelerating

#40

Post by majormajor »

hkmurakami wrote: post #18
Glyptodon wrote: post #7

Thank the gods we're no longer in that weird bubble from a few years back where decent used cars were basically more expensive than new ones.

Could you tell us more? Was this in some niche segments of discontinued but popular models (like certain Subarus) or were run of the mill cars also like this?

I think 2012 was the peak of this, with some models literally being cheaper out the door new than 1 or 2 years old.

http://business.time.com/2012/03/22/when-new-cars-are-cheape... http://genxfinance.com/buying-a-new-car-may-actually-be-chea...

Short version, a couple of things hit at the same time. I don't think Cash For Clunkers was involved as those cars were much older than the 1-2 year old ones, but it was more a factor of:

* shrinking new car demand in a post-financial-crisis buyer market that was very cost sensitive and had internalized the "cars lose 20% of their value the moment you drive them off the lot" type stuff, so started ruling out even cross-shopping new cars because they wanted to save money

* banks and dealers having more aggressive incentives and better loan rates on new cars (which is true even in non-recession-times, but they had to get more aggressive as new car demand dropped)

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