By on February 28, 2019

2017 Toyota Camry XLE side, Image: © 2017 Sajeev Mehta/The Truth About Cars

Dearest TTAC readers,

I’ve come to know you incredibly well over the last seven years. I realize that what I’m about to tell you is somewhat akin to waving a dripping piece of red meat in front of a starving, caged tiger. But, like Bane, I am here for you, the people, and I’m willing to suffer abuse at your hands because the truth will ultimately set you free.

I also know that because much of my source material for this blog post was given to me anonymously and confidentially by one of the most influential dealers in the country, you’ll scream something like “I WANT TO SEE YOUR DATA,” but such is life, guys. I can’t show his numbers to you. I’ve substituted some data from the National Auto Dealer Association’s Mid-Year report for 2018 (the final 2018 report isn’t available just yet). You’ll see the correlation.

Now, let’s get into the meat waving bit, shall we. Breathe deeply, and jump in with me as I tell you this:

In 2019, car dealers are happier than ever to sell you a used car instead of a new one. This could make buying used a bad proposition. Here’s why.

In order to write this piece, I called one of my oldest, dearest frenemies in the car biz. We don’t agree on everything, but I often ask for his guidance on those rare occurrences where I seek consensus. He’s been doing this racket for decades, holding nearly every title in the franchise car industry along the way — including “Owner.” He’s resisted the urge to sell out to one of the giants like AutoNation or Sonic, and has satisfied himself by owning just a rooftop or two and keeping his hands directly on every part of the stores. He’s also in high demand as a consultant for those same giants, who look to him for insights almost daily.

Of course, I can’t pay his huge fees, but as long as I agreed not to name him or get too specific, he was happy to talk to me about the state of the new and used car business. And the first thing he told me?

“I can’t make money on new cars anymore,” he said. “The market compression is ridiculous, and the OEM (stairstep) programs have so many hoops to jump through that it just isn’t worth it to try. The co-op funds are impossible to get — you can only use their pre-approved vendors, and they won’t let you bid against them for keywords or airtime. The Tier II ads that I’m helping pay for are running right now for (heavily discounted 2018 inventory). I haven’t had one of those in inventory since December.

“So I opted out. I’m getting out of the new car business. I’m finally going to sell the (brand) store and just do pre-owned cars. I’ve got a used car superstore opening up next month, and we’ll carry 500+ pieces of low-priced inventory, all of which I’ll sell at a front-end profit.”

Here’s the thing — while I would have disagreed with him as recently as three years ago, what I’m seeing on my side of the business indicates that he’s absolutely right to get out while he can. The OEMs are continuing to squeeze and squeeze dealers until there’s nothing left. GM slashed their Standards for Excellence dealership employee bonuses by 33 percent in 2018, and from what I’ve heard, they’re going to do it again for 2019.

NADA data supports my friend on this one, too. Overall dealership profits are trending downward, and they have been since 2015. 2019 projects to be the worst year for average franchise dealership profit since 2012. However, used-car department profits are on the rise — 2019 is going to be the most profitable used-car year in history. In fact, the average used-car department is accounting for more profit than the rest of the dealership combined.

But it’s not just the initial profit that is scaring my contact away from new-car sales. It’s the quality.

“New cars are literally too good. They last too long. Not to mention the fact that the length of the average car loan is approaching six years now, so everybody’s underwater for years. If I sell you a new car today, I can’t sell you another new car for a long, long time. It’s going to be at least six years, and maybe closer to 10. Don’t get me started on leasing — that’s not the answer. I don’t make a dime on leasing. You’ll be back in 36 months? Great, I can lose money on you then, too — and your car is under warranty the whole time, so I can’t even service you. No, thank you.

“But if I sell you a five- to eight-year-old car today, you’ll probably be back in three years for another one, and I get to sell the note again, too. I can also sell you an warranty (which is about 100 percent profit), and if you don’t buy it, that’s okay — I’ll get your service business anyway.”

NADA backs up my pal on this, too. The average price of a used car has now crept up over $20K for the first time in history, thanks to a glut of lease returns and a shortage of older used cars, thanks to the industry’s sales downturn from 2009-2012. (This is my “I told you so” moment.) Used transaction prices are higher in relation to new transaction prices than ever, too.

Long story short — used-car dealers can make more money, turn more inventory, make more on service, and not have to deal with regional reps knocking on their doors every two weeks.

What does it all mean for you? Well, it means that buying used is more expensive than it’s ever been — not just in raw dollars, which is to be expected thanks to QE X eleventy billion, but in comparison to new. Buying a new car is going to be a better deal throughout at least 2019, as the industry is predicting a slowing (which has already come to fruition in the first two periods of the year) and dealers are panicking. There will undoubtedly be more cash on the hood of slow-selling models, deeper dealer contributions, and aging inventory on lots across the country that will need to be discounted to sell.

In other words, in comparison to used, buying new is a better deal than ever, especially if your plan is to ride it out until the end of the car’s usable life. Buy new, negotiate hard, and you’ll likely come out ahead.

[Image: © 2017 Sajeev Mehta/The Truth About Cars]

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153 Comments on “Bark’s Bites: As the Market Compresses, Dealers Look to Used Cars to Save Them...”


  • avatar
    28-Cars-Later

    I knew fourteen years ago the real money was in service and used cars it just sounds like the bottom completely fell out of new car sales. This will certainly lead to some interesting supply economics in time.

    “The average price of a used car has now crept up over $20k for the first time in history, thanks to a glut of lease returns and a shortage of older used cars, thanks to the industry’s sales downturn from 2009-2012.”

    I agree on 2009-12 but how about the ’12-’18 increased unit production YoY? I think there were something like 18 million units sold in USDM in 2018 up 5 million from 2012. Even with increased demand the numbers don’t add up. Where is this supply hiding?

    • 0 avatar
      SPPPP

      I think it’s hiding in the driveways of the just-hanging-on middle class. People bought a bunch of new cars and scrapped their beaters. At least in my neck of the woods, you just don’t see crap cars like you used to. When these recently new cars get to that 10-year mark and start to break down, then they will be for sale. (If you want them at that point.) Watch out for a lot of freshly detailed lemons at used car dealers around 2022.

    • 0 avatar
      vehic1

      USDM was just over 17 million in 2016, 2017, and 2018 – up from a low of 10 mil in 2009.

  • avatar
    IHateCars

    “In other words, in comparison to used, buying new is a better deal than ever, especially if your plan is to ride it out until the end of the car’s usable life. Buy new, negotiate hard, and you’ll likely come out ahead.”

    This advice is gold as I start shopping around for a new truck. 2018s of most makes have $6 – $12K on the hood before you even say “Hello”. It’s gonna be fun!

    • 0 avatar
      FreedMike

      Used truck prices are completely insane.

      • 0 avatar
        FerrariLaFerrariFace

        This is a fact. I bought a brand new Colorado for less than some dealers near me were asking for a used one with 50k miles. Bonkers.

        • 0 avatar
          markf

          I’ll third that, ended up buying a new 4Runner in 2017 as 1-2 y/o used trucks were asking 90-95% the price of a brand new one.

          • 0 avatar
            PrincipalDan

            Though I want to buy a sedan or wagon just because I become more and more certain those body styles are soon to disappear (and I like getting closer to 30 mpg hwy as opposed to 20 mpg hwy…) new full size trucks stay on my radar as a value proposition.

            Advertised prices are usually a full 10K off of MSRP for the mid trim type trucks I would go for. Given the general utility of said vehicle compared to a CUV/sedan/wagon costing the same amount of money – it’s easy to see how they stay popular.

      • 0 avatar
        28-Cars-Later

        Regarding used truck valuations, the only thing which makes sense to me is the who is financing the note. It is possible the captive finance companies will not finance a buyer on a new note, but the pool of financiers for used is simply deeper. Thus it becomes hose the truck buyers who can’t get financed new.

        • 0 avatar
          Adam Tonge

          Where I work, we don’t care new vs used. As long as the Debt-to-Income ratio and LTV are in line, I’ll finance it. I’ll even go longer on new than used.

          But I’ll also go 180 months on “classic cars” over $75,000 and 144 months on “classic cars” that are at least $35,000. Who wants a $330 payment a month for 12 years? I got you!

          I don’t work at Chase, a captive, or Santandar though.

          • 0 avatar
            28-Cars-Later

            Interesting. Then my theory is wrong and I have no idea why they are buying used trucks at nosebleed prices when they could buy new for a hair more.

          • 0 avatar
            Adam Tonge

            The captives may price things differently. I’d ask my neighbor, but he sets pricing for GM Financial for various emerging markets, not the US. It may depend on what indirect lenders the dealer has lined up. They get a kickback from various lenders. I assume most would offer a similar payout for used or new.

            We only do indirect lending for boats, RVs, and motorcycles, so I don’t deal with auto dealers on a daily basis. Try to stay in our profitable niche.

          • 0 avatar
            Tele Vision

            @Adam

            180 months?! That. Is. In. Sane. What happened to putting some money away every month, without paying anyone any interest? I did that for a remarkably short period of time and bought one of my dream cars with cash. The best bit was that the car went down in price as I saved for it.

          • 0 avatar
            SSJeep

            Its not uncommon to see 180 to 240 month financing on higher dollar classic cars, aircraft and boats. That’s what makes the toys affordable to a wider audience.

  • avatar
    jatz

    “New cars are literally too good. They last too long.”

    What’s that line from The Producers where the crazy old nazi is trying to shoot Bloom….

    “Zis iss not verking! You are not dyink!”?

  • avatar
    ajla

    “Buy new, negotiate hard, and you’ll likely come out ahead.”

    Even with the premium brands? Like comparing buying a new CT6 or G90 and keeping it for 7 years versus getting a 3YO one and keeping it for four.

  • avatar
    PrincipalDan

    Hit ’em where they ain’t…

    I have noticed with one of the local dealers say 13 years ago when I bought a used truck the used car lot was quiet and not very packed with vehicles. The vehicles themselves were largely what they had taken in on trade with very few coming from auctions.

    Now that same used car lot is stuffed to the gills with a wide variety of vehicles including many coming off auctions (former fleet/lease vehicles slapped with CPO are plentiful too.)

    That is of course merely anecdotal and represents ONE family owned dealership that is not part of any mega-chain and only has one storefront in one little corner of NM.

    However it does line up with what Bark is saying.

  • avatar
    Cactuar

    I offer an alternative: buy used from a quality private party. Shop for a quality seller, don’t first shop for a car. By that I mean, buy a car from someone who understands car maintenance and held no expenses. Buy from someone who garaged their car, did all services, applied rustproofing every year. Look at the quality of the tires installed on the car. Buy in good neighborhoods. It’s not a guarantee that the car will be trouble free but chances are it will be a quality used car for a fair price. You also skip the dealer shenanigans, which is always a bonus.

    • 0 avatar
      jatz

      You’re not from around here, are you?

    • 0 avatar
      gtem

      The issue is, there’s not many people selling newer cars via private sale. But for older stuff in the sub-$10k category (and especially sub $5k), I agree wholly.

    • 0 avatar
      EquipmentJunkie

      Excellent points. I follow them when I can and your principles sure seem to work for me.

      The internet tools like Craigslist sure has made this discrimination much easier. The quality of photos in the ads also say a lot.

      • 0 avatar
        gtem

        “The internet tools like Craigslist sure has made this discrimination much easier. The quality of photos in the ads also say a lot.”

        The craigslist “by owner” section is about 75% car flippers at this point, yes they take nice photos and clean the cars up fairly well, but you’re buying an auction flip (at best) and a sketchy rebuild (at worst). I’ve shifted to using the Nextdoor classifieds section to find the better quality cars, although certainly craigslist and facebook marketplace still has some gems.

    • 0 avatar
      Add Lightness

      I have always bought used private as the $300-$700 ‘document fee’ upsets me so much that I want no part of the game they play.
      The dealers also want another $3,000-$6,000 over private which doesn’t help.
      Fortunately, I can do my own inspection very well and am able to do all my own repairs.

    • 0 avatar
      duncanator

      As I get ready to sell my 2012 Odyssey, I sure hope more people think like you! I have all the maintenance records and it runs and looks great! Plus, all new tires last month as well as all new brake rotors and pads. Why am I selling it again? Anyway, here’s hoping someone will pay a decent amount for a really cared for and clean minivan.

      • 0 avatar
        CKNSLS Sierra SLT

        duncanator-
        It depends on the payment. In theory-you can finance a new car longer than a used one. In my many years of (life) experience anything over $10,000.00 is a problem to sell privately. You can sell $5,000.00 used cars all day long. BTW-While private parties could care about maintenance records-the trade in value at dealers are not affected. They could care less. Bluebook/NADA Black Book is the rule.

    • 0 avatar
      stuckonthetrain

      +1 I bought a ’14 500 Abarth cabrio from a private owner last year for under $10k. It had 3mos/2k mi of factory warranty left, and he was an older semi-collector (not a Jay Leno, but had a few Lancias and Alfas) and had all the service records. While that was all great, it also took about 3 months to find this particular car/scenario and wasn’t going to be our primary car. When you have more on the line, and less time on hand, YMMV.

      On the flip side, we sold our ’07 Element EX AWD with about 50k miles for about $12k. That was $4-5k more than any dealer offered to take it for, and $4k less than a dealer would have sold it for. So yeah, I can see how they’re making much bigger margins on used than on new.

  • avatar
    FerrariLaFerrariFace

    So if more and more dealers can’t make money selling new and stop doing it, maybe they’ll quit getting in the way of manufacturers selling direct like Tesla does?

    • 0 avatar
      theBrandler

      I wish. More likely what will happen is the manufacturers will start making cheaper versions of cars, figuring out what features they can strip out without average-joe-consumer noticing to knock the prices down. And then on the other end pushing more and more luxury and technology where they can really make a profit.

      We may even see luxury brands drop base models and focus solely on highly profitable models much like Tesla has been forced to do.

      Of course there is also another option. Lets say that manufacturers for one reason or another can’t get prices low enough and volumes continue to contract. We could see, as we have with sedans, that as volume drops, prices skyrocket. This would leave even more people with the only option being to buy used.

    • 0 avatar
      healthy skeptic

      @Ferrari

      +100

      I was going to post something similar, but you beat me to it.

  • avatar
    ToddAtlasF1

    He just needs to wait it out. Most cars being sold today are not going to hold up like the ones made prior to 2011. I’d like to see what brand he has been selling, if his bays aren’t full of warranty work.

    • 0 avatar
      Cactuar

      “Most cars being sold today are not going to hold up like the ones made prior to 2011.”

      What makes you say that?

      • 0 avatar
        JimZ

        “What makes you say that?”

        some people believe “reality” is whatever they say it is.

        same people who form ironclad opinions about things they only just discovered 10 seconds prior.

    • 0 avatar
      theBrandler

      Why do you think this? If you look at the reliability reports put out by various organizations, by far the biggest complaints with new cars are squeaks/rattles and entertainment system quibbles. Hardly issues that will concern longtime reliability. It’s one of the reasons JD Power ratings are useless. Brake dust is one of their primary items they asses for quality and reliability o_0 – BRAKE DUST! Brake dust has NO relation to quality or reliability.

      This guy’s correct, modern cars, made with modern techniques are more reliable than ever – so reliable that these organizations have to quibble over brake dust and noisy trim to differentiate the reliability scores because nothing else ever goes wrong with most of them.

    • 0 avatar
      FormerFF

      We have two 2014 Fords that we bought new. So far, they’ve been the most reliable cars we’ve ever had, besting our previous Lexus and Hondas.

      • 0 avatar
        johnds

        I have to laugh at the more reliable than Brand X or Brand Y. The only thing that could make my 2007 Honda Accord more reliable would be if it refueled itself or it never needed oil changes, or unlimited brake pads. How could it get anymore reliable than Great!? Lifetime tires?

        • 0 avatar
          Vulpine

          Unless they’ve changed their warranties, the unlimited brake pads is doable at Midas. But then, I almost never need to change brake pads as I typically average 60K to 90K miles on each set.

          • 0 avatar
            HotPotato

            Pad thickness being equal, logically it would seem that what makes a “lifetime” brake pad would be that it’s made of a lower-friction material, no?…meaning less stopping power. I remember C/D tested a cop car years ago and the heavy duty metallic pads increased braking distance by a shocking amount over the civilian car (another reason to get out of the way if you see a black and white coming).

          • 0 avatar
            Vulpine

            @HotPotato: As I recall, Midas claimed free replacement pads for the life of the car (or as long as you own the car, was their exact wording.) This doesn’t stop them from charging you for replacement parts or turning the drums/rotors each time.

    • 0 avatar
      Add Lightness

      From a different perspective, a few years will tell the story of which cars you should buy and which ones to stay clear of.

    • 0 avatar
      210delray

      Yes, why is 2011 the breakpoint? GDI and turbos used in greater proportions? More complex infotainment systems?

      • 0 avatar
        MBella

        GDI and turbos will have a lot to do with it. Lighter oils on top of it also. I’m seeing more engines apart now at dealers I visit than I have for a long time. Manufacturers are trying to ink out every little bit of efficiency, and engines are becoming less durable. You take many of these modern engines apart and the internals are tiny. I I took a connecting rod from one of these modern engines, and your lawnmower and put them somewhere de by side, you probably couldn’t tell the difference.

        • 0 avatar
          ToddAtlasF1

          Newer transmissions are another big piece of the puzzle. They’re smaller and lighter with twice the moving parts, except for the ones that are putting two hundred horsepower through belt variator CVTs that are better suited to mopeds.

          Emissions controls intended to fight cold start emissions don’t help either. Building the exhaust manifold into the head with a catalytic converted bolted directly to it combined with long oil change intervals and light oil is the next best thing to sabotage. Brands that rarely had problems are now having problems. Brands with low expectations are delivering on them.

          • 0 avatar
            ToolGuy

            Todd,

            I think I like your 2010 break point. There has been some discussion before on the site about ‘peak reliability’ – my current working hypothesis will now be somewhere between 1996 (OBD-II is big for me) and 2010.

            The miserly decontenting/penny pinching also seemed to get serious around that time. (Picture a display board with a number of current-production front grille emblems on it. Purpose of the exercise: Just how thinly can we apply the contrasting black paint on the chrome emblem. Remember that we are discussing our brand identity, and now take a guess at the potential per-unit savings – pennies?)

            I am quite convinced through first-hand experience that I don’t care for many of the newer ‘driving aids’ (or *their* long-term reliability) so 2010 seems reasonable there too.

            Thank you for your insight and perspective.

        • 0 avatar
          johnds

          Add to the problem lifetime fluids too! I know people who say I can change my oil every 15,000 miles and transmission fluid is good for 150k or more. Also some are like I love my cylinder deactivation! I’m sure better maintenance practices will help somewhat.

      • 0 avatar
        Art Vandelay

        Things like active aerodynamics and forced induction are big deals. They certainly made the Duesenberg SJs that had them reliability nightmares (yes, the SJ had grill slats that opened and closed just like an ecoboost F150. The horror. Maybe Leno will sell me one cheap.

  • avatar
    relton

    I just bought a nice used BMW 335i coupe from an individual. I knew he was a conscientious owner when I noticed in every interior photo the parking brake was applied (automatic transmission car). Indeed, every BMW service had been performed, and there were repairs for minor things most people would have ignored, such as a noise in the steering column. It even had a new set of Bridgestone tires of the same type the car came with.

    I didn’t hesitate, or even bargain. I bought the car and drove it home, and have enjoyed it for a month now.

    I never enjoyed a purchase this much.

    • 0 avatar
      Cactuar

      Well done sir. Enjoy the car!
      I bought a used 7 series the same way.

    • 0 avatar
      EquipmentJunkie

      Those little details matter. I always pay close attention to things in the background in photos…signs of a well-kept property, clean garage floor, or anal-retentive arrangement of things on shelves gives me the thumbs-up sign.

      • 0 avatar
        Cactuar

        When I bought my 7 series from the previous owner’s daughter (he had passed away), she gave me this really soft microfiber duster that her dad used, to keep the car dust free. You mean to tell me that the car was never winter driven, always kept in a garage, driven sparingly AND it was also dust free? Yes please!

    • 0 avatar
      SPPPP

      Nice! Enjoy the car. By the way, if you don’t know how old the serpentine belt is, change it. And check the pulleys. Trust me.

    • 0 avatar
      DavidB

      I recently sold my 2002 Lexus ES300 with only 121K miles to an engineer. He brought a mirror to examine the undercarriage. It was in mint condition and my nice neighborhood certainly helped, he paid my asking price in 5 minutes because of the 3-ring binder with every service receipt in reverse chronological order in acid-free mylar covers. (My wife’s an archivist.) Matching top-end Michelins with less than 8K wear didn’t hurt, or the immaculate interior and engine compartment.

      I type this from the waiting room of my local Honda dealer as a “Waiter” on my oil change. I have dedicated snow tires/wheels and find the receipts from dealers — when I use their coupons — has 2 main benefits: 1.) easier to prove service was done on time if a warranty issue arrises, and 2.) much higher and quicker resale.

  • avatar
    cdnsfan27

    I agree with Bark, the money is in used, CPO and manufacturer demos, haven’t made more than a mini on a new car in months. Customers want Nieman-Marcus products and service but want to pay Walmart prices.

    • 0 avatar
      jack4x

      This argument would make sense if two Nieman Marcuses (or two Walmarts) had drastically different prices for the same merchandise in the next town over. Of course customers don’t want to pay more when another dealer will sell them the same vehicle for less. Used cars have more variability and can’t be compared as easily. Therefore allowing for more profit.

    • 0 avatar
      jatz

      Used cars should give you the chance to pass on a lot of hidden abuse and defects in off-warranty cars with no OEM looking over your shoulder, too.

      • 0 avatar
        cdnsfan27

        No, our pre-owned manager is a Navy Vet and is anal on every pre-owned being top notch or it is sent to auction or wholesaled.

        I don’t understand a business model that causes you to lose money on everything you sell, that is insane.

  • avatar
    theBrandler

    You know the issue I take with this is, the average new car price. You can get a nice, well, anything you want, used for ~$15-17k. Age and mileage will vary of course, but still, cars in that price range generally have a ton of life left in them. But anything equivalent new (unless you really just want an economy box) is going to run in the high twenties to low thirties. That’s a lot of money, that’s two used cars.

    It just really gives me pause. The most expensive car I ever bought was a $12k Honda accord. It lasted me 7 years. Buying a brand new $30k car – I’d have to keep the darn thing for 15-20 years to get my moneys worth!!! And to have similar payments to the used car, I’d have to have an 8 year loan!

    • 0 avatar
      FreedMike

      You’re talking about used *cars*. Used CUVs and SUVs are another story, and used truck prices are literally insane.

      • 0 avatar
        tankinbeans

        I spent some time visiting salespeople last week for the fun of it; I was bored. Told one that I would like AWD and a manual. Most didn’t even bother checking about manuals. A local VW dealership kept showing me off-leash Mitsubishis with a CVT and even showed me a 12yo Grand Cherokee with 100k miles for $15k. I don’t know if that’s the going rate since I’m not in the SUV market, but that’s just nuts.

        I’d sooner redo my Blazer purchase (18 years old, 217k miles, $2000). Keep thinking I should have kept that as a winter car. Alas, having a second automatic vehicle made me the constant target for “friends” who wanted to borrow it.

    • 0 avatar
      gtem

      Yeah, I feel pretty darn swell about snagging a clean 2 year old, low mileage minivan loaded up with heated leather seats and steering wheel, power everything, DVD, etc for $18,500. The depreciation of Chrysler vans is precipitous and we couldn’t resist.

    • 0 avatar
      ToolGuy

      theBrandler,

      Agreed. Further, amazon + ebay + youtube means more people than ever can keep that used vehicle running and in good repair at a reasonable cost. It is a golden age for DIY.

  • avatar
    Dave M.

    Where’s my tiniest violin? That said, New is the way to go these days. There’s excellent, fully serviceable machinery available in th $15-25k range with new car warrantys.

  • avatar
    FreedMike

    @Bark:

    What you’re talking about is nothing new – thirty years ago, I did a stint selling Nissans (which was about as successful as the Bay of Pigs, but I digress), and everyone wanted to sell used cars because there was a lot more money in it. Selling a new Sentra was a one way trip to an all-ramen diet. So what we’re talking about here is nothing new.

    What I’ve noticed, though – and this is completely anecdotal – is that used car pricing is a tale of two segments. I’d say you can get a screaming good deal, as long as you’re looking at a sedan, or a compact. Used luxury sedans are a ridiculous value IMHO (so says the guy who just bought one).

    But those are the vehicles that aren’t selling when new, so what about the stuff that is – CUVs, SUVs and trucks? Used CUVs and SUVs don’t strike me as a particularly good value.

    Then we have trucks. I’ve been scouting around for a small pickup for my girlfriend’s kid, and there are dealers out there asking $12,000 for a nine-year-old four-banger Ranger with 100,000 miles, and they’re doing so with a straight face. Don’t even ask about Tacomas. Full size pickups appear to be a better deal, but they still strike me as being awfully high. I’ve come to the conclusion that buying a truck used makes about as much sense as giving yourself a root canal.

    Speaking of root canals, then, let’s drill down a little further.

    CUVs, SUVs and trucks all tend to cost more than sedans and compacts when new, and they tend to hold their values better. Therefore, is it possible that the market shift light trucks and CUVs/SUVs the predominant factor at play here? All the NADA data shows is that the transaction price of used vehicles is going up. Well, given that the vehicles people want are more expensive, and the values tend to be higher, that’d explain a lot.

    Given that, I think the “used cars aren’t a good value anymore” argument needs to go a bit deeper.

    • 0 avatar
      28-Cars-Later

      I concur.

    • 0 avatar
      Kendahl

      I suspect what you describe is a transient phenomenon that will disappear once the ratio of trucks/SUVs to sedans stabilizes. What’s on the used market right now is what people used to want rather than what they want now. Therefore, there is a temporary shortage of trucks/SUVs and glut of sedans.

    • 0 avatar
      d4rksabre

      This is exactly what I see as well.

    • 0 avatar
      gtem

      FreedMike just go older on the truck. There honestly isn’t enough improvement mechanically in a 2011 Ranger versus a 1998 to justify paying the cost, and for the most part they hold up well mechanically. And in Colorado they shouldn’t rot too bad.

      • 0 avatar
        FreedMike

        gtem, even older ones go for stupid money. Like this one…

        https://www.schompmini.com/inventory/used-2004-ford-ranger-xl-fleet-rwd-regular-cab-pickup-1ftyr10e44pb10556

        2wd, vinyl seat, 15 years old. Insane!

        Granted, it’s a dealer, and this one has very low miles for its’ age, but this is just dumb. Personally, I think he just needs to hang on to his mom’s old Hyundai for a while

        • 0 avatar
          gtem

          Yeah older used cars at a main line dealer is absolutely a non-starter, I simply cannot believe the prices they list. Around here a lot of them will list even the most ragged trade ins on cars.com before they wholesale them, we’re talking 200k mile S10s with rotted out beds, vans with slipping transmissions and dents, etc. The prices are easily double what is being asked on craigslist.

          No miles listed on either of these, but both look like solid bets:

          denver.craigslist.org/cto/d/broomfield-1993-ford-ranger-xlt-4×4/6824096499.html

          denver.craigslist.org/cto/d/aurora-97-ford-ranger-xlt4x4/6828883431.html

          Stick shift avoids the auto transmission troubles these can develop, whatever V6 it has predates the Rube Goldberg SOHC Cologne, and the Twin Traction Beam front end is less prone to premature wear than the more modern (and nicer riding) true IFS that followed.

          A ’99 4WD with the newer front suspension and a trusty 3.0L Vulcan and a stick shift:
          denver.craigslist.org/cto/d/elizabeth-4×4-ranger/6813355204.html

          Fleet spec 2wd ’03 with the updated Mazda 2.3L DOHC motor and lower miles for $3900:
          denver.craigslist.org/cto/d/broomfield-2003-ford-ranger-regular-cab/6828120520.html

          I WISH Indy had such nice non-rotten Rangers to pick from!

          • 0 avatar
            jatz

            “nice non-rotten Rangers”

            The Bane of the Salt Belt. Riding around here in someone’s small car like a Fit shows some scary underbody rot on pickups and SUVs whose topside appears clean.

            Wish I knew more about LR Disco models, but sat behind one at an intersection last week and was aghast at the uniformly heavy rust on every frame and suspension component I could see while looking up its chuff.

          • 0 avatar
            gtem

            I was walking by an early 2000s 4WD Ranger in the parking lot after reading FreedMike’s dilemma, and initially was impressed with how well preserved the body was. Then I noticed the rear bumper was drooping quite a bit on one side. Closer inspection revealed the whole back part of the frame was rotted off. My ’97 was the same way, most of the outside sheetmetal remarkably well preserved, but looming underneath was a rapidly thinning out frame, spring hangers hanging on by a thread, and a radiator core support that was literally rusted in half down by the body mounts. Learned my lesson, the ’94 I scooped up the following spring had a rougher looking body (dents and scrapes from the old farmer that finally gave up driving), but was absolutely solid underneath.

            There’s a reason I keep my 4Runner absolutely pickled in Fluid Film and avoid driving it in the salt to begin with.

          • 0 avatar
            jatz

            Yep, pretty sheet metal can be a dangerous ruse.

          • 0 avatar
            FreedMike

            Good suggestions, gtem, thanks! The search is kind of on hold for now (he won’t need something for another year or so as it turns out).

            And, yeah, God bless the state of Colorado for not using salt anymore.

    • 0 avatar
      Menar Fromarz

      I WANT to sell my ’06 four door long box 4X4 F350 diesel, but no one either has the moolah to play, and Im not talking stupid $, or is a fruit bat ( CL or FB ). And its a great truck with proper maintenance and snags followed up and dealt with.
      It seems that the prevalence of thefts of this type, coupled with high insurance costs to cover it are scaring folks away.
      Maybe its because the price is too low…..

    • 0 avatar
      PSX 5k Ultra Platinum Triple Black

      I agree FreedMike, I sold cars for 3 years about 16 years ago. It was a huge dealership with 6 different brands. The front end of the new car side was always a money losing operation at the end of the month (most if not all the money made on new cars is in F&I), yet it did allow the owner to make money with the manufacturers service and parts department.

      Plus people trust a new car dealer more than a no name used car lot to buy a pre owned car. Every car on our used lot was marked up a minimum of $4,000. Used car guys made all the money in their washout check. New car guys almost always got minis, but you could almost make it up if your CSI score was high when you got your spiff check.

      The body shop was the real profit center of the dealership though.

    • 0 avatar
      Lou_BC

      11 years ago when I was shopping for friends, I quickly realized that used pickups were selling for more than new pickups if one waited for typical factory clearance discounts. That’s why I bought my truck.
      I’ve been looking at vehicles now that my sons are 15 and 17. Dealers gouge people on used. I’ve seen 3 year old Jeep Wranglers listed at the same price as new.
      Unless I get a great deal on a private sale, I’ll buy new again.

      • 0 avatar
        nrd515

        A friend of mine bought a used ’16 Sierra 4×4 ext cab and probably could have grabbed up a leftover ’17 for about the same price. He just can’t seem to buy any vehicle new, even when it would work out better for him. The truck he bought has super low miles on it, looks new inside and out, but there is always the question of why was it traded in after only 15 months? At least it worked out better than his last purchase, a used ’10 or ’11 Jeep Wrangler that had major issues that an inspection he didn’t have would have shown. He ended up putting about $2000 into fixing the problems, mostly due to rust and on the 4WD system, before it was ready to be him and his oldest son’s winter get to work vehicle. Now the Sierra does that job, and the Jeep is his youngest kid’s get to work vehicle.

  • avatar
    Kendahl

    It doesn’t necessarily follow that higher average prices for used cars mean the buyer is getting a worse deal. I would agree if dealers are charging more for the same vehicle but it looks like buyers are simply paying more for younger vehicles. The depreciation curve is enough to explain what’s happening. If anything, a glut of younger vehicles coming off lease should lower the prices they would otherwise command.

    • 0 avatar
      28-Cars-Later

      “If anything, a glut of younger vehicles coming off lease should lower the prices they would otherwise command.”

      You would think that, yet here we are. In 2018 there were in excess of 17 million units sold alone, and by 2020 all of the two year leases/early trades will start to pour in, in theory.

      What I take from all of this is, there are no deals and you will all be reamed to the maximum extent of the law, so start lining up proles.

      “Sales of new vehicles in the U.S. rose slightly in 2018, defying predictions and highlighting a strong economy.

      Automakers reported an increase of 0.3 percent over a year ago to 17.27 million vehicles.”

      “That auto sales remain near the 2016 record of 17.55 million is a testimonial to the strength of the economy, said Mark Zandi,”

      foxnews.com/us/us-new-vehicle-sales-in-2018-rise-slightly-to-17-27-million

    • 0 avatar
      JMII

      The depreciation curve still makes buying a slightly used (2 to 3 years off lease) the best bargain out there. Sure there are great deals on new cars but $5k off is nothing compared to $20K. So even if the used car is overpriced is still way more affordable.

      Honestly it seems vehicle prices overall (new or used) are too high and the market needs to adjust downward. However I believe the reason is the longer terms and the trend of most people to focus on monthly payment and not final price. Thus prices are high because nobody actually pays them, they take some insane monthly payment, get upside down and repeat.

      I am still firmly in the used car camp. Depending on your timing a 2 to 4 year old vehicle could still be the current generation thus your likely not missing out on any bells and whistles on the “newer” car.

  • avatar
    FormerFF

    I just (yesterday) bought a 2017 Escape Titanium with 21K miles for my daughter, for $20K plus tax. Original transaction price on that car was probably around $28K, so we have a car that is maybe 11% used up for 30% off of its original price. Even allowing for the car being into its brakes and tires, that’s a pretty significant savings.

    Normally I’m a buy new and drive it for 10 years kind of guy, but buying a teenager a new car is just bad juju.

  • avatar
    Gardiner Westbound

    “I can also sell you an warranty (which is about 100 percent profit), and if you don’t buy it, that’s okay — I’ll get your service business anyway.”

    A prime advantage of buying a used car is there is neither a warranty nor a requirement to have it dealer serviced.

  • avatar
    sportyaccordy

    This makes me feel better about buying my used Optima. By the time I’m ready to sell it’s gonna be in that “just cheap enough not to finance” sweet spot. Maybe Carmax will see enough margin in it to be generous. And I was planning to buy new + drive into the ground with the next one anyway.

    Like FreedMike said above I agree that this is a consequence of the shift away from sedans. I’d wager Jeep, Honda and Toyota dealers are having a pretty good time right now.

  • avatar
    stingray65

    What I’m seeing at least among the luxury or near luxury brand cars (BMW, MB, Lexus, Audi, Mini) is lots of 2018 models with 6,000 to 12,000 miles advertised as used cars with 3+ years of factory warranty remaining and in some cases an extra year of CPO warranty for 30 to 40% off new sticker. Brand new 2019 models of the same car are typically priced more like 10 to 15% off sticker, while 2016 models with 30,000+ miles are often only $2-$3,000 cheaper than the 2018s with little or no remaining factory warranty. It seems like the very lightly used (I think a lot of them are demo or factory service cars) 2018 models are the sweet spot, and I have no idea why anyone would want to pay only a slightly smaller amount for a 2 year older model without a warranty.

    • 0 avatar
      cimarron typeR

      +1. Our last 2 purchases were 6m old with 5k, 7k miles respectively. Interestingly the 5k mile qualified for CPOship, whereas the 7k miles Sienna was a heavily discounted new car.

    • 0 avatar

      Totally agree. I myself bought 2018 CPO car with 14K miles about 7 month old with 5 years of new car warranty and 7 years of power train warranty for about $7K less than new one would cost me. 2017 would cost couple of thousands less.

  • avatar
    bking12762

    Bark’s expert sounded like my father did when he owned a new car store 40 plus years ago. Some things never change.

  • avatar
    FormerFF

    If you’re financing this purchase, that can skew the math. New cars quite often come with low rate promotional financing, while the rates for private party purchases can be downright punishing.

    • 0 avatar
      HotPotato

      Yep. Most folks don’t have $10-25k in free cash lying around, so a lot of the trends are driven by the whims / business calculations of lenders. Why can’t private sellers get full price for their cars? Because lenders charge higher interest rates for them than for cars—new or used—bought at a franchised new-car dealer. Why do people overpay for late model used cars? Because many big-name lenders will only make used car loans on cars a few years old and under a certain mileage limit. Why are the resale values of Fiats and Mitsubushis in the toilet? Because some of those same lenders explicitly refuse to finance them. And so on.

  • avatar
    SoCalMikester

    some people just cant get financing for a new toyota, so they have to buy a used one.

    • 0 avatar
      Adam Tonge

      If the price of the vehicles are similar, approval shouldn’t be that much different for new vs used. Especially when dealerships have a bunch of indirect lenders lined up. Now if you are talking new lease vs used loan, that may be true.

  • avatar
    Vulpine

    … and then you have people like me who won’t buy used unless they’re forced to. Oh, sure, there are SOME good used cars, but my experience has me paying more for the vehicle AFTER purchase than I paid for the vehicle itself, far too often.

    • 0 avatar
      sportyaccordy

      I’m guessing you bought piles near the end of their lives? There’s no reason a typical 2-4 year old used car will hit you with its value in repairs.

      • 0 avatar
        Art Vandelay

        I’ll agree, there is no reason. Yet it has happened to me also. Are there good used cars? Sure. But many of those low mileage newish used cars are in fact lease returns and my leases are treated as the 2 year rental cars they are. I don’t think a day has passed that my Fiesta ST hasn’t seen redline and I don’t typically let it run when I get home (my home is on top of a mountain so it’s a fairly hard drive) so the turbo cools like I do on my truck which I own. These issues will be between owner 2 and the CPO Warranty.

      • 0 avatar
        Vulpine

        “There’s no reason a typical 2-4 year old used car will hit you with its value in repairs.”
        When I bought used (because I couldn’t afford new) I was buying at 5-6 years old. Certainly not ‘piles’ because they still looked new but with only two exceptions, they were essentially lemons. My oldest single purchase is one I intentionally purchased for a specific reason and KNEW what kind of shape it was in… all the others, taking those two exceptions into account, needed constant engine work.

  • avatar
    ToolGuy

    Mark,

    Excellent article – thank you for the insight!

  • avatar
    eggsalad

    Someone needs to tell every dealer in Las Vegas that there’s no profit in new cars. Every new car on every dealer lot has the “Desert Protection Package” or some variant thereof, to the tune of $2-$4k. That’s 95% profit straight into their pockets.

    Any new-car buyer with any sense can grab a $150 one-way flight to Phoenix and buy the exact same car for at least $2000 less. I suspect most people do not do this. Las Vegas is not like the rest of the country – you can’t go to the next town over and make a deal; the “next town over” is 200+ miles away.

    • 0 avatar
      Adam Tonge

      I lived in Tucson and purchased cars in Phoenix for this very reason. Found a VW dealer that sold everything at $300 below invoice +$299 for tint. I don’t know that I got the best deal ever, but $1 under invoice is good enough that I don’t need to haggle. Not a word about the Desert Protection Package either.

    • 0 avatar
      PrincipalDan

      There’s at least one dealer in Phoenix that claims they’ll pay for your flight if you buy a car from them. They do sell Chrysler/Dodge/Ram/Jeep however.

      I’ve noticed the local Toyota dealer has the “brass ones” to post the MSRP on their website, the their price (which is $2000 more for no apparent reason) AND THEN take the incentives off of their price NOT off of MSRP.

      WTF? I guess that’s how they pay for those “free” hot dogs and root beer float promotions every weekend.

      • 0 avatar
        Adam Tonge

        The VW dealer in Phoenix I purchased from basically sold me a car via e-mail.

        “All of our GTIs are $1 under invoice including window tint”

        “Ok, what is the catch?”

        “Please come and buy a car. Here is a purchase agreement and invoice.”

        “I want a gray one with 4 doors”

        “Please sign here and here.”

        Picked car up the next week.

        • 0 avatar
          PrincipalDan

          There’s some AZ dealers I’ve been tempted to buy from because the price is low enough to make up the difference between NM vehicle taxes and AZ vehicle taxes PLUS many Phoenix dealers have already tinted the windows to AZ levels (which would be technically illegal in NM.)

          I wonder how long it would take the Po-po to bother me about it?

          • 0 avatar
            Adam Tonge

            The AZ dealer should collect NM taxes if you are titling the vehicle in NM. If they don’t do that, they are a $hitty dealer.

          • 0 avatar
            PrincipalDan

            Sorry never done out of state, never thought about it. I always assumed you paid taxes where you bought things…

            Silly me.

          • 0 avatar
            Adam Tonge

            It’s all about where you register the car.

          • 0 avatar
            jkross22

            Adam, I don’t understand your comment. Why is it shitty for a selling dealer to not collect sales tax and leave it to the buyer to pay when they register their car in their home state?

          • 0 avatar
            Adam Tonge

            If someone is buying from a dealership, they shouldn’t have to pay taxes separately or run around and do a bunch of other stuff. The dealer has the ability to collect tax for other states. They do it all the time. It is a better customer experience, and it leads to a smoother overall transaction. The state of Michigan may be more aggressive in enforcing this stuff than other states though.

          • 0 avatar
            tankinbeans

            Back in 1999 my mom’s friend moved up here to Minnesota from Indiana. She’d just bought a car and paid Indiana sales tax. However, Minnesota wouldn’t allow her to register it here because Minnesota tax wasn’t paid. Ended up being such a hassle that she let it be repossessed.

            To clarify, the move was within the 15 day grace period in Minnesota (or whatever if was then).

    • 0 avatar
      jkross22

      Alaska Air and Southwest have one way tickets going from $50-100 from LV/LAX all the time. I’m sure a LA dealer would cheefully pick you up at the airport and drive you to the dealership.

  • avatar
    Lightspeed

    The used cars I was looking at one year ago, are now more expensive than they were that year ago, and they are another year older! In Alberta there’s the added factor of folks that used to buy new and only new, are now looking to used and bringing more money with them.

  • avatar
    George B

    Bark, if dealers don’t make money off selling new cars, why do they still have car salesmen? You’d think they’d want customers to want to come back for service and dealing with car salesman makes me to vow to visit car dealerships as infrequently as possible.

    • 0 avatar
      ToddAtlasF1

      There’s a new car dealer in Charlottesville, Virginia that uses a third party vendor to train the double digit number of salesmen they hire every other week or so. The salesmen pay an exorbitant amount for said training, suggesting there is a cut for the dealership. I’m guessing the third party education company doesn’t exist because there is this one small dealer group that has figured out how to turn desperate job hunters into a profit center.

      • 0 avatar
        HotPotato

        Holy crap, that’s depressing. Lot of turnover in that job. A buddy of mine is the skeeziest salesman I know, but the combo of shady ethics and low pay was too much even for him; he sells industrial machinery instead of cars now.

        There’s a great episode of the podcast of This American Life that shadows the staff at an FCA dealership for a month as they try to make the quota for a big bonus. It’s kinda horrifying to see staff sell *themselves* new cars they probably can’t afford, just to get another sale on the board.

        • 0 avatar
          Vulpine

          There’s sleazy and there’s SLEAZY; my personal opinion of the majority of FCA dealerships is that they are SLEAZY. They’re as willing to screw FCA itself as they are to screw their customers. To them, FCA is buying their services rather than working to mutual benefit.

          This is why I so strongly dislike NADA and all the laws preventing OEMs from simply yanking their franchises. FCA tried about ten years ago to yank nearly 50% of their franchises after taking over from Chrysler. They had very valid reasons for doing so, too. But those franchisees hit them with a class-action lawsuit that forced FCA to re-instate their licenses. We can see where that has led both the brand AND the dealerships. I’ll buy a car from a dealership but once the warranty is expired, I almost never go back for service.

        • 0 avatar
          ToddAtlasF1

          “It’s kinda horrifying to see staff sell *themselves* new cars they probably can’t afford, just to get another sale on the board.”

          Surely they have a manager trained by Bankers’ Life and Casualty. That’s pretty much the life insurance business model in a nutshell.

  • avatar
    ItsBob

    Only working part time at dealership after a few years retirement but nothing has changed.
    We are in Canada and “ALL” our used trucks end up in USA. A broker pays us more than we could ever sell them for at retail, ships them a 1000 miles to southern Ont, and brings them to auctions in N Michigan where a US dealer buys then, ships them somewhere, then adds a profit and sells at retail. By then the price is WAY higher than a new truck here with shipping costs and profit added at each handling.
    This works partly due to the difference in US and Can $$ and the extreme high demand for used trucks in USA.

    However, when it didn’t work to ship to USA and used trucks (or actually any late model used) were on the lot with close to new prices they still sold.

    My personal feeling was that the customers looking at / buying these “felt” they couldn’t “afford” a new vehicle and just did not compare.
    In my selling days, I switched many up to new.

    • 0 avatar
      Add Lightness

      I guess the folks way down south where the used CDN vehicles end up don’t know about the ticking time bomb of salt contamination from the first couple years.

    • 0 avatar
      CKNSLS Sierra SLT

      It’sBob-

      True-my son just bought used F150 from a local Ford dealer (one owner vehicle) that had an option package not offered here. It turns out the truck came from Canada. He is in Utah.

      • 0 avatar
        rpn453

        Ontario and Quebec vehicles are to be avoided. They’re coated in wet salt for months every year. Manitoba, Saskatchewan, and Alberta vehicles aren’t too bad because the prairie climate is dry and too cold for salt to be effective for much of the winter. BC vehicles can vary quite a bit. Most will be similar to the prairies but there may be some warmer mountain areas that use a lot of salt. Cars from Vancouver and the island may never see salt.

        Not sure about the maritime provinces.

        The “Easter Bunnies” (from Quebec and Ontario) suffer high depreciation there so there’s good profit in shipping them west and selling them in the prairies to unsuspecting buyers. Typically, one glance at an aluminum part like the radiator is enough to identify them.

        • 0 avatar
          Tele Vision

          Calgary is using beet juice on the roads instead of salt. Any used truck in the USA with a slightly pink radiator? You now know where it came from.

    • 0 avatar
      Raevoxx

      A lot of time, those vehicles are shipped to fricken BHPH lots in SE Michigan, mostly in rural and poor areas. Especially in the thumb, or even mid-state.

      I have a few friends who have unfortunately been, or are still, in difficult financial situations. And I cannot tell you how many times I’ve seen them buy a car and the dash is in Kilometers…

      And every single one of them has terrible rot, or water damage, and there’s numerous things that don’t work… and they are 99% Big-3 brands. Usually they require repairs in the first 6 months of ownership, or have a “Due Bill” laundry list of repair items… and they never ever EVER last longer than 2-3 years before something major just craps the bed.

  • avatar
    jkross22

    Aren’t new Buick Regals and Fusions going for 40% off msrp?

    Value shoppers can usually find a good deal. It might mean being more flexible on the car they pick, but a new Fusion or Regal is cheap transportation.

    • 0 avatar
      Blackcloud_9

      In my experience, the discount mostly applied to whatever manufacturer’s discount they were offering that month. In February (and in CA) Buick was offering a $5k discount on Regal TourX’s which was about 11 – 16% off of MSRP depending on model. And the dealership was not willing to bargain much beyond that discount. Years ago there was much more room from MSRP to what the dealer paid. That isn’t the case anymore even with domestics.
      I did receive a 40% discount on a new Buick Lacrosse. However it was a 2017 Lot Queen that the dealer was desperate to get rid of. I didn’t care because it was also new to me and the Lacrosse features have changed very little since the last redesign.

    • 0 avatar
      HotPotato

      And they are both really good looking, damn good driving cars. I was determined to go electric this time, but was sorely tempted to change course by the bargains on those two: the Regal because it comes as the world’s sexiest wagon (from the outside anyway; from the inside it looks like an ’88 Camry)…and the Fusion because it was practically free: how’s $169 a month for a well-equipped base-engine car strike you? No matter how much you hate gun-slit windows, long decks, and lazy stepped automatics (I hate ’em all a lot), the fact is, the Fusion drives like a 90s BMW at semi-reasonable speeds, is well-debugged and reliable, and you can drive a new one for less than the monthly repair bill on that 90s BMW.

  • avatar
    deanst

    Not much news here. New car sales have been a very small part of dealership profits for many years – with dealers hoping to make their money on the servicing. With cars getting more reliable, even the servicing business becomes more at risk. Of course used cars are more profitable to sell – each is unique and not subject to the infinite amount of data available for the consumer regarding new car margins.

    As far as Barks “I told you so moment”, the St. Louis fed puts used car inflation at 1.6% last year – below the overall CPI. I’ll let others judge whether this constitutes a win or not. But I will note that prices jumped in the fall as manufacturers pulled back on incentives in the new car market – prices were actually down for the year before this occurred. This increase in price is highly unusual from a historical perspective, and I doubt it is part of a new trend.

    Lastly, I’d note that leasing maturities hit a cycle high in 2019, potentially raising supply in the used car market. Not exactly positive for prices.

  • avatar
    macmcmacmac

    I’m seeing reasonable mileage, 4-5 year old Mercedes B250s going for mid to high teens. 208hp 2.0t seems like it would make such a car a reasonably fun vehicles to drive. Do they have the same punishing reliability of other German stuff? My 2009 Focus is getting long in the tooth, although it has been anvil-like in its dependability. Ideally I’d like a 5.7 Charger or 300 but pricing is much higher, naturally. Gas isn’t going to be cheap forever either.

    When I worked the lot, the used car guys were making A LOT more money than new.

  • avatar
    millerluke

    I was looking for a new car for work, and only one dealer was willing to get me what I wanted. The rest just said ‘Sorry, don’t have one” and directed me to their used sales desk. Of course, some of the dealers didn’t have a used model either, and still were not interested in seeing if one was nearby.

    • 0 avatar
      Vulpine

      Personally, if a dealer doesn’t have what I want on the lot (highly unlikely) and can’t (or won’t) get one off dealer stock nearby, then I order. Simple as that. I refuse to look at used unless I simply have no other choice (and I’ll go a LONG way out of my way to avoid that!)

  • avatar
    ect

    Bark, cry me a river. NADA (which represents new car dealers) reports that the average return on equity for their dealers in 2018 was 23.2%, UP from 21.6% in 2017. This is much higher, for example, than the OEMs can hope to achieve, and more than double what the S&P 500 companies earn.

    Protected by state laws that ensure their position, dealers make excess profits (economic rent, in economists’ terms) at the expense of consumers. Bark’s source is shedding crocodile tears.

  • avatar

    I wonder about all the natural disasters. Floods all over the South. Fires in the west. All of which destroy cars wholesale. While we often remark on the sketchy nature of washed titles, the fact is the combination of need and insurance money must be a great stimulus to the market-folks need cars and trucks, new and used.

    Un mentioned here is “used car purgatory”, where you are still making payments, but the car is beginning to need repairs…stuff wears out but the payments continue and repair bills can’t be avoided.

  • avatar
    Mathias

    @Bark:
    You only get to have your “told-you-so” moment if what you told us was controversial.

    I don’t buy that high lease residuals prop up individual used-car values. Cars are worth what they are worth, and it is the consumer that determines what to pay. What keeps older used-car prices up is the lack of supply and the number of people in need of “cheap” transportation.

    @Everyone
    STOP ALREADY with the 40-percent-off sales on Buick Regals. Here in mid-MI I’m seeing NOTHING of the sort. Life ain’t fair. I really wouldn’t mind the wagon version, if I could get it for the mythical $20k ppl talk about on TTAC. Must be a southwest thing. Opel Insignia FTW!

    There are plenty of good deals to be had in 2-3 year old used cars… but only for certain makes/models/types. I spent nearly a year looking for a used minivan before I gave up and spent $20k on a stripper new Grand Caravan. Used seemed hopeless.

    I’m leasing a ’17 Cruze LT with stick. The residual at 20k/24 mo is 13,800, for which they will get their car back, thank you very much. The auction price for that gem is around $10 at the moment. I may turn it in this fall and try to buy it either from the dealer if he’s willing to play ball, or watch where it pops up and snag it then.

    It’ll be interesting to see if prices tank further since the car is an orphan, or recover because used is the only option.

    As far as cars under $5k are concerned, things continue to be bleak. It’s expensive to be poor.

  • avatar
    Raevoxx

    They simply don’t stock non-trucks at the Buick dealers, in the SF Bay Area. Most dealerships have one, or none, of Regal or TourX. I was amazed to find a high-trim Regal with $10k off in San Jose.

    So on one hand, the deals CAN be found. On the other hand, it might be a deal on the ONLY vehicle they have on the lot… or for the oldest one of… two… they may have.

  • avatar
    HotPotato

    The weirdness of the used car market seems driven partly by the business-model problems of new-car dealers, you’re saying?

    While there will always be the jackass buyer that loves dealers because he fancies himself a great negotiator, for most buyers and sellers the collapse of the current dealer arrangement can’t come fast enough.

    Tesla’s factory store system is one alternative.

    Moving the when thing to the internet is another. You can automate everything from comparison shopping, to test drives (click for home delivery of a tester: free for 30 minutes or low-cost rental up to 3 days), to handling the trade (inspector comes to your house, completes a checklist, dealers bid on it), to getting the exact car you want (spec it online and get options for factory order, closest new inventory match, closest used inventory match), to getting the best financing deal (banks instantly make their best lease and finance offers). First company to roll all those services into one wins.

    I can also see a nationwide new/used online/megastore hybrid model: basically CarMax but with new cars too.

  • avatar
    DenverMike

    New cars are less and less a necessity, or gotta have, every year that passes. They’re less wanted too, and suck in many ways. Lots of backlash against them also, with designed/built-in obsolescence, timebomb electronics, transmission rebuilds that come with a finance officer, to name a few.

    Meanwhile the parts aftermarket, remans, etc, are blowing up exponentially btw.

    “Trucks” paint a clearer picture. Even though the segment is hanging tough, the popularity of refurbished (cosmetic/mechanical) pickups has never been stronger, with companies specializing in the craft. Consumers have no problem dropping $30K or more on 15 or 20 year old pickups, easily paying 2X what the book for.

    You could say some are better than new, bulletproofed, tuned, pre emissions diesels, customized, built to order and whatnot, yet still half the cost of new, or less.

    Not just for play, but for serious work too. Car or truck, there’s never been so many better choices than just plain old “new”.


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