The Used Car Market Is In SERIOUS TROUBLE | Episode 1036

It's noon here in Venture City, New Jersey, and this is Car Edge Live for Friday, March 20th,

with your hosts, me, Ray here in Venture City, and Zach in Washington, D.C., and Ann Zach. It's

what I call Feisty Friday. And on Feisty Friday, we're going to talk about how the used car market

is in serious trouble. I'll turn it over to you now. How are you handsome?

Feisty Friday. All right, here we go. I'm Feisty. I'm Feisty. Happy Friday, everyone. Thanks so much

for tuning in for another episode of Car Edge Live. Man, what a privilege that I get to do this

with my dad. Also a privilege, getting to run caredge.com with my dad. For those of you that

are unfamiliar, for the past six years, me and my dad and our incredible team have been providing

car buying services that take care of vehicle research, dealer outreach, and even negotiation.

Me, learn what matters to you, contact dealers, compare offers, and help you get the best deal

without the stress. For those of you that are interested in our services, we're running a

little promotion right now. $200 off our car buying service and 20% off Car Edge Pro. This is

going to last for another couple hours here, about a day or so, so take advantage of that

while it is available. Now, the big story that I want to spend time on this morning, dad,

Strong's, please, now he drives up used car values. We'll spend some time

looking at that. We also have the Blackbook Market Insights, which shows continued appreciation

of used vehicles. Let's start there, dad. Use car market update. Use car prices keep going higher.

That's not good for the used car market. They seem to have been going higher earlier this year

and faster than in years past. Quite honestly, I think that has everything to do with the

affordability of new cars out there. I think many new car dealers and the independent used car

dealers have realized that even though many manufacturers have said that they are acutely

aware of the affordability issues for many Americans and that their intentions are to do

something about it. I know Ford talked about it and their intentions are to do something about it

in 2028 or 2029 when the whole world is collapsed by then. I think new car dealers who are in the

used car business and independent used car dealers have realized, guess what? We're going to be able

to raise the prices of used cars. We'll be able to pay more for used cars because this spread

will be significant enough between what our high priced used cars are selling for and what those

even higher priced new cars are selling for. The latest data shows that used car sales are

increasing at the same exact time as we have less vehicle supply. That's the dynamic. We talk about

it all the time. It's supply and demand. We know that the quality of used vehicles for sale right

now, many of the vehicles for sale at dealer auctions, more so than ever before, are repossessed

vehicles. This is why the used car market is in some serious trouble right now. You've got tight

supply and sales increasing. You've got low supply, high demand. It's because to your point,

Ted, more customers keep saying to themselves, okay, yes, I'm not going to buy that $50,000

new car. I'll look at the $26,000 used car. Well, it was $26,000 last week. Now, it'll be 27 this

week. We're seeing appreciation of used cars again. Yes. The spread is still big enough

between the new car and the used car that people who realize they can't afford that new car will

gladly fork over a little too much money for that pre-owned car at the moment because

it's a significant savings. If the average new car payment today is, I believe, $803 a month,

and the average loan term is 72 months. If you can buy a pre-owned car for significantly less

and your payment suddenly goes from $803 a month to $550 a month, even though you might be overpaying

on that used car, since 85% of all buyers out there are monthly payment buyers,

that $550 is going to seem affordable even though you paid too much.

Yeah, the used car market is in serious trouble in the sense that prices are going up and day

supply is going down. Well, this is the time of year that day supply does go down because, well,

we're in the spring selling season and tax season. Now, it's not all vehicle types are being treated

equally. Blackbook puts out this data that breaks down the appreciation or depreciation of used

cars broken down by the type of vehicle they are. Look at this chart, Dad. Full-size cars.

What the heck? Full-size cars. Why did they appreciate in one week by $218? You can see some

of the other trends here. Compact car prices are up. Sports car prices that are up. You can see

its luxury vehicles are where we're seeing the depreciation happen week over week. We're seeing

earlier than we've seen in the past, appreciation of used vehicles, more aggressive appreciation

and price points of used vehicles. In particular, full-size cars, Dad, which had been depreciated

like crazy over the past few years now, are skyrocketing up in value. That's nuts.

It is, but my suspicion would be is that many people are thinking, okay, maybe a full-size car

instead of a full-size SUV. I will be interested to see what happens to use car values relative

to what we're seeing going on with gas prices and how that might impact things. It wouldn't

surprise me if compact, more fuel-efficient cars escalate in value much more quickly than those

well-gas guzzling big-ass SUVs. If I may, Dad, because Blackwood breaks down the data for trucks

and SUVs, this chart looks a heck of a lot different than the car one we were just looking at. It looks

a lot more flat, a lot more measured, a lot more close to zero change week over week. It is, in

particular, around cars, Dad. Like you said, compact cars and full-size cars, where we're

seeing price appreciation, is that already an early sign of people looking for more fuel-efficient

vehicles? I think you can make a case that it is, because again, for those of you that are not super

familiar, this chart is showing you week over week what happened to subcompact crossover wholesale

used car prices. Why should you care about that? Because if it's going up like it is for full-size

cars by weight for it, over 1.25% week over week, that means you're going to pay more for

full-size cars when you go to the dealership to buy them, or if you're the proud owner of a full-size

car, it means you're trade-in. It just went up in value significantly. However, what we're seeing

is appreciation in full-size cars, compact cars, and sports cars. Sports cars make sense because

it's the month of March. They bring selling seeds in here. Trucks and SUVs are flat to downish,

so it'll be interesting to see if those vehicles end up appreciating or depreciating, because

obviously, they're a little less fuel efficient than those smaller options.

I just know from experience how reactive consumers are when it comes to spiraling and

spiking gas prices. They just look at the immediate impact as opposed to trying to figure out what

the long-term impact might be. My guess is that another couple weeks of gas prices continuing

to go up, we will see some people starting to make the decision, in my mind, the improper decision,

of reacting and trying to figure out ways to get out of their less fuel-efficient vehicles and

into more fuel-efficient ones. In many cases, we'll roll a tremendous amount of negative equity

from the less fuel-efficient vehicle into their new better efficient vehicle.

I hate to say this, but people need to sit down and take a breath before they make decisions.

You know, I've limped it any number of times where I've just watched people make stupid

financial decisions, even after suggesting to them that this might not be the most prudent

decision financially that you could make for yourself. The response typically was,

well, don't tell me what I should do. Okay, I'm sorry. Yes, you're right. My job is to allow you

to buy it if you want it, even if it doesn't make good sense. Let me pull up here just because

you mentioned it. Gas prices, we do have an update today. Month over month, we're at about a dollar

more expensive per gallon of gas. That is insane appreciation in gas prices, which is going to

influence how consumers shop, whether you want to say that's good or bad is up to your discretion,

your perspective. We do have other data here, Dad, that starts to bring into mind what you and I

talk about all the time, the affordability piece. We know that there are fewer quality used vehicles

for sale, yet sales are up. Well, that is most acute, excuse me, for used cars priced below

$15,000. They have the lowest level of availability, a 31 days supply, nine days below the industry

average. Think about that for a second. If you are one of the most price conscious shoppers out there,

that is where there is the most limited availability of inventory. This is another reason why the

used car market is in trouble. If you're looking for value in the used car market, there was a

great article in the Autopian today, thinking about buying a used car, look at a new Chevy

Trax instead. It's actually a better value to look at a new Chevy Trax with a manufacturer.

Used cars do not represent the value they once did, especially when you start to look into the

more sub $15,000. You might be spending $15,000 on a 12-year-old car, a 15-year-old car. That is

common now, which is great. I think we touched on a little bit yesterday in that many new car

dealerships in the past who would have not kept a vehicle that was approaching 100,000 miles or

a vehicle that had in excess of 100,000 miles. Those were vehicles that would have just, when

they were traded, were expected to go directly to wholesale auctions.

Think about selling it to a customer just to keep the auction.

Yes. Many of those same dealerships today are running those vehicles through their shops,

doing as little reconditioning as they can get away with, and keeping those vehicles on the lot

for sale because there is an incredibly large swath of the population that is looking for

$15,000 and under pre-owned cars. It would be foolish for dealerships to not try and cater to

those folks. We're seeing dealerships keep older, much older, much higher mileage vehicles

and retailing than we ever have. The value that that customer thinks they're getting

isn't really a good value. It's just an affordably priced vehicle that you're still

way overpaying for. One more thing on the use car market, then we'll switch gears.

This chart is wholesale weekly price index. As the black line goes up, that means use car prices

for wholesale auctions are increasing. The other lines represent prior years. The blue line is

last year and the orange line is 2024. Obviously, we have earlier in the year appreciation of wholesale

use car prices and more rapid appreciation than we've seen in the past. Again, as a customer,

why do I care about that? As a consumer, why do I care about that? This is the same exact index,

but now looking at retail listing prices. You can see here in past years, we've obviously seen

appreciation in the spring selling season. Last year, we did last two years ago in 2024,

use car prices came up a little bit, but not that much. The same phenomena is happening here

in the retail market. We are already starting to see asking prices for used cars that you are

looking to purchase at a dealership or private party or anything. They're starting to go up.

We do see a trailing connection between wholesale prices and retail prices. Anticipate seeing

used car prices go up even though, like we're talking about here, quality might not be there.

The prices are going to go up. That's that relative value question that you were just

asking a second ago. Is why we still communicated able to look in the new car market because the

new car market has the opposite problem. They have too many vehicles for sale in many instances and

not enough buyers. One last piece of advice for somebody that might be looking for a good value

in a pre-owned car. I know this is going to be morbid when I say it, but I have said this

in the past. Check the obituaries, dammit. Lots of people pass away on a daily basis.

Lots of those people have automobiles that could be newer or could be older but hardly used.

Look at my brother, God bless him. He's 82 or 83 years old and he drives a Ford that's 22 or

23 years old that has 42,000 miles on it. If God forbid anything were to happen to him and

the estate had to liquidate his vehicle, there's a vehicle that somebody could find that would be

reasonably priced and reasonably good quality. I hate to say it, but check your local obituaries.

See who's dying and see if perhaps they had an automobile and you can get your hands on

on a higher quality vehicle at a lower price. Just a morbid thought and I guess make friends

with whoever's running your local funeral home, I suppose. I don't know.

Car buying tips and tricks with Bapyshapska. We're in the obituaries.

All right, Dad. Earlier this week, we know the FTC sent a letter to 97 different dealership groups

saying, hey, y'all are advertising potentially. They actually didn't name names or anything.

They said potentially deceptive advertising practices. Well, look at this, Pops. There's

an article in Automotive News this morning, dealership ad pricing condemned by FTC is widespread

car edge data shows. Did you get a chance to read this article about what's going on?

If I see the name car edge in the headline, you're damn right, I read it.

Yeah, man. Look at this. Car edge data being cited here in the industry publication Automotive News.

The FTC obviously had that action. You can't even call it an action. They just sent a letter.

It's not an action. They didn't do anything. They just sent the letter. But our data from

car edge shows that pretty much every dealership out there, we found a couple dozen that don't

have doxies and things like that. Pretty much in general, Dad, the price you see online,

it's going to increase by like 6%, 7%. Sorry for all the young people out there for doing that.

It's going to increase from somewhere between 6% and 7%. And that's because that price you see

online is not the actual price when you go to the dealership. Yes. And the FTC's suggestion is,

and one that they would hope the industry would take to heart, is that, well, the price that you

have advertised it for has to include things like the dock fee. And any other fees that you may

require from a customer cannot be a separate fine print listing. It has to be built into the price.

And so my suspicion is that the FTC did it this way just as a wake-up call.

And we know automotive news, the principal industry publication has run several articles in regards

to this to help amplify the fact that this should be a wake-up call. And I appreciate the fact that

they're citing our data or data, however you want to say it, to justify why it is dealers

need to do something different. And if every dealer actually did this, you'd think to yourself,

well, every dealer wants to just advertise the lowest possible price. Yes and no. I mean,

could your price be a hundred or a couple hundred dollars higher than a competitor's price?

But could that price include an explanation as to why? Could those conversations be had as to,

yes, you might have to spend a tad bit more with us, but here's the reasons why. Here's what we do

on the service side of things to help you out. It's not even that bad. It's just create a level

playing field where the actual prices are the actual prices. I hear you on where you're going,

but it feels very like you're back in the dealership. Just create a level playing field

where the prices are. It would be nice because when I see an ad at, say, Best Buy for a TV,

the most amazing thing is, is I can go into the store and I see them that typically they

haven't stacked deep and they have a price associated with them showing what the original

price was and what the sale price is and that anybody can walk in there and buy it for the

advertised price and not have to worry about, well, did I qualify for a rebate or is there some type

of added dock fee? Yeah, and to be clear here, what a great section of the article and automotive

news, this is Muffer Iji, excuse me for mispronouncing your name, Christopher. He's the director of the

FTC's Bureau of Consumer Protection. This is what he said, it's illegal for dealerships to

advertise prices lacking all required fees or emitting, quote, additional items customers

were required to buy. Prices that incorporate rebates or discounts not available to all customers

or were contingent on an additional required down payment or the use of dealer financing also

broke the law, he wrote. Finally, dealerships can't include unavailable or non-existent vehicles

and advertisements, he wrote. This is directly followed up with statements from us. For anyone

who has ever sat in the finance office watching a $32,000 car turn into a $38,000 car, this is

not a surprise, said Car Edge co-founder Ray Shepska. It's great to see the FTC finally doing

something about it. Car Edge also provides a set of constantly updated figures on specific charges

it finds added to deals, charges that might not be disclosed in advance to consumers. The average

dealership tax on the dock fee, we also found that over 38,000 out-the-door price quotes,

only 12 dealerships actually didn't have a dock fee. 52% of dealerships charged customers for add-on

such as window tint and wheel locks or other fees, which added together average $2,043 on each deal.

So it's quite the humbling moment to be in the industry publication, our faces on it,

our names quoted after the FTC director. It's your face buddy, it's your face. They went with

the young good-looking face. They didn't go with the grizzled veteran face.

But yeah, this is the type of data that the FTC should be in touch with us for.

Again, I don't want a phone call from the FTC. I just want to be very clear. I don't,

but if they do, obviously we have a lot of information that's really compelling. But don't

call me. Don't call me. I don't need the FTC call me, but we've got the data. And you know what?

You don't even have to call me. It's available on the internet. Exactly.

Just go to the website. Yes. I mean, they can pull up all the quotes and see for themselves.

So it's nice that we have collected the information. It's nice that we're able to

share that information, not only with the buying public, but with any federal or state agency

that might be interested in looking at that data so that they could prepare whatever they need to

prepare for any cases they might want to bring against you. It's there. Utilize it. It's not

like they have to spend money to get it. All right, Dad. Let's switch gears. Stalantis and Ford,

they're going after a dealership group that's out of trust. Double floor planning. Did you see this?

But they had like Stalantis' captive finance arm floor plan a vehicle and also had Ford's

captive finance arm floor plan the same vehicle so that they collected money on those vehicles

twice. Is that what they are alleging? Something along those lines and then when they sold those

vehicles, they didn't promptly pay off either one of the lenders that had actually paid for

the vehicle. Oh my God. Have I ever mentioned that dealership personnel are some of the most

creative people on the face of the planet as to how it is they try and do things?

Craziness, man. Yeah, it is much very similar to what my dad just described. It is absurd,

Dad, some of the crazy things that we see. Obviously, any business that's on good financial

health maybe gets a little bit desperate, but trying to do this is very, very, very illegal.

May I say, as someone who at one time in his life had a franchise golf store, pro shop,

golf USA and who struggled mightily and there were cash flow issues and there were payments

that were missed and so yeah, I understand how it can happen. I don't understand actually

committing fraud in order to alleviate the situation where you sell the same car to two

different lenders. That's a little different than, well, I can't make my payment for the goods that

I bought that were due today and I might not be able to make my payment 30 more days from now.

That's different than, well, I'm just going to sell the car twice to two different lenders

or I'm not going to pay it off once I've sold it. I get how struggling businesses can find

themselves in difficulty and not know entirely what it is to do making fraud.

Fraud is never the answer. Fraud is definitely never the answer. Never.

Let's end the show on a high note, Dad. Subaru Buyers helped cancer patients get 54,213 rides

to treatment. For those of you that are unfamiliar, my dad and I, we lost my mom,

his wife to lung cancer, so this hits close to home. I'm currently dad on the board of,

let me pull it up, lung cancer foundation of America. I'm currently a board member and

involved with Lung Cancer Foundation of America, this organization which is funding researchers

for lung cancer. Dad, this is not necessarily funding research or anything like that.

This is Subaru getting involved to help get rides to treatment for patients. What happened here?

This is really nice. This is on a corporate level and on an individual customer level.

Subaru has always been as a corporate entity, heavily involved in a lot of good causes,

whether it be for animals or whatever it is. They have what we used to refer to at many,

a second date program where they like the customers to bring their cars back

two to six weeks after they've purchased them so that they can sit down with an individual at

the dealership and go over the vehicle again and they can gather information that might make

suggestions as to what can make the car better, this, that or the other thing.

They reward customers for coming in to do it. Subaru customers could have gotten a personal

gift of some type or they could have chosen to donate to what was it,

gift on wheels or something like that. I believe it was over 50% of the

Subaru customers who participated in this opted for, I don't need anything personally,

let's help others. So it speaks volumes to Subaru as a corporation and volumes to their

customers who would rather help others than get something free for themselves. By helping others,

they have, as you stated, over 50,000 rides for cancer patients to get the treatments.

It's just a way to make the world a smaller place where we can all help each other to some

degree or another. In this case, all you had to do was go in, have that conversation and

Subaru made the gift in your name similar to when at many, when I worked there,

where we made a contribution. I think it was $100 or $50 in the customer's name to the

children's wing at Johns Hopkins Hospital in the customer's name because our thought was,

hey, let's protect the most important minis of them all, which are our children.

Rather than spend money on advertising, we donated in the customer's name to the children's

hospital at Hopkins. Yeah, it's nice to see things like this, and it fits the Subaru brand

really well. They really do. Yeah, they definitely have carved out in our minds,

but they're good people over there. So yeah, really, really excited that we got to talk about

what happened there, but obviously just even see it happening and the impact of it is really

beautiful, really, really nice. So let's call it a show for today. Let's wish everyone a great

weekend. I've got my half marathon tomorrow, so I am so excited for that. I feel pretty good.

I feel pretty good. So I can't wait to come on on Monday and share how that goes,

going to try and set a personal best. So that'll be hard, but that'll be fun,

and I think the weather's going to be nice. So I hope you get outside and enjoy some time out there.

You know, I'm going to run a personal best tomorrow as well.

Yes, but it'll probably just be from the kitchen to the bathroom.

But good luck tomorrow, handsome. I have great faith in you that you will indeed

set a personal best. All right, y'all, we're back here on Monday. Love you, Dad.

Yeah, love you too. Have a great weekend, everybody. We'll see you Monday.

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.

The Used Car Market Is In SERIOUS TROUBLE | Episode 1036

About this episode

used car market

Blackbook Market Insights

affordability of new cars

supply and demand

repossession

appreciation

monthly payment buyers

day supply

spring selling season

tax season

full-size cars

sports cars

compact cars

vehicle depreciation

full-size SUV

fuel efficiency

subcompact crossover

trade-in value

negative equity

gas prices

inventory

days supply

Chevrolet Trax

pre-owned car

FTC

dock fee

dealer fees

transparent pricing

Subaru

Request an Explanation

Want to learn more?

Help improve this episode

More from CarEdge Live