Remember when buying cars used to be fun? Alright, maybe fun is the wrong word, but it wasn’t that long ago when prices were reasonable, vendors were plentiful, funds were conventional, and everything was as predictable as overnight oats. Now though, funding car-purchases has only grown weirder and more difficult, more retailers have either merged or closed up shop, and the ongoing UAW strike is halting the production of several made-in-America vehicles. Will the strike eventually lead to higher used car prices as more new vehicle shoppers turn to the used market? One expert says it might not.
Matt’s put me in charge of today’s Morning Dump, and I realized at about 8:30 a.m. that I haven’t written a massive car market update in a while. Well, that changes today, so fasten your seatbelts and get ready for some bite-sized news about buying and selling cars.
Used Pickup Truck Values Are Up, But Used Car Prices Should Remain Stable
You know what’s expensive these days? Gasoline. Although we’ve certainly come a long way in the past few months, there’s a chance prices may never drop to pre-pandemic levels. You know what else is expensive? Used pickup trucks. According to the Manheim Used Vehicle Value Index, wholesale prices on those things are up 0.7 percent year-over-year. That doesn’t sound hugely impressive until you realize that every other major market segment saw year-over-year value declines, with vans seeing the lowest drop of 2.3 percent and compact cars seeing the largest decline of 9.9 percent.
So, will the UAW strike and interruption of new domestic vehicle supply leave us finishing 2023 with strong used car prices, particularly as full-size pickup trucks are among the hardest-hit new vehicles? Possibly, but don’t be surprised if we don’t see any massive changes in used car prices over the next few months. Chris Frey, senior manager of Economic and Industry Insights for Cox Automotive, has shared some educated thoughts on where the overall used car situation is going in a media release:
While there was a bit of an acceleration from August, we shouldn’t get ahead of ourselves heading into the late fall and winter period. We are at a crossroads for wholesale, mainly from concerns about the UAW strike’s potentially slowing new retail sales and moving buyers into the used market. We don’t see that happening just yet, as it always takes time for changes to work through the market. Two very different outcomes are possible. One is to see higher prices from an extended strike on new production also showing up at wholesale and then used retail. The second leads to very little change – a strike resolution leading to price declines at relatively normal rates, or simply pausing, thus the wholesale and used retail markets are minimally affected. While we have some modest changes built into our MUVVI forecast, we think the market mainly reflects balance at this point, relative to what we have been seeing for much of the last three years. We typically see only slight upward trends in wholesale values in the fourth quarter, which is why are forecasting our Used Vehicle Value Index to finish down 2.2% for the year.
If we end up finishing 2023 with used car wholesale values down 2.2 percent from last December, expect used car prices to basically stay where they are right now, a contrast to previous predictions of a 4.3 percent drop over the course of 2023. While this isn’t great news for used car affordability, it does offer a possible window of predictability. Welcome to the new abnormal, where cars just cost more both new and used. We certainly aren’t filling a supply hole of several million vehicles globally anytime soon, and people still need to get to work.
Still, It Could Be Worse
It’s easy to think of Canada as a relatively mild-mannered nation of winter weather-enjoyers, coffee addicts, and pop stars who’ve maybe grown a little too big for their heads. However, America’s northern neighbor has household debt exceeding its GDP, and this could be causing some wacky things in the car market. According to Automotive News Canada, more Canadians may be turning to home equity lines of credit, commonly known as HELOCs, to buy cars.
Well, using a HELOC to buy a car is certainly one option. With auto loan rates often sitting in the double digits, the possibility of lower rates through a HELOC may be enticing to some. However, HELOC rates are variable, meaning they could rise just as quickly as they could fall, and buying something that depreciates using funds tied to a variable interest rate doesn’t seem like the greatest idea. Then there’s the whole thing about temporarily trading away home equity for a car. Still, taking a step back for perspective won’t stop Canadians from playing with fire, will it?
Ferrari’s Late To The Crypto Game
Well, if this isn’t a blast from the recent past. Just as the Web 3.0 hype has been thoroughly drowned in the bathtub, Reuters reports that Ferrari will accept cryptocurrency in exchange for new cars in the American market. What year is it?
[Ferrari’s Chief Marketing and Commercial Officer Enrico] Galliera did not say how many cars Ferrari expected to sell through crypto. He said the company’s order portfolio was strong and fully booked well into 2025, but the company wanted to test this expanding universe.
“This will help us connect to people who are not necessarily our clients but might afford a Ferrari,” he said.
The Italian company, which sold 13,200 cars in 2022, with prices starting at over 200,000 euros ($211,000) and going up to 2 million euros, plans to extend the crypto scheme to Europe by the first quarter of next year and then to other regions where crypto is legally accepted.
Either Ferrari is late to the game on something the nouveau riche have been doing for years, or this is a proverbial canary in the coal mine. I’m just saying, being sold out of house-priced cars into 2025 yet still moving to accept questionable digital tokens doesn’t seem to bolster confidence in exotic car market growth, especially for a company that’s, um, particular with its clients like Ferrari.
Shift Is Officially Over
Remember Shift, the online used car retailer that went public via SPAC before getting bowled over in the used car boom and not-quite-bust over the past few years? Well, Automotive News reports that it’s officially filed for Chapter 11 bankruptcy protection.
Gee, who’d have thought profitability would be an important part of running a publicly-traded business? Unfortunately, relying on continuous investment isn’t a great strategy in times of belt-tightening, and failing to stay afloat has consequences. With only 24 employees reportedly kept on board for bankruptcy protection guidance, 120 employees are now out of work, and everyone trying to buy a car through Shift has reportedly seen their deals terminated. It sucks to be left out in the cold because some people expected funding to keep rolling in, so I wish every former employee and everyone who tried to buy a car through Shift the best of luck picking up the pieces. With an expensive used car market and a cautious job market, it’s a tough situation to be in.
The Big Question
Maybe I’m being overly simplistic here, but selling used cars online doesn’t seem that complicated, mostly because it can’t be revolutionary. Unless a car doesn’t actually run or drive, I’d want to see and test drive a car before signing on the dotted line, especially since lots of damage can hide through the glass of a camera. Hell, if you stepped back ten feet from my 325i, you wouldn’t notice that the hood looks like it was glanced by birdshot, such is the extent of the stone chipping. Oh, and with high used car prices and a tightening financing market being the new normal, relying on younger buyers for digital sales feels like less of a safe bet.
So, how would you solve selling used cars online? Is it really just a matter of having a better, more proactive, more knowledgeable internet marketing department?
(Photo credits: “Car Dealership on Western Ave” by David Hilowitz is licensed under CC BY 2.0., Ram, yonkershonda licensed under CC BY-SA 2.0., Ferrari, Shift)
Support our mission of championing car culture by becoming an Official Autopian Member.
-
Tesla Doesn’t Want To Pay Lawyers $230 Million Over Compensation Lawsuit: Report
-
The UAW Just Hit Ford With A Surprise Strike At A Profitable Truck Plant
-
America Doesn’t Have Enough Electricians For An EV Future: Report
-
BMW Is Quietly Selling A Ton Of Electric Cars
-
Nissan Screwed Up With The Leaf And Chevy Succeeded With The Bolt: The Loyalty Data Proves It
Got a hot tip? Send it to us here. Or check out the stories on our homepage.
Canada, especially the Golden Horseshoe and Vancouver, is still pretty insane for housing. I really don’t know how younger folks will get homes. When housing values were less than half of what they are now, it was still a bit of a struggle to get a down payment.
> how would you solve selling used cars online? Is it really just a matter of having a better, more proactive, more knowledgeable internet marketing department?
Part of it is dealerships hiring marketing/”digital sales” people who aren’t two-finger hunt-and-peckers and stopped learning anything new in 1987. 3D virtual tour technology is widely available.
The other part is hiring (and incentivizing) sales managers with honesty and integrity who want to sell the right car at the right price to their buyer, and as such make sure the car is accurately and thoroughly reprsented. Which is never going to happen.
The third part is that new and used car sales need to be regulated with a mandatory return policy.
This has absolutely nothing to do with today’s morning news, but I just wanted to mention it because I’ve never been this stoked to be wrong.
MIT just released a report that they’ve designed a solar thermochemical hydrogen (STCH) plant design which uses concentrated solar to superheat metals which are then exposed to steam where they oxidize, breaking the oxygen out of H2O. They anticipate up to 40% thermodynamic efficiency.
This is huge. This is a game changer. Existing hydrogen generation (electrolysis and solar hydrogen) are 6-7% efficient, and this is the single biggest problem with hydrogen as a consumer fuel. With 25% efficiency, let alone 40%, hydrogen becomes economically viable.
I’ve always been openly pessimistic about hydrogen, but if this new production method pans out, then consumer grade H2 transport could easily become a much bigger part of the decarbonization conversation moving forward.
Great…. hope it gets to the market before you die of old age. There’s huge canyon between “design[ing] a solar thermochemical hydrogen (STCH) plant design which uses concentrated solar to superheat metals which are then exposed to steam where they oxidize, breaking the oxygen out of H2O” in a lab at MIT, and filling up your Chevy with hydrogen at the 7-11…
TL/DR: Where’s my flying car? That technology has been theoretically possible since the 1930’s.
In January of 2020 I bought a 2016 Dodge Dart GT 6spd manual with 32k miles for 12K that sat on the dealer lot for 8 months due to being manual. I drove that car for 3 years putting 25k and then sold it to Carvana for 15K when used car prices were high. Its no wonder why companies like that file bankruptcy. They paid a premium for my car which has low market appeal and will have that cash tied up on it until they find another person like me who like Mopar and can drive a stick.
I had a similar experience. Bought a fairly run of the mill Optima though it was the loaded version with navigation, dual sunroof, cooled seats, etc. (only thing it didn’t have was the turbo engine) and the dealer just wanted it off their lot to make room to get an extra SUV on their allocation. Bought it for ~12k in Jan of 2021.
Fast forward to Feb of 2022 and we decided it was time to replace it with a van, so I sold it to Carvana for pretty much the same price I paid for the car – ~12k. The best offer I could get from a local dealer was 7k.
I have a few interesting thoughts about used car prices. I’m not an analyst or anything so here goes…
I believe Carvana and Shift’s strategy was to do high volume of lower-margin transactions. Both companies were established in 2012/2013 so they’ve always operated in a relatively low interest rate environment therefore their pricing model and business is built around that
The sudden Shift in interest rates means:
Lower demand: Leads to lower prices & tighter margins, esp. on inventory they’ve overpaid forHigh interest rates: More expensive to run business ops, fewer fundraising opportunities from investorsIf the current situation didn’t do them in, I think they’d run into trouble in a few years anyway because
Less available used inventory: The supply of used cars will be severely constrained from the lack of new car sales over the pandemicLower margins: The high-turnover models they tend to buy may creep too close to the new version of that carCarmax seems to be smarter about the whole thing because they’re an older company (founded in 1993) and have operated in higher-interest environments, so their buying/pricing strategy is tighter
For example, they got screwed by the original Tesla price drops so after the pandemic, Carmax dumped nearly their entire inventory of Teslas like Han dumping Jabba’s cargo, the moment Tesla nudged the price down. Everyone else got left holding the bag on those when Tesla continued to adjust prices downwards
using a HELOC to buy a car… oof
I decided to dig around, plus ask Canadians about those rates as well. 6.95 – 7.70%.
Scotiabank is at 7.70%, which is typical. Their auto loan rates however are in the 7.70 – 10.49% range. So I guess it’s a potential savings, but oi, I’d just shop rates and secure financing myself rather than take out a HELOC. People never want to do any work though.
I decided to dig around the seedier lenders to see how bad it could get, for “fun”:
Remember, they offer them because some people take them. Yikes.
What’s spooky is as of May, 45% of Canadian auto loans were 84 or more months!
Bought my 2012 Prius v at a dealership in late 2019. Only 30 day warranty since it was over 100,000 miles.
Price was a little high, I guess, but they did come with me to my local mechanic for a PPI and I haven’t regretted buying the car ~4 years and 30,000 miles later.
I definitely have no desire to buy brand-spankin’ new or really recent used cars, partly for money reasons, and partly for privacy concerns. One thing to connect to my phone for Android Auto and the like, and another to have a separate, independent, “black-box” internet connection built-in to the car.
It seems to me that Ferrari believes their brand image will improve if cash rich criminals find it easier to get into a Ferrari. Not disagreeing.
I buy a lot of used cars, and often help friends buy used cars. I kind help but feel that Carvana, Carmax, Shift and etc. are all seeking the exact same buyer. Their inventory is all very similar, that second owner relatively clean 23k car. That the buyer unlikely to have cash on hand and will have to seek financing for. Is this the average buyer, yes. But how many people are looking for car at any given time. So, to counter a crowded market, they took a large amount of other’s people cash to try gain a monopoly by being the only one with cars. I feel instead of burning cash, one of them should have just moved down market. That 10k-15k market. Would likely be more labor intensive due to inspections. But you could low ball sellers for less desirable cars, after that selling it. Your only competition is Bob’s Used Cars on route 26 and FB Marketplace. The two worst place to buy a car! So, mark it up a bit because no one wants to talk to Bob, and you’re making money off the actual car and not just financing. Repeat at scale, and boom you’re a cash positive business.
I think Carvana and Shift shot themselves in the foot during the pandemic when car prices shot up and interest rates were super low.
Their business strategy, common to a lot of silicon valley startups, is to use a high volume of low margin transactions to make $
They probably hoovered up a ton of used cars but their pricing models probably didn’t keep up with the sudden rise in interest rates and the subsequent fall in demand for used cars
One of the things I understand that Carvana was (is?)doing is playing statistics with their car inspections. MOST cars they buy are likely to be in good condition. It’s cheaper to take care of the people who complain that it is to do any kind of detailed inspection.
I’ve never purchased a used car at all — let alone online, and one of the things that turns me off to the idea is just not knowing the condition of the vehicle. Buying online makes it even harder to determine the mechanical and even cosmetic condition of the car.
To make buying online more attractive, I’d suggest an independent third party providing vehicle condition reports. Not just CarFax telling you whether a car has been crashed before but a detailed mechanic’s report detailing any findings. Same goes for the looks — a detailed report showing all cosmetic imperfections would be useful.
The key to the above is that the condition reports must be done by an independent third party — someone who does not benefit from the sale at all and therefore impartial. I feel as if such a service would be well received by car buyers.
Check out Lemon Squad who does exactly that (https://lemonsquad.com/). I haven’t had a chance to use them myself. I believe there are other companies that doe this as well.
I think what would help the most, at least for me, is posting a copy of the Monroney sheet for the car, so I don’t have to rely on the dubious knowledge of the dealership to correctly enumerate the options and configuration. Better lit, better composed, better resolution pictures would be great. For more premium cars, a PPI from a legit shop. But all of those things take a bite out of margins, so I don’t see them happening any time soon.
As much as I hate used car dealers, I kind of hate these “online” retailers of cars more. They are the reason for the ridiculous used car market. They bought anything and everything. When the bulk of the supply is in a few people’s hands, prices go up. Supply may be low or high, but if only a few own the bulk of the widget supply, prices will go up and everyone will follow suit.
I think you’re over estimating how much of the market these online used car retailers actually control. Sure, some specialty places probably do have a lot of market power (a la BaT), but the ones like Carvana or Vroom probably have little ability to actually inflate prices just because there are so many other options out there.
Politely, you’re wrong.
Caravan admitted to buying too many cars at too high of a price. They had to sell high because they bought high. Now everyone sells high.
https://www.theverge.com/2022/11/9/23447764/carvana-98-percent-stock-price-market-cap
Carvana is the first retailer to sell 400,000 cars in a year. That’s a shit ton of USED cars.
https://blog.carvana.com/press-information/carvana-leads-industry-as-fastest-to-sell-one-million-vehicles-online-since-founding/
What does BaT have to do with anything? Sure, they might make the price of 1990 300ZX TT jump by $5000, but that’s not the topic at hand. Those are rare collectible cars whose market could evaporate tomorrow. Traditional supply and demand philosophy is hardly relevant in the collector (read: buying on emotion) car market.
I’m open to being wrong, but, ya gotta come with proof if you’re going to, through politician speak, condescendingly say I don’t understand.
I mean, just googling around, it looks like something close to 40 million used cars are sold every year in the US. You’re telling me that because a single seller accounts for about 1% of that, it’s enough to sway the entire market by a substantial amount? No way. Just because they bought high doesn’t mean they can sell high, hence why your own source shows how much money Carvana has lost in past quarters. If they really controlled the market like you claim, they wouldn’t be losing money for 7 out of 8 quarters. You haven’t linked the data you provided (high cost, lots of losses, 1% market share) to your claim (Carvana has unfair market power and influence to the point they can dictate prices).
Simply put, the bulk of supply is clearly not in a few peoples hands when the biggest single supplier barely accounts for 1% of the overall market. With such a small market share, there is no practical way for them to influence overall market pricing. Market capture typically need to be much much much larger (like approaching fractions larger than 1/4th the overall market) to have that much influence. If you wanted to argue they are doing the whole “Wall Street is willing to eat loses long enough to eventually get large enough to eventually influence the market” I’d probably agree with that, but we aren’t to the point yet. They aren’t even close to having that much sway.
> close to 40 million used cars are sold every year in the US
And millions of new cars.
I do not understand these numbers. There’s no way so many vehicles are needed.
I was surprised to find out that OffLeaseOnly died.
It’s not just online retailers seeing issues.
OffLeaseOnly’s problem was they sold to a VC firm who changed management and tried to make it more like a Carvana.
For selling cars online, mainly talking just used cars right? I think new cars would be better to move in that direction, instead of the dealer getting various models of white/black/grey with trims people may not want, they just have a few demo models and people order what they want in nice reds/blues/yellows….plum crazy purple, whatever.
For used as others have said think Carmax has the better setup, the cars have to sit somewhere, better to have several lots around the country where people can walk in and buy them, than storing them “somewhere” and then when somebody buys one having to ship that 1 somewhere, wasting time and fuel and all that. Even when Carmax ships it’s doing multiple cars to it’s different lots, but Carvana and the rest are like, I’m a put this 1 car on a single carrier that gets 10mpg and drive hundreds of miles to your house! Hopefully you like it!
The new car scenario you described is pretty much how I bought my current car. The car I wanted was an uncommon model, so the local dealer had only one example in stock. Add to that my pickiness regarding options and color, and I’d be lucky if there happened to be one or two equipped the way I wanted it for say anywhere in the country at any given time. I went down to the dealer, test drove their one example, and then gave them the printout of their online configurator showing my exact specs, telling the salesman: Order this, and call me when it gets in.
It took 9 full months for the car to be delivered.
That was fine for me. I didn’t have a pressing need for the car (I probably didn’t really need a new car at the time), so I was fine to be patient and wait in order to get exactly what I want. I recognize that that’s not the case for most people. For many car buyers, their current car no longer meets their needs, and they need to replace it immediately. Waiting 9 months is unacceptable to those buyers, so dealers stock their lots and showrooms with dull colors and high-margin trims.
Today I have even less incentive to rush into a new car purchase. I have the option to work remotely when needed, and Ubers are everywhere. So while there are people out there for whom that plan would work quite well, any dealer that follows that plan would essentially be writing off any potential customers with time-sensitive car purchase needs.
Yes reality is a harsh mistress, so it’s a great point, also maybe not time sensitive, maybe just more, I want to buy a car today regular consumerism and whoever’s got them in stock wins.
I have had two stealerships try to hide previous damage on a car I was about to purchase. I am not trusting enough to assume I would have had not a lot of trouble trying to return the vehicles once I discovered the damage. I am definitely with Thomas here, I would want a Certified used warranty if I could get it, but I still want to put my hands on it and buns in the seat prior to signing anything.
I will gladly pay the premium for a certified used car almost every time. I know some folks claim that it’s usually a ripoff, but I don’t agree. It’s hard to put a price on peace of mind.
I bought my current car CPO from a dealership too far away to go and see the car in person. For me it was an overall great experience.
I know that generally people do not care about driving dynamics like enthusiasts do and that the way a car looks and the paint color and how many cup holders there are sells to the general public. for me I would not have done it if I had not driven the car before (I owned one prior) and that there was a CPO warranty.
Another thing I will say about this: I had a fantastic sales person. When I asked about the overall cosmetic condition of the car he admitted there was some minor damage to hitting a parking berm on the underside of the front fascia. Sent me plenty of pics and noted some rock chips and other things that were minor. it made all the difference and I used that info to negotiate down on price of course (this was 2019, before all the madness).
So, if I were to try this again and I felt like I was getting incomplete info or like the dealer was hiding something I would walk away or drive out to see it. And I would not purchase like that without a manufacturer–backed warranty ever (maybe I’d accept it from Carmax or a bigger chain where I would have some recourse, maybe…).
One thing to note about the HELOC in Canada. The rate of home ownership is higher in Canada, meaning that some of those using home equity for a car may not have a mortgage payment.
I just checked, GM’s finance rate is right around 7%, my HELOC is at 7.7%.
Car financing loans are open loans here, I can pay it faster, but can’t slow down payments. A HELOC is flexible both ways.
Not sure if anyone talks about 401K loans, but I do pay myself interest on a loan that come out of my paycheck each week and did not tie a vehicle title to the loan, so the vehicle could in theory be sold quickly without any liens if need be. it worked better to clear out high interest credit and then use the rest for a down payment on a lower rate but shorter term auto loan though.
The significant danger of being able to ‘slow down payments’ is that people do just that, and result in a loan for longer than the vehicle’s life.
It doesn’t help that we’re all bombarded with ads from financial institutions about all the things we ‘could’ buy with money that isn’t ours; talk about taking advantage of the financially illiterate.
Maybe HELOC’s are cheaper in Canada, but I can get an auto loan for 2015 and newer for 5.99%, and a HELOC is at about 8% at my credit union. The only reason to use a HELOC is to stretch the payments out longer. Using a HELOC for an auto loan seems like a bad idea. Best not to risk your house if you get into a bad situation.
I actually had the occasion to check my credit union loans for new cars this Saturday the lowest was the under 20K rates around 7.5 percent. the more you borrowed, the higher the rate, which of course seems off to me(8%+), but I would be interested to know where you are seeing 5.99%
My credit union (CapEd) offers rates based on age of car, not price. 6.99% for 2015-2023 (which is a much wider range than I remember from just a couple years ago when I financed a lease buyout), 7.99% for 2014 or earlier.
I very much agree that the higher price and higher loan seems a bit counterintuitive.
Good. A depreciating asset should be more risky the more expensive it gets.
sort of I suppose, but if the goal is to loan out my savings to make the bank more money over the long run, it would seem that an incentive to lend more with less added cost and thus risk of missing the payments would be a positive thing. but I also realize the more you borrow, the higher the potential default loss in the name of one person, so it is a double edged sword I suppose. Just seems like not that long ago the loan amount was less important than the age of the vehicle when determining loan percentages. Also length of the loan since the longer the vehicle is on the road the more likely it ill be demolished or the MFR’s planned obsolescence kicks in.
I’m far from an expert in this field, but, I find it interesting how we try to mitigate risk by making more money. That does nothing to actually mitigate risk. The upside is greater, sure, but that’s not risk. If the risk of the borrower is extremely low, a wealthy buyer with good credit, then the risk lies in the vehicle they chose; a $100K BMW turns into an $80K BMW over night.
wealthy buyers rarely buy on credit, unless it is a tax write off of course.
That’s interesting. My uncle was told by his tax consultant to always purchase his new vehicles on credit (best rate possible, usually the shortest) because a large transfer of funds from the bank would trigger the IRS notice of money laundering and a possible audit. He would then pay it off early, but below the IRS trigger limits.
Wealthy buyers almost always buy on credit if they think the money will do better in their hands. And they usually get very favorable interest rates, so buying on credit is almost always in their favor.
That’s also part of how they game taxes, of course. No capital gains until you cash out, so they only cash out investments when they need the money or have the write-offs to counter the taxes.
Michigan Schools and Government Credit Union. https://www.msgcu.org/michigan-credit-union-rates. They always seem to be the best rates around Detroit.
“So, how would you solve selling used cars online?”
Same way I sell everything else online too big to stick in a USPS Flat rate box:
Craigslist.
A trusted national brand such as Carfax or AAA, offering inspection services and detailed reports such as this one https://lemonsquad.com/sample/standard. Include a report like that along with the Carfax report and add on a decent warranty and return option. Then it’s just a case of building a reputation so that buyers trust your brand.
Well, the UAW strike probably won’t affect compact car prices since they don’t make any compact cars.
Selling used cars entirely online necessarily involves some sort of guarantee that you’ll be able to drive the car and change your mind (usually in the form of a return policy). And it also means you have to deliver cars all over the place. I think the CarMax model is the more sustainable choice. Lots all over the nation, can ship from one lot to another, but you can have better inspections and test drives (hopefully reducing returns) while reducing the costs of delivering each car to individual buyers. And they usually charge shipping, except from the closest lot(s), which helps. Though I could also see the shipping charge just used as a deposit to kind of ensure someone buys.
But if you truly want fully online sales, you should be doing thorough video walkthroughs of every car. Photos, even the full 360 that most of them show now, are not enough. Get close, show the flaws. Because pretending their flaws don’t exist just means an increased risk of rejection at delivery.
Online car sales need to be less of a scam/ripoff. Plenty of people would be willing to buy online (I’m one of them) if it offered a seamless, normal, slime-free process. Unfortunately it doesn’t, because capitalists did what they always do and streamlined it into a way to fuck over the working class.
All of these companies have made headlines for terrible reasons countless times…whether it’s selling defective cars, selling stolen cars, the product that’s delivered being exponentially worse than what was advertised, etc. Hell my neighbor bought a fairly new Audi off Vroom and it’s lived in the service bay since they got it. Also, the financing terms they offer are ridiculously predatory. I’ve put my information into Carvana in the past while browsing and the interests rates they’ve quoted me are hilariously terrible.
I consistently qualify for the lowest rates (not trying to brag, just giving context) and Carvana was quoting me interest rates close to 10% early in the pandemic. I can’t even imagine what they are now and I can’t even imagine what they look like for people who don’t have great credit. I’d imagine they’re well into the 20s for a lot of folks.
So, they more or less offer a slightly more convenient process…but it’s at a higher price and requires you to roll the dice on what you’re getting even more than a traditional dealership does. It’s no wonder they’re struggling…it’s just another stupid Silicon Valley non-solution that makes something we already have worse and funnels money upward.
If they want to survive they need to offer a competitive product. It’s not enough when the only advantage you have is “lol you don’t have to go to a dealership”. They get back at you in myriad other ways. If I were in charge I’d look at Carmax for ideas. I’d offer various warranties on all the cars I’m selling to give people peace of mind. I’d also look into creating a certified used program.
You don’t have to do it with every car since there are plenty of people who don’t care/don’t want to pay the premium…but for the folks who do give the cars a multi point inspection, fix what needs to be fixed, make sure all the recalls are caught up, and offer a warranty on those vehicles. Hell, go one step further if you want and offer some special financing on those models like traditional manufacturer’s do.
And finally find some reputable folks to partner with/run your finance department. You can’t treat every single buyer like a subprime one. Interest rates are bonkers right now but if you have a well qualified person looking to get into a car your interest rates should at least be competitive.
To be fair, that’s what new Audis from dealerships do too 🙂
I agree with everything you’ve said as well, especially around the silicon valley hubris the startups suffer from
CarMax is very smart from a business perspective and keep a very close watch on market conditions. When Tesla nudged their prices down after the pandemic, Carmax immediately wholesaled over 90% of their Tesla inventory.
Car dealerships and the online used car startups didn’t seem as responsive. A friend of mine traded in his WRX to a dealership for an Audi A5 earlier this year. The dealership bought the WRX for almost as much as he paid for it, but probably realized they f’d up so they tried to un-sell him the car
What ruse does a dealer have the stones to employ, to try to ‘un-sell’ a car?
I mean, if you tried to un-buy one, they’d be doubled-over, cackling, or just look right through you like some unpleasant ghost was clanking chains and hoohooing nearby . . .
> my neighbor bought a fairly new Audi off Vroom and it’s lived in the service bay since they got it.
Duh, it’s an Audi.
I’ve bought two vehicles online, and while both transactions were straightforward and relatively trouble-free, I wasn’t left convinced buying online is a better solution. The problem with buying cars online is the timeline. In-person, one can walk into the dealership and walk out with the keys in a number of hours, but online it’s more like a week before you actually get your car. Much of this is due to the paperwork, which must be signed, notarized (in some states), and returned to the retailer before you can even think about scheduling a delivery.
Repeal the fucking chicken tax. Join the UNECE standards (or be like Mexico and accept both US and UNECE standards).
Less Detroit crap, more Toyotas and Hondas.
Nissan will keep making the Titan a little longer than they thought they would LOL
I don’t buy used cars at all, so my opinion here may be worse than useless, but I think the only way you’re going to get around the “won’t buy without a test drive” crowd is to offer real warranties and/or returns.
Car wasn’t what you expected from photos and you don’t like it after 10 days? Return it and just pay $X/mile driven (to avoid deadbeats “renting” cars from you). Engine blows up after 9 months, you’re covered.
Now, I have no idea what that would cost and whether the peace of mind would be worth passing up driving to a regular (cheaper) used car lot. But I’m always amazed how many people pay a lot more than they should to buy at Carmax. So the idea may have some promise.
The online retailers (Carvana, Vroom) already have a return policy within certain mileage and vehicle condition limits. I never actually tried returning either of the used vehicles I’ve purchased online, so can’t comment on how easy it actually is to do, but even assuming there are some annoying hoops to jump through, I’m not sure there is anything else online retailers can do from that standpoint.
I’ve returned cars to Carvana, CarMax, and Shift (R.I.P). They were all really easy. You simply called the 800 number and told them to start the return. They sent out an email with return instructions (Carvana and Shift picked up and I signed 1 doc., CarMax was return to the lot after 28 DAYS!!!! ) and you just follow the protocol. This is a really great way to buy a used car.
While CarMax pricing is pretty high, the 30 day window to return makes it pretty nice.
And I’ve noticed CarMax often has the highest offer for my car, so the high price can be somewhat offset by a higher trade value.
Why did you return them? Something broke that they wouldn’t pay to fix? Didn’t like that color after all as it looked better in the pics? Found undisclosed crash damage? 3 returns seems like a lot?
Shift was an Edge Sport (Great car) that was a bit too small. The Carvana return was a Model X they said was a 7 seat model but it was only a 5 seat.
CarMax was a 7 seat Model X that I returned after 30 days. After returning it, I realized how much I actually liked it and went back and bought it again. The mess with the DMV having 2 registrations with 1 vehicle is comical.
I’ll bet!!!
I bought and returned a Saab 9.3 SportCombi to Carmax. This was around 2008? It was easy but they did make me stew for an hour while they “completed the paperwork”.