Hammer Time: Sell!

Steven Lang
by Steven Lang

Timing isn’t everything, but it is pretty damn important when buying high dollar assets.

Back in April 2009 I told folks that now would be an ideal time to buy a new car. Demand had slacked off over 40% from the record highs. Dead and dying brands were still in the glut of recessionary despair. The credit markets, the only financial source for a lot of car buyers, were a shadow of their former selves. Plus Uncle Sam was all too willing to subsidize the gluttons amongst us with Cash for Clunkers in about a month or two. It was the perfect storm for those of us who needed cheap new wheels for the long run. But today…

This is the perfect time to sell if you happen to have an extra car you no longer need.. Not only have used car prices reached their historical highs. But a lot of the barriers to high used car prices are eroding. I will even go so far as to say we are hitting the peak of used car demand. Why do I say that? A lot of reasons.

1) Cheap leases, better values

We are no longer at the point where the domestic models have depreciation costs in the 50% range after three years. That Chevy Cruze you may be considering now may be forcasted to maintain 65% of it’s value after 36 months. Or possibly even more.

What this means is that GM and Co. may lease that vehicle at a price far lower than the buy-here pay-here lots can finance their 2003 thru 2007 models over a 3 to 5 year period. In the next few months I believe you will continue to see more banks and auto finance companies offer more aggressive financing terms for these vehicles as well. We’re not off to the races yet. But the market is turning the corner.

Stronger residuals for new cars will make them ‘better deals’ in the marketplace, and more buyers in time will be able to access those deals.

2) Youth and economy

Back in 2009 you had a lot of older and uncompetitive vehicles in the marketplace. Aveo, G3, Cobalt, Focus, PT Cruiser, and all things Kia and Mitsubishi had flooded the rental and rental markets. A lot of the mainstream models across the board were either middling redesigns or supersized to the point of SUV-like blandness. Obviously the Camry wasn’t exactly breathtaking in it’s bulbous blandness… but the Accord was panned for… well.. being too much like a Camry.

What does that have to do with used car prices? An awful lot. See, if you think you can get the same type of car for a lot less money… that’s exactly what you’ll do. The utter lack of groundbreaking vehicles in the marketplace back in the spring of 2009 made most late model cars seem like virtual equals. Used car prices on average have shot up over 30% over the intervening three years. Three year old models from 4 Runners, to Explorers, to Priii are now up over 50% from that time. Even the past month has seen prices shoot to a point that I would consider the ‘bubble stage’.


May vs. June 2011 Trade-In Values of Some Popular Small Cars


ModelYearVehicleMayValueJuneValueJuneIncrease%Increase2009Kia Rio$6,400$7,500$1,10017%2007Hyundai Accent Hatchback GS$5,125$6,000$87517%2007Toyota Prius$13,400$15,350$1,95015%2009Ford Focus S$9,375$10,700$1,32514%2005Subaru Impreza RS$6,650$7,575$92514%2010Honda Civic Coupe DX$12,300$14,075$1,77514%2009Chevy Cobalt$7,450$8,550$1,10015%2009Chrysler PT Cruiser$9,225$10,350$1,12512%

Source: NADA Used Car Guide (Car values are based on average condition.)

The good news is that the new car market should change all this in the next 12 months. The Focus, Cruze, Civic, Yaris, Versa, Camry, Accent, Sonata, Elantra and Jetta will be all new or in their early model cycles by early 2012. That mass of models alone will spark a lot of new interest in new cars.

The domestics in particular have the benefit of marketing fewer brands and models which will help their sales. Plus virtually everything out that will be out there by that time will benefit from the recent high (for now) and stable (for now) gas prices.

Buyers are now factoring $4 gas into the equation when it comes to buying a car. From that viewpoint, I believe that this new generation of vehicles will represent far better overall values than the ones that preceded them. There may be a few exceptions. But the jump in quality, technology, and fuel efficiency will be far greater by the spring of 2012 than was the case a couple of years ago.

When new cars become the better proposition, the used car becomes the less desirable alternative. If the credit markets continue to strengthen for the Big 3 you should expect far less demand for used cars.

3) Irrational exuberance:

Even with the Japanese manufacturers ramping up their domestic production back to near normal levels, the market has remained at all time highs.

Trust me, it will not last. In fact the illusion that until recently was $5,000 plain-jane 10 year old Buicks and based out Y2K Echos retaining half their new car price is becoming kaput. More of these trade-in’s are no-saled at the auctions due to the high asking prices..

I have seen a few of the large scale dealers buy far fewer vehicles at the auctions over the last couple of weeks. This is due to lack of demand. If people need to finance vehicles they will always pay a premium for it. People ‘need’ a car. But when they don’t need one the market skitters for a few weeks at the auctions with lots of ‘no-sales’, as it is right now. Then it finally tumbles.

Atlanta may be just a smudgy dot in our country. But it represents a massive center for automotive remarketing in the Southeast. Millions of cars get sold here and when buyers begin sitting on their heels at the auctions, the sellers soon realize they are sitting on major losses.

I think we’re on that precipice right now.

So if you are looking to sell a car taking up nothing other than money and space, now may be the time.

Steven Lang
Steven Lang

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  • The Comedian The Comedian on Jul 13, 2011

    I have followed Mr. Lang's advice several times in the past. I bought a new 2005 SRT-6 for 20K off sticker in '07 after he mentioned their availability at fire sale prices. I picked up a new 2008 Volvo C30 in May '09 for ~8K off sticker after he remarked that it was high time to buy new cars from distressed brands. I just don't know how to exploit this latest market signal. The most likely vehicle to flip would be my daily driver 2008 C30. I paid cash for this one just over 2 years ago, $22,500 for an R-Design that stickered just under $30,500. If I were to sell it, with what would I replace it? Are there any great new car deals now? Financing wouldn't be an issue. I would take a zero to one percent note or I'd pay cash. But I just don't see any great new car deals. The shortage that has pushed up used cars seems also to be limiting bargains on new cars. Any ideas? Other current vehicles -- Wife drives a 2011 BMW X5 35d on which I owe ~17K, the second half of a 0.9% 24 month loan. Bought well using eco credit, diesel tax credit, BMW driver event incentive and a deep discount because car had a low but odd option set custom ordered by a buyer whose credit fell apart. If kbb, clearbook and edmunds are to be believed, a 2010 X5 diesel is currently worth more now than what I paid for my 2011. I have a leased '11 BMW Z4 35is - Payment is just $363 a month with only the security deposit(s) down. 22 months to go on a 24 month lease. I don't think that this vehicle would be safe to use from December to March here in Connecticut, so I wouldn't want to be down to just 2 cars if one of them were this car.

  • BklynPete BklynPete on Jul 13, 2011

    How is a Z4 not safe to use any day in CT from Dec. to March? I live in NY and see plenty of Porsches and Vettes out for exercise on the good days - though admittedly there were very few last winter.

  • MaintenanceCosts It's not a Benz or a Jag / it's a 5-0 with a rag /And I don't wanna brag / but I could never be stag
  • 3-On-The-Tree Son has a 2016 Mustang GT 5.0 and I have a 2009 C6 Corvette LS3 6spd. And on paper they are pretty close.
  • 3-On-The-Tree Same as the Land Cruiser, emissions. I have a 1985 FJ60 Land Cruiser and it’s a beast off-roading.
  • CanadaCraig I would like for this anniversary special to be a bare-bones Plain-Jane model offered in Dynasty Green and Vintage Burgundy.
  • ToolGuy Ford is good at drifting all right... 😉
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