The Used Car Market is Crashing But Another is Booming

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Well, that headline needs a qualifier.

The private sale used car market is crashing. Very few people are buying that way, though information about this is being suppressed by not separating out person-to-person used vehicle sales from dealer-to-person sales.

Which are booming. But we get ahead of ourselves.

If you’ve attempted to sell a car lately yourself, you probably already know the score – from the lack of responses (excepting spammers) to your Craigs List or Auto Trader ad. If you’re asking more than $5,000 for whatever it is you’re selling.

The reason being that very few people can scrape together a stack that high.

Back in January – before the Gesundhsitsafuhrers (not the WuFlu) wrecked the economy – Market Watch reported that 74 percent of all salaried workers were living paycheck to paycheck and that three out ten Americans had zero reserve cash at all. They would need to finance a new refrigerator if their old one croaked.

How are Americans doing now, given tens of millions no longer have a paycheck at all  – or a temporary one, issued by the government as compensation for cancelling their employment?

Not well enough to scrape together $5,000 in cash money – much less $10,000 or more in cash money. Without which you cannot buy a used car person-to-person because when you buy such a car, you actually have to buy it. The “down payment” is the entirety of the payment.

The owner isn’t going to let you drive away based on your promise to pay.

And so, fewer and fewer private sales are happening. Much to the manufactured good fortune of used car sellers, including the big chain Carvana – which specializes in fire-sale purchases of vehicles too pricey for the average broke American to pay for at the time of purchase, in cash – but which can be re-sold to them on a pay-as-you-go basis, plus interest.

After having acquired it at the fire-sale price (low trade-in value) from the desperate-to-sell-it former owner, who eats the 15-20 percent lopped off what the vehicle is worth on the retail market.

Which becomes the profit – plus interest – for the re-seller.

Or rather, the re-financer.

The dead broke American who can’t scrape together $5k much less $10k or more can scrape together a few hundred bucks – for the first monthly payment, into which of course exorbitant interest on the loan amount is discreetly folded,making it appear invisible – and “affordable” – to those in denial, the desperate and the innumerate.

In plain language, the least able to afford debt are acquiring more debt.

Cruelly, many of these people would be better-advised to buy – that is, finance – a new car, as the interest rates are often significantly lower and the loan itself is usually spread out over longer because there is more “depreciation cushion.” The new car’s value is much higher to start than the used car’s – and this means you probably won’t find yourself under water – owing more on the car than the car is worth.

For just this reason, lenders – who are many things but generally not innumerate – will not write a loan on a used car that’s too-many-months long, because they are aware of the under water issue and know that a not-small number of people caught by that trap will just stop paying on the loan and walk away from the car, forcing a repo and all the hassle of fining a new debt-serf to carry the load.

But the people who can’t scrape together $5k in cash are often exactly the people who cannot qualify for the new car loan, which may require a substantial down payment as well as excellent credit.

So, they finance the used car – and often pay more per month. On a car that is more likely to suffer a failure of some kind or need repairs such as brake work or new tires . . . which they haven’t got the money to pay for.

Everyone loses in this game – except the big-chain car stores that Hoover up all the used cars at fire sale prices and resell (refinance) them to people too broke to buy the same car outright for less from a private party. The private party, in turn, gets bled of the difference, reducing their “stack” of reserve cash or their hopes of using the money they just lost to pay for some necessary thing with that cash, as opposed to financing it on credit.

If you’ve noticed a common theme here, you’re already ahead of the story. It is the same theme played out during the government-ordered “lock downs,” which harmed private individuals for the benefit of large corporations – which were not “locked down” – notwithstanding that almost all of them sold items that didn’t meet the “essential” criteria propounded by the government.

The really essential thing being the calculated impoverishment of the average American for the sake of these corporate combines, which have as their goal fief dependence via debt, which will give them limitless power over the average American for the simple reason that beggars can’t be choosers.

You get what they give you, nothing more.

Welcome to your new normal.

. . .

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  1. Out in Oregon license tabs last 2 years. The old illegal alien method used to be buy a cheap beater with newish license tabs, don’t spend money on a new title, don’t put it in your name, and don’t get insurance. If it breaks down leave it where it is and buy another one.

    • Doesn’t make sense to me…here any private seller would remove the plate & turn it into the local DMV office to show it’s been sold & avoid any potential liability from the buyer driving on the seller’s plate.

  2. Another thing I’ve noticed in the last couple years is that there are a LOT more sharks in the used car water than there used to be. People who were selling a used car with a problem used to be more up front about it/or more willing to unload it cheap. Now they always seem to be hiding something and trying to get top dollar for junk. When you dig in and find evidence of attempted repairs you figure it out. Caveat Emptor!

    • Hi Ernie,

      That has probably always been true, though it’s possibly worse now because there are more people desperate for money and morals have loosened markedly. The more tragic thing, though, is that good used vehicles are increasingly beyond the ability of people to buy – in cash – leaving them at the mercy of the professional con men.

      • I am going to reprint my response to another topic here.

        “Absolutely not a silly question. It’s called “planning” you are guessing what the future will bring. I am a lawyer, my primary practice area is bankruptcy. If you are insolvent, it is important to best utilize your options. Pay first for what your need to to survive. Talk to a consumer bankruptcy attorney about the rest. Do not use your retirement to pay creditors. Do not use whatever equity you have in your home to pay creditors. If you have income it needs to be protected. It is a business decision. People feel bad about not being able to pay debts. Jesus had the better idea. Scourge the money lenders from the temple. 100 years ago the length of the average mortgage was 7 years. Now it’s pushing 40, who does that benefit?”

        • Amen, Ugg –

          There is a special rung in Hell reserved for predatory lenders. Yes, I know – anticipating Nunz – that people freely chose to go to Payday Loan places and take out debt at 27 percent interest. But that doesn’t excuse the taking-advantage-of. As a moral – human decency – thing, if I have say a medicine which will save someone’s life and leverage that to bankrupt them, I may (and arguably do) have the legal right to do that – but it doesn’t make it the right thing to do. Put another way: People have the right to be assholes. But they are still assholes if they act that way – and deserving of contempt.

  3. It’s too bad credit union car financing loans aren’t any better than a banks now a days. They generally were far better deals or at least more affordable, than the regular banks and automakers financing.

    That is how many people once bought private party used cars.

    Another bad angle with this scam, your old car is broken, so its even worth less as a trade in. You should be fixing it instead of replacing it, but you can’t borrow for repairs (well maybe a payday loan…..).

    You have little independence with lots of debt. Even if your making good money. Higher income people get into trouble as fast as low income earners do. So earning more doesn’t help unless you can cut back in a big way, which most people are loath to do.

    • Amen, Rich –

      Debt is a kind of cancer in that it eats life. The less debt you have, the more life you have. Debt chains you to a job, a particular place; it limits what you can do – and it can force you to do things you’d rather not.

      My truck is almost 20 years old. It does not have an LCD touchscreen. But it’s paid-for and that’s priceless to me!

  4. So what’s the oldest car that can be financed? I’m guessing it’s well less than seven years. In that case, 2012 and older vehicles are beyond the scope of your article. No dealers will be involved in this kind of purchase.

    Based upon your estimation that very few used car buyers can pony up for a cash purchase, this lower demand should make a decently maintained 2008 to 20012 Toyota or Honda a real steal.

    There’s a silver lining for you.

  5. After all, that was the intent of the corona flu psyop. Transfer what wealth is left in what’s left of the middle class to the bank cartel and its minions in government and corporations. They mean to starve us into submission, and it looks like they might succeed. In fact they already have in, in large numbers. Those of us who know better than to finance our lifestyle with a credit card are still doing OK, for now. My depression has deepened over what we are allowing, even asking to be done to us. Being one capable of critical thought, it became obvious to me several months ago that this operation had little to do with anyone’s health. Quite the contrary.

  6. You want a used car? I can get you a used car by three o’clock this afternoon. har

    Advertisement paid for and by Midnight Auto, Our Deals are Steals. lol

    Wisconsin, smell the dairy air.

    Was in a Walmart to find a few things to make life better, saw one person unmasked.

    I wear the dirtiest smudged-up mask I have, it only makes sense, offers more protection from the imported factory air from China. A pair of dirty gloves, I’m in, you feel like the pariah that you are. You have to protect yourself, you can’t be too careful, the dirty filthy swine in Malwart are riddled with diseases.

    Makes you want to power barf all day long. Most fun you’ll ever have. lol

    Wearing a dirty mask and a dirty pair of gloves helps you get in and out of there in a hurry, nobody wants to see a person wearing gloves, although it makes more sense than wearing a masky wasky.

    All of it is absurd, ad nauseam. Next comes the goggle experience, that should show the clueless idiots how absurd it all really is. Mask, gloves, goggles, it’ll be the new genuflect.

    Help me, Lord.

    Beam me up.

  7. My TDI’s engine is worn, have parked it. I have been looking hard at the classifieds and I’m finding high prices on the few that caught my eye, called one seller and she would only budge slightly off the price even though AC was out. I have had 2 used sublime green Chargers that I was willing to take the loan out on at local dealers (both well under $20) – make appt to see and both sold before I could get there. I’m picky, and only have a handful of cars on my list… and at this point I’m giving up.

    My family thinks I’m nuts dumping money into a high mileage car, but at this point I’m ready to buy a used engine I found. Added up fluids, gaskets and such – Estimate coming out to $1200 (me doing the labor).

    I like to do my part for clean air, but feel the market is forcing me to keep this Diesel on the road. 🙂

    • Hi Bin,

      I tire of being lectured about “doing my part” – for whatever it is – by creatures who never do theirs. Like the Undiapered Fauci. Like the Hair Plugged Man – who lives in a house that makes most of ours look like outhouses. C’mon, man!

  8. I remember the used car purchase technique of a girl I worked with: She would buy $500.00 vehicles with full year inspection stickers and the expectation of owning it for a year. Even with minor repairs, the cost of ownership would be negligible. On the other hand, if a major repair issue happened, she would sell the car for junk, and buy another “roadworthy” cheapie…

    • Hi John,

      Yup; if it weren’t for all the taxes and mandated insurance, once could drive a beater car almost for free, less gas. I know it was possible because I did so, once upon a time – in the early ’90s, when the country was still vaguely free.

    • I used to do this (basically) as well when I was young. Buy $500 car, drive until it blew up, sell to the junk yard for $500.

      This worked great right up until Obama’s “Cash for Clunkers” program literally destroyed the used car market. The $500 beater now costs a minimum of $5,000!

      Eric, this might make for a great article if you haven’t already wrote one about it.

      • Hi SW,

        Yup; Obama did a lot of destroying – one of the most subtle being the last-minute regulatory decree that CAFE mandatory minimums – “fleet averages” – will double before 2025. This was done in late 2015 and it had been anticipated for some time prior. It dramatically altered “product planning” by the car companies; among other things, it lead to the cancellation of development of engines larger than 2.0 liters, the accelerated development of very small, highly turbocharged engines, transmissions with multiple overdrive gearing and the diverting of resources toward development of more EVs for which there is no viable market.

  9. Excellent article Eric; I’m exactly in the situation your writing about right now. Budget is 10k total to pick up another 4 wheeler of some kind.

    1:) Go to a dealer to buy from their well maintained, but low end used inventory. They tack on at least $2,000 in “reconditioning and service fees” so you pay 20 to 30% over the used vehicle’s real value otd. (~8-9k range.) Tried two different dealers and neither would remove said charges to make a deal. (Flat out “no.”) So I walked out. Twice in two stealerships.

    2:) Buy new and finance it. No again! My rules: If I can’t pay cash for it, I can’t afford it.

    3:) Buy used from a random private individual and take your chances the vehicle in question hasn’t had the living s__t beat out of it and break the day after you buy it. Major risk factor right? Their selling the thing for some reason; good chance it’s mechanical! Currently at this stage and not liking this option at all.

    4:) Just keep riding my motorcycle and work around the problems associated with low storage capacity. Cost? Almost free. (Granted I can do this in FL during the upcoming dry/winter season.) Not ideal, but it’s all I got atm.

    5:) ?????

    I’m not liking at all where this is heading. The “big picture” is looking very grim atm, simply because 99 out of 100 people are walking around like brainwashed robots. Flat out scary I tell you. Masks for a non-existent virus, election riots on the horizon are a near certainty, rumors of Covid 21 lock downs this winter and so forth. Bad juju otw.

    Quick Publix update from today’s trip:

    No mask, got the overhead P/A riot act again. No confrontations, nobody else not wearing masks either. Sigh, I feel like it’s just a matter of time before some Karen or Kenny cracks and causes an altercation with me because I’m acting “defiant.” No clue how that will turn out because I’m *not* going to back down.

    • I’m not sure what you do for a living or your situation amigo, but I’ve gotta say you can do worse than riding a bike. Depending on what it is and if you do your own work on it the savings can be enormous. Set up correctly you can carry a lot more than most think. Even a monster scoot will get you 35 mpg heavy, and they’re sure one helluva lot more fun than 99% of the cages out there.

      I still ride year round every single day and had only smaller bikes in the past that were my sole transport for years. Don’t be in a hurry. You can stash some cash in a year or two.

  10. The radio station I listen to constantly has new car dealer ads that specifically mention buying used cars even if a person isn’t buying anything. It struck me as something I’d never heard before. Now I understand their angle and why I’m seeing folks who seem like unlikely car buyers driving around in older but new-to-them cars with dealer plates.

  11. I’ve never spent anywhere near as much as $5,000 on a car. I probably haven’t spent that much on every vehicle I’ve ever owned put together.

    If you’re handy with tools you can pick up a car for a heck of a lot less that’s basically solid and just needs some TLC. Maybe it needs brakes front-to-back, or maybe a water pump, alternator, ball joints – stuff that’s not worth paying a shop to do on an old beater but can be tackled by the shade-tree mechanic for the cost of parts and an afternoon or two of wrenching.

    • Hi Jason,

      Agreed – and I’m glad I can wrench. Sadly,many people can’t – and it’s not surprising given the cultural shift as well as the increased complexity of modern cars that has made wrenching harder for the newbie.

      • Eric, I have often heard that it is always cheaper to repair than to replace. I have an 18 year old Silverado that I purchased new and had it rust proofed at the dealership. I do have to put some money into it each year. I think in the long run that I am ahead of the game. If something major goes like a transmission or even a motor, do you think it would be worth it to invest that kind on capital in this old truck?

        • Hi Oskar,

          There are several important variables, including the type – and year – vehicle we’re talking about. Your 18-year-old Silverado is well worth putting money into – for many years to come. The basic architecture is tough and simple. Even if you someday need to install a crate/rebuilt/good used engine or transmission, the cost to fix vs. value of the vehicle ratio remains very favorable.

          Hang onto that one!

        • I agree with Eric. I have a 19 YO GMC Sierra, bought at 16 YO on purpose. You can get every part that makes up the thing, and you can do most work in the driveway (although I’d love to have access to a lift sometimes). I’ve made up my mind that whatever breaks gets fixed and when I’m done with it, you can cremate me, put the ashes in a cup and put me in the cupholder as a weird and bizarre prize for the next owner.

    • “If you’re handy with tools you can pick up a car for a heck of a lot less that’s basically solid and just needs some TLC.”

      That USED to be true… but lately people want stupid money for almost anything — especially used trucks. Seems that people beat them to death and don’t put them up for sale until they’ve got 200,000+ on the odo and are completely rotted out. In other words, far beyond the “she just needs a lil’ TLC” point.

      I ran across a kid last year who had just bought a ten-year old Jeep with 81,000 on it for $19,000. He actually thought he got a DEAL! He said to me “only $19,000, how can ya go wrong?”

      I bit my tongue, but I am starting to worry about how I am going to replace the nineteen-HUNDRED dollar truck I’ve been driving for the past seven years…

  12. That would explain why no one is replying to my Audi ad, thanks for the entry Eric!

    Also, I’m unfortunately the sole who doesn’t have $5-10k either, im a terrible spendthrift. Actually making the conscious effort to save up as we speak

  13. Besides supplying usurious financing to their victims … errr, ‘customers’ … ‘Buy Here Pay Here’ dealers install black boxes which not only report the vehicle’s location, but also immobilize the vehicle if payment isn’t made on time, making it easy pickings for the repo man.

    Presumably, every Tesla could likewise be Over The Air updated to immobilize the vehicle, should the public interest require it. Just as Evil Google could cripple every Android phone with a malware update to suppress a serf rebellion.

    To paraphrase Andy Grove, in a world of increasingly malicious technology wielded with bad intent, only the LoTeks survive. Knife, rifle, IC engine: molon labe, effers.

    • “To paraphrase Andy Grove, in a world of increasingly malicious technology wielded with bad intent, only the LoTeks survive. Knife, rifle, IC engine: molon labe, effers.”

      Lot of wisdom there. And nicely said.

    • I’ve been teaching a young fellow I know to sail. Big old 39 footer built in ’70. He couldn’t believe someone (me) could actually sail it in and out of her slip without even starting the engine. Several of us camped last week and I was the only one who could start a fire. Honestly, the only one. I’d planned to show them how to use a bow-drill set anyway, just for kicks, but when I started the fire they couldn’t with two sticks and a string they looked at me like I was from Mars.

      I often wonder how a people who have forgotten all their foundational skills could have any chance of surviving any real widespread catastrophe

    • Andy Grove?
      “Only the Paranoid Survive”?
      As much as I agree with your viewpoint, a knife and rifle isn’t any use against the power of the federal government.
      Barring leaving the country, there doesn’t seem to be a good option out there for Americans and Western Europeans.
      Ironic that people are freer to go about their daily business in so-called totalitarian states like China and Russia.

  14. This never would happen under an Elizabeth Warren presidency!

    Just like we never get robocalls, payday loans are all forgiven after 6 months, and Wells Fargo is forced into Chapter 7 bankruptcy because of their guilt. Thanks, Obama.


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