Why It’s So Hard To Sell Your Car At The Right Time

I have a good friend who pre-ordered both an Audi RS6 Avant and a top-spec Ford Bronco shortly after both debuted. These were the pre-pandemic times, and no one I know assumed a semiconductor shortage that would fundamentally alter the industry was on the horizon. My friend just thought they were cool, and so he ordered them.

You can guess what happened next. Both vehicles were delayed and, by the time they were ready to be delivered, were already worth massively more than what he agreed to pay for them. This sometimes happens with desirable models, but not to the extent that occurred during the pandemic. He drove the RS6 Avant for a short period of time before succumbing to an offer too ridiculous to ignore. The Ford dealer tossed a ton of cash at my friend for the Bronco before he could drive it off the lot. Ultimately, my friend made a lot of money by not owning the cars he ordered.

While he’s quite financially astute in general, none of this was a plan. I asked him if he had any regrets about selling these cars, to which he responded that he “regretted selling any car I’ve ever owned” because they’d be so much more valuable now. Living adjacent to a downtown, he realized it made more sense to sell his other cars and use Uber for a while and wait for costs to come down.

The Morning Dump, as always, is not in a position to make spiritual, financial, or horticultural advice. My point here isn’t that there’s a smart way to time this out; my point is that it’s super hard. A big hedge fund has taken a big position in Hertz, partially premised on the idea of used car values rising. They are rising and probably will, but it’s difficult to be long something when it requires you to be short that same product.

Will a trade war make used cars more valuable? Probably. Will it make new cars more expensive? Yes. Will it make China more powerful? Maybe.

It’s Friday, so let’s take a break from all of that and instead focus on one of my favorite topics: Volkswagen making a hard thing even harder, Trucks Edition. And, finally, Ford’s gotta recall more trucks because time is a flat circle.

Hertz, And The Idea Of Being ‘Long Used Cars’

Ackman is going long used car prices https://t.co/XyicgC8IkF

— Joe Weisenthal (@TheStalwart) April 18, 2025

If you don’t know Joe Weisenthal, he’s one half of the Bloomberg show “Odd Lots,” which is both a newsletter/podcast and a larger social experiment. I’m a huge fan, and what works about the show is that Weisenthal seems endlessly fascinated by what’s going on in the present while his co-host, Tracy Alloway, is fixated on the (usually negative) outcomes.

The friction of those viewpoints is especially valid today, when nothing feels normal and the outcomes seem like they could be terrible for most people. This is a challenge for me because I don’t have a co-host. Inside me are two wolves, and one likes never having a shortage of things to write about, while the other wolf has a 401k he’d like to still be there in the future.

In the tweet embedded above, Weisenthal is using the shorthand of the financial internet to say that hedge funder Bill Ackman thinks that the value of used cars will be high enough, for long enough, to make Hertz a good investment. I’ll quote from Ackman’s long tweet for those of you who don’t want to use Vichy Twitter or listen to Bill Ackman.

His basic premise is that the car rental business is an oligopoly and that Hertz, though it made some bad bets, has good new leadership and could transform in the coming years. Perhaps, but it’s this bit I want to talk about:

Hertz is uniquely well-positioned in the current tariff environment, where auto tariffs are likely to cause used car prices to rise. Hertz owns a fleet of over 500,000 vehicles valued at approximately $12 billion. A 10% increase in used car prices would equate to a $1.2 billion gain on its auto assets – equivalent to approximately half of the company’s current market capitalization.

The company finalized its 2025 model year purchases with OEMs earlier this year on attractive terms prior to the tariffs being enacted, ensuring a favorable basis in the replacement fleet.

Just as a reminder, the two big things that matter to rental car companies are RPU and DPU. RPU is “revenue per unit” and DPU is “depreciation per unit.” Rental car companies keep huge fleets on their balance sheets, and minimizing depreciation is almost as important as maximizing the profit you make off each vehicle.

In Q4 of last year, the company improved its DPU ($460 per unit per month), but its RPU dropped ($1,393). Its DPU has long been terrible because the company made the decision to buy a bunch of electric cars right before a price war, and slowing demand/increasing inventory caused used EV prices to plummet. Hertz had to sell a lot of cars, specifically Teslas, at big losses. Even worse, people found the experience of renting an EV underwhelming, which impacted RPU.

The good news about bad fleets is that they turn over, and Ackman’s contention that tariffs could cause used car values to go up isn’t entirely wrong. That’s what most experts think, and wholesale used car prices continue to rise according to Manheim. Ackman says that the company has already agreed to purchase agreements with OEMs, therefore, the prices for its next fleet of cars will be low.

That is a short- to medium-term gain for the company, but what happens if tariffs and supply chain shocks cause new car prices to continue to rise? An increase in the cost of new cars usually makes used cars more valuable, so there’s a chance it all negates itself. But what if something causes the economy to worsen (like a recession) or rental car utilization to drop (Waymo in more places) at the same time that supply chains have been moved to North America, making cars way more expensive?

Rental car fleets are a good buyer for car companies that need to balance out a lot of production capacity, i.e., to move unpopular cars. There’s a reason why rental fleets lately have seemed biased towards Nissans and Stellantis products. The catch there, of course, is that the more a model is dumped into a fleet, the less valuable it is, which increases depreciation.

Being a car rental company is as much about balancing out these forces as it is about renting cars, and the continued existence of rental car companies shows this is not impossible to do. Hertz’s recent troubles also show, however, that it ain’t easy. If you’re holding onto a used car and trying to time the market as an individual, it’s even harder, which is why my advice is that normal people should buy and sell cars before they have to, but shouldn’t always buy or sell a car just because they want to.

The Old Boss Is Always A Dick Until You Meet The New One

Last week, I talked about how the tariffs imposed by the United States could drive some of our allies into the arms of the Chinese government. The counter to that is, while the United States may be difficult to deal with, it’s often still better than the alternative.

Definitely check out this New York Times news analysis: “China Wants Countries to Unite Against Trump, but Is Met With Wariness.” In particular, there’s the idea that Xi Jinping’s outreach might be a bit hypocritical:

During his travels in Southeast Asia this week, he has depicted China as a leading defender of the global order and indirectly cast the United States as an unreliable player. In Hanoi, he urged Vietnam to join China in opposing “unilateral bullying.” In Kuala Lumpur, he urged Southeast Asian nations to also “reject decoupling, supply disruption,” and “tariff abuse.”

“Chinese officials have quietly conveyed that the way the U.S. treats its longstanding allies and partners in Europe is a sign of what’s to come for Southeast Asia,” said Lynn Kuok, the Lee Kuan Yew Chair at the Brookings Institution in Washington. “With Trump’s steep, sweeping tariffs across the region, that message needs no reinforcement.”

But Mr. Xi’s attempts at presenting China as a paragon of free trade and a champion of the rules-based international order ignores years of Beijing’s own coercive economic behavior and generous subsidies for select industries that have often alienated the country’s trading partners and neighbors. It partly explains why the world’s eroding trust in Washington has not immediately led to newfound alignment with Beijing — that, along with the risk of retribution from Mr. Trump for siding with China.

Dare I say it, but this seems like a great opportunity for the Dutch to sweep in and claim the empire they lost in the late 18th century.

Volkswagen Doesn’t Know Everything, Part Zwei

A few days ago, I mentioned that it was pretty chill that Volkswagen’s CEO admitted the company didn’t know everything and could use some help. A lot of what VW has done lately is move away from projects that rely on a ton of engineers (like software company Cariad) and instead has looked outward to more flexible organizations.

That doesn’t seem to be working out for VW’s combined truck unit Traton, which was supposed to find efficiencies by getting all of its big truck subsidiaries together. Now, the McKinsey consultants are on the way, according to Manager Magazin:

Traton ‘s board of directors is currently nervously awaiting news. McKinsey has also been in-house at Volkswagen’s truck subsidiary for several weeks – and once again, the focus is on a project that’s going quite awry: TMS, the Traton Modular System.

Traton is almost 90 percent owned by the Volkswagen Group. The Munich-based truck holding company is the parent company of the truck and bus brands Scania, MAN, International, and a VW-led subsidiary in Brazil. TMS was intended to unite the brands’ rival development organizations. The idea was for around 8,000 developers to work together to develop the next-generation truck kit. The new platform is expected to be available by 2028.

It’s hard to believe that 8,000 developers didn’t lick the problem right away.

Ford Recalls 148k Trucks Over A Brake Fluid Leak

Ford is taking its quality issues seriously lately and has pledged repeatedly that it’s making sure its new vehicles don’t suffer from the same issues that plagued the old ones. Well…

Per Reuters:

The automaker will recall 123,611 vehicles due to a fluid leak that could reduce braking performance and increase stopping distance. This affects certain 2017–18 Ford F-150, Expedition and Lincoln Navigator models.

Dealers are expected to replace the affected parts such as the master cylinder or the brake booster free of charge, the U.S. auto safety regulator said.

Separately, Ford is calling back 24,655 of its 2025 Explorer SUVs as a powertrain control module may reset while driving, which can damage the vehicle’s park system or cause an engine stall, according to the regulator.

I guess it’s good that Ford is catching problems earlier, though the Explorer issues could have been solved much quicker if the company had over-the-air updates available on more models.

What I’m Listening To While Writing TMD

It’s crazy that Oasis managed to blow up so fast and so completely by claiming, before it was even true, that they were “Rock ‘N’ Roll Star(s).” I guess it helps when your lead singer is a complete nut with supermodel good looks and zero self-awareness.

The Big Question

Have you ever bought or sold a car at the right time? How did you do it?

Top photo: Depositphotos.com