The Used Car Market Is In a BUBBLE & It Might Have Just BURST | Episode 933

It's noon here in Venter City, New Jersey, and our nation's Capital Washington DC. And this is Car Edge Live for Friday, September 26th with your hosts. Me, Ray here in Venter City dressed like it's winter and it's not. And Zach in DC dressed like it's summer and apparently maybe it is. How you doing today, handsome? Do fantastic. Happy Friday, everyone. Hope you've had a great week. We certainly have here in Car Edge

Land. I want to remind everyone that today's show is brought to you by our company caredge.com. A million people every single month go to caredge.com. That is insane. And they get help buying a car without the headache. The thing I want to turn your attention to today, folks, you are running our end of month promotion, 20% off car edge insights, which are the tools we use to help make sure we're negotiating and getting the best possible deal for our community members. And our car buying services, our concierge service,

aviation expert service. And I just want to take a quick second to let everyone know thousands of reviews, five star reviews. Here's one that we recently got two weeks ago. My carage concierge Josh is named Josh, but accidentally John here, Josh R was great to work with. He helped me narrow down my desired vehicle to a Toyota certified great war to 2023 RAV 4 XL with low miles. She's a but Josh handle negotiations, got a discount and no unwanted dealer add on the deal, even included 12 months of maintenance. Thank you, Josh. So folks, there you get 4.9 stars, almost

2000 reviews. If we can help you out, please, please, please give us the opportunity to now that being said, that the story that I want to talk about today is a little bit of a continuation from what we discussed yesterday, which is, could it the used car market bubble actually just beyond the verge of bursting and did car max whose stock drops 20% in one day, could car max have signaled the beginning of the end for the bull run of used car prices and use car market being more of a seller's market.

Plus a buyer's market for those of you that didn't tune in yesterday, dad, the story was pretty clear. Car max sold fewer cars, it made less money for per vehicle and their outlook moving forward was pretty bearish instead of bullish. So that's what I want to queue up today use car market in a bubble. I think we can all agree. That's true. Could it have just burst pops. I don't think so. Yeah, I don't think so. And the reason I say I don't think so is because there is clearly still a shortage of high quality low

mileage younger new use cars. And as long as that shortage continues, I think we will continue to see premium prices being asked for and premium price is being paid for those those type of pre-owned cars. Is there a signal in that data? I believe there is. And I believe the signal is that

there are more and more people that are just overstretched when it comes to being able to handle everyday living. And this this is just another example that the reason I say that is, you know, you went over yesterday, the major significant increase in their loan loss provisions, which

indicate that they think there's going to be their portfolio is going to be performing worse than expected going forward. And what shows is that the loans that they they entered into in 2022 and 2023 are definitely performing worse than they expected.

And that just in my mind that that signals that those people that that bought then and felt they could afford the payments that they entered into then two and three years later are so stretched because of rising insurance costs, rising maintenance and repair costs.

That it signals to me that in that aspect, it could be the beginning of the end for a lot of people now that it is interesting. We are you mentioned the data. Let's talk about some of the data points here.

One is we are starting to finally see for this year use car price at the wholesale level start to decline. So this vehicle, excuse me, this chart is showing you the percentage that vehicles are selling for at wholesale auctions relative to where they started at the beginning of the year or down 1% to 99%

and we can corroborate this data with the fine folks, the data from the fine folks at black book. They've seen modest appreciation weed over week for the past couple of months quite frankly. So we are starting to see on the wholesale side, which you and I've said for a long time wholesale is typically typically a leading indicator for what's going to happen in retail now post pandemic chip shortage 10 million cars not being produced wholesale and retail have not actually kind of been as intertwined as we would have thought in the past.

That's another sign of some weakening or maybe you can even make a case that it's just normalization, but it does make me think that there's a little bit of some we talked about cracks in the foundation but first thing like it's not as pretty the situation is not as pretty as it once had been even for use cars now there is an exception to this rule which would be those older more cheap more cheap vehicles.

Vehicles are still commanding insane prices cocks on about to actually provide some data on that that we've already seen price increases this year for three year old models or older versus the whole market so when it's a newer use vehicles interesting we're seeing price pressure downward on new cars right now to a degree that's kind of translating to some of the newer use cars not necessarily commanding as much of a premium but older use cars are actually commanding a premium because there's more shoppers looking for a lower price point but not enough supply.

So there's some multiple dynamics right now going on in the use car market.

It's almost as if for the past two or three years we've been putting lipstick on a pig when it comes to the use car market and thinking if you're a retailer thinking that this could go on forever when actually it can't and it probably won't.

But having said that I do believe that use car prices even though there's some downward pressure use car prices will remain significantly higher than where they were four or five years ago in relation to what a three four or five year old use car used it used to bring at a retail number.

So yeah it's scary in the sense that what's going on at CarMax and they are the largest used car retailer in the United States and not buy a little bit but buy a lot of it.

And so it's scary when you see them start to have some issues and how you know you look at that and normally you would be able to extrapolate what you think the future might hold but it just hasn't been safe trying to predict the future for the past three or four years because there's always something that seems to artificially impact what you thought would have.

There was another publicly traded company dad that's getting some heat right now and it's actually avis rental cars avis and budget because there's an expectation that they're going to have to write down even more value of the rental car fleet they've gotten a rating downgrade here and there's that again that expectation that because use car pricing for those types of vehicles are not holding up as well and again that's that's corollary to what we're seeing at CarMax CarMax profits were down revenue was down because they use cars that they have in their portfolio are not selling.

They're selling in commanding as high of prices again and it is broad spectrum here but it's another example this is a rental fleet company that's just having to write down more depreciation costs which ultimately is going to impact their bottom line I do want to pull up a comment though here from you go or thank you spot on Zach value decline is by brand not all brands and models have the same when it comes to depreciation I don't think it means depression depreciation there and I think you were spot on here it's a totally different market for some new for some use cars than others and it's and it's pretty damn close dead what we see on the new car side

things like those jeeps that got marked up like crazy you know the depreciation on Jeep grand wagon here it doesn't matter if it's three years old or I know there aren't grand wagon years that are 15 years old but you know like it doesn't really matter those things plummeted in value versus name the Toyota or Lexus products so I think maybe there's some indication that the bubble could be getting a little bit maybe more contracted and I think there's another great comment here from rich weakening sounds so much better than crashing I think it just spot on there's maybe a little bit of weakness but to your point

longer term pops we're probably still looking at a really strong use car market for all the obvious reasons you know I'll share something with you from yesterday a a I was I was texting with our buddy John Cannon okay I hope I hope you don't mind I mentioned your name John but you're you are a buddy of mine and John asked yesterday he says you know he saw from CDG or from somebody the coal mine

canary is coughing and it was talking about car maxes the client and sales and and the decline in their studies so Ray what does this mean for the use car market good for buyers not good for anyone sorry the link the link isn't live

and I said from what we have gathered the loans that they are making are not performing as well as they expected so they have significantly increased their own lost provisions and have sold a rather large trunch of access at asset back securities and the whole thing is

negatively impacting their business my suspicion however is that the broader use car market is in trouble because too many customers are too

stretched financially and we are seeing some sales declines will this eventually lead the lower use car prices and a buyer's market my guess is no because

there's still a significant shortage of quality used cars so will there be a softening think so okay but I don't think it will become a buyer's market anytime soon I I think we

might become Switzerland before we become anything else I hear you loud and clear dad let's change the switch gears though I want to talk about the new

vehicles that actually have the opportunity to be really negotiable and I'm going to try something new here I'm going to pop a QR code up on the screens for those of you

there we go for those of you that want to follow along here with the data that I'm about to share you just got to tap on that QR code up there in the top

lap 85,000 new 2024's remain unsolved in late 2025 these are the vehicles dad you want to talk about buyers market you want to talk about the bubble bursting these are the

vehicles broken down by a make and model where you can truly go squeeze the dealer and get a hell of a deal because unlike on the use car side of things there is not

too much supply or not enough supply and not like too much supply here you can see right here Justin thank you so much for

consolidating this the key takeaways dad bigger supply or bigger surplus and last year about 85,000 new 2024 models remain on lots in late 2025 versus 50,000 left over 2023's at this time last year

even more surprising 8,000 new 2023's are still unsolved as of September 2025 we're talking about 15 to 20% off MSRP discounts you're shooting for here folks and dad the leverage trucks and SUV's dominate the top 10

still and this brand show up repeatedly and Maserati has a standout amount of share of their inventory being two model years old you're right to break down this this data I am I am just I must say one thing I I am just so shocked that I'm sitting here and a suddenly there's a QR code in the upper left hand corner of what it is that we're broadcasting today and be I don't even know what the hell it

QR code is but damn that looks sexy up there in the upper left hand corner it kind of looks like it's it's like in your living room you know it's kind of nice all right here we go but can you do me one small favor yeah what is a QR code so dad if you take your phone do it right

now sorry guys we're going to teach my dad's not so take your phone got your phone put the pull up the camera app okay so like that hope you know there I am you

say I'm on the camera yeah yeah now put the camera on the QR code oh my god and then tap up the carage yeah then tap that link oh my god it takes us right to that

article my god technology you know if I only understood it all right let's forget the data here we go pops the 10 cars and trucks with the most

unsolved 2024 inventory drumroll please we've got the Ford F-150 there are over 2,853 2024 Ford F-150s still out there on the market today if

you're a Ford dealer dad sitting on some unsolved 2024s you're doing anything you can and your power to get rid of it correct well you should be

if you're not then a you're either working for a moron who believes that these trucks are all going to get better with age or or you're just not aware of what's

about to come around the bend when those 2026s start filling up your lot all right the Ford escape dad coming in at the number 2 spot

over 2,024 Ford escapes still in dealer inventory again these are not 2025s headed into 2026 we're talking 2024s and Ford dealers nationwide have over 2,000

escapes sitting there right now you know I am I am certainly glad I am not managing one of those Ford dealership

ram 2500 dad there are almost 2,000 ram 2500s still on dealer lots that are 2024s again we already have 2026 ram 2500s on dealer lots are almost 2000

2024s out there I wonder how many 2023s are still out there we've got another Ford on the list that this is so

damning if you're a Ford dealer you've got the Ford Bronco Ford or nearly 2,000 of them that are 2024 model year still out

there Ford Bronco Ford doors again these are examples of vehicles you can definitely go in and you have a ton of leverage more

Ford's the F250 Super Duty nearly 2,000 of them 2024 model year the Ford Bronco sport with 1672

2024 Ford Bronco sports there you go I mean Ford has Ford dealers that have a lot of inventory right now that is 2 plus years old

that they can't get rid of yeah certainly not the position you want to be in on them say September 26 2025

yeah really really really not a good situation then you have the Dodge Hornet one of the slowest selling cars in America

there are almost 1500 and 50 Dodge Hornets for sale that are 2024s Chevrolet getting in on the action

dad with the Silverado 1400 Silverado 2500s that are the 2024 model year then the non-heavy duty version

of the 1500 almost 1100 almost 1200 excuse me of them that are 2024s and yet another Ford

dead the Ford Ranger has over a thousand 24s out there and the only thing that

might prevent a dealer from getting really crazy selling some of these vehicles

and and I'm I'm not offering this as an excuse because I if it were me I would do whatever it would

take to sell one of those and get rid of them finally yep but when you look at the numbers

and and you go okay there was 1600 of these and 800 1200 there's what 2600 Ford dealerships out

there so it's not like every dealerships going to have one yeah it in many cases it might be

the only one or one of two or three that a given dealership might have but so when you look at

those numbers and you compare it and contrast it to the number of franchise dealers that are out

there for that brand it might be difficult for some folks to be able to find what they're looking

for to be able to get the type of deal you one would suspect you could get on one of those type of

vehicles that's a really good point that they could be like the only one in the area or the region

but still the fact that there are thousands of twenty twenty fours out there now you have to

compile just the philanthropist data here let's look at this dead five percent of rams current

inventory are twenty twenty four model year vehicles two and a half percent of jeeps inventory are

twenty twenty four new vehicles dodge almost fifteen percent thirteen point eight percent of

dodges inventory right now folks are twenty twenty fours we're about to be celebrating you know

going into twenty twenty six the twenty yes model your vehicles are already out there alpha dead

almost a quarter of all alphas for sale are new twenty twenty fours and over a third of all

Maserati's for sale are new twenty twenty fours so they good list here it's kind of the polar

opposite of some like if you're in the market for a used Toyota sure we're talking about how maybe

some aspects of the use car market are seeing some fragility but honestly it's a totally different

ballgame than if you're in the market to buy forgive me here but a new Maserati like you know new

Maserati's new Toyota's totally different car buying experience absolutely and

you when you look at the Maserati numbers and you look at the alpha numbers the alpha numbers suggest

to me that we we could see alpha Romeo perhaps abandoned the North American market again Maserati

is typically doled with their Ferrari sister so in many cases it's it's a Ferrari Maserati

dealership they don't they don't necessarily expect to sell anywhere near as many Maserati's as they

do Ferrari's those are such niche vehicles that yeah I'm sure there's a buyer out there for for

those three hundred or some it might take a while to find all those buyers um and and you know

realistically you would think that the people that are looking at the Maserati's would understand

that yeah if you're gonna spend Maserati money spend a little more and spend Ferrari money and

get the better vehicle all right we've got folks the QR code coming off the screen thanks dad for

planning I like to be our coach all right bye bye QR code yeah all right dad we've got some

interesting data as well from Edmunds and Cox on the new car side of things there's a really

interesting reality going on on the new car side right now which is you're about to have the

strongest third quarter and new car sales in the past six years seven yes and this is a lot of

this I mean it's down I want to be very clear quarter over quarter and but year over year the

expectation is that this is a really strong sales quarter a lot of this is driven dead by the

realization that EVs are selling like fire cakes right now fire cakes lava cakes I don't know

what I was trying to say I think it's called hot cake and the one thing you don't want is you don't

want your EV to ever be on fire because well they burn so hot they're almost impossible to put out

we're gonna have the expectation is over 10% market share for new EV sold which is leading to some

of the strongest sales you've ever seen in in a quarter in the post you know most recent decades

this is some really interesting stuff well it is but we know what's driving it yeah and it goes

away that right like we know it goes away yes 10% of market share for the most recent quarter I don't

say it all goes away but a lot of it goes away five days it's like it's like the car market knows

it's about to stall out in October but we can celebrate you know we can celebrate even though

we all know it's gonna get really bad in about a week it's no different than what goes on in

December okay when in December we the dealerships there's so much pull ahead from customers who

would have normally purchased in January or February but they are motivated by the by the offers

that are out there to do it sooner rather than later and then you know come January and February

one of those months will be the slowest sales months month of the year volume wise and so

if we did not see a significant uptick in sales in quarter three due to EV purchases and leases

then we would all really be screwed you know it is anybody who who was on the fence about an EV

anybody who thought you know maybe it's time anybody who was thinking of stuff well I'd like

to get an EV by the end of the year well those folks you've changed the calculus and said okay

because the the potential for the $7500 federal tax credit is going to go away on September 30th

I'll move my purchase up to September or it was August so now those people are moving their

purchases up to September these might have been planned purchases for November or December

so we are the industry is stealing their their November December customers and forcing them into

August and and the September customers and it will be really really interesting to look at those

numbers for October and November December and see how much lower than 10% EV sales are

of all of vehicle sold so it's this is like a live experiment can can a $7500 federal tax incentive

help move EVs and I think the answer to this experiment is wouldn't you tell us they're going to

expire in four days they can now the other dynamic to all this that would be that I think folks are

trying to buy cars before tariff price X and I want to show you a really interesting two really

interesting things from Cox Automotive this chart is showing you MSRP year over year change in 2025

so each month how much of MSRP's go up and you're starting to see a really obvious trend line

right MSRP's are starting to go up folks and again 3.3% is that that huge year over year you know

when you're talking about a $50,000 vehicle sure actually does add up go deep for not a money but

look at the look at the slope right we're not you and I are no mathematicians but I think we know the

slope of this line is up into the right and then there's another data point here from Cox Automotive

let me pull it up this one right here tariff costs are real and will be influencing decisions

5500 is the average cost impact for all imported vehicles 4,900 is the average cost impact for all

vehicles imported from Canada and Mexico a thousand dollars is the average cost impact for all US

assembled vehicles we expect 4 to 8% price increases on all vehicles new and used as a result of

tariffs that's coming from Cox Automotive so yeah I'm working you have you be tax credits ending

at the end of this month and that's pulling ahead a lot of people who like to your point it's

kind of like end of year get them get the best deal while you can yeah I think there's also a lot of

people starting to I don't know listen to our content watch the videos and realize oh crap cars

are actually getting more expensive which is partly why I think the article that Justin created

that we have the QR code for before go out there and buy a 2024 new cart folks like those are not

impacted by tariffs you could go negotiate a hell of a deal or the lingering 2025 inventory

because 2026 is are going to get more expensive and this could actually be another reason why

use car prices do go up because if new car prices go up typically use car prices fall that at

least a little bit so really interesting dynamics in the new and used car market right now

it it is and and you know the the cost of so many things has has gone up dramatically over

the last year or so um you know and I and I I constantly think of automobile insurance

as as one of those costs that that we always see moving in my opinion in the wrong direction

I had gotten my and I carry on my vehicle 100 300 thousand limits or auto insurance

for my auto insurance because it's a least vehicle and and so you have to that's the minimum

you have to carry and well you know I want to I want to protect myself as well um I had gotten my

insurance down to about a hundred ten dollars a month now everybody knows including our good

friends at Geico that right doesn't drive a lot okay Ray just had his his six month oil change

he had 1300 maybe three miles on his car when they when they did the oil change um so I don't drive a

lot and I had gotten it as low as as a hundred and ten dollars a month it is back up to 130

dollars a month okay and and it was a hundred and ten dollars a month on the particular car that I'm

leasing now so it is there's just this constant upward pressure on prices and premiums and it is

it is at a certain point you know you you're looking me go well it's only 20 dollars a month oh it's

only two dollars a month here it's only once you start adding all this up it it is like

it's never ending at a certain point you go I can't afford any of this stuff anymore um I just

got in the email from Hulu and Disney plus and oh yeah the Hulu's going up and and it's like come on

kids stop already one thing that's going down folks the price to pay for a car when you use our

discounted car edge insights and our car buying at service we've got 20% off here we're trying to

close our month strong back in car edge land another example of our concierge service helping a

customer want to pull this one up here dad this is five stars from four weeks to go great personalized

experience my concierge Nick have lots of patience as I was looking for a needle in the haystack

once we found what we were looking for Nick built a report with the salesperson we got everything

up set up and set everything up excuse me so all I need to do is arrive at the dealer and

sign the paper where he also made himself available to walk through everything via phone if needed

but it wasn't there were no surprises or issues everything was seamless can't recommend

enough thanks Nick so pops everything's going up all the prices are going up no not in car edge land

we're here offering these promotions these discounts to try and help our community because yeah the

prices of these things actually have gotten really expensive so we're trying our best to be able to

serve the community yeah it really is kind of crazy how how there there doesn't seem to be anything

that's going down at all and and it's it's you know most people's wages aren't going up

to the same degree that pricing is so that it's becoming harder and harder for more and more

people to be able to sustain themselves at the levels to which they have grown a customer

and again we're saying a huge q3 in the auto industry and in part we think that's because

people are pulling ahead those purchases because they think it's cheaper today than it will

be in the future and generally speaking I think we agree with them that in Facebook don't love

the name but we're going to read the comment thoughts on extended warranties any better than others

honestly folks we have a partner fair you go to carage.com click on warranty get a quote from them

and then shop it around shop it at the dealership we've got a promo running over there two two

hundred dollars off but we partnered with the company to be able to provide services and solutions

I think if you're in the market for an extended warranty really what you have to do is do your

research and you have to contact multiple providers just like buying a car get quotes and they can

be really good they also can be really really really bad obviously we've vetted a partner we've

helped thousands of people with an extended warranty and we have that promotion two hundred dollars

off running right now so please you're interested in that stuff do your research that is the utmost

importance I concur happy Friday y'all we're back on Monday have a great weekend everybody

you two handsome I have no idea what your plans are for the weekend but what's get called up

up for the show here okay sounds good to me in the broadcast so we can chat a little bit see

y'all on Monday what we thought love you true I also

The Used Car Market Is In a BUBBLE & It Might Have Just BURST | Episode 933

About this episode

Jeep Grand

Ford F150

Ford Escape

Ram 2500S

Ford Bronco

Ford Bronco Sport

Dodge Hornet

Chevrolet Silverado

Ford Ranger

Request an Explanation

Want to learn more?

Help improve this episode

More from CarEdge Live