Dealer financing has to have a lot to do with this. My understanding is that loan terms are now regularly as long as seven years or even longer. That has to be making this easier for some people to pay such huge markups.
Private party prices for cars with mechanical or cosmetic issues aren't quite as crazy. Still crazy, though.
So which cars will keep their new values when the market goes back to normal?
mr2peak said:So which cars will keep their new values when the market goes back to normal?
Step #1: I don't expect a full return.
I think the love of anything SUV will continue and anything trunk will decline quickly in the future. Even right now, many of the "good buys" are trunks. Manual trans cars are impossible to sell and will only get worse but they can be "cheap" to buy now. Just plan to drive it into the ground because there will be no one to sell it to later. Sports cars excluded, this applies to non-sporty cars with manual trans, like a 4cyl manual trans Ford Fusion.
I think anything with a 3rd row is increasing in price the quickest. The strangle hold being that people who need 3rd row...need 3rd row. These are then big cars usually and that means new prices north of $40k. That high price point will force a lot of strapped families into the used market.
In reply to mr2peak :
"normal" won't happen until 2023, at the earliest. The recipe for retaining appreciation gains would be a trifecta of older+low mileage+not a piece of crap.
Late model used will see some downward pressure mid-late 2022, but there won't be enough volume to force a market "correction"
In reply to volvoclearinghouse :
Be glad that you jumped when you did. I waited thinking things would start to normalize late last year. That seems to have been a somewhat foolish move.
It's not going to happen. History has proven it time and time again.
In the 1930's new cars sold for as little as $400 while cheap used cars could be had for as little as $5. A decade later New cars were $1000 and used were $50.
By the 1950's $2000 & $100.
What do new cars sell for now? And the average used car is $30,000. If you keep waiting, at some point you'll be walking.
That's OK. Gas is over $3.00 a gallon when I used to buy it for 21 cents a gallon. Looking ahead expect $5,00 a gallon.
Want to know what things cost in the future? Look at the past and that's the rate it will grow at.
Local VW dealer is selling a used Golf Alltrack Wagon for more $$$ than they sold for new I believe..
dr_strangeland said:Dealer financing has to have a lot to do with this. My understanding is that loan terms are now regularly as long as seven years or even longer. That has to be making this easier for some people to pay such huge markups.
Private party prices for cars with mechanical or cosmetic issues aren't quite as crazy. Still crazy, though.
The whole "dealer financing" thing is bizarre to me. If you have good credit, the dealer will match anything this side of PenFed (sub 2% with good credit), I think many don't realize you can negotiate this in the finance office not just "payment." In which case they will just stretch the loan out to get it close to your range, instead of people negotiating on price.
But if people are too lazy to educate themselves on large purchases, when the information is readily available for free all over the internet, that's their problem and not mine.
OHSCrifle said:It's crazy. Same with houses. The old "live below your means" rules like don't buy a house for more than 3x you gross income... seem impossible in 2022 where I live.
Likewise, cars. I can technically "afford" more but I just have a philosophical hang up about spending over $400/month on a car. There are not many options left for me right now so we are definitely hanging on to what we've got.
Yep, since we both work from home permanently, it would be really nice to have a 4 bed 3 bath house (we currently have a 3/2/2) and out of Oklahoma. But even something that's as nice as ours with 4/3/2 or 3 car gargage, even in the OKC metro area is going to be $300k+ and that would still only be about 2x our gross. Which I know to those of you in much larger cities sounds CHEAP.
But I feel much more comfortable the house I bought is just over ~1x our gross.
And I'm still have trouble justifying buying a new BRZ.
In reply to z31maniac :
I agree that people need to do their homework. Then they can make the system work for them.
As an example, we took the dealer financing @ approx 5% to get the rebates and other incentives instead of the low rate. We were already pre-approved to refinance it for 60 months @ 1.5% with the credit union, and I think we had moved it to the CU before the first payment was due (longest part was waiting for KMF to get the account set up in their system).
In reply to No Time :
Perfect example of doing your homework. Did the CU charge you any fees for the refi?
In reply to z31maniac :
I don't think I've even seen fees for an automotive refi. It's just structured as a new loan.
z31maniac said:In reply to No Time :
Perfect example of doing your homework. Did the CU charge you any fees for the refi?
I don't recall there being any fees.
$25k is the rule of thumb number I have in my head when it comes to a new or lightly used vehicle. I'm not saying that number is 100% grounded in reality, as it's what my parents paid for their '95 Suburban in like 1998.
Our '06 Rav4 was just under $25k new, our '05 Odyssey was $19k as a CPO with 36k on it, my wife's '16 Pilot was $20k at 3 years old with 52k on it in the Spring of '19. Even the Cadillac ATS (AWD, 2.0T) we bought in early 2015 was only $27k, and that might have been out the door (they had huge discounts and I had $3k in GM points).
We typically run our vehicles into the ground, so I wouldn't benefit from an increased trade-in value, and either way, the cost of the newer vehicle would be more than what Inwas trading in.
I don't understand how the average family affords the average car now ($46k new, $29k used). Or are the numbers skewed by rich people buying several very expensive cars?
Either way, we dodged a serious bullet by replacing our daily drivers in 2019 and 2020 before all the pricing craziness began. We probably saved about $15k. Very thankful for that!
I’m very thankful we jumped on our ‘17 Explorer when we did (October of 2020) and my daughter bought a nice ‘17 Focus in January of ‘21. I’m quite sure we could get more in trade than we paid on the Explorer but then we’d have to replace it. Currently we’re seeing 10 year old vehicles with close to 100K miles listed for more than they were new as well as ads for leases on used cars.
Steve_Jones said:In reply to z31maniac :
I don't think I've even seen fees for an automotive refi. It's just structured as a new loan.
Good to know. With all the different cars I've purchased, new and used, I've never refinanced a vehicle.
Just went ahead and refinanced our '18 Mazda 3. We had 3.5 years left on the current loan (I was deeply underwater in the car after the 135i fiasco).
Payment essentially stays the same and knocks 6 months off, I was hoping to go for a 24 month loan, but they don't offer that on a used refinance, so I'll just pay extra on it since I don't have a car at the moment.
PenFed made that super painless. The only real inconvenience is that I'll have to sign the check then forward it to Chase. You'd think by now the financial institutions could handle just making the payoff.
In reply to z31maniac :
I think it really depends on the bank/CU.
DCU was all electronic, I just signed and uploaded a couple forms. They FedExed the check to KMF.
In reply to No Time :
Back in 2017 GM had a "use our financing at 5.9% and get a $2000 rebate" offer I used. They had a 6 month minimum or you had to pay the rebate back. I refinanced at that point.
The only killer in Illinois is you have to pay for a new state title since the bank is on the title - another $150 or so.
dj06482 (Forum Supporter) said:I don't understand how the average family affords the average car now ($46k new, $29k used). Or are the numbers skewed by rich people buying several very expensive cars?
I think the average family:
- isn't buying the average new or used vehicle
- and/or is up to their eyeballs in debt
-and/or they stretch the loan out for a very long time to keep the monthly payments in an acceptable range
In reply to STM317 :
I also get the impression the average American family is a lot more comfortable with debt than the average GRM forum user.
John Welsh said:mr2peak said:So which cars will keep their new values when the market goes back to normal?
Step #1: I don't expect a full return.
I think the love of anything SUV will continue and anything trunk will decline quickly in the future. Even right now, many of the "good buys" are trunks. Manual trans cars are impossible to sell and will only get worse but they can be "cheap" to buy now. Just plan to drive it into the ground because there will be no one to sell it to later. Sports cars excluded, this applies to non-sporty cars with manual trans, like a 4cyl manual trans Ford Fusion.
I think anything with a 3rd row is increasing in price the quickest. The strangle hold being that people who need 3rd row...need 3rd row. These are then big cars usually and that means new prices north of $40k. That high price point will force a lot of strapped families into the used market.
Counterpoint. A little over a year ago, 09-15 Audi S4's were $15-$20k, no matter the transmission. Now the DSG ones are $12-$20k and manual trans ones are $25-$35k.
Special or "last" manuals are definitely going up.
Ian F (Forum Supporter) said:In reply to STM317 :
I also get the impression the average American family is a lot more comfortable with debt than the average GRM forum user.
This, 100%. A lot of people I know are just hooked on "monthly payments" and don't mind their second (or first?) mortgages.
another counter point. In 2019 when I bought my golf R I was also looking at 200 series Land Cruisers. At the time, a 3 year old 2016 Land Cruiser with 30-40k miles on it was $60k. Now $40-45k buys you a Land Cruiser with 125-150k miles on it, if you want one with 30-40k miles on it you're going to be spending more like $80k.
While the value of my R hasn't dropped in two years, it also hasn't gone up. From a coldly financial stand point, I should've bought the Land Cruiser. I'm almost considering selling the R now, since I get what I paid for it and seeing if I can find a 2021 Land Cruiser Heritage for close to sticker. I can then depreciate it completely in 1 year through the business, knocking 30% off it's purchase price. It'll be worth that amount for years to come. Finance it, make small payments, sell it in a few years for what I have into it or more, drive it for free...
Doc,
I just did something similar with my golf R. I actually got paid to drive it but I knew that wasn't going to last.
Here is the real funny thing. My BRZ I am picking up this week is $29K brand new. I can't find a BRZ used that isn't trashed in the midwest for under 20K and most are close to what I'm paying for the newer generation. I know I'll have exclusivity as based on the order book there are only 5 ordered for the entire state. I'm not going to lose it in a parking lot other than all of the pickups overshadowing it.
It's better to buy new right now.
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