Gas prices are how much you pay for gasoline to fill your car. When gas prices go up, people might think about buying different kinds of cars that use less gas or no gas at all, like electric cars.
Used electric vehicles are electric cars that someone else owned before. More of these cars are becoming available for people to buy, which changes how car dealers sell cars.
A car buying service is a company that helps you find and buy a car. They do the hard work like talking to dealers and getting good prices so you don't have to.
AAA is a big company that helps drivers with things like car problems and travel. They also keep track of gas prices so people know how much gas costs around the country.
An internal combustion engine is what most cars use to run by burning fuel like gas inside the engine. It makes the car move but uses gas and creates pollution.
Electricity rates are how much you pay for electricity. If oil prices go up, electricity can get more expensive too, which means charging electric cars might cost more.
Franchise dealers are car dealerships that work directly with car makers to sell their new cars. They have special permission to sell certain brands and follow rules set by those car makers.
Direct sellers are companies that sell cars straight to buyers without going through regular car dealerships. This is a newer way to buy cars that can change how people shop for vehicles.
Lobbying is when car dealers try to convince politicians to make rules that help dealers, which can sometimes stop the government from stopping bad dealer practices.
Bait and switch is when a car dealer shows you a cheap price to get you interested but then tries to sell you a different, more expensive car or adds extra costs that weren't told to you before.
Fast charging means quickly filling up an electric car's battery using special chargers that work faster than regular ones, but it can cost more money.
Leasing a car means you pay to use it for some time, like renting. You don't own it, but you get to drive it and return it later.
LIVE
It's noon here in Ventner City, New Jersey, and our nation's capital, Washington, D.C.
This is CarEdge Live for Wednesday, March 18th with your hosts, me, Ray here in Ventner,
and Zach hanging out in D.C. How are you today, handsome?
Do fantastic pups.
Happy Wednesday, March 18th.
Thanks so much for tuning in and joining us for some more CarEdge Live.
Gas prices are skyrocketing, and car dealers, man, the headline in automotive news this morning,
used EVs are about to flood the market. Here's how dealers can profit.
All right, let's demystify this for folks. Let's spend some time talking about this today.
Here's what car dealers don't want you to know about what's going on in the car market
and how you can leverage that information. Now, before we get started, we have a new
product here at CarEdge. It's over at CarEdge.com. If you're in the market to buy a car, give this
a try, share some feedback with us. We really appreciate it. And for those of you that want
the normal CarEdge experience, no beta for you, just head over to CarEdge.com. We actually just
started a promotion dad for our car buying service and CarEdge Pro 200 and 20% off respectively.
If you're unfamiliar, CarEdge.com, we provide a car buying service that takes care of the
research, dealer outreach, and even negotiation. We learn what matters to you. Contact dealers,
compare real offers, and help you get the best deal without the stress. Yeah, let's turn our
attention. First things first, to gas prices. We're going to head over to AAA. We are up to
$3.84 a gallon is the nationwide average for gas prices right now in this very moment. And if I
scroll down here, we can see they're going up. A month ago, we were at $2.92. Now we're about a
dollar above that at $3.84, getting close to a dollar above that. Gas prices are going up,
used EVs are flooding the used car market. We want to be, okay, yeah, break this down for us. We
want to be in the know. We want to be knowledgeable. What do we need to understand right now?
Well, used EVs are not quite flooding the market. The theory is that they will, that many of the
three-year EV leases are coming up. They expect an influx of used EV leases to come due this year.
And the reality is that the residual values on those EV leases are in many cases much higher
than the market values of those vehicles. So if you are someone who leased an EV and you have the
ability to buy it at the end of the lease for the residual value and you wanted to, you're probably
a fool because in this case, you're probably going to pay 25 to 40 percent above market value for
that vehicle. So what that means is smart people who lease their EVs will just turn them in at the
end of the lease and then they get to go to auction and depending upon what dealers are willing to
bid on those, those leasing companies aren't going to get anywhere near what the residual value was.
My suspicion would be it'll be about 40 percent lower than the residual values what they get. So
the dealers will have an opportunity to buy these vehicles at a much reduced rate and smart dealers
will, I think, be cautious with it. And if they can't buy them right, they won't buy them. And if
they can buy them right, they can use them as vehicles for people who have real payment concerns.
Yeah, let's pivot to really a focus here because the interesting angle is that the Wall Street,
excuse me, the automotive news is commentating here that, hey, you're ultimately going to be more
profitable, kind of like Wall Street. You're going to be more profitable here because you're
going to pick up these EVs for dirt cheap and you're going to be able to turn around and sell
them. But the consumer angle here is as these gas prices go up and as this war continues,
you're going to have more and more consumers that want to buy those vehicles. So what is the takeaway
here, dad, for car shoppers right now? Like dealers are going to be able to buy those vehicles
at auction significantly below their residual value. Sure, but what's the takeaway for a
consumer right now? Well, I think the takeaway for consumers is many consumers are reactive and
not proactive. And what do I mean by that? Many consumers, I've already seen articles appear
where truck drivers who drive for a living, well, I was paying $140 a trip and now it's
over $200 for every trip. So we're already starting to see the articles about how expensive it is
for those who do a poop ton of driving. You know, for someone like me who doesn't,
go to $10 a gallon, it's irrelevant. But what I was about to say is consumers tend to be more
reactive than proactive. They will react to the increase in gas prices. And what I mean by that
is they will look to make a change to get out of the higher priced internal combustion engine
vehicles sooner than they probably should. You know, they're going to look at worst case scenario
and they're going to say, oh my God, gas is almost $4 a gallon now. It's going to go to
$5 or $6. We need to get out of this now. And so even on our search site, we know that
search traffic for pre-owned EVs is up about 20% since the war started. So more people
are considering an EV as an option strictly because gas prices are going up.
So dad, that brings me to this question, which is timing of a purchase. And I'm going to pull
up this comment from Igor here. Appreciate Igor. I just finished my auction day and used vehicle
values are up, especially on hybrids and small engine vehicles and on the EV segment as well.
So dad, what is the rationale you think here? If the anticipation is that gas prices will
continue to go up, which again, I pulled up the chart at the beginning of the show. This is from
AAA. The current average gasoline price nationwide is $3.84. A month ago was $2.92.
If that trend continues, you think there'll be a run on these vehicles. Again, automotive news is
leading with the fact that they think that there's going to be a flood of used EVs hitting the market
here off these vehicles. And the whole intent in automotive news is to talk about how dealers can
profit. So what is the timing rationale here for consumers about maybe picking up one of these
hybrid or electric vehicles that should theoretically become an even hotter commodity
over the next couple of weeks and months? And we're in spring selling season for the used
car market right now. So how do you think about all that? If you were interested in an EV,
you should have bought it four weeks ago. The cost of EVs is only going to go up since then.
As gas continues to go up, we know that searches for EVs are going to increase, that more people
will consider it as an alternative vehicle rather than spending an extra $100 a month or whatever
it is on gasoline for their current vehicle. So dealers know that. Everybody knows it. Igor
suggested he's seeing it at the auctions already, so that the bottom point for purchasing an EV is
passed. You missed that time. We're on the upswing. Will they continue to depreciate faster than
ICE vehicles? I think for the time being, they probably will. Six months from now, if this war
is still going on and gas prices are $5 or more per gallon, then yeah, I think you'll see an
increase in EV sales. And I think the increase would be on the used car side of things because
if dealers can buy these right cheaply, inexpensively in comparison to the older ICE vehicles,
then I think they'd become affordable options for people who are payment buyers.
You're taking me down a mental model, Dad, which is we've seen used car values appreciate before.
And there was a period of time where if you leased the vehicle, what was this, maybe four years ago
and your lease was coming due, you could buy your lease out and sell it and make a bunch of money.
Are we headed down that path for EVs? I hear you saying it's not going to happen this week,
but maybe in a couple of months, if I had, okay, you don't think so.
All right. And the reason I don't think so is I don't think they can appreciate that quickly.
Nothing has depreciated faster than EVs in the last couple of years. So even if you see an uptick,
which I would expect you will see, even with an uptick in EV values, if these things currently
are worth 25 to 40% less than what their residual values are, I don't think there's going to be a
25 to 40% uptick in wholesale values on these vehicles. Dealers are not going to purchase
a bunch of EVs for the same price that they would have to pay for a comparable ICE vehicle.
I mean, only 7.7% of all new cars sold last year were EVs.
Okay. And that number's going down. It's not going up at the moment. So it's still somewhat of a
limited market. It will be a market that will allow the 85% of people who are payment buyers to
suddenly consider a two or three or four-year-old EV because it could be significantly cheaper than
that five or six-year-old ICE vehicle. If I may, Dad, just today we got the latest
Mannheim Used Vehicle Value Index report from Cox Automotive. And there's some interesting
insights in here. First and foremost, folks, we are seeing used vehicle values increase. That is
what's happening. This is normal for this time of year. And that's what this chart is showing you
is they're slightly going up and to the right. Now, what I want to jump all the way down here to,
Dad, is EV versus non-EV index. The electric vehicle index was up 6.7% year over year and up
2.5% from February. So the tracking of wholesale prices for electric vehicles actually increased
2.5% through the halfway point of March just from February. Non-EVs are up 5% year over year
and up 0.8% from February. So think about that for a second, Dad. We're talking about a 3x as
big increase in EV price appreciation as compared to non-electric vehicles. That's what this data
is showing you. And so as you have more and more and more people looking at those gas prices going
up, this is the reality of the situation. You're going to have more and more people contemplating
an electric vehicle. And at this point, it's just contemplation. Now, whether that actually
turns into action, that's what we have to wait and see. And I think whatever statistics we see
on sales for March will give us some idea as to what direction it's going. Do I expect or
would I expect that there will be some uptick in EV sales in March because of what's going on
with gasoline prices? I would. I would expect to see it more on the used EV side of things
than the new EV side of things. If we live with the premise, and I spent 43 years doing this,
so if we live with the premise that 85% of the public are payment buyers, what they're concerned
with is how much the monthly cost is for the payment for their car. And we know that you not
only have to look at what the monthly payment for the car is, but what your fuel costs are
and your maintenance costs. If ICE vehicles are continuing to be unaffordable for the vast majority
of people, as gas prices go up, more people will consider used EVs because the payment,
the monthly payment on the vehicle itself will be less because you'll be able to buy one of those
cars for considerably less than an ICE vehicle. Your fuel costs will be significantly less
because using electricity is still cheaper than gasoline and your maintenance costs
will be much lower than on an ICE vehicle. So the ultimate cost will be compelling enough
for a decent size percentage of people, I believe, to move towards EVs if gas prices
continue to be elevated. All right, so we'll keep tabs on this, but so far the signs are
that as gas prices go up, there is more and more demand for electric vehicles, hybrid vehicles.
The things dealers don't want you to know, they're going to be buying all those off lease EVs for
cheap, all right, even though the prices are starting to go up, they're still cheap. And so
definitely go in with some negotiating leverage if you're contemplating an electric vehicle or
a hybrid vehicle. And if you think prices are going to keep going up for gas, obviously,
they can move sooner rather than later on that EV. We've got from Matthew here, pops. Thank you,
Matthew. Appreciate the kind contribution. Let's trade in the paid for car for $1,000 a month payment
to save $100 on gas only in the American consumer credit carnival raise seen at 1,000 times before.
Yeah, that is a little bit what we're prognosticating could happen right now and already is happening,
right? Yeah, a little bit crazy to say out loud. Yeah, no, but it's true because consumers are
reactive. They just look at short term, they don't look at long term, they don't look at what the
long term outlook will be for having doing or done something. And let me just say one thing,
we know that it's less expensive to fuel up an electric vehicle today. Now, obviously,
as gas prices go up and the cost of oil goes up, well, you can bet your butt that electricity rates
are going to go up because a lot of the electricity, they utilize oil to help generate it. So,
yes, will it cost more in the long term to charge your electric vehicle? Yes, but it'll still be
considerably less than if you had to fill the fuel tank with gasoline, in my opinion.
All right, folks. Let's switch gears, Dad. Let's spend another second. We talked about it yesterday.
We got to talk about that more today on Audi. Then I want to read something that came out with
regards to the FTC stuff that we mentioned earlier this week. Audi expects new SUV models cost savings
to boost 2026 profits. Audi and Volkswagen are struggling. We keep talking about this day in
a day out. Here's an article from Bloomberg that Audi is making a huge bet on the upcoming Q9,
the SUV, as a way to improve their profitability. And here's a chart that shows you Audi's profit
percentage over the past four years. And obviously, it's going down into the right.
What I find interesting, Dad, is Audi's strategy has predicated on bringing the market an even
more expensive full-size SUV than the Q8, which is currently in market and not selling particularly
well with a 90 plus. I mean, this is almost $100,000 SUV. So, their big bet, Dad, over at Audi
is even more expensive big SUVs. And this is in light of the fact that the Q5 is one of the
slowest selling vehicles based on supply and demand right now in America. So, just an interesting
headline with regards to Audi. We don't have to belabor it too long, but DW and Audi definitely
in struggle mode. It's wonderful to have an expectation. Audi expects new SUV models cost
savings to boost 2026 profits. When I was like 18, 19 years old, I expected to be 5'8".
Okay. And then I settled. And then I settled. Damn, I just like to make it the 5'7". Okay.
I never got beyond 5'6". My guess is if you measured me today, I'm less than that because
I'm older and I'm shrinking. Expectations are a wonderful thing. Whether or not the expectations
actually come true, that's a different story. But if you're trying to promote the idea,
that your struggles are behind you as an automaker, well, this would be one way to do it.
There's nothing that says it isn't doable or it is doable. It's just an expectation.
It's just fascinating, Dad, because again, slowest selling cars in the United States.
Excuse me right now. Audi's got two of them. The S3, which is one of their sedans, and the Q5.
And we measure this based on day supply of inventory. Audi's Q5 inventory situation right
now that it would take them a whole year to sell out of all the available Q5s. And we're not even
talking about the big new expensive Q9s. And here you go from Igor. My old Audi store has
over 100 new unsold 2025 and 2026 Q5 models, 10 to 11% off MSRP. Quite the strategy to say,
okay, but we're actually going to turn the corner by making essentially souped up Q5s,
bigger Q5s, more expensive Q5s. We were just saying that the Q8, it's $100,000 MSRP vehicle.
Yeah, so what's a Q9 going to be? I can't imagine 10.
Nine's less. Yeah, 110. Yeah, I'm pretty sure the higher the number,
the higher the price. I'm pretty sure the Q3 is less expensive for a consumer than a Q5.
And the Q5 is less expensive than the Q7. And the Q7 is less expensive than the Q8.
We're onto something. Now, unless they're changing their strategy completely,
my suspicion would be that the Q9 is going to be more expensive than the Q8, which couldn't
make it, I don't know, the most expensive one. We've all got expectations. Okay, we do. We do.
So why should now we have theirs? Dad, we talked earlier this week on Monday about the FTC
sending a letter to 97 car dealerships and groups out there. This is the editorial response from
automotive news. I'd like to read it to you, okay? Okay, yes. In our opinion, dealers don't have to
worry about the FTC warning if they're honest. You ready? No poopy, of course. The Trump
Administration's Federal Trade Commission didn't try to save the Biden-era cars rule,
but it's now pursuing a similar crackdown on this leading dealership ad pricing.
A year ago, the Bitts U.S. Circuit Court of Appeals overturned on procedural grounds the FTC's 2023
combating auto retail scams regulations on dealer advertising and finance and insurance practices.
The FTC did not appeal the January 27, 2025 decision, nor did it restart its rulemaking
process to include the step the appeals court said it had skipped. But on March 13,
so just five days ago, the FTC warned 97 dealership groups through vehicle advertisements must
include quote, all required fees and quote, except for government charges, the same quote,
offering price concept found in the provisions of the cars rule. The FTC also warned dealers that
advertised vehicles must be available for purchase and that all car buyers should be offered the
price pricing listed in advertisements. The FTC's refocus on the car buying process likely is a red
flag for dealers nationwide. The regulatory spotlight on car buying transparency should
require even the most careful dealers to more closely monitor their sales personnel and FNI
practices. If all dealership personnel always engaged in good practices, regulatory oversight
wouldn't be needed. But consumer complaints and lawsuits continue to expose dishonest business
practices and hidden dealership fees. Dealership staff who focus on caring for clients instead
of taking advantage of them are apt to be transparent and more likely to win and have a
loyal customer base. The industry must maintain honesty with customers to retain public trust.
This is especially relevant as franchise dealers confront the threat of direct sellers,
but dealers aren't the only entity in this environment that need process reform. The FTC,
whose basic mission should not radically change with each successive administration,
needs to be more consistent in the level of importance it puts on transparency in retail.
Consistent rules, regardless of which political party is in power, would give dealers clear
guidelines on what's expected, almost done here. The franchise sales model benefits auto sales
and consumers, but dealers need to keep a sharp focus on honest practices,
even when it might mean lower profits. If the industry follows the rules and continues to
prioritize customers, regulators are more likely to stay out of dealerships. Customers who feel
well cared for and fairly treated are more likely to return strategically. That is the best investment
for dealers. What do you make of this, Dad? I thought that was an interesting editorial response.
It's always been so. These rules and regulations aren't set up for the good dealers,
okay? They're set up for the bad dealers. The only reason they exist is because of the bad dealers.
That was why I thought there would have been more buy-in from auto dealers when it came to the
CARS Act that the FTC was proposing. When there was a public comment period,
I know we were very involved in getting public comment in favor of the CARS Act,
and there were a handful of dealers that were as well.
Girls do it in Toyota, I remember.
The vast majority, however, either stayed silent or were opposed to it. If you don't think they
were opposed to it, then why did the National Automobile Dealers Association choose to go
to court in the Fifth Circuit in Texas? It's true. It's good for the honest dealers,
and it's good if you embrace these rules. To suggest that this is a red flag,
it's... I will repeat what I said Monday. It means nothing if there is no enforcement.
I know some of the commenters on our videos have suggested, well, this is the first step.
What? The first step? The dealers have been doing this crap for 40, 50, 60 years, okay?
So it took 40, 50, 60 years for the first step. Well, you can't go in and enforce it until you've
said to them, well, we're going to look into this. They've known it for years. They violated the rules
and regulations for years. Their lobbying efforts have protected them for years. These dealer groups
have bought and paid for the best politicians that they can. And so, yeah, this is just
government BS to make it seem as if the government really cares. If they really care,
they do something about it. They don't really care. It's much easier just to send letters to
97 dealer groups, okay, than to actually enforce the regulations.
We've got a video coming out on Saturday, the 10 worst car dealerships in the United States of
America. And it's based on the dealers that have F ratings from the car edge dealer ratings portal.
If you come out here, this is our attempt. Hey, you want to see dealers who do bait and
switch advertising and don't actually offer vehicles for sale at the price they advertised
online? Click on D and F here on the car edge dealer ratings. And we do name the names of
the dealerships that have unfortunately demonstrated to us through the quotes that they send to us
that they are, we'll do this one right here, adding on fees. We've got that right there,
or let's do this key and tell your ride right here, view the quote. There it is, your recon fee,
your cert fee. I mean, this is the type of stuff that drives consumers crazy. And it also makes it
impossible for good dealers to differentiate themselves, especially when you get marked as a
great deal on certain websites. And so anyway, we're doing our best because the likelihood that
there will be enforcement that I think is pretty low. These letters don't have a ton of teeth to
them, but at least they spark a conversation. And I thought it was interesting to see the industry
publications say, okay, we're paying attention to this, but just be honest, that's the best strategy,
which I agree with, we agree with, be honest, it's the best strategy, we're trying to help honest
dealers. Listen, I'm not trying to denigrate the FTC to the degree that most people might think I am.
I think it's wonderful that they sent out the letters. And I think it's wonderful that they
publicize the fact that they sent out the letters. And I think it's wonderful that us and others
have noticed, taken notice to those letters, have publicized the fact that there's those letters,
have spoken about it. Because the reason I think that's important is because
it starts a conversation. Okay, now, should every consumer, when they go into a dealership,
should they take a printed copy of the letter that the FTC sent to these groups?
Perhaps, perhaps we should make that letter available on our website so that people can
pull it up and print it out and take it with them or include it in their email, okay, as an
attachment. So that at least the dealer will know that they're dealing with somebody that is better
informed than someone else. So yes, I think it's important that they've done it. And I think it's
important that we're having conversations around it. But I also think in my heart of hearts that
until they bring an action, because they know it goes on, it's not as if at the federal level
they don't know that it's going on. And it's not as if at the state levels that they don't know it's
going on. It's whether or not anybody chooses to enforce it.
I haven't seen most of this stuff that Rich had. Oh my, yeah. Yeah, yeah, it would be great if just
the front end disconnected all together. Yeah, that's truly an interesting concept. And I can
understand why you'd probably have that in your underground nuclear bunker. Yeah, that one makes,
that one makes no sense. Well, it makes no sense whatsoever. And we've got from Matthew,
appreciate Matthew in California, public fast charging can be more expensive than gas lights.
That was to your point earlier pops around the actual infrastructure costs for all these things.
I want to call out here from Michael. Thanks for this, Michael. Zach, I'm looking at a 2026
Genesis lease two years for $369 a month already seems like a good deal. Can car edge negotiate
this? Maybe. I don't know. I'm not 100% sure. Have to look at the actual deal worksheet. That
being said, you've cued me up here, Michael. We are offering right now $200 off our car
buying service. So back at CarEdge.com, take advantage of this $200 off the car
buying service or 20% off CarEdge Pro. For those of you that don't know,
we offer car buying services. So we will actually do dealer outreach, negotiation,
learn what matters. Do you contact dealers and compare real offers? So Michael,
I don't have a great answer because I don't have the worksheet right in front of me, but
we do offer a service for those of you that are interested in what our offer a promotion.
I will say this, just based on the payment, that seemed relatively expensive.
But I'm guessing the big kicker that Michael didn't include in that, how much cash stay out,
they were looking for on that lease. You've taught me well, Pops. All right,
folks. We're back here tomorrow with more CarEdge live. We look forward to seeing you
back here at 9 a.m. Is it 9 a.m. Pacific? Yeah. I'm pretty sure it's 9 a.m. Pacific.
If 9 a.m. Pacific, 12 p.m. Eastern time, we're here for you. We appreciate everyone,
and yeah, we'll look forward to doing it all again tomorrow.
Thank you. Thanks for being here today, and we'll see you here tomorrow.
About this episode
Gas prices are surging, pushing more consumers to consider used electric vehicles (EVs), but dealers are poised to profit by acquiring off-lease EVs at auction below residual values. The hosts discuss the dynamics of EV depreciation, timing for buyers, and how rising fuel costs influence demand. They also cover Audi's struggles with slow-selling SUVs and its plan to boost profits with pricier models. Additionally, the episode examines the FTC's renewed crackdown on dealer advertising transparency, highlighting ongoing industry challenges with honesty and enforcement. Practical advice for car buyers and dealer insights round out the conversation.
Today on CarEdge Live, Ray and Zach discuss the latest data on the car market. Tune in to learn more! Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com
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