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

Robert Farago
by Robert Farago

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?

Robert Farago
Robert Farago

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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.

  • CanadaCraig You can just imagine how quickly the tires are going to wear out on a 5,800 lbs AWD 2024 Dodge Charger.
  • Luke42 I tried FSD for a month in December 2022 on my Model Y and wasn’t impressed.The building-blocks were amazing but sum of the all of those amazing parts was about as useful as Honda Sensing in terms of reducing the driver’s workload.I have a list of fixes I need to see in Autopilot before I blow another $200 renting FSD. But I will try it for free for a month.I would love it if FSD v12 lived up to the hype and my mind were changed. But I have no reason to believe I might be wrong at this point, based on the reviews I’ve read so far. [shrug]. I’m sure I’ll have more to say about it once I get to test it.
  • FormerFF We bought three new and one used car last year, so we won't be visiting any showrooms this year unless a meteor hits one of them. Sorry to hear that Mini has terminated the manual transmission, a Mini could be a fun car to drive with a stick.It appears that 2025 is going to see a significant decrease in the number of models that can be had with a stick. The used car we bought is a Mk 7 GTI with a six speed manual, and my younger daughter and I are enjoying it quite a lot. We'll be hanging on to it for many years.
  • Oberkanone Where is the value here? Magna is assembling the vehicles. The IP is not novel. Just buy the IP at bankruptcy stage for next to nothing.
  • Jalop1991 what, no Turbo trim?
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