Do those more connected have insight into how used car prices are holding up? Any noticeable trends? High end cars hit hardest/least, sports cars? F80 M3s in particular. Thanks in advance.
Some locations are totally closed and onsite inspections are not being allowed Fewer buyers. Lease returns are effectively stopped along with most new repos.
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Only folks doing repo rn for the most part are BHPH from what I’ve seen.
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So the used car market is grinding to a halt? (At least on the back end).
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So what happens to all those returned leased cars. Do they just sit on the back lot or what ?
In some states Manheim is open and taking drop-offs. Where they aren’t, they’re filling dealer’s storage lots.
Seems to me there is going to be (already is?) a liquidity issue. If there is no backstop to quickly get cars off the books so dealers have no choice but to either hold ($) or take whatever they can get for them. Likewise owners in trouble who need to sell are going to take a bath. Then when things do open back up there will be a ton of used cars for sale and 10-15% unemployment. Accurate?
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The delay in the captives recovering their capital after it stops paying them monthly income will get costly, quickly.
The dealers are just put-out by warehousing bald tires and stale farts.
What levers can be pulled?
- offer dealers deeper discounts to buy out (and certify) more lease returns - captive gets paid
- 0% floor plan until sold
- subvented financing for customer by captive — so the captive bought the car, rented it to customer 1, sold it to dealer with 0% floor plan, and potentially holds the used car loan (Most obvious fit is Chase and BofA)
- the more they do, the more they can absorb/smooth their losses/costs out over time
- auctions are usually fast/clean way to move those leases off balance sheet into cash. But how much volume/demand will there be for used lease returns?
alternatives:
- if you have data to show a forthcoming spike in demand for or value of used cars, and then the captive can just hold them until market is ripe. Manufacturer and captive try to focus on new supply vs used demand, so any used car play by captive is a distraction they don’t need (unless you see demand going to 0). Carmax has the best analytics I’m aware of here but NADA or a bid dealer group likely has something in their back pocket on how to rebalance used inventory for next year.
- or someone like carvana/vroom does deals to just eat all that stock on consignment and sell direct to consumer on captive’s behalf. I don’t see this being much more efficient than current model. Unless they can warranty
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I have good friend who is a used car dealer so I have some insight and as mentioned above most auctions in North East have totally closed. They keep running the inventory which is already on their lot online only but there is no interest. The cost to bring cars back has gone higher by 2.5 times as well due to lack of local tow trucks drivers who want to operate at this time.
Everything is at a grinding halt. Nothing is moving and we don’t see a change to it unless people need to commute to work after everything opens. Even for companies who were regularly requiring employees work in office locations will now encourage more people to work from home after this forced mass work from home experiment which has largely been successful and employers realize that this is a viable option.
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Another option is for the OEM to offer substantial discounts (from contracted residual) to people returning leased cars to purchase them. As it exists now a lessee buying a lease return at residual is way too pricey.
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Ahh right: the most logical/least likely. I would love to see more of this but 
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