By on July 12, 2011


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

ModelYear Vehicle MayValue JuneValue JuneIncrease %Increase
2009 Kia Rio $6,400 $7,500 $1,100 17%
2007 Hyundai Accent Hatchback GS $5,125 $6,000 $875 17%
2007 Toyota Prius $13,400 $15,350 $1,950 15%
2009 Ford Focus S $9,375 $10,700 $1,325 14%
2005 Subaru Impreza RS $6,650 $7,575 $925 14%
2010 Honda Civic Coupe DX $12,300 $14,075 $1,775 14%
2009 Chevy Cobalt $7,450 $8,550 $1,100 15%
2009 Chrysler PT Cruiser $9,225 $10,350 $1,125 12%

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.

 

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23 Comments on “Hammer Time: Sell!...”


  • avatar
    FromaBuick6

    I’ve got a low mileage 10 year old Civic with badly flaking paint on the hood and a one year old Mustang GT that’s, well, just silly. I’ve toyed with selling both, maybe in a year. Any suggestions?

  • avatar
    dwford

    Auction prices are so high that we can barely bring ourselves to buy anything. A 2010 Elantra with 35k for $13,000 at auction??? We were selling brand new 2010′s for $14,500 last fall! It makes no sense to buy a year old used car right now. Just buy the brand new one for the same price, or less!

    Yes, if you have a spare car, now is the time to offload it.

  • avatar
    HoldenSSVSE

    Pontiac G8s in all flavors have stunningly held their values.

  • avatar

    I took reason #1 to the max, I traded my 5 year old Mazda3 hatch for a new lease on 2011 3 hatch, the deal I got was so much better than what I was offered 2 years ago that it took me 1 day to decide, it was so good.

  • avatar
    TheEndlessEnigma

    A friend just sold a 2006 Mercury Mariner with 176,721 miles to CarMax for $4500. This thing did not have leather or power seats but did have a sunroof and the V6 engine. Is CarMax kidding? What do they honestly think they can get at auction? With $4500 from CarMax, it got me to wondering how much this thing would sell for?

  • avatar
    supremebrougham

    IN December of ’08 I decided to look at used Fusions. At that time dealers in the Detroit area were offering ’06 Fusions with low miles for around $10-12k. I was all set to get one but every time I would plan to make the trip the weather would be too bad (I live three hours above Detroit), so it never happened. This year I could not find ANY decently priced Fusions, or Focuses anywhere. For instance, the local Ford dealer in my town is sitting on a stripper Focus, ’07, 114k on the clock, little rough looking in the interior, and they still want $9k for it!

    Back in May when I was looking for a car, I ended up finding a 1995 LeSabre Limited, one owner, 103k, loaded, very well kept, and I ended up paying $4700 for it. In a way it seemed a bit high, but it was by far the best car I could find for the money by a wide margin.

    I hope this insanity blows over soon. I am still debating about weather I want to sell my 1995 Mystique when I get it fixed, or sell it and get something else. But so far, for the money I would get for it, there is nothing out there even remotely as nice as it is for the $$$.

  • avatar
    drylbrg

    I couldn’t agree more. Through no intelligence of my own I was able to take advantage of this market. I was going to sell my Mustang last fall but then decided it would be easier to sell in early summer. The prices went nuts during that time and I made at least $2k more for it. That was one credit card completely paid off with just the difference.

  • avatar
    Dimwit

    You know the market is hurting when the local Mannheims is holding Public Auctions on Saturdays and even marketing it on the radio. Obviously the dealers are sitting on their hands.

  • avatar
    cardeveloper

    I’m looking for a specific car, and my fav dealer said don’t even bother. They added auction market is so messed up, they are only buying local cars for their lot.

  • avatar
    threeer

    This is what I’m trying to find a way to break the news to my 67 year old mother about…she is just now starting to contemplate her “last car” purchase (she keeps them for 10 years, so this will be her last). Her 2003 Corolla LE (leather, sunroof, etc…) with 85k is worth more now than it was a year ago, so I’m thinking that this is probably her best chance to sell before the bubble bursts…

  • avatar
    brapoza

    After following Steven’s articles for a while, I decided to sell a pristine 1995 Eagle Summit DL that I had inherited. It only had 28K mileage and I had put 10K of those on. Friends said it’s 15 years old and only worth $1,200 according to the Kelly Blue Book. I put it in the paper for $4,500 and it sold for $4,000 in a couple of days.

  • avatar
    Zackman

    Boy oh boy…I have a 9-year-old CR-V with 90K, a 7-year-old Impala with 83K and an ’07 MX5 I’m making modest payments on. Hmmm…now what?

  • avatar
    lancerfixer

    Ooh, maybe now’s the time to unload the ’98 Volvo S70 GLT…it’s honestly been a great car, but I’m just sick. of. driving. it.
    Hell, it’s only got 148k on the clock and no rust (new suspension and brakes, even!) Whaddya think, Steve?

  • avatar
    windswords

    I’m now in the market for a new (to me) ride. I have budgeted exactly 9000 for the purchase. I figured I could look at cars in the low 10′s and talk them down. But I don’t want anything older than 2004. Is it possible to get a C or D class vehicle for that money?

  • avatar
    The Comedian

    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.

  • avatar
    bomberpete

    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.


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