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Used car market gets even more bizarre

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Re: Used car market gets even more bizarre

#221

Post by noduerme »

OnlineGladiator wrote: post #138
noduerme wrote: post #129

Earlier quoted context omitted.

I still won't even buy a car with GPS. Seems I'm in a vanishing minority. It won't pass, because people born after 1990 have spent their adult lives in a world with surveillance machines in their pockets at all times. Their cars are just big phones. By 2040 you probably won't even be allowed to drive your own vehicle.

GPS is a one-way communication. It's really no different from radio in that regard (a signal sent from far away and you have an antenna to read the signal). Unless there's also a cellular modem in your car (which pretty much every modern car has today so I'm not pretending this is unusual) it's impossible for others to monitor your location. You can simply disable the cellular modem and enjoy using GPS without anyone…

I understand this. To be clear, I'm willing to use GPS. I'm willing to carry a cellphone. I'm even willing to use those things in conjunction when I choose to put a battery in and turn mobile data on and location on. If there were a car with a built-in GPS that didn't have cellular reception, I would get it. (I used to use a TomTom).

But I won't buy a car where those things are integrated and can't be turned off. Several people here seem to assume that I don't understand that almost all cars from the past decade have this capability.

It's one reason I drive a car from 1980, with basically no electronics whatsoever. (Other reasons being: it's more fun, it's simple to repair, and it will still run after an EMP).

Re: Used car market gets even more bizarre

#222

Post by eru »

KiranRao0 wrote: post #182
latortuga wrote: post #139

Earlier quoted context omitted.

Another flip side effect. My dad is a CFO at a car dealership and tells me that the banks are having problems due to the lack of cars as well. A dealership will normally float all their inventory on a big bank note but they basically have no cars on the lot to sell which means the banks underwriting those notes are making no money on interest. Multiply it by thousands of dealerships nationwide and this has big impact…

This seems like a really good thing for the dealership. They are able to operate with ~0 inventory and ~0 inventory holding costs.

Amazon famously has (or had?) something like negative inventory on the books. To be more technical, it's negative working capital, or negative cash conversion cycle.

That's because in whole-sale you typically have something like 90 days to pay your bills. But Amazon sells its inventory on to retail customers (who up front) before those 90 days are up.

Now, if I describe it as 'negative working capital' it sounds like some desirable thing. But the flip side is that you can also describe it more mundanely as: Amazon gets loans from its suppliers.

Re: Used car market gets even more bizarre

#223

Post by rhizome »

lotsofpulp wrote: post #152
emaginniss wrote: post #147

Earlier quoted context omitted.

Right, but they can access your car later and see all the places you've been.

Seems like a futile effort to avoid cars with GPS if you carry a device around that is connected to a mobile network. Is there anyone that does not carry around a dumb phone, if not a smartphone?

Presumably you are the only person with the password to your phone unless you use biometrics, with which you can be forced to unlock it. The car's black box, on the other hand, can be dumped by warrant (at the most).

Re: Used car market gets even more bizarre

#224

Post by eru »

oasisbob wrote: post #17
larrydag wrote: post #4

Here's the flip side of that from auto lenders. They are seeing a huge recovery benefit from repossession of vehicle after chargeoff. Lenders portfolios are seeing a net benefit in chargeoffs which has hardly ever happened in recent history. Even more bizarre. https://www.yahoo.com/now/ally-financial-ally-beats-q3-12451...

That's insane. If only all the small US banks and credit unions held off on their (~2005) indirect lending strategy and saved it for now, it might have actually been profitable!

Are you saying that doing indirect lending around 2005 makes them unable to do the same in 2021?

Re: Used car market gets even more bizarre

#226

Post by rossdavidh »

mpol wrote: post #130
tobyjsullivan wrote: post #105

What would it look like if asset speculation hit the used car market? Would it look much different than this? Normally that would be a poor investment because same-car prices steadily trend downward. But if the market changed such that used car prices were increasing - say, due to a shortage of new car availability - then would some investors be inclined to start hoarding used cars?

If prices are increasing faster than the maintenance that is needed :) Hoarding used cars for a slightly long time will have them deteriorate somewhat. Some will have small issues, some might have bigger. Theoretical value might be higher, but when selling time comes the practical value might be a disappointment. Getting them ready for sale will have costs. Car dealers just go for fast profit, like they always did.

All true, but I feel compelled to point out that houses need maintenance as well. But, as a percentage of the price, probably not as much.

Re: Used car market gets even more bizarre

#227

Post by eru »

mdavis6890 wrote: post #180
nostrademons wrote: post #156

Earlier quoted context omitted.

Usually the bank has no mechanism to alter whether you make payments or not. Keep making payments and they can't repossess the car. It'll be interesting to see what this does to the credit quality of future borrowers, which is the only leverage the bank has. Secured loans on appreciating assets mean that at some point, the bank has an incentive to write loans that they know are not going to be repaid, because they bu…

"...it becomes profitable to write loans to borrowers that you know are going to default, because you can take the house and enjoy the asset appreciation while getting a nice stream of cash flows in the process." Not the way it works, for two main reasons. First, people who owe less than the house is worth are generally not foreclosed on - in the worst case they just sell and keep whatever equity they get away with.…

> At least for houses, banks aren't allowed to profit from foreclosures.

I assume the details depend on whatever the fine print on your mortgage says?

Re: Used car market gets even more bizarre

#228

Post by baggy_trough »

0xFreebie wrote: post #98

Might their be some need to legislate chip allocation? What would sink GDP more: one year of no new cars, or one year of no new phones? Which would have the greater domino effect on the economy? Because auto manufacturers are such low margin, they can't buy chips reserved by monopoly businesses. But what happens when people can't afford a new phone because they can't get to work?

If you wanted to stick a knife in this already reeling economy, centralized planning of chip allocation would be an excellent way to finish it off.

Re: Used car market gets even more bizarre

#229

Post by dghughes »

dlmiller wrote: post #2

My car died, needing a new engine, so I was forced to get one in October. I usually only buy used, but prices are so inflated it didn't seem worth the premium. Used 2017-2020 Toyota Rav4's with 30-60k miles were the same price as a new 2021 model, if you could get one. I knew it was bad, but I was shocked of how bad it was. I went to multiple mega dealerships with 500-1000 cars that were all spoken for. Most had 0 ne…

I'm in a similar situation my old truck will cost more to repair than it's worth. I thought I'd go EV but two year old used EVs cost the same as new EVs. Used EVs get $5K rebate and new $10K rebate so new it is! But as you say zero new vehicles. I've never seen car lots so empty or new or used.

Re: Used car market gets even more bizarre

#230

Post by eru »

nostrademons wrote: post #156
wpietri wrote: post #29

Earlier quoted context omitted.

Wow, those are some terrible incentives. I've never had a loan, so maybe I misunderstand the experience. But I'd hate to owe money to somebody that is hoping I fail badly enough that they take my stuff and while keeping my money.

Usually the bank has no mechanism to alter whether you make payments or not. Keep making payments and they can't repossess the car. It'll be interesting to see what this does to the credit quality of future borrowers, which is the only leverage the bank has. Secured loans on appreciating assets mean that at some point, the bank has an incentive to write loans that they know are not going to be repaid, because they bu…

> It'll be interesting to see what this does to the credit quality of future borrowers, which is the only leverage the bank has. Secured loans on appreciating assets mean that at some point, the bank has an incentive to write loans that they know are not going to be repaid, because they buy only part of the asset, receive a stream of cash payments for it, and then get the full asset anyway when the borrower defaults. It's like a call option that you get paid for instead of paying for.

Seems a bit roundabout. If they want to bet on appreciating assets, they can just buy those assets directly?

> Come to think of it, I wonder if this is why we got NINJA loans with the 05-07 housing bubble.

There was no housing bubble. Only a big housing 'burst'.

See eg https://www.idiosyncraticwhisk.com/p/a-slide-deck-on-bubble-... (and if you are really interested, I can give you some better material.)

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