When I sold my car to a dealer last month I got what I thought was a fair deal. Looking at the data I’m wondering if I could have gotten a better deal by holding out a little longer. Wholesale prices of used cars are on the rise, but that doesn’t necessarily mean you’re going to pay more for a used car. This is capitalism, manifest.
In other exciting news, if you were enjoying a succulent Chinese meal in Beijing you might have noticed a lot of new plug-in vehicles. In fact, more than half of the new vehicles sold in China last month were either full EVs or some form of PHEV. That hasn’t happened in the United States and may not for a while, but more than half of automakers will be replacing their limp CCS cords with mighty Tesla NACS cords for reasons beyond just supercharging.
And, finally, before we say tata and farewell to this Morning Dump, our favorite Chevy dealership in Malta, NY goes corporate.
Used Cars Are Worth More And Less At The Same Time
I feel like studying modern economics is like thinking super hard about a Christopher Nolan film. Up is down. Down is up. The deeper you look the more complex and contradictory it seems. Overall, I think the questions are more elucidating than the answers, which are generally quite straightforward (Cooper is dead, Cobb is stuck in the dream).
Prices for used cars shot up dramatically during the pandemic as new car supply was limited. You can read more about this effect in my Trimflation article, but it makes logical sense. With fewer new cars being made, more people were holding onto their old cars for longer, reducing the amount of used inventory. The lack of new inventory also meant fewer people were trading cars in, compounding the issue. If that wasn’t bad enough, leasing went down, therefore reducing the number of off-lease cars available now (for 2-3-year lease terms).
Somewhat inevitably, new car inventory climbed back up and incentives soared, causing wholesale used car values (a reasonable proxy for the price that a dealer pays for a used car) to come down from their peak. The main measure of this, the Manheim Used Vehicle Value Index, started to flatline this summer and even went up last month. What’s happening? Are used cars just getting more expensive again?
Not quite. According to Cox Automotive/vAuto, the average listing price of used vehicles has similarly flatlined this year, but actually started to go down in July!
How is it that it’s more expensive for dealers to buy cars and yet they’re selling them for less money?
There are a few reasons and it shows why it’s getting harder to be a dealer and easier to be a customer.
First, we can’t dismiss that there’s probably some CDK Global Ransomware attack noise in the numbers as transactions were impaired at the end of June and the beginning of July. Cox Automotive says they think the outage “appears to have had less of an impact on the used-vehicle market” and that seems correct, though I’m sure it had some impact.
Second, the same economic factors that are impacting new car sales (rates, consumer confidence, inflation) are hitting used car purchases as well, though in slightly different ways. People are still keeping their cars for longer out of an inability to purchase or out of economic fear and one way to pull people off the sidelines and into a new car is to offer a good price on a trade-in. This, of course, inflates the cost for a dealer to get a car but doesn’t necessarily inflate the sales price if the dealer then has to try and sell the car to another wary consumer.
Third, we’re coming to the end of all those three-year leases run in 2021, as Cox points out:
“We are just beginning to see lower lease maturities for the key 3-year-old segment, and that impact will be felt over the rest of this year and into 2025 and 2026.”
This is further constraining supply.
Fourth, and this doesn’t get enough play usually, but dealers or private party sales used to be the only game in town for selling your used car. Now there are a plethora of online retailers like Carvana who, even though I sold my car, keep bugging me to buy my Forester.
Dealers basically have to have used cars to keep their businesses running and those cars have to come from somewhere. Car Dealership Guy had basically the same thought in his newsletter when he saw the data, and got this great quote:
Cars are a supply/demand business and retailers are dealing with both a lower supply of good cars and also weaker demand. This sales rep in Atlanta makes clear the impact as he notices dealers holding onto trade-ins that aren’t even that good just to have a car, rather than passing it onto auction.
This isn’t a great market for dealers, but it could be great for consumers. This means you can get a better deal on your trade-in when you go to buy new or, potentially, get a nicer deal on a used car. I’m hedging a bit here on buying a used car because there just aren’t as many good-quality off-leased cars as there usually are so quality is going to vary.
New Energy Vehicles Accounted For 50.7% Of All Sales In China Last Month
China is, by far, the biggest market for vehicles with a plug. The country groups all plug-ins (whether extended-range EVs, battery electric vehicles, or more traditional PHEVs) into one category called New Energy Vehicles, or NEVs.
Last month, NEV sales were up 37% year-over-year, which means that they hit a record market share of 50.7% of new car sales. That’s a big deal.
Reuters does a good job of putting this into context:
NEV sales accounted for just 7% of total vehicle sales in China three years ago, but its heavy investments in EV supply chains have propelled the growth of domestic EV industry, leaving many established foreign brands scrambling to catch up.
By contrast, the share of electric and hybrid vehicle sales in the United States amounted to 18% in the first quarter of this year, according to the U.S. Energy Information Administration, a research firm.
It’s a vast understatement to point out that the Chinese marketplace is different from the European or American marketplaces. Still, it does show that with a massive push, it’s possible to switch consumer behavior.
The Other Reason Why Everyone Adopted Tesla’s NACS Plug
More than a year ago I wrote that Ford was right to switch over to the Tesla NACS standard. My reasoning was largely that companies like ElectrifyAmerica had so dramatically screwed up the rollout of the alternative CCS charger that giving EV consumers access to Tesla’s superior supercharging network was worth trusting Tesla on this one thing.
I still stand by that, but Automotive News makes another great point about why the switch is good:
While the real prize for EV makers was access to the Supercharger network, analysts said there are concrete advantages to the North American Charging Standard connector over its Combined Charging System counterpart.
Tesla’s plug is smaller and can be used for DC fast charging on a public network and AC slow charging at home. For non-Tesla vehicles, the bulky Combined Charging System plug is used for fast charging and a smaller J1772 connector is used for AC charging.
“The more uniform you can make the charging experience with every vehicle and every charging location, the better for consumers,” said Teske. The Tesla plug is more like a gasoline nozzle in terms of size and maneuverability, creating a more familiar experience for consumers transitioning from an internal combustion engine vehicle to an EV.
This is quite logical. I’ve never had a big issue using the different cord styles, but I also can’t charge at home so all of my home charging is limited to freeloading off of friends. Being able to use one simple, clean plug for everything is a nice advantage.
Mary Barra Gets It
We’ve already pointed out that the single-camera parody of The Office produced by a Chevy dealership in upstate New York is probably the best new TV show. Someone at General Motors seems to have noticed and so we get a Very Special Episode where the team goes to GM HQ in Detroit.
In fact, CEO Mary Barra even makes a cameo (as do a bunch of other GM C-Suite folks). It’s cute. It’s fun. If you can’t see the video above click here.
These videos have been a success on TikTok and the key is the effervescent and ridiculous Grace, who came up with the idea and stars in these short films.
Enjoy the Rado!
What I’m Listening To While Writing TMD
Just in case David didn’t get a joke, here’s the original “Succulent Chinese Meal” guy. RIP Jack Karlson.
The Big Question
Have you ever traded a car into a dealership? How was the experience?
I drove in to the Subaru dealer with our ’84 Nissan ZX and drove out with a Subaru wagon with no money changing hands. With twins on the way, the ZX just wouldn’t be practical. A few years ago I spotted a Porsche 911 with two baby seats in the back seat. A true hero.
“Tesla’s plug is smaller and can be used for DC fast charging on a public network and AC slow charging at home. For non-Tesla vehicles, the bulky Combined Charging System plug is used for fast charging and a smaller J1772 connector is used for AC charging.”
And that’s just it… compared to CCS, NACS is a better and cheaper design. CCS is nasty kludge and the people that came up with it should be embarrassed.
Here’s a good video that goes into this in more detail
https://www.youtube.com/watch?v=zsNiupN1X7s&t=360s
“Have you ever traded a car into a dealership?”
I traded one car in at a used car dealer. The car I was trading was my old 2000 Saab 9-3 with 397,000km on it. They gave me $300 for basically the scrap value.
I could have sold it for more on my own for sure. But I was at a time in my life where I was busy and didn’t have the time for selling the old Saab that had an intermittent no-start issue and other issues.
So yeah, trading it in is less hassle, but you also get less.
When I recently changed from my 2008 Honda Fit with 306,000km and with the check engine (EGR Valve issue) and ABS lights on and a decent amount of rust, I sold it myself and got CAD$1000 for it… which is at least twice what I would have gotten if I traded it in.
No, never traded anything in. As a friend once said, “You don’t create an Empire of Junk by selling stuff.”
I only traded one car, my ’06 Mazda3. It was rusty and felt like it was end of life with 167k on it, and had dried concrete on the front from a dripping truck (kept it dirty to hide the rust and so the cement might look like I ran over a milkshake or something). I saw someone from the dealership come out, back it out of the spot about ten feet, then pull back in. That was it. They gave me book for one in good condition with normal (much lower) mileage, so that was a win.
I have never traded a car in. I’ve sold one using classified ads back in the stone ages. Sold one to a friend. Sold one to a cousin Sold two on Craigslist to strangers. My painter and have a handshake deal that he gets first crack at my 2009 Outback when I sell in this fall.
You weren’t kidding about writing more about the Forester!
My vehicle prices are more closely driven by current steel prices at the scrapyard than trade-in values.
We keep our cars for a long time, so we haven’t had much turnover. The last car we traded into the dealership was my wife’s C-class. I hated that car, so as long as the dealer offered a little more than the Carmax offer, I had no problem trading it in for the convenience. My E92 sold on Facebook marketplace within a few hours of posting.
I’m currently trying to sell my 99 Land Cruiser and it’s been annoying. So many “Is this still available?” followed by silence. Or, a potential buyer will ask for a bunch of additional pictures, so I’ll crawl around on my back to take pictures of the brake lines and then – nothing. Not to mention the lowball offers. I think some of them just use bots that automatically offer 50%-65% of the asking price. But, my absolute favorite are the guys (it’s always guys) who just contact me to tell me what’s wrong with my car and why they aren’t interested. Gee, thanks buddy, if all those things were fixed, the price would be higher, now wouldn’t it?
of the 30 something cars I have owned I have traded in all but 2 of them, one I sold to Carvana during the pandemic cause they were offering crazy money. Sold another to an inlaw. I buy new cars and trade them in when bored or i need something else, its easier to get a dealer to give me a decent amount and put it towards the next car I want rather then dealing with tire kickers.
Three times. The experience is a lot less painful than selling, but the payoff is also lower, of course.
The really frustrating experience is when you decide not to trade in after they take a look. I had one sleazy dealership try to take my trade before they repaired a loose muffler (or whatever was really going wrong) on a car I was interested in buying. When I questioned whether they were certain they could get it repaired, they assured me that they’d get me into another car if that happened. They did not get me into any car, since I wouldn’t trust that. And I’ve had to get short with a couple dealerships to get my keys back when they were evaluating my trade.
Other than those instances, it’s been smooth: a little negotiating, then they take it and apply that money to my new vehicle. Once, I traded something in that I was still paying off. They delayed the buyout and cost me an extra payment (which I think I got them to pay), but they also gave me a payoff figure notably lower than the actual payoff, so they applied more value to my new car than they should have. It all worked out.
Shortly before I got married, a good chunk of my fleet began giving problems. The first was my fiancée’s car – it died on her one day on the interstate. It wasn’t going to be a simple fix, so I gave her my ’94 Sedan deVille and started dailying my ’67 Sedan deVille. The water pump soon went out. Then I went to my $200 ’91 Celica. Water pump went on that soon after. When it rains it pours.
I was down to a white ’59 Cadillac Series 62 I had bought specifically for our wedding. I had found it at a farm auction for $4500 and really wanted my money back not long after the purchase. It was an okay 20-footer with good chrome and a decent interior, but up close the bondo-covered rust really started to sour the experience. It also didn’t run all that well, but was now my primary car with about a week to go before our wedding.
A local Ford dealership had a ’98 Eldorado with 100,000 miles on it that was priced right. I figured, “what the hell” and drove the ’59 over there. On the way there a chunk of rust fell off the bottom of the car and the passenger-side carpet started to billow up. I didn’t expect the negotiations to go well.
KBB on the Eldo was about $14K at the time. It was listed for $8900 so I was already pretty excited about it. Up close it was nice, but it was apparent some work had been done to it and the out-of-state previous address made me think it was being title-washed. Didn’t care, just wanted out from under that awful ’59.
They came back with a $3000 offer on the trade. I told them I needed $4500. Back to the sales manager. No can do. I pointed out similar cars I had saw on Ebay going for between $4K and $5K. Another trip to the sales manager. $3500. I said $4K is the least I’d take. Back to the Sales Manager. No Can Do. I countered with I’ll keep it and put it on Ebay if they knock $9000 off of the Eldo. Back to the Sales Manager.
The Salesman came out on that last round and said, “Well, I guess we’re done”. I picked up my coat and said “that’s cool, maybe I’ll be back after I sell it”. And he quickly went “No no! They’re giving you the 4K for the trade”. I had been at the dealership for almost five hours at that point. Luckily they had good coffee.
That ’98 Eldorado turned out to be one of the best cars I ever owned. It looked great as our “wedding car” and worked well for a tri-state road-trip we took the next week for our honeymoon. We even brought our daughter home from the hospital in it three years later!
Besides that Celica, you’re really earning that username.
Lol, I do step out of my comfort zone every once in a blue moon.
I tried trading in my wife’s Jeep GC once, they wanted to give her $8k for it.
We thoroughly detailed it the next day, listed it on Marketplace. We got a bunch of spam and lowball offers but the Jeep was sold within 2 weeks for $12.5k.
Private sales are annoying indeed, but to us, the $4.5k difference was worth the hassle.
I always try… but my cars are worth so little when I’m done it’s not worth trading them in for the $1,000 they offer. I can sell them on craigslist for more and the tax benefit to trading in is basically zero at that value so I don’t worry about that.
I’ve traded once and “traded” once. The first was my first car and while I didn’t technically get that much for it, I was able to make up the difference by having my insurance pay for some minor hail damage that I had never gotten fixed. Worked out well for me, even though I still think the dealer was playing games on the trade value.
The “trade” was when I sold my old vehicle to my brother, but went through the dealer to do it so I got the tax break on the new one. It was fine for me, but they treated my brother like shit when he went to pick it up. I get it, they weren’t making any money off him, but given that I always got a bad vibe from the sales department at that dealer anyway it just further soured me on them.