Was This Finally “Peak Insanity” in Used Vehicle Prices? And all other crystal ball questions

I really believe that now that most of the captives have shut down 3rd party buyouts, you’ll see pricing stabilize and used prices drop some. I don’t think you’ll see them at “normal” levels until new stock starts building back up, but with less competition now that the captive’s dealer network knows they have less competition since the car must be grounded at a captive dealer’s store, along with the fact most people aren’t going to buy out their lease and flip it to a 3rd party, you’ll see things begin to slowly stabilize.

The gravy train is nearing it’s stop soon.

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Could not agree more, but didn’t want to say it to the angry hordes of “why can’t I sell someone else’s property!” :triumph:

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Could it have the opposite effect if it reduces number of sellers due to the policy changes ?

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Not at the moment, wholesale market is softening.

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To be fair, before GM shut down 3rd party buyouts, I went through with it myself and got a quote through Carvana. Then GM dilly-dallied and didn’t get carvana a payoff. Then the inevitable “we can’t buy your car message.” Well, we already got a new lease expecting things to be smooth sailing (my mistake), so now we had a car for 5 months we didn’t need. I did some of the appraisals online at the GM dealerships near me, and most were 4-5k over buyout…great! I can still sell to a captive. Once I went in to get the in-person appraisal, each and every GM dealership offered me retail payoff and not a penny more once they found out it was a maturing lease.

Long story short, Carvana ended up calling me back and saying they got a waiver to buy the car since we started the process before GM put the halt on 3rd party sales, so at the end of the day I got pretty lucky. That said, I also learned a pretty valuable lesson in the process considering GM could’ve just told me to go pound salt, and to be fair to GM, there’s nothing I could do since it wasn’t my car. Just trying to make the wife happy could’ve been way more expensive than it had to be.

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I heard that most cars at auction today were going below MMR (not by much though), so prices are creeping back to normal.

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A thought: Child tax credits will start hitting bank accounts this month. I wonder how many will use this money towards a new car, whether as a down payment or assume it will continue indefinitely and finance more than they would otherwise.

A fact: CarMax just made the best offer yet on my 2021 Odyssey EXL w/RES&NAV w/ 12k mi - $39k. Lowest offer was earlier this year in March @ $34.5k. I leased it in August 2020 for $35k.

If you’re looking to sell it do so ASAP as you have a week before Honda stops 3rd party buyouts

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I’d have to replace it. I came close in April but the offers were around $35k. I couldn’t get the color I wanted on a new one back then. Now there is very little on lots and dealers are all at MSRP with no money from Honda. Happy with what I have.

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Can you restate this with layman’s terms? Not tracking what you mean by “captive”, or a car being “grounded” at a “captive dealer”

Captive refers to finance company owned by manufacturer (gm financial/ Chrysler capital etc) most captives have stopped allowing places like carvana and vroom to buyout the lease to allow you to cash out any positive equity you have so the only way to get out of a lease early is to sell back to brand dealer.

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Or buy it yourself and sell to whomever you want.

And, yes, that means paying tax and waiting for the title.

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In addition to Leasing 101, you may want to bookmark

You already got a refresher on captive: if you drive a lease to disposition (the end of the term, e.g. 36 months) and return it to a dealer (not sold, not traded) and leave with an odometer statement, you have grounded the lease — and unless you are leasing another of the same brand, owe the disposition fee.

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Hopefully we’re in the worst of it

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I agree with the stock rebuilding. I disagree with it happening soon. If Ford only has 1 week supply of SUVs nationally according to their leadership it’ll take months and months to build back up to a 90 day supply to be back to where we were.

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It’s been about a year now since used car prices starting increasing and every month people say “this is the peak” yet the equity opportunity endures. This experiment has shown that margin can be just as effective as volume, so why would dealerships want to return to the old way, where they had to stock massive inventories. I don’t believe we will ever return to the days where new vehicles see market depreciation of 60% in a few years, it simply doesn’t make sense in the world of modern auto manufacturing. I think the better question is, when will we start to see lease residuals adjust to reflect more accurate projected values.

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Say it aint so Joe!

No Chance That Aint Right GIF by Aurora Consulting

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Individual dealerships may prefer margin to volume, but the manufacturer will push for volume… they’re not benefitting as much from the increased margin in the dealership model.

All it takes is one high volume dealer to start playing ball again.

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In most cases, they already are.

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