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Vehicle resale values declining #4098154 05/16/16 10:40 AM
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supton Offline OP
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Ward's

For cars, although if truck leasing is on the rise, eventually they too have to hit the lots; and if credit contracts, then I'd think truck prices would have to drop too, if buyers cannot swing the money. [If enough sit, then value has to drop, as supply is above if not demand then above ability to purchase.]

Fleet sales might not hurt value as much as before, if OEM's make less stripper rental models.

Quote:
Goyal: The last five years have been very, very strong. As we came out of the recession, there’s been a lot of strength in the market. The supply has been lower than demand, as the economy has been chugging along. Gas prices have been low, so vehicle miles traveled has gone up. Credit availability has come back all the way, in some cases more. (Now) we are in a situation where we are plateauing. We’re not going to see a lot more of credit expansion; we’re going to see a little contraction, in fact. We’re not going to see gas prices drop any more. We’re entering a situation where supply is going to exceed demand. So naturally we expect the values to be softer.


Quote:
Goyal: Pre-recession we saw 16%-18% (annual depreciation rates). That was kind of the norm. ... One thing we saw last year was a very distinct market between cars and trucks. That pattern where supply is exceeding demand? That’s only happening for cars. Small cars, midsize cars, there’s more supply than demand. We saw a pretty good correction last year in that segment. In small and midsize cars there was 20% depreciation.

Whereas if you look at fullsize crossovers and pickup trucks, there was only 5% depreciation.


Quote:
Goyal: Yes, leasing has gone up across the board. In pickups leasing is 11%-12% of the volume...


Quote:
Kalfus: The rental-car companies are getting smarter also. They (are looking ahead) to remarketing those 12 or 18 months down the road (and don’t want to have to move de-contented models). And their customers are used to those creature comforts, and when they get into a stripped-down rental (they’re not as happy). So it’s a win-win. There’s better customer satisfaction and vehicle value retention.


Then again, Ward's also is indicating that we might be due to a contraction in car sales.

Quote:
U.S. buyers snapped up 14.2 million new cars and trucks at retail (not including fleets and daily rentals) in 2015, up 700,000 units from 2014 and the best result since 2004... This year, that number will be surpassed, King says, with retail volume hitting 14.5 million vehicles and climbing to 14.7 million in 2017.

Perhaps more importantly, consumers will continue to spend more for those cars and trucks. Last year, average transaction prices (after incentive costs) rose $600 to $30,600, with total spending on new vehicles a record $436 billion, up $29 billion from 2014. King expects that trajectory to continue over the next two years.


Quote:
The bad news? Incentives are rising, the growth in leasing could seriously threaten profitability and loan terms are headed in the wrong direction.

Incentives, which King calls the biggest concern, account for 9.6% of suggested retail prices, up 0.7 points. That spending needs to rise only another 1.5 points to hit levels seen just prior to the last recession, he says.

Most of the incentive spending action is focused on cars, which are less in demand than trucks and car-based CUVs, the J.D. Power executive notes. Cars are averaging incentives at 12.3% of the suggested retail price, or $3,660, compared with 8.2% ($3,207) for trucks.

Car-leasing incentives equate to $6,710 per unit, evidence of the 8-point gap between supply and demand in that sector, King says.


Quote:
Overall, the new-vehicle leasing mix has risen 3.6 points to 31.4% of retail. Some 1.8 million units will be returning off-lease this year and next, with 1.9 million due back in 2018. That could mean residual values fall short of plan, particularly if incentives continue to rise. Every one point of residual shortfall will cost the industry $1.8 billion, King says.


Quote:
Loan lengths also are increasing, with 33% at 72 months or longer. Loans of 84 months now make up 5.4% of the industry’s portfolio, a 1.4 point jump from the previous year. Credit scores are falling, with 17.6% now below 650, an rise of 4 percentage points.

“That’s not a record,” King says, “but it’s moving in the wrong direction.”


Quote:
Oversupply is another problem the industry is facing. Some 31% of new vehicles spend more than 90 days in inventory, well above the 30-45 days considered healthy.


2011 Toyota Camry, base, 2.5L/6MT, 187k, hers
2010 Toyota Tundra DC, 4.6L/6AT, 153k, ours
1999 Toyota Camry LE, 2.2L/4AT, 209k, his
Re: Vehicle resale values declining [Re: supton] #4098159 05/16/16 10:43 AM
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supton Offline OP
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An unrelated Ward's article on car pricing.

Quote:
...citing results of a new Cox study, Rowe says, “Low price and transparent or fair price are the same in the consumer’s mind.”


Quote:
In this case, “fair” pricing means competitive pricing, or being in the game. If an online shopper is doing a lowest-to-highest price check on a vehicle, dealers appearing on the fifth or sixth web page of search results essentially are sidelined.

“If pricing isn’t in a specific range, it isn’t perceived as fair,” Rowe tells WardsAuto.

Transparent pricing means, among other things, what customers see online and elsewhere is what they get at the dealership. Transparency reflects openness and consistency across marketing and sales channels.


Quote:
“Only 20% of consumers absolutely want the lowest price,” he says. “Eighty percent want a fair price. If I’m looking for more buyers, I don’t think I’d focus on that 20%.”


Quote:
According to the study, top consumer frustrations are negotiating a purchase price and finding the best deal (39%), lengthy transactions marked by filling out lots of paperwork (27%) and negotiating a trade-in value (21%).


Quote:
Cox polling also indicates that if the car-buying process got better, 72% of shoppers would visit dealerships more and 53% would buy cars more often.

Many dealers use the Internet and other means to try to extend their market reach. But the research indicates reach alone may not produce the best results. Instead, it may behoove some dealers to rein it in and target the right audience.


2011 Toyota Camry, base, 2.5L/6MT, 187k, hers
2010 Toyota Tundra DC, 4.6L/6AT, 153k, ours
1999 Toyota Camry LE, 2.2L/4AT, 209k, his
Re: Vehicle resale values declining [Re: supton] #4098161 05/16/16 10:44 AM
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KrisZ Offline
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What goes up, must come down.
Post 2008 lots of people could not afford or get approved for a new car loan, so they either held on to what they had or bought used. Used vehicles sales and prices went up and new vehicles sales and prices went down.
Now we have the opposite, so it is only natural that the used vehicle prices are coming down.


2015 Grand Caravan 3.6L - 31k miles.
2006 Mazda 3 2.0L - 171k miles
Re: Vehicle resale values declining [Re: supton] #4098162 05/16/16 10:45 AM
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I am still surprised by how strong resale values are today. My 2011 Prius has 130,000 miles and is a fairly "stripped" model (three). CarMax gave me an offer of $7,000 for the car, which is quite surprising given the mileage.


2011 Toyota Prius 1.8L - 195K - Idemitsu ZEPRO Adv. Moly 0W-20
2007 Honda Accord 2.4 - 138K - Mobil 1 EP HM 5W-30
Re: Vehicle resale values declining [Re: The Critic] #4098173 05/16/16 10:54 AM
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surfstar Offline
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Originally Posted By: The Critic
I am still surprised by how strong resale values are today. My 2011 Prius has 130,000 miles and is a fairly "stripped" model (three). CarMax gave me an offer of $7,000 for the car, which is quite surprising given the mileage.


What?
If I was a used car shopper looking for a commuter, $7k for a 2011 Prius III with only 130k miles sounds like a great deal, actually!


2016 Golf Sportwagen 5MT M1 0w40 LC20 RLI BioPlus
my other vehicle is a Roth IRA
Re: Vehicle resale values declining [Re: The Critic] #4098196 05/16/16 11:17 AM
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Originally Posted By: The Critic
I am still surprised by how strong resale values are today. My 2011 Prius has 130,000 miles and is a fairly "stripped" model (three). CarMax gave me an offer of $7,000 for the car, which is quite surprising given the mileage.


Especially considering folks are no longer nutty about extreme MPG given inexpensive gasoline prices. I have seen very few new PRius being sold around here. The mpg difference gap is narrowing with models.

Re: Vehicle resale values declining [Re: supton] #4098228 05/16/16 11:56 AM
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Kestas Offline
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Around here, where car prices are generally below average, I've heard stories where dealers are not dropping their prices on off-lease vehicles. I wouldn't be surprised if they are doing what the banks did when homes were foreclosed upon in the depths of the housing crisis. They are holding on to their stock until the market is more favorable to them. What's another year for the dealers to hold on to their stock?

Re: Vehicle resale values declining [Re: supton] #4098286 05/16/16 12:54 PM
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Used truck prices are crazy in my state......

Re: Vehicle resale values declining [Re: Kestas] #4098296 05/16/16 01:08 PM
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i dont think holding onto cars is ever a good idea for a used car dealer.. They will finance someone and when they ask how much for the car the stealer says only 300 a month never even saying what it will actually cost..They sneak the price into the deal. And after say 8 years they are finally paid off.


Check To See That The Oil Jugs You Buy Have The Exact Amount Of Oil In Them And Have An Inner Seal Under The Cap. I Use Mobil 1 And Fram Ultra Filters
Re: Vehicle resale values declining [Re: supton] #4098408 05/16/16 04:03 PM
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This should not be a surprise. Increased new car sales the last few years mean that there is a larger supply hitting the market as opposed to the lean years. More supply and less demand (folks are buying new) means prices have to go down.

Would be nice if trucks would do so soon. Used pickup pricing is insane these days. Many years ago I swore I never would buy new and let someone else eat the depreciation. Now, there is no benefit to buying used at current prices. The truck I bought for $12,000 last time goes all day for 25,000 now...

Re: Vehicle resale values declining [Re: supton] #4098425 05/16/16 04:33 PM
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Cash for Clunkers artificially drove up the price of used vehicles. Maybe supply is finally catching up.


Greggy D.

Re: Vehicle resale values declining [Re: surfstar] #4098428 05/16/16 04:39 PM
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Nebroch Offline
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Originally Posted By: surfstar
Originally Posted By: The Critic
I am still surprised by how strong resale values are today. My 2011 Prius has 130,000 miles and is a fairly "stripped" model (three). CarMax gave me an offer of $7,000 for the car, which is quite surprising given the mileage.


What?
If I was a used car shopper looking for a commuter, $7k for a 2011 Prius III with only 130k miles sounds like a great deal, actually!


Yes, that Pri probably has cheap 80-120k miles left to drive. Hybrid battery might come to the end of it's lifespan at some point though.

Last edited by Nebroch; 05/16/16 04:40 PM.
Re: Vehicle resale values declining [Re: surfstar] #4098468 05/16/16 05:37 PM
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Originally Posted By: surfstar
Originally Posted By: The Critic
I am still surprised by how strong resale values are today. My 2011 Prius has 130,000 miles and is a fairly "stripped" model (three). CarMax gave me an offer of $7,000 for the car, which is quite surprising given the mileage.


What?
If I was a used car shopper looking for a commuter, $7k for a 2011 Prius III with only 130k miles sounds like a great deal, actually!


CarMax offered $7K to buy it, they aren't going to sell it for $7K, more like $9-10K.


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Re: Vehicle resale values declining [Re: supton] #4098471 05/16/16 05:53 PM
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I have been looking at used (relatively inexpensive - up to $7K) trucks here in the PA/NJ/NY area and can't believe how much people (and dealers) ask for rusty, 200K+ mile worn out junk. I am starting to think I should have patched up the rust and replaced the cracked cylinder head on the 2000 Sierra that I just dumped.

Andrew S.

Re: Vehicle resale values declining [Re: supton] #4098473 05/16/16 05:55 PM
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sciphi Offline
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The leasing being what it is, I'm not surprised. Companies are trying to move metal to folks who don't necessarily have the means to buy. So those folks leased. Now a lot of those leases are coming back, so it's driving down the market.

An off-lease car can be a good deal. Especially something with complimentary maintenance included during the lease duration. The odds are that it got oil changes and tire rotations are increased, as well as any teething issues that the particular car had during the B2B warranty.


2013 Toyota RAV4 XLE
2012 Chevrolet Cruze Eco
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