The Truth About Cars » Auction Monday http://www.thetruthaboutcars.com The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Mon, 15 Sep 2014 16:54:45 +0000 en-US hourly 1 http://wordpress.org/?v=3.9.2 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars editors@ttac.com editors@ttac.com (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars » Auction Monday http://www.thetruthaboutcars.com/wp-content/themes/ttac-theme/images/logo.gif http://www.thetruthaboutcars.com Auction Monday: All! Hail! Mary! http://www.thetruthaboutcars.com/2013/03/auction-monday-all-hail-mary/ http://www.thetruthaboutcars.com/2013/03/auction-monday-all-hail-mary/#comments Mon, 04 Mar 2013 12:00:56 +0000 http://www.thetruthaboutcars.com/?p=479862 When you have 120 dealers looking at the same exact car on a Monday morning, you have three options if you plan on buying a car. 1) Bid 2) Watch 3) Leave After I saw a 2003 Infiniti FX35 with 220,558 miles sell for $9100 plus the auction fee, I left for good. Right now […]

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When you have 120 dealers looking at the same exact car on a Monday morning, you have three options if you plan on buying a car.

1) Bid

2) Watch

3) Leave

After I saw a 2003 Infiniti FX35 with 220,558 miles sell for $9100 plus the auction fee, I left for good.

Right now we are in the midst of tax season. A time when millions of consumers get their tax refunds from Uncle Sam and, on average, spend it all within a 72 hour period. A few pay off their debts. A few more buy top of the line televisions, cell phones, and electronics. The rest put a thick down payment on an older used car that is now being financed for anywhere between three to six years.

A luxury SUV like the Infiniti can be sold for stupid money at the moment. We’re talking a $1500 down payment and about $85 a week for 36 months. On the miracle that the buyer makes a full payoff on the loan, you’re looking at about $15 grand in total once you calculate all the tax, tag, title, finance charges and assorted other bogus fees that are usually levied onto that number.

Is it a terrible buy for the consumer? Of course! But in the end, an affordable monthly payment in exchange for the impersonation of wealth is the only thing that will truly matter to them.

You may think this is a suckers bet par excellence, and you would be right.

But there are plenty of other suckers that were down the line last week. Consider these prices…

1999 Lincoln Town Car, Cartier Edition: $3200, 206,789 miles.

2002 Lexus ES300, scraped on one side: $3300, 274,166 miles.

2007 Chevy Tahoe LT, Rough interior: $11,000, 248,804 miles.

Who would finance any vehicle that is already well north of 200k?

A lot of companies will if the potential level of return is attractive enough. Dealerships will keep the riskier deals on their books for a few months, and then sell many of the potential dogs for a pre-determined price to a finance company. That company will, in turn, sell it to a Wall Street firm that will package it into a conglomeration of ‘asset backed securities’, where it will be given a credit rating. Then it will be marketed to a variety of buyers in the finance world far and wide.

Overheating? Why yes it does get hot here in Atlanta! How does $7995 sound?

Does this sound familiar to you? It should. Yes, these are the type of seeds that sprouted the sub-prime mortgage crisis and the near ruin of our economy. But the same mechanism of buying and selling these automotive assets also serves a vital purpose for every automaker that finances or leases their vehicles. 

Every automotive manufacturer has one thing in common. They want to sell their ‘paper’ so that they have the financial resources needed to keep building their business. Toyota, GM, Honda, VW, Nissan… even the smaller automakers such as BMW and Mazda require plenty of liquid cash to survive.

They can’t pay their people in IOU’s any more than the consumers who are currently financing their vehicles. So they will sell the paper to those buyers who are willing to accept the risks.

2013 Jeep Wrangler Unlimited Sahara – Built In The USA / Now Financed In China

There is no shortage of takers. This article offers plenty of the basics of the ‘prime’ world of automotive remarketing which historically involves selling far lower risk deals at reasonable returns.

But if you are to get one thing out of an obscure part of the automotive industry, read and dwell on this quote…

“For the most part we have seen a reversion back to the kinds of underwriting standards we saw five years ago, before the crisis, and for that we are not unduly concerned,” says Glenn Costello, senior managing director at Kroll.”

Mr. Costello may know a lot about the fundamentals of this business from a pure numbers perspective. But if I were a buyer of those securities, I would be real careful of buying anything that carries the same type of risk as the vehicles I saw go through the block.

The number of sub-prime deals for automotive asset backed securities has more than doubled in little over a year. The quality of those vehicles has not followed the same path. From what I see at the auctions, they are getting far worse in condition and mileage.

Are you underwater in your car? How about your trunk? $6995! Buy now!

I am not one to recommend shorting specific companies. But if I were to short anything in this business, it wouldn’t be an automaker. Not by a longshot.

I would be looking squarely at those companies that either retail to sub-prime customers, or finance companies that specialize in the higher risk areas of this market. When it comes to late 2014 and all the delinquencies begin to be removed from the credit reports of those who got hit during the last financial storm, you are likely going to see a swarm of new car buyers abandoning the crappy old sleds for new metal that may even cost less on a monthly basis.

Of course the loans will likely run in the six to eight year range by then. But hey! New wheels! And the cycle will begin anew.

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Auction Monday: Shamu Edition http://www.thetruthaboutcars.com/2011/07/auction-monday-shamu-edition/ http://www.thetruthaboutcars.com/2011/07/auction-monday-shamu-edition/#comments Mon, 04 Jul 2011 17:54:15 +0000 http://www.thetruthaboutcars.com/?p=401572 A 1991 Chevy Caprice in faded battleship grey went for $3000 at last week’s sale. It had only 37k miles. But none of the bells and whistles that would make such an old timer truly desirable. Now the 1996 Chevy Caprice with 71k and leather was a completely different story. Garage kept. No paint fade. […]

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A 1991 Chevy Caprice in faded battleship grey went for $3000 at last week’s sale. It had only 37k miles. But none of the bells and whistles that would make such an old timer truly desirable. Now the 1996 Chevy Caprice with 71k and leather was a completely different story. Garage kept. No paint fade. All the bells and whistles in good working order. I was expecting around $5000 for this ancient beast.

It went for $5100. Truth be told this was the first auction with relatively decent prices in a long time. The 4th of July makes at least some of the dealers go away which was more than OK with me. I got four cars today. None of which were anything special.

What was? Apparently a 5 year old base Grand Prix in GM tan and only 61k was the crack pipe deal of the day. $7950.

Other notable buys included a 2005 BMW 645 Convertible with 76k for $18,400 (repo but clean)

A 2008 Jeep Patriot Limited in Black for $9050.

And my favorite a 1992 Corvette with only 66k (but sadly no picture). Automatic, Good Leather and absolutely pristine.

Today’s TTAC prize of the rare Victor Sheymov spy novel ‘Tower of Secrets’ will go to the first person to guess the selling price within $100. A great book worth the read. This offer is good until 800 P.M. today. No purchase necessary. Batteries not included. All sales final.

 

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Auction Monday: Carmax http://www.thetruthaboutcars.com/2011/05/auction-monday-carmax-2/ http://www.thetruthaboutcars.com/2011/05/auction-monday-carmax-2/#comments Mon, 16 May 2011 18:00:17 +0000 http://www.thetruthaboutcars.com/?p=395059 Some folks say that stupidity is doing the same thing over and over again and expecting a different result. Well, those folks have never been to an auto auction. Today we had over 95 dealers doing the same thing over and over again. Looking at a vehicle. Bidding it up to the nether-regions. Hoping that […]

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Some folks say that stupidity is doing the same thing over and over again and expecting a different result.

Well, those folks have never been to an auto auction. Today we had over 95 dealers doing the same thing over and over again. Looking at a vehicle. Bidding it up to the nether-regions. Hoping that profit will come back via retail or buy here pay-here. Carmax has cutthroat middle-fingered competition at their dealer auctions and the prices reflect the screwing mentality that will likely be passed onto the bad credit consumer.

15 year old Explorers? $3000. A 14 year old stick-shift Subaru Impreza that came from the rust belt? $2900. Both of these vehicles were in clean condition… which means they are finance fodder at the buy-here pay-here dealerships.

The Explorer will likely be financed at around the $6k range when all the payments are said and done. The Subaru on the other hand? I don’t know what to make of it. I think the Latino BHPH dealer will find a willing customer who may finance it close to $6k.

You would be surprised how low that $6k balance can be if you spread it over a 24 month period. About $55 to $60 a week for what amounts to run of the mill transportation.

Then again, it can be even lower if you set it up for a 5 year run. The market for low mileage vehicles is just ridiculous. The Subaru in this case had 77k, which means that it can still make a healthy car note in rust-free Atlanta. But let’s look at the higher end side of the world and see if the air is any thinner up there.

2011 Jeep Wrangler Rubicon (2dr, Manual) $27,200

2007 Land Rover Range Rover Sport HSE $31,800

2007 Chevy Suburban 1500 LTZ 5.3L V8 4WD $23,000

2004 Dodge Viper Convertible SRT (67k ) $34,400

The buyer for the Wrangler will likely have around $28k in it once you add in the buyer fee and the Ebay fee. Will he get it? I don’t know. But it only had 3460 miles and looked mint. The stickshift puts it back a bit but the miles are excellent. We’ll see.

The Land Rover went to an exporter (surprise?). The Suburban was a dogfight between two dealers from North Georgia. It still went for $1000 below average wholesale which also happened to be right where the condition was on the vehicle. Overall this was a decent buy during tax season but definitely not something you want to hold since it had 71,000 miles.

The Viper is more of a curiosity than anything else. Given that a silver 04’ with half the miles no-saled on Ebay recently, I’m not too sure that the buyer will make an easy buck on it. I hope he already had a buyer on the hook.

One other item for those still looking for an older low mileage car. The going wholesale price (before fee) of an 11 year old Buick LeSabre with 72k and leather is $5000 according to one dealer at the sale. I’m sure Carmax rang up a $2000 profit on that one within a week. The dealer on the other hand may be able to double that profit. But it will probably take about 3 years and a small bit of luck to make that so.

About a third of finance dealers at the BHPH dealerships go south. Sometimes you get back a good car. Much of the time the cost in repo, repair and recon will average around $800. I’m lucky in that the very few I’ve had to get back this year are voluntary and still in good running condition.

There is an old saying in this business that, “You sell in February and repo in July.” I’m hoping that I can make this year hassle-free for everyone concerned. Now that the majority of my deals are finally cash again, I’m planning for a lot less headaches.

Pick a car, any car... 96 Explorer 07 Suburban 04Viper Subaru Wrangler

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Auction Monday: Oakwood http://www.thetruthaboutcars.com/2011/05/auction-monday-oakwood/ http://www.thetruthaboutcars.com/2011/05/auction-monday-oakwood/#comments Mon, 02 May 2011 16:25:23 +0000 http://www.thetruthaboutcars.com/?p=393405  Wanna buy a Hummer? You can buy them as cheap as dirt these days. There was a beautiful one that went through the block at a weekly public auction in Oakwood, GA. Nice leather interior. Well kept. The H2 models in particular were an easy piece to market and sell not too long ago… […]

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Wanna buy a Hummer? You can buy them as cheap as dirt these days. There was a beautiful one that went through the block at a weekly public auction in Oakwood, GA. Nice leather interior. Well kept. The H2 models in particular were an easy piece to market and sell not too long ago… but not last Thusday. It no-saled. Not even the hope of a bid at $13k. Then came the H3. No sale at 10k. No takers. Only two no-sales from new car stores that generally sell everything. Why?

If you said that SUV’s simply don’t sell these days…. you would be wrong. So many folks are taking the contradictory logic of buying used gas guzzlers these days. They want an SUV for all the usual reasons. Big, safe, luxurious. And of course ‘the big one’.  Consumers can ‘supposedly’ buy them cheap when gas is high. So they pull the trigger on the belief they bought it at the right time. Gas prices are high right now. That is true. But so is the bidding at the auctions. .

In today’s wholesale market there is a fierce pecking order that comes to play even before the consumer gets his foot in the dealership’s door. First off, the imports absolutely rule the used car roost when it comes to midsized and full-sized SUV’s. Sequoias and Pilots are high above the endless herds of forever sitting Tahoes and Expeditions. Toyota 4Runner’s and Nissan Xterra’s still have strong cache and are becoming increasingly difficult to find in good shape. RAV4’s and CR-V’s are even rarer birds these days.

All of them are still bought at stiff price premiums at the auto auctions. All of them represent ‘finance fodder’ where the actual selling price depends on payments and the term of the loan. In today’s finance driven market, the cash dealers are definitely SOL compared with the buy-here pay-here dealers. Finance deals make more money. Plain and simple. So those buyers rule the sales.

Except now something has changed on a global scale. Even the former mighty dealers of funny money have fallen to a new force at the auto auctions. Exporters.

Exporters send high demand Japanese SUV’s far away from our depressed domestic economy.  Thus enjoying the simple returns that come with weak US dollars and less shaky local currencies. Even with customs, duties, and tariffs to contend with, they make a solid profit. Ghana, the United Arab Emirates, Costa Rica… even Nigeria.  Japanese SUV’s with American levels of features and content are a red hot commodity in dozens overseas markets.

The funny money that is the US dollar has gradually made all the auto auctions fiercely competitive. Dealer sales. Salvage sales. Even the public sales are now export happy. I’ll give you another example at the Oakwood sale.

A 2004 Honda Element EX 4WD with over 136,000 miles and at least $1000 in cosmetic issues, an orange exterior, and a bad Carfax to boot… still sold for $8300. I saw an 08 in a good color and half the miles sell for $10k just six months ago. Dogfights between exporters always drive the prices beyond clean Black Book values at the auction.  But they are just the top dogs in a long pecking order.

Then there are the used car stores that are brand specific. Many folks think that the used car stores can easily buy these types of vehicles by the boatload these days. Not even close.

The ‘factory’ (a.k.a. the manufacturer) is now busy trying to keep their dealers healthy at all costs. Japan is rebuilding which means far fewer vehicles on the new side of the ledger for franchise dealers. Where is that money going that once went to new cars? On the used side of course.

The used Japanese cars and trucks are getting bid up with a vengeance. Add in the fact that we’re still in ‘tax season’ where used car prices are already sky high, and you wind up with an auction market that has prices beyond the best and worst of public expectations.

That is unless you buy the ‘unpopular’ SUV. If you want a late model Trailblazer with high miles, you can buy them aplenty. Orphan brand SUV’s such as Saturn VUE’s and Saab 9-7’s are there for the taking. Even the larger public sales in your state should have plenty of unpopular SUV’s.

As for those Hummer’s I mentioned earlier? You can’t find an SUV more dead in the financial water than a Hummer. Clean Manheim Market Report value on the silver 2003 model with 100k was $16,400. At the public sale it couldn’t even hit $13k. The 2006 H3 with 79k had even less traction in the marketplace. No money even below ‘rough’ value.

So if you’re looking for Bush era bling factor… there are Hummers. Then of course there is the practicality of a Trailblazer if you want better capability at half the price. But if you want the absolute best bang for the buck… don’t buy anything right now. It’s still tax season.

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