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A glut has used-car depreciation accelerating

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Re: A glut has used-car depreciation accelerating

#361

Post by kbob »

djKianoosh wrote: post #145
grecy wrote: post #32

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…

If what you say becomes true, then those 911's and R8's (I'm guessing that's generally what you mean by exotics/pleasure drives) will actually go UP in value, no?

It will be a replay of the 1970s when a combination of new emissions and safety standards locked a lot of niche manufacturers out of the US market. Pre-1975 exotics held value and even appreciated. The gray market, which imported high end used cars, became popular until NHTSA banned it.

Re: A glut has used-car depreciation accelerating

#362

Post by sliken »

woodandsteel wrote: post #123
dangrossman wrote: post #50

Earlier quoted context omitted.

All other articles and GM comments say that the extended summer shutdown is to increase Bolt supply, not because there is too much supply already. The Bolt outsold both of Tesla's vehicles last month. The Sonic has weak sales, so during the shutdown they're reconfiguring the plant to make 1 Bolt for every 1 Sonic, where it was 1:2 before.

>The Bolt outsold both of Tesla's vehicles last month. The article says GM sold only 7,592 Bolts in the first six months of this year. Tesla sold way more, and it makes a much higher profit per vehicle. I don't know why Bolt sales are so low. When it came out the reviews were all very positive, and they said it would be strong competition for the Tesla Model 3. But the Tesla already has several hundred thousand pre-o…

GM isn't promising autonomous driving, isn't perceived as being as safe, nor does it have a large supercharging network to charge quickly.

Nor are GM dealers pushing it, dealers prefer to sell ICE because they make more money on service.

Re: A glut has used-car depreciation accelerating

#363

Post by neilwilson »

dsr_ wrote: post #305
samstave wrote: post #168

Earlier quoted context omitted.

this and the below comments just show that cars are, in general, ridiculously overpriced. Instead of "universal basic income" - we should have "free cars for every individual" -- Look at how THAT would affect autonomous driverless cars!!!

The incentives there are wildly misplaced. With UBI, you get money. You can spend it on whatever you need or want. With "Universal Cars" you get a car. If you already had one, you probably need to sell one or the other. But now everyone has a car, so the resale value crashes to nearly scrap. If you keep it, you need to pay for insurance, maintenance, and actual usage, which may or may not be a net positive. Let's sup…

"With UBI, you get money. You can spend it on whatever you need or want"

As long as you have a slave class doing the producing who are forced to take your money. Otherwise you just get inflation because you haven't added anything to the supply of production side.

Re: A glut has used-car depreciation accelerating

#364

Post by neilwilson »

guan wrote: post #44
beejiu wrote: post #21

In the UK, many cars sold in the past few years are under a so-called Personal Contract Plan (PCP). These are basically sub-prime loans for cars where you lease the car for the difference between its purchase price and its projected depreciated value at the end of the term. https://www.theguardian.com/business/2017/jun/10/car-loans-p... One of the UK regulators recently warned about the exposure to these loans. "An i…

British PCPs are very similar to the car leases that have been very common in the United States for many years (in both prime and subprime markets). There has been a lot of recent discussion about the risks associated with PCPs is mainly because they are relatively new in the UK, and because they have grown so quickly lately from almost zero. That means assumptions about the “residual value” (to use the American term…

"it is the lender who loses out if the resale value is less than rejected."

And those lenders are linked to the car manufacturers for a large part of the market (since car finance is largely a form of vendor financing).

Who then book the losses to the cost of a new car, or start shipping off lease cars to Africa.

Unlike houses, cars are mobile. So you can correct the market if you have enough power over the market.

Re: A glut has used-car depreciation accelerating

#365

Post by neilwilson »

ZeroGravitas wrote: post #313
bengale wrote: post #312

Earlier quoted context omitted.

Maybe they just want a nicer car?

Everyone wants a nicer car, but usually there's good reasons why they haven't bought one. It seems like something has shifted recently and many people have cars nicer than they would have previously. Possibly nice cars are just cheaper, or everyone is richer or people can get credit for cars where before they couldn't. It might just be me, I thought people spent too much on cars anyway, and now they seem to have nice…

It's a straightforward effect of financialisation.

It's because you get the benefit of the part exchange value of the car in three years time now, rather than in three years time.

That simple discounted present value trick allows you to have a nicer car the first time you get on a PCP plan, because it lowers the total amount of credit on that plan vs the alternative.

Re: A glut has used-car depreciation accelerating

#366

Post by neilwilson »

S_A_P wrote: post #143

This bubble has been building for years now. Wholesalers and other exporters have been hiding the problem for a while now, and but somethings got to give. The problem is multifaceted: 1) Lease rates arent necessarily in sync with the used car market 2) Buyers are keeping cars longer if they purchase 3) Subprime loans and buy here/pay here dealers are multiplying. THIS IS A BUBBLE. I wont call when its going to burst,…

But it is a bubble with a feedback loop.

(i) car manufacturers are big enough parts of the market that they can buy up used cars and scrap them/export them, putting the cost of that onto new cars

(ii) they can lobby government to introduce environmental standards. Japan exports a good part of its used cars because of the cost of maintaining a used model.

The difference with cars over houses, is that cars are mobile.

So the issue, if there is one, is just the usual one of over-lending via agency originators and securitising those bad loans onto muppet pension funds searching for yield. But that's not unique to the car market.

Re: A glut has used-car depreciation accelerating

#367

Post by mlonkibjuyhv »

LeifCarrotson wrote: post #317
cesarb wrote: post #207

Earlier quoted context omitted.

> Seriously, 20A? How do you even run an air conditioner on that, much less an entire house? The poster mentioned Spain, which uses 230V (unlike the USA, which uses 120V), so 20A should be around 4600W if I did the calculation correctly. With a quick search I found a window AC with 18000 BTU using only 1700W, so even with 15A it would be possible to run one AC with plenty to spare.

The USA uses 120V for outlets and lighting, but most buildings have what we call "split phase" where 240V is available between two opposing sine waves. A neutral down the middle gives you 120 from either of these phases. Large appliances run on 240V dedicated circuits, the rest are 120. And 4600 KW is only a couple tons. You'll need more than that for a 5-ton central HVAC to cool an average house in a hot or humid ar…

What's a ton in this context? I'm hoping it's not the mass of the unit, but what do I know.

Re: A glut has used-car depreciation accelerating

#368

Post by dredmorbius »

davidgerard wrote: post #348
dredmorbius wrote: post #291

Earlier quoted context omitted.

That's not the full story. It's that the trading market is sufficiently thin that even a few hundred units of freshly off-lease vehicles will crash the price. David Gerard makes a similar point of Bitcoin in Attach of the 50 Foot Blockhain -- that "market capitalisation" of crytpocurrencies is complete nonsense, due to market thinness. Rather, you want to look at total transaction volume. A large player can move the…

> Price, it turns out, is far more like pressure than volume. Or voltage, as we sorta worked out on G+ :-)

Right. Which is a pressure-analogue.

Re: A glut has used-car depreciation accelerating

#369

Post by dsr_ »

neilwilson wrote: post #363
dsr_ wrote: post #305

Earlier quoted context omitted.

The incentives there are wildly misplaced. With UBI, you get money. You can spend it on whatever you need or want. With "Universal Cars" you get a car. If you already had one, you probably need to sell one or the other. But now everyone has a car, so the resale value crashes to nearly scrap. If you keep it, you need to pay for insurance, maintenance, and actual usage, which may or may not be a net positive. Let's sup…

"With UBI, you get money. You can spend it on whatever you need or want" As long as you have a slave class doing the producing who are forced to take your money. Otherwise you just get inflation because you haven't added anything to the supply of production side.

If your mental model is based on a single self-sufficient town plus outlying farms that does no trading and never improves their technology, I can see how you would come to that conclusion.

But that's not the world we live in.

Re: A glut has used-car depreciation accelerating

#370

Post by collyw »

wbracken wrote: post #109

Tangentially in the business. Two recent stories told to me: 1) Saw at Manheim Auto Auction (one of the largest) 300 Nissan Leafs run through the auction line in one afternoon ahead of some of our cars. Drop in "value" of leafs went down 10%+ in one day. All were recently off lease. 2) For similar reason, Santander is holding 4000+ cars on auction lots "waiting for pricing to stabilize". Reality is, when they run tho…

So we don't actually get a free market so that the banks can maximize their profit.
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