Hidden fees are extra charges that can show up at the end of a purchase. In car buying, they can make the final total cost higher than what you expected.
Carvana is a company that sells used cars online. Instead of going to a dealership, you buy through their website/app, and they handle the process end-to-end. Here, they’re basically saying something about how the used-car market is changing.
The used car market is just the world of buying and selling pre-owned cars. If a big player like Carvana changes what it’s doing, it can affect prices and how easy it is to find a good deal.
This is a way to measure how much profit a company makes on each car it sells. It’s useful because it can show whether profits are coming from pricing or from running the business more efficiently.
Wholesale is usually selling cars to other sellers, while retail is selling directly to regular customers. Those two paths often have different profit margins and different pricing dynamics.
This means, on average, how much money the company makes for each car it sells. If it goes down, it can be a sign that selling cars is getting harder or less profitable.
Wholesale value is what dealers pay for a used car before they sell it to you. If those prices jump, dealers have to either accept lower profit or raise retail prices.
Margin compression means the difference between what a dealer pays for a car and what they can sell it for is getting smaller. Even if sales volume stays strong, smaller margins can make the business less profitable and more sensitive to price swings.
This is the price the dealer puts on the car for customers to buy. If it doesn’t rise as fast as the dealer’s costs, the dealer makes less money on each sale.
Dealers don’t buy and immediately sell every car the same day. There’s usually a delay—often a couple months—so wholesale price changes can take time to show up in the prices you see.
They’re predicting that used-car prices will keep rising. The idea is that when dealers pay more for cars, those higher costs eventually show up in the prices customers see.
Gross profit is basically the profit from selling cars after paying the direct costs to get the cars ready and sell them. The hosts are using it to compare how Carvana did in one quarter versus another.
A retail customer is the person who buys the car for themselves. The hosts are saying Carvana makes much more money when it sells directly to that end buyer than when it sells through auctions.
This is the sticker price you’d see when buying a used car from a dealer. It tends to rise when dealers have to pay more for the cars they buy and when there aren’t many used cars available.
A trade-in is when you turn in your old car to the dealer and it counts toward the price of the next car. The dealer can then sell that car again, which affects how many used cars are available.
Dealers sometimes buy used cars at auction events instead of finding them one-by-one. If auction prices go up, dealers usually have to charge more when they resell those cars.
This is basically how many used cars are sitting on lots (or available to dealers) at the moment. If there aren’t many cars to choose from, prices usually rise because everyone wants the limited supply.
Modern cars rely on computer chips. When there weren’t enough chips, car companies couldn’t build as many cars, so fewer cars ended up on the road—and that shortage can keep used prices high later.
When you buy a car, the deal can include extra money from financing and insurance. The hosts are trying to separate that extra profit from the profit that comes purely from the car’s price.
Retail used-car prices are what regular buyers pay for used cars at dealerships or online listings. If someone says these prices will go up, it means used cars may cost more soon.
They’re talking about looking for cars that cost less than $20,000. It’s basically a budget limit for finding options.
Topic
need it fast
“Need it fast” indicates urgency in the buying process, which can affect what inventory is available and how quickly a buyer can complete paperwork and delivery. In used-car marketplaces, speed often correlates with in-stock vehicles rather than special orders.
CarMax is another major used-car retailer, and the hosts reference it as having a different pricing strategy. The idea is that CarMax may hold prices steady while Carvana expects prices to increase, creating a market “disconnect.”
They’re talking about a specific used car example: a 2025 Toyota RAV4. It’s a fairly low-mileage SUV, and they’re using it to explain pricing strategy.
Concept
price drop
A price drop means the seller lowered the asking price. It often happens because other similar cars are cheaper or because the market is cooling off.
Only having one key can be a problem because many cars need a programmed key fob to start and stay secure. If you need a second one later, it can cost money to replace and program.
They mean paying more than you’d like for the car. In this case, it’s because the buyer is being very specific about the car they want, and that makes it harder (and more expensive) to find a good deal.
MSRP is the price the car maker originally suggested for the car when it was brand-new. When you’re shopping used, people compare today’s price to MSRP to see if the deal is fair.
Carfax is a report that tells you some of a used car’s history, like whether it’s been in an accident. Buyers use it to help decide if the car is a good deal or a risk.
When a car is “registered as a rental vehicle,” it typically means it was used by a rental company and may have higher wear from frequent use, short trips, and more drivers. It can also affect how the car was maintained and how it’s valued.
A minor accident means the car wasn’t written off, but it still may have needed repairs. You’ll want to check what was fixed and whether it was repaired properly.
Wholesale price is the price cars trade for before they reach you. Retail price is the price you see when you’re actually shopping. If wholesale prices go up faster, it can make it harder for sellers to profit when they sell to you.
“Days on market” means how many days the car has been advertised for sale. If it’s been listed a long time, it often means the price may be too high or demand is weaker.
“Minor damage reported” means the car’s history includes a smaller crash or damage event. It might still be fine, but it’s worth checking closely to make sure it was repaired properly.
A dealer markup is an extra amount the dealership adds to the price of the car. If a car is hard to get, the dealer may charge more than the normal price.
They’re saying that if you can’t wait for a brand-new car, you might consider one that’s been in an accident. But even then, it may still cost more than you’d expect because supply is tight.
Term
20,000 miles
Miles are how far the car has been driven. Higher mileage usually means more wear, and it can change the price and what maintenance might be coming up.
“XLE Premium” is the car’s trim level—think of it like a specific package of features. Two cars can be the same model, but different trims can have different equipment and cost.
That’s a used car that’s only about a year old and has low mileage. Normally you’d expect it to cost less than a brand-new one, so the point here is that the price is staying too high.
Term
Q1
Q1 is the first three months of the year. They’re using it to say when the price changes happened.
You can either pay for the car all at once (cash) or borrow the money and pay it back over time (finance). The choice can change what the car really costs you.
If there aren’t many used cars for sale, sellers can charge more. When the supply is tight—especially for newer used cars—prices usually don’t fall.
Concept
one to three-year-old ones
This means cars that are still fairly new—about 1 to 3 years old. People usually want them because they’re newer than older used cars, so they can cost more.
A recession is when the economy slows down and people spend less. The host is saying that even if people worry about a recession, car prices aren’t dropping yet.
This is basically comparing the real cost of buying new versus buying used. The point here is that used cars aren’t always cheaper anymore, especially when you factor in warranty coverage and overall risk.
Depreciation is how quickly a car loses value over time. If a used car is “already depreciated 20%,” it means you’re buying it after it has already taken a big chunk of that value drop.
A manufacturer warranty is the official promise from the car company to pay for certain repairs for a limited period. It can save you money if problems show up soon after you buy the car.
Concept
new option
“New option” just means buying a brand-new car instead of a used one. They’re saying that depending on prices, a new car can sometimes make more sense than you’d expect.
Profit margin is how much money a dealer keeps as profit after costs. The speaker is saying dealers may make more profit on used cars to cover other expenses.
“Accounting magic” is a casual way to suggest that a company’s reported results may be influenced by aggressive accounting choices rather than purely by operational performance. Here, it’s used as a question about how Carvana achieved unusually strong profitability.
In car retail, “negotiating” refers to the back-and-forth process between buyer and seller to agree on price and terms. The hosts contrast that with Carvana’s more direct, convenience-focused purchase flow.
Concept
delivered directly to them
“Delivered directly” describes a direct-to-consumer delivery model where the vehicle is brought to the buyer rather than requiring an in-person pickup. This is part of the convenience pitch the hosts attribute to Carvana’s business approach.
Depreciation analysis is a way to estimate how much a car’s price will fall as it gets older. It helps you understand whether a used car is losing value normally or holding value better than you’d expect.
“Not depreciating” means the car’s price isn’t dropping much over time. Sometimes that happens when lots of people want the same type of car, but there aren’t many available.
“Trading value” is what a dealer says your current car is worth if you use it as part of the deal. It’s usually not the same as the price you might get if you sold it yourself.
A used car dealer is a business that buys vehicles from consumers and resells them, typically after inspection and reconditioning. In this segment, the discussion is about how dealers can profit from trade-ins when market conditions shift quickly.
Market value is the going price your vehicle can realistically fetch in today’s buying environment. The host emphasizes checking market value so you don’t accept a low trade offer based on a dealer’s pricing strategy.
A “cash offer” is when someone offers to buy your car and pay you directly, instead of using it as a trade toward another vehicle. It’s useful because you can compare it to what a dealer offers you as a trade-in.
This means “way too low” compared to what your car should be worth. It’s a reminder to check the market value so you don’t accept an unfair trade offer.
LIVE
It's noon here in Vettner City, New Jersey,
and our nation's capital, Washington, D.C.
And this is Car Edge Live for the last day of April,
April 30th with your hosts, me, Ray,
here in my living room in Vettner
and Zach hanging out in Washington.
How are you today, handsome?
Doing pretty good, Pops.
Happy April 30th.
Thanks so much for tuning in
for another episode of Car Edge Live with me.
Am I beautiful, handsome, rugged, father?
Dad, you're matching your blanket behind you,
which is really cool.
We're gonna come back to that in a second.
Before we do today's show,
is brought to you by CarEdge.com.
For those of you that are unfamiliar,
me, my dad and our incredible team
have been offering car buying services, research tools,
and all sorts of fun stuff back at CarEdge.com.
For years now, we're up to six years,
so please take a peek,
learn more about all the work we do
to help you whether you're buying or leasing a car.
We'll contact dealers, remove hidden fees,
and handle every step of the car buying process for you.
Dad, the big topic we're gonna talk about today
is Carvana, before we do, we're gonna, I mean, again.
Never heard of them.
Look behind your shoulder.
You are matching that blanket behind you.
You look really good.
What would you say?
What would you say if I told you I had green socks
on, green underwear, and green shoes?
I coordinate, baby.
You coordinate.
Okay, it's just that simple.
All right, here's the deal, folks.
I'm not changing the blanket behind me tomorrow.
I can tell you that.
Carvana, Dad, is sending some warnings
to the used car market.
Used car market's been crazy so far this year.
The first thing's first, we gotta start with the fact, Dad,
that they have announced another set of insane growth
in terms of their business.
They're selling more cars, 40% more cars
than they had a year over a year.
They're making more money.
All things are good things over in Carvana land right now,
but this show is not gonna be about the success
of their earnings.
This show's gonna be about the impacts
that it's having on the used car market in depth.
There are a couple of things
that are worth pulling out of this.
Obviously, the headline numbers are insane.
They're growing quite quickly,
but buried within all of this, Dad,
are some pieces of information
around gross profit per unit,
and that's where I wanna turn our attention.
So, Carvana, growing like crazy, nothing new there.
They're making different amounts of money per vehicle,
so depending on where they're selling it,
wholesale or retail, help us understand,
kinda when you peel this back,
what's the warning sign for the used car market?
Well, their overall profit per vehicle sold is down, okay?
And there's a hidden reason for why it's down,
and that reason, and you know,
I mean, they're still earning well over $6,000
according to them per vehicle sold,
which is pretty damn amazing.
Astronomical, it's amazing, yeah.
Well, it's astronomical to everybody in the industry,
not just you, because nobody else in the industry
is anywhere close to that.
But the hidden key here is that that new car,
or excuse me, used car profit per vehicle sold
dropped a couple of hundred dollars.
It's not a lot, but I guess 187,000 cars,
you know, $200 per car is a lot.
But what it indicates is because the wholesale values
of these used cars that they've been selling
have gone up so rapidly in the first quarter of this year,
it's actually compressing their margins.
They haven't been able to, at least at this point,
increase the retail asking price as much
as the wholesale cost price has gone up.
It would seem to me that that will catch up eventually.
Yeah, and what that means is,
since it's usually 60 to 90 days between what they pay for it,
we'll see it on the retail side 60 to 90 days later,
we're gonna see, I would think,
use car prices continue to go up, not go down,
but go up, and that, that's the real hidden fear here.
Yeah, so just to again restate
what my dad shared with me a second ago,
total gross profit over at Carvana for the quarter
was $6,911.
That's actually down from where they were recently,
which was $7,140.
Now, Carvana sells cars not only to people like us,
you, me, and everyone in our community,
they also sell many of their vehicles at auction.
And the amount of money they made at auction
was actually down 8.6%, it was $881.
So think about that for a second,
Carvana makes almost 10 times as much money
when they sell it to a retail customer, $6,911
versus a wholesale customer, $881.
Now, the CFO at Carvana had a quote in the earnings
that read this, quote,
wholesale prices appreciated more than retail prices,
and a quote in Q1, and retail is quote,
expected to catch up.
So think about that for a second, again,
just restating what you shared a second ago,
they've seen wholesale competition essentially.
That's so demanding, go up so much,
and they haven't seen retail prices increase
in concert with that yet.
And so their expectation is that over the next 16
and 90 days, retail use car prices
are gonna go up even more, which is shocking to me
because retail use car prices are already sky high.
Yeah, but there's a couple reasons for it, okay?
And the biggest reason or the biggest driver in my mind
is use car inventories, even though dealers
have to pay more to get their hands on them,
either via trade-ins that perhaps they appraise them
for more money than they would have liked to,
or when they go to auctions,
wherever they're getting their cars,
they're paying more for them.
And the reason for that is because there's
few of them available.
We know that used car inventory levels
are below two million vehicles on a monthly basis.
It's just the lowest level they've been in many, many years.
And there's no Calvary coming to the rescue
because there's nowhere to find the additional used cars
that are needed because of the 10 to 15 million new cars
that were scheduled to have been built globally
during COVID that weren't built
because there was a chip shortage
that never got sold so it can never make their way
back into the market.
This is only going to get worse, not better.
And in my opinion, it's something that could last
for several more years so inventory can catch up.
Let's do a little bit, you know,
we always do this, a live experiment.
This time let's go to Carvana's website, dad,
and let's spend some time here
and look at what their current prices are because again...
Can I say one thing about this?
Yeah.
Right car, right price, if you don't check the price.
But they don't put that little subheadlight in there.
I think it goes without saying for our community,
you know, if you buy a car at Carvana,
again, they have record-setting gross profit
because no one else even gets close to them.
And even when you take out the finance and insurance
component, which is like, I think it was 2,600 bucks,
that suggests that Carvana is making over $4,000
just from the cost of buying the car
and then the price of selling the car to you.
So yes, right car, right price, it's great branding,
it's great marketing, and this is...
We're not trying to throw any shade at Carvana,
it's just the reality of the situation.
They make a ton of money when they sell used cars.
And again, the insight, the warning that they sent
to the used car market today was,
we actually think that retail used car prices
are gonna go up even more.
That was essentially the quote,
that is the views from their CFO.
Let's spend a second here, dad.
What do you wanna search for?
Should we do a Toyota?
Should we do a Ford?
Where do you wanna go?
Well...
We can explore cars that they say all love,
under $20,000, need it fast.
What do you think?
Well, what are the most popular cars today?
Toyotas.
Yeah, so we have...
What are the vehicles on the new car side
that people have to pay the most for?
And so we should see what that looks like
on the used car side.
All right, so let's look here.
We're doing Ravforce,
and I've got this currently set to,
I don't know what it looks like.
And can I say one other thing if I may?
Of course.
You know, it was like a week and a half ago
or two weeks ago where we did a story about CarMax.
And their situation was,
that they believe they need to lower prices
because they're losing sales.
Carvana, they're saying straight out,
prices are gonna go up.
So there's a disconnect between these two major
used car retailers in this country.
And if the CFO of Carvana is correct,
then the folks over at CarMax want to listen to them
and just hold their prices steady
because eventually they will be able to sell those cars
at the prices they have them listed for.
Yeah, you're onto something here, Dad.
Let's look at this one.
Let's do a little bit of analysis.
This is a 2025 Toyota RAV4.
It's got 20,000 miles on it.
And Carvana is offering a,
what is this, $400 price drop just today.
It looks like it just got a price drop.
And this is again, 20,000 miles on it.
So what I did there is you saw,
it took a little searching,
but I went to vehicle details.
I did view features and specs, specs.
There's the VIN number.
You'll love this.
You only get one key with this thing.
So keep that in mind as well.
That's probably because the rental car company
that it belonged to before doesn't have the second key.
One of their renters walked off with it.
So here's the deal.
I went over to caredge.com.
And what I did, Dad, is I put that VIN in.
I went to shop cars.
I went to use cars.
And I pasted the VIN right here.
So we've got this, yeah, high mileage for 2025.
It is, yes.
And then, Dad, the thing that I really wanted to look at,
this, the original MSRP on this vehicle was $37,050.
And we haven't picked up on the price drop yet.
So it'll be $39,590.
But think about that.
That's $2,500 over original MSRP
for a used 2025 Toyota RAV4 with 20,000 miles.
And again, the warning to the used car market
from Carvana today is we think retail used car prices
are gonna go higher over the next couple of months,
not lower.
Let that sit for a second.
That's crazy.
Well, that tells you two things.
One, it tells you how hard it is to get your hands
on a new RAV4.
And obviously, you can't get your hands on a new 2025,
but the new 2026, the redesign, is even harder to get.
So since you can't get your hands on a new one,
if you want a one-year-old RAV4,
and you insist that that's what it has to be,
you are going to significantly overpay for it
and do it graciously because Carvana, you can't negotiate.
They don't negotiate with you.
The price is the price.
But it also did.
I, again, you're using the word overpay.
This is what the market's currently dictating, which...
Well, and the market is based
on what people are willing to pay.
So there are people out there that won't do what you just did,
which is to find out what that damn car's MSRP was
when it was brand new with no miles.
And if they did, I don't think most people would agree
to pay $2,500 more than the original MSRP
with 20,000 miles on it, but they won't do it.
It's not that they can't do it.
It's that they don't and they won't.
And it's, you know, so much of this is brought along
by our own laziness not to do the work
to find out if something is a good buy, a bad buy,
a geez, I can't wait to get my hands on it buy.
This is one of those bad buys, you know,
where literally you should say goodbye.
You know, I'm not buying it.
That's way too much money for what it is.
Do they offer a look at the car fax by chance?
Yeah, we've got the car fax right here.
I'm just curious as if it was registered
as a rental vehicle one time.
Personal vehicle, dad.
Ooh, must've been a drug runner.
It had a minor accident.
Geez, okay.
It's got a lot going for it.
You can pay way more for this car
than what it sold for new
with a minor accident and 20,000 miles on.
Yeah.
Yeah.
You know, I think I'd like to step right up
and did something say Montana on there.
It's from Montana.
But I also saw Virginia.
What's it in Montana now?
Yeah, it used to be in Virginia.
Yeah, now it's in Montana.
Mm, yeah, yeah.
Because, you know, most people who buy a car
in Virginia ultimately make their way to Montana.
So can we just, let's just chill for one second here.
The CFO of Carvana, again, the quote,
the quote that when we dug through the earnings
that really stood out to us, again,
Mark Jenkins, CFO of Carvana.
He said, quote, wholesale prices appreciated
more than retail prices,
and quote, expected to catch up
when talking about retail prices.
He expects them to catch up to wholesale prices.
Yes.
What we just looked at, we just did one experiment.
We did not plan this because if you've been watching
Car Edge Live for long enough,
if you're watching me and my dad,
you know we don't plan a damn thing, we just do it live.
We went on Carvana's website.
We searched for Toyota RAV4s.
It used my zip code here.
So I think that's, you know, let me go all the way back.
So I mean, we must be looking at one,
well, free shipping, get it Tuesday, May 5th.
I don't know.
I don't know where this car is located.
I have no clue.
But it was one of the first ones that popped up.
And I clicked on it because that had a price drop.
Yeah.
When we looked at that, we then took the VIN,
and we plugged it in on CarEdge.com.
Two things I was looking for, days on market.
They've only had eight days,
but they've already discounted the price.
And I was looking for that original MSRP
versus dealer asking price.
But does it tell you which Carvana location it's at?
Let me see.
Just out of curiosity.
South Chesterfield.
South Chesterfield.
So it's in Virginia.
Yep.
My God, how did it end up in Montana for a day or?
I don't know.
Then we looked at the car fax.
Let's continue here.
So then we looked at the car fax.
So they're asking about 2,000,
a little more than $2,000 over the original MSRP.
It's got 20,000 miles on it.
They've just given you a $400 price drop.
And they're on the car fax,
has been minor damage reported.
That is the current state of the used car market.
And again, it's come full circle.
Their CFO thinks that used car prices
are going to go up more.
I agree with him.
Him or her.
Is it him?
Mark Jenkins.
I think it's a him.
Well, okay.
Yeah, I agree with him.
You never know, dad.
That's why I'm just saying I agree with Mark.
That's crazy, man.
That's absolutely crazy.
It has, I didn't know it had the damage.
We just found that it had the damage.
We'll do another example here in a second,
but that's absurdity.
And we had Tyler Rahn from Toyota of Ackerman
earlier in the week on Monday.
And you can get your hands on a new 2026 Toyota RAV4.
You're going to have to wait a little bit in some cases.
You shouldn't be paying additional dealer markups
and things like that.
But if you desperately need a new RAV4,
your best bet is to pay over original NSRP
with the one that has an accident on it.
And 20,000 miles.
Now, here's what I want you to do.
Here's what I want you to do since we never plan a thing.
We don't plan a thing.
Now see if you can find a 2025 used RAV4 XLE at CarMax.
Oh, okay, let's do that.
And let's see what they might be asking for a similar vehicle.
Okay, let's do it.
Give me a second here.
Yeah.
Okay, so you said 2025.
Yeah, because that was a 2025 RAV4 XLE.
Yep.
All right, let's do it.
And it had about 20,000 miles on it, right?
And I would have a little over 20,000, yes.
So maybe XLE premium.
No, I don't want.
Let's just do this one with 17,000 miles.
Okay, they're asking 34,990.
Which is $5,500.
But what I want to look for here is,
do they have the Carfax?
Wow, do they not give you Carfax over at CarMax?
No Carfax on the CarMax?
Apparently maybe not.
Interesting, okay, well let me find the Vin on here.
Give me a second.
They don't make it easy to find the Vin.
Where's the, there it is.
Okay.
They make it easy as long as you know
where you're looking for it.
That's a good point.
All right, I'm back on CarEdge used.
Yep, $34,998.
Which is, and the other one was $39,450,
they had reduced it to?
Yeah, $39,590.
Okay, $39,590.
Oh yeah, this was an XLE premium.
Okay.
Okay.
So wait a second, let's go back.
There was-
And find an XLE premium.
Yeah, this one right here, right?
Okay, but we can't see your screen at the moment.
You can't see my screen?
Now we can.
Okay, this one right here.
Okay.
So let me copy this Vin.
Well, that's still like this.
Still significantly cheaper.
Yeah, $2,500.
Give me a second here.
All right, you ready for the big reveal?
Yeah.
So they're asking $36,998.
We're $52 below original MSRP.
So they both MSRP did about the same.
They both have about the same miles on them.
Because this one has 20,000 miles.
Yeah, this one has, wait for it, 21,000 miles on it.
Okay, so we're within spit and distance.
And it's $2,500 less or $2,600 less
than what you could buy the comparable vehicle for
at Carvana.
Crazy, man.
And either way you slice it.
Yes.
You're looking at a used 2025 RAV4 at original MSRP
or greater.
Yes, yes.
We're 20,000 plus miles on it.
Yes.
So there is, I don't know what more proof we need
that the market, which is dictated by what people
are willing to spend.
I know that there are many out there watching and listening
that will say, oh, well, it's the dealers.
They're just asking too much.
The dealers can only sell it for what people are willing
to pay for it.
So the market is dictated by what people are willing
to pay for it.
And the people are willing to pay more than they should
for year old vehicles with 20 or 21,000 miles on them.
And I'll go back to what I said before.
There's no excuse for that.
Okay, there's no reason for someone not to know
that they're basically paying MSRP from what it was
a year ago on one of those vehicles
and $2,500 over MSRP for the other.
It's easy enough to find that information if you,
I mean, even if you don't have a computer,
most public libraries do and you can use them.
And so even if you went to your public library
and did a little bit of research,
you can save yourself thousands of dollars
and figure out what is or is not an appropriate deal
for a pre-owned vehicle.
Now, Dad, I want to correct something.
We have the estimated original MSRP back on caredge.com.
I found the window sticker here through CarMax,
the original MSRP for that one we were looking at
was $36,120.
So it's only $800 over $800, some dollars
over the original MSRP.
Yeah, again, I want to be just for the record here.
We estimated it at $37,050.
The actual MSRP for this RAV4 from CarMax
knew was $36,120.
CarMax is asking $36,998,
meaning they, just like Carvana,
are asking over original MSRP for a Toyota RAV4 used.
That is the current state of our car market,
used car market.
And again, the warning sign from Carvana
came from one quote and one quote only
from their chief financial officer.
Again, I'll read it one more time.
It was, quote, wholesale prices
appreciated more than retail prices in Q1
and retail is expected to catch up.
Cool.
And we have seen.
Invigorating.
Yeah, we have seen through the first quarter of this year
a significant unthought of increase
in wholesale values, especially in the
one to three year old vehicles, used vehicles.
Those have appreciated more quickly
or depreciated less than historically they would have.
But the first quarter, I mean, it's not even close
to what history would suggest these vehicle values should be.
It's, you know, I think I started saying this
sometime last year.
If you find a used vehicle and a price that you like
that will, and if you're not paying cash
and you're financing it, and it will provide you
with a monthly payment at a reasonable interest rate
for a reasonable length of time, please folks,
not more than 60 or 72 months, don't go 84 months.
But if you find that vehicle today and you like it
and it checks out, buy it because it's gonna be cheaper
today than it is tomorrow the way things have been going
for the last six or seven months.
There is nothing on the horizon that would indicate
used car values are going to significantly drop.
Everything indicates that they are going to continue
then upward and to the right trend, which is not good
for you as a consumer, but great for those who are selling
these vehicles trying to make a living off them.
So if there's something you like and it fits your budget,
whether it be cash or finance, it's gonna be cheaper
to buy it today than it is to wait.
And I know there's gonna be commenters out there
who are gonna say, Ray, why are you encouraging people
to buy cars when prices are so high?
Because they're gonna go higher, okay?
And if somebody needs a car, it's gonna be cheaper
to buy it today, even though it's overpriced in my mind
and in many other people's minds, even though it'll be
overpriced in my mind, it'll still be cheaper
than what it will be tomorrow or next week or next month.
There's just such a shortage of available used cars,
especially one to three-year-old ones,
that there's nothing that's gonna cause those prices to drop.
And every time we say, oh my God,
there could be a recession, well, that doesn't appear to be.
There seems to be enough money circulating
throughout the economy, whether it be just by the 13
to 15% of Americans who can afford new cars,
that they're doing enough shopping
for the rest of us who can't.
So, you know, it's just, if you like it
and it fits, buy it today.
Now I will, throw one caveat in there.
Do your analysis of new versus used.
Unlike prior car shopping experiences you may have had
five years ago, 10 years ago, you wanted a better value.
It was obvious, you'd go for the used one,
the one that's already depreciated 20%
when it drove off the lot.
But these are depreciating.
In today's market, if you're looking for a value,
it may be that you have to go for the new option
that has full manufacturer warranty from a dealer
who's not playing games.
So, that would be my only addendum or addition
to what my dad just shared there is.
Really do the value analysis of new versus used
in today's market.
We had a thoughtful contribution come in from Lego Joe
and the earlier in the show, Dad.
Thank you.
Yes, Lego Joe.
Dad, I will buy you, what do I buy?
I'll buy you something for your birthday with these 20 bucks.
We appreciate Lego Joe brands that can't sell new,
naking up their floor plan interest
by higher profit margin used vehicles,
which then shows a buyer more upside down
in their current note because the dealer offers less
for the trade.
This is a fascinating.
We had Joe from J.C. Lewis on yesterday.
He said, what, I have 176 new Mazda's.
176 new Mazda's.
And he had like 60 used cars.
Yes.
So, it was interesting.
He actually was kind of probably not making it up
on the used cars side of things
because he didn't have that much used car inventory.
But didn't he say that he's turning over
all those 60 used cars every month?
So, like...
No, no, no, no, he didn't say that.
He didn't say that, okay.
No, no, that was another, that was an acumen
where they had 70 new cars, 70 used cars in stock
and they delivered 65 in the month of...
So, maybe Lego Joe's onto something here, Dad,
that these dealers are just making a bunch of money
right now on the used cars side of things.
Obviously, there's money to be made there
and nobody, whether there's accounting magic going on
or not, nobody seems to have figured it out
better than Carvana has.
Nobody has gone from the death bed
and they're about to expire, which was, what, four years ago
where their stock had dropped to nothing
and every pundit in the country, in automotive,
was saying, okay, they have to go bankrupt
and they went from that to a juggernaut
that is threatening CarMax for supremacy
being the number one volume pre-owned dealer
and doing it at three to four times
the average profit per vehicle sold
that is above what others in the industry are doing.
So, I don't know if it's accounting magic,
I don't know what it is, but they have certainly
somehow figured out how to tap in to a market
that seems more than willing to spend perhaps a few dollars
more than they should for the convenience of A,
not having to go through the hassle of negotiating
in the back and forth and to have a vehicle
delivered directly to them if they so desire.
Absolutely, yeah, and a good reminder,
please folks, use the depreciation analysis
we have for used cars back on the CarEdge website.
When you search for cars under shop cars
and then click on use cars under the CarEdge
pro-market insights, we have depreciation analysis
for all used cars, so it's very relevant in today's market
to understand the dynamics of what's going on
for used cars and how they in many cases
are not depreciating.
From Ray to appreciate this as always.
Rich, thank you, sir.
We've got here, Ray, in a fit of rage,
have you ever told Zach you're going to drop him
like a bad transmission?
We had that like fight one time,
but that was me, I got upset, that wasn't you.
Yeah, but even though you got upset
and then you screamed at me,
I didn't tell you I was gonna drop you quicker
than a bad habit or a bad transmission.
No, you didn't.
And the salary-
You gave me a big hug, you gave me a big hug, yeah.
And the sad reality is today in many new cars,
dropping like a bad transmission,
that might happen in the first thousand miles,
which in my case would be six months.
But in many other people's cases,
that could be the first month,
and those people who were driving those RAV4s
might have been in the first two or three weeks.
Could have been, could have been.
Want to come here, Dan, from LROB2Q.
Does this mean that you would get
a more favorable trading value?
Yes, absolutely.
But don't be surprised if many dealers
are trying to, what's the word, Dan?
Steal, steal your trade.
Right now is a great time if you're a used car dealer
to steal someone's trade and make a boatload of money,
not even necessarily selling it
to another retail customer to the auction.
So I'm gonna come off the screen first, I can hear you.
Dan, explain to our community how you can,
make sure you're protecting yourself
when it comes to taking advantage of this.
You need to know what the market value is of your vehicle.
And how do you do that?
You can even go to our website and get offers
for your local offers for your car.
Once you put the information of your vehicle
into the website, we can get you cash offers.
Yeah, used car managers want to buy their used car inventory,
go figure, just like a retail customer.
But they want to buy it as cheaply as they possibly can.
So, most used car managers,
they're thinking, how can I steal the customer's trade?
If the trade's worth $30,000,
well, why don't I tell them it's only worth 25
and let's see where we end up.
So you need to know what the true market conditions are
and market values are of what it is you're trading
so that that used car manager
that's trying to get your vehicle
for an inordinately low amount doesn't succeed.
So, yeah, dealers always want to try and steal your trade
because as dealers will tell you,
you make your money when you buy the vehicle,
not necessarily when you sell it.
Encourage everyone, the thing to Google search
or chat GPT or whatever it is,
is trade and tactics for success.
My dad and I collaborated on this,
oh my gosh, we started the original postage in 2020.
We've been doing this for a while, y'all, please,
please, please, please read this car trade
and tactics for success guide.
We've kept it updated over the years
and it's got all the information you need here
to understand how you can do the best
when it comes to your trade-in.
So please spend some time on that page
and learn more.
One of the many free resources we provide back
at the land of edging cars.
Yes, yes, yes.
That's a slogan that'll die a slow death.
We're made for perhaps a quick one.
Hey, Les Coffin from Pops Today, so excited about that.
Hopefully he's going a little bit better.
Grateful to hear a few less cops out of ya.
We're back tomorrow with more Car Edge Live Friday,
so we'll have some fun tomorrow.
Yes.
And let us know.
I'll double check the comments from yesterday's show
and earlier in the week with Tyler as well.
How are you guys feeling about having
some of these dealers on?
I enjoyed the two conversations we had this week.
So let us know.
Let us know what brands you want to see us have dealers
on from and we'll try and get some people lined up.
But yeah, Ted, let's do it all again tomorrow.
I'm in, I promise.
I'll be here.
Me too.
Yeah, yeah, buddy.
Well, thank you everybody for being here today.
We hope to see you all back here tomorrow at noon Eastern.
And if you enjoyed this nonsense today,
please be sure to come back and, well,
tell a friend to tell a friend to tell a friend.
If you liked the show, please take a moment
to rate, review, and subscribe.
It really does help the show to grow.
Thank you for listening.
About this episode
Carvana’s latest earnings are being read as a warning sign for the used-car market: wholesale prices are rising faster than retail, and the hosts think retail will have to catch up. They point to live listings showing Toyota RAV4s still priced at or above original MSRP, even with mileage and minor damage. The broader takeaway is blunt: supply remains tight, especially for one- to three-year-old vehicles, so buyers may need to act carefully and compare new versus used value.
Today on CarEdge Live, Ray and Zach discuss the latest info on Carvana. Tune in to learn more! Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com
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