False Dawn: Rising Used Car Prices Do Not a New Car Sales Surge Make

Robert Farago
by Robert Farago
false dawn rising used car prices do not a new car sales surge make

Bloomberg (and a lot of other good-news-hungry outlets) are reporting that a recent surge in used car prices indicates that new car sales may soon rise. The theory: a falling supply of used cars and a glut of new cars will lead buyers back to the new car F&I guy. Of course, that assumes that there’s a falling supply of used cars. For that assumption, the MSM turns to . . . new car dealers: “A survey by Wachovia Securities analyst Rich Kwas showed that 42 percent of dealers report ‘too little’ used-car inventory.” Yes, well, they would do, wouldn’t they? As new car sales plummet, franchised dealers’ supply of used trade-ins declines by, oh, roughly the same amount. Or more.

As TTAC’s Hammer Time’s Steve Lang will tell you, there’s plenty of old iron out there. And LOTS of repos to come. Hundreds of thousands of them. Despite this supply, or because of it, there are some freakanomics in play. Even in this downturn, demand is seasonal. The rental fleets are certainly holding onto their cars longer and order less. But there is little chance of a sustained new car recovery until house prices recover. But let’s not let the facts get in the way of pro-car biz prognosticating.

“There is a very, very interesting inflection point where the financing on a new car becomes more attractive than the financing on a used car,” said Scott Painter, owner and founder of TrueCar.com.

True enough. However, to reach that point, manufacturers would have to dump their new inventory on the market at insane prices. (50 percent off C11 sales?) Of course, if people trade-in their old cars to buy these new cars, the used car supply will increase, which will drive down used car prices and make them more affordable. Making it harder to sell new cars. See how that works?

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  • Lokki Lokki on Mar 19, 2009

    I went through this 'Used cars sales are up - New car sales are down' drill back in the early 80's. The reasons then are similar to the reason now... nobody could get financing (although then it was because inflation had interest rates at 17 - 20 percent) and new cars then were perceived as having no improvements (in fact they were worse!) than older models.

  • Sbrown Sbrown on Jun 09, 2009

    Used car prices are going up and it's a direct representation of the economic crisis. They will recover over time but until then consumers need to think smart and bypass the traditional means finding some bargains at fleet auctions or even wait out the storm utilizing their current form of transport for a while longer.

  • Art Vandelay I’d grab one of these if I’d spent my working life at GM for sure!
  • FreedMike Looking forward to the protests at the factory accusing Toyota of excessive woke-ism. First, EVs...next, grooming. Lord help us all.
  • MrIcky I remember when Gladiators came out and everyone was shocked at how expensive they were. Now all the off road specials have caught up or passed it financially. I like this truck a lot, but I'd still take my Rubicon over this. I'd take this over the Ranger Raptor or Tacoma TRD though. When I found out the increase in track for the new TRD was just wheel offset-I knew they were just phoning it in. Why spend so much R&D on those stupid seats when you could have r&d'd longer arms or a front locker.
  • Alan Hmm, I see a bit of politicking here. What qualifications do you need to run GM or Ford? I'd bet GM or Ford isn't run by experienced people. Anyone at that level in an organisation doesn't need to be a safety whip, you need to have the ability to organise those around you to deliver the required results.
  • Alan That's about $74k AUD, seems like a good price for the vehicle of this calibre. I think the Ranger Raptor will start around the $78k mark here. A friend of mine just bought a W580 Amarok for $97k. Nissan have the Navara Warrior which is cheaper, I think it starts in the high $50s. The cheapest is a Chinese iteration of one of these off road tuned vehicles starting in the $40s ($29k USD). But all of the above vehicles are not equal. I would think the Raptor is by far your best bet for an off roader.