By on April 9, 2012

Did I really buy that car? Ohhh....

A base 1999 Jeep Grand Cherokee with 160k miles was coming to the auction block. Zip ties were holding up the passenger mirror. Options were minimal, and the various dings and dents did the trade-in no favors. It’s the type of vehicle that usually does no more than $2500 during most times of the year.

But with April comes tax season, and with tax season comes prices that hold only the lightest resemblance to reality.

It sold for $4500. Plus $180 auction fee. Plus a fair amount of reconditioning costs… the dealer who bought it is likely looking at around $5000 for a 13 year old base SUV that is incapable of finding a second-tier financing source due to its high miles.

At best, the fellow will yield a $1000 down payment on it and about $60 to $65 a week for 24 months. In two years they may realize a healthy 23% annual return over two years, or a brutal four figured loss.

That may seem like decent odds if we were talking about a secured asset like commercial real estate. But the buy-here pay-here business is a far riskier endeavor for one simple reason.

Most of the customers are riding on a proverbial pendulum that swings between ‘debt’ and ‘broke’.  Tomorrow I will cover the nuances of helping debtors become owners. For some it’s easy. For others, it’s an allergy. But in the spirit of the light hearted banter of most Mondays, here’s a list of this week’s most interesting purchases.

2010 Dodge Challenger R/T (Loaded w/ 24k miles, cheap paint work from accident, good Carfax): $24200

2007 Ford Mustang GT: (Base w/ 29k miles, no sunroof, repo, paint work, bad Carfax): $16200 

2000 Toyota RAV4: (Mid-model w/165k, dings and dents, sunroof, faded black paint): $3900

2000 Ford Explorer XLS: (Base model w/ 127k, Alloys & Automatic, cost just as much as one I bought four years ago that was two years newer and 20k fewer miles): $3300

and the one that blew me away

2002 Chevy Astro: (Mid-model w/182k, 3 door like all Astro’s but AWD, Alloy wheels, Faded grey paint): $3100 

Like the Grand Cherokee, this Astro is a low demand used car that effectively doubled it’s ‘real’ wholesale value.


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23 Comments on “Auction Day: Irrational Exuberance...”

  • avatar

    Crazy used car prices. Or it’s a well run auction along with dealers know if they take a hit on one they’ll make it up on another.

  • avatar

    This explains why I couldn’t touch a 4X4 Grand Cherokee in decent shape for $4000. They don’t exist.

    • 0 avatar

      I wouldn’t touch one period. I’ve had two friends with these, and niether lasted longer than 140-ish K miles, and both needed MAJOR repairs about that time. Both cars seemed well cared for, and my friends have nursed several other different vehicles well beyond the 200K mark. The ZJ and WJ are about the most disposable pieces of garbage I’ve ever seen.

      • 0 avatar

        There seems to be very mixed feelings on the older Grand Cherokees. In any case, as you may can tell from my avatar, I went with an XJ Cherokee. By all accounts a much better vehicle. I still paid $4000 for a 13 year old vehicle though. And while that may seem ridiculous to some, the fact is the market decides what something is worth. And if you’re not willing to look at other cars, you have to pay the going rate.

      • 0 avatar

        I can show you a 93 grand cherokee right now with over 200k that runs great, still has the original engine & trans.It’s owned by a fellow that owns a tire shop near me, it has the straight 6. Both the AMC 6 and the 318 are just getting broken in at around 100k.
        I replaced the transfer case in a regular cherokee for a guy about 3 years back, it was a 4.0 model with about 169k. It still had the original engine, trans and rear end, and ran great. I still see him driving it, so I know the mileage has to be at least around 200 by now.

      • 0 avatar

        AMC I6 is a solid piece of machinery, I can’t speak for the 318. I can say though every V8 Grand Cherokee I have ever seen has been a turd in some way.

      • 0 avatar

        Whatever, dude. :)

    • 0 avatar

      I found a nice ’02 Grand Cherokee 4×4 in Southern NJ three weeks ago for $3300. Found it on eBay, 145K on it. Quite nice inside and out. Transmission already rebuilt. :-) It’s my new winter beater/dump runner, replacing a ’93 Volvo 965. I won’t be putting a ton of miles on it. 6 cylinder, very basic truck, fuel economy is not as atrocious as I expected, 20 city, 24 highway. Everything works, I’ve put about $500 into it fixing sundry things, leaky steering box, tie-rod ends and alignment. Drives like a big fat truck.

      I feel like I got a good deal on it. And I must say, parts are crazy cheap, and it is pretty easy to work on, other than everything is bigger, heavier, and tighter than I am used to. $4000+ at an auction seems insane, but they do go for crazy money retail around here.

  • avatar

    Back in mid January, I bought an ’03 Mazda Protege5 from the used car lot side of a new car dealer for $6400. They had reconditioned the car (don’t think it required too much work as it was in good shape more or less when traded in) and had tried to get $8422 for it.

    The car had a good Auto check report, no accidents, no deployed airbags, local car, 2 previous owners, the second traded it in on a larger car so he could carry his dogs around much easier.

    We found a 2nd tier financier, Chase to float the loan on the car as it had about 110,650 miles on it and my credit, while not wretched, was not ideal and still got it for a monthly payment I was willing/able to handle so I can’t complain but yeah, used car prices are out of this world.

    • 0 avatar

      Dude I’m pretty sure even the most casual user of this site has heard about your protege by now. You don’t have to try and relate every single post to your own personal ride. Yeesh.

  • avatar

    I am curious as to when the market ebbs – in your experience – and used cars are traditionally the best buys?

  • avatar

    I’ve been looking for a used Subaru, 10 year old Subarus with over 100k going for over $8,000. You know they are going to need head gaskets, timing belt/water pump right away, so add another $2,000 on top of that and it almost seems silly to not just buy new at that point.

  • avatar

    Crazy used car prices right now.

    My wife and I picked up a 2004 Accord Coupe EX-L with 90k miles for $7400 in the depths of the recession here in Michigan when no one could sell a car (Feb 2009). Absolutely mint, clean carfax, several dealer accessories installed, brand new tires, CPO, etc. The car was listed at $9500, book value was about $11k, and I had a fairly hilarious 2 hour negotiation with the salesman and general manager to get them down to such a ridiculous price. When they turned my final $7400 offer down and came back with $7900, I said thanks but no thanks and we walked out of the showroom – and the salesman literally ran after us and pleaded with us that he’d figure out a way to get it done. That’s how bad it was for those guys.

    The same Honda dealer that sold it to us back then offered us $7600 for it this weekend – 2 years and 50k miles later, $200 more than we had paid. And that number wasn’t tied to the price of another vehicle purchase. Unbelievable.

  • avatar

    4.0L Jeeps bring very good money. A Cherokee 4×4 with low miles can bring $2000+ out of the book.

  • avatar

    AWD Astros are pretty pricey here too – not a one below $2k and most with upper 100k’s, many in 200k+ miles. Year is irrelevant, apparently, 1989 models are selling in the same price range as 2003 models. I suppose usage can be quite different though. I have to think that there are plenty of contractors who would otherwise be looking at a V8 Econoline are looking at Astros (even used passenger models) to abuse unto the grave.

  • avatar

    A small used car dealer down the street has had later 80’s Mustang convertible for months. Decent looking car (at least from a distance). But it’s white and has crappy non-stock wheels. Up until recently, the asking price was $4995. Tax time? $5995. LOL!

    • 0 avatar

      An 80s mustang would have barely went for over 5,000 even 10 years ago, (well, at least in 1999 I bought my 1989 camaro for 3,500) they must think there are a lot of suckers out there if they are asking that much for it.

  • avatar

    I’m glad I don’t need to buy a car right now. I’ve been shopping for about five months for my aunt. Twice I’ve gotten as far as having cars inspected, but both failed. Both were sedans around $4000 and 14 years old. One was so rusted out underneath I wouldn’t even feel safe driving it. The other could have easily needed $2000 in repairs on top of the $4000 price. Last weekend I saw a 1997 Regal with unknown mileage and a missing AC compressor. They were still asking $3000. Yesterdays $1000 car is today’s $2000 car, and yesterdays $3000 car is today’s $5000 car. I’m just glad “Cash for Clunkers” revived the economy.

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