Welcome to the North American Subaru Impreza Owners Club Monday January 20, 2020
Home Forums Images WikiNASIOC Products Store Modifications Upgrade Garage
NASIOC
Go Back   NASIOC > NASIOC General > News & Rumors > Non-Subaru News & Rumors

Welcome to NASIOC - The world's largest online community for Subaru enthusiasts!
Welcome to the NASIOC.com Subaru forum.

You are currently viewing our forum as a guest, which gives you limited access to view most discussions and access our other features. By joining our community, free of charge, you will have access to post topics, communicate privately with other members (PM), respond to polls, upload content and access many other special features. Registration is free, fast and simple, so please join our community today!

If you have any problems with the registration process or your account login, please contact us.







* As an Amazon Associate I earn from qualifying purchases. 
* Registered users of the site do not see these ads. 
Reply
 
Thread Tools Display Modes
Old 01-16-2020, 06:28 AM   #1
AVANTI R5
Scooby Guru
 
Member#: 73805
Join Date: Nov 2004
Default Gently Used Cars Posing Harsh Threat To New Vehicle Sales



Quote:
Consumers may finally be nearing a breaking point as new vehicle prices continue to rise, causing a seismic shift in the marketplace as shoppers scramble to find the models they desire at prices they can afford—and that’s danger for the automakers.

That was the sobering message from Cox Automotive economists during a briefing for the media in Detroit on Monday.

Cox Automotive is an automotive services company headquartered in Atlanta, Ga.

Ed Garsten
The average sticker price for a new vehicle last year was $40,000 according to Cox senior economist Charlie Chesbrough who warned, “that's a huge amount of money for most Americans.”

Indeed with the growing popularity of crossovers, SUVs and pickup trucks and the decline of generally less expensive passenger cars, sticker prices have been on a steady road north, giving consumers fewer choices on the lower ends.

In 2012, for example, vehicles priced below $30,000 accounted for 51% of the market, but by last year, that share shrunk to just 28%, according to Cox research. In comparison, vehicles priced above $50,000 accounted for just 6% of the market in 2012, but grew to 24% last year.

If new vehicles cost so much, then how did the industry crack the 17 million mark last year? The answer, in large part, is automakers laying on incentives for retail sales and turning to a generally less profitable fallback strategy.

“What's keeping us at 17 million is the fleet side of the business,” explained Chesbrough, who pointed out that a change in federal tax laws in 2017 provided a windfall for businesses who bought new vehicles for their commercial fleets. The new regulations allowed for increased tax write-offs for vehicle depreciation—some as high as 100%.

But after two years of being able to take advantage of that spiff, fleet sales are liable to slow down, putting more of the sales onus on the retail side, that's already challenged by a growing number of consumers who simply can't afford a brand new vehicle.

Ed Garsten
The most logical place for priced-out shoppers to turn are used car lots where an infusion of what's known as “gently used” vehicles are becoming available. Those are vehicles from model years 2000-2004. In addition, about 4.1 million vehicles turned in at the end of leases are expected to show up on used car lots this year, according to Chesbrough. Good news for shoppers, scary news for automakers.

“This is a real threat to the new vehicle side because these vehicles are selling at a fraction of the price of new vehicle counterparts,” said Chesbrough. “The products consumers are most interested in are selling at 30%, 40%, 50% discount to their new counterparts.”

Off-lease vehicles, model years 2000-2004 are lower-cost options for new vehicles.

Ed Garsten
The attraction to gently used vehicles is evident in rising sales. Combined, 28 million new and gently-used vehicles were sold last year with gently used, model year 2000-2004 vehicles, accounting for 11.6 million units, or 41% of the total market.

Further evidence of the affordability challenge is what could be rising interest rates charged on so-called subprime car loans given to the most marginal customers.

“At the end of December we measured 18.9% average rate for a subprime new vehicle loan, said Cox Chief Economist Jonathan Smoke. “That's more than two percentage points relative to the year prior. It's substantial. It helps explain why affordability is one of the industry's big challenges.”

Despite an array of threats hanging over the industry, Cox economists remain fairly upbeat for this year, predicting only a slight decline in new vehicle sales to about 16.6 million units. It would be the first time in more than a half decade sales fell below 17 million.

But Chesbrough warns, while 16.6 million is still a “healthy” number, “be prepared, it's gonna be a rough ride.”
* Registered users of the site do not see these ads.
AVANTI R5 is offline   Reply With Quote
Sponsored Links
* Registered users of the site do not see these ads.
Old 01-16-2020, 09:29 AM   #2
arghx7
Scooby Specialist
 
Member#: 232940
Join Date: Dec 2009
Location: cold
Default

the whole economy is built around low interest rates now (6 and 7 year auto loans). If they go up more than a point or two the auto industry will really be in trouble.
arghx7 is offline   Reply With Quote
Old 01-16-2020, 10:18 AM   #3
SoFlaRRRex
Scooby Newbie
 
Member#: 407565
Join Date: Dec 2014
Chapter/Region: South East
Location: Raleigh, NC
Vehicle:
2015 WRX
Red

Default

The whole economy is built around people living at or just above their means. Living balance transfer to balance transfer to keep those promotional interest rates low on their life-long debt.
SoFlaRRRex is offline   Reply With Quote
Old 01-16-2020, 11:01 AM   #4
godfather2112
Papi Chulo
Moderator
 
Member#: 53794
Join Date: Jan 2004
Chapter/Region: RMIC
Location: Boner kill city
Vehicle:
... 2017 BMW M2
2017 F-150

Default

Except now lenders are starting to crack down on auto loans as defaults and repos begin to sky rocket. There was an article recently on dealerships lying on credit applications and inflating the persons income to increase chance of approval.

Now would be one hell of a time to open and tow and impound lot. Who wants go in on it with me?
godfather2112 is online now   Reply With Quote
Old 01-16-2020, 11:27 AM   #5
Keshav
Scooby Specialist
 
Member#: 1654
Join Date: Jun 2000
Chapter/Region: NWIC
Location: Seattle, WA, USA
Vehicle:
2019 GoCycle GX
MV Agusta Brutale S

Default

the auto industry isn't the whole economy, thank god. Just the part we talk about on this forum.

It would be great if there wasn't an artificial mechanism creating endless money available to those who sell debt. Your bank account would actually pay a return. The issue is that Keynes's garbage theories are what the world banks on as true. Animal Spirits! Paradox of Thrift! Gotta pump up that spending, guys! Print more money, this time! Stimulus! QE!

BS.
Keshav is offline   Reply With Quote
Old 01-16-2020, 11:32 AM   #6
Dex
Scooby Specialist
 
Member#: 163775
Join Date: Nov 2007
Location: Getting schwifty
Vehicle:
2014 Ford Fiester ST
Murica Red

Default

Quote:
Originally Posted by godfather2112 View Post
Except now lenders are starting to crack down on auto loans as defaults and repos begin to sky rocket. There was an article recently on dealerships lying on credit applications and inflating the persons income to increase chance of approval.

Now would be one hell of a time to open and tow and impound lot. Who wants go in on it with me?
Truth. There's a company called Lender Recovery Services that I regularly drive past near my house, whose lot has nearly tripled over the past few years. There used to only be a handful of cars impounded there, now it's packed. The most telling part is it's not Carollas and Kias in there, but large RVs, SUVs with fancy wheels, luxury cars, etc.

Where's the breakdown? When someone comes in and shows an income that can barely afford the car they're trying to buy, why is it okay to just go "well, that's your problem, ace, enjoy your temporary new car".

I know it's unrealistic, but there should be a required personal finance class before you're allowed to finance a car.
Dex is offline   Reply With Quote
Old 01-16-2020, 04:12 PM   #7
godfather2112
Papi Chulo
Moderator
 
Member#: 53794
Join Date: Jan 2004
Chapter/Region: RMIC
Location: Boner kill city
Vehicle:
... 2017 BMW M2
2017 F-150

Default

Quote:
Originally Posted by Dex View Post
Truth. There's a company called Lender Recovery Services that I regularly drive past near my house, whose lot has nearly tripled over the past few years. There used to only be a handful of cars impounded there, now it's packed. The most telling part is it's not Carollas and Kias in there, but large RVs, SUVs with fancy wheels, luxury cars, etc.

Where's the breakdown? When someone comes in and shows an income that can barely afford the car they're trying to buy, why is it okay to just go "well, that's your problem, ace, enjoy your temporary new car".

I know it's unrealistic, but there should be a required personal finance class before you're allowed to finance a car.
Dealers get paid by lenders for loan submission / approval so they have an incentive to inflate someone’s income for approval. That said, lenders are starting to catch on and now have a clause stating that if the dealer is found to have altered the income of the applicant, the dealership is responsible for the financial burden / difference.
godfather2112 is online now   Reply With Quote
Old 01-16-2020, 04:51 PM   #8
dwf137
Scooby Specialist
 
Member#: 161333
Join Date: Oct 2007
Chapter/Region: NWIC
Location: Seattle
Vehicle:
'18 Golf R
'14 Outback

Default

Okay, great discussion, but did anyone catch the fact that they're comparing brand new car sales to sales of 15+ year old cars? WTF even is this article about? People can't afford brand new $40K cars, so instead they're buying a $3K piece of crap?

Quote:
The most logical place for priced-out shoppers to turn are used car lots where an infusion of what's known as “gently used” vehicles are becoming available. Those are vehicles from model years 2000-2004. In addition, about 4.1 million vehicles turned in at the end of leases are expected to show up on used car lots this year, according to Chesbrough. Good news for shoppers, scary news for automakers.
dwf137 is offline   Reply With Quote
Old 01-16-2020, 04:51 PM   #9
n2oiroc
Scooby Specialist
 
Member#: 141952
Join Date: Feb 2007
Chapter/Region: MWSOC
Location: milwaukee'ish
Vehicle:
18 golf arrrr!

Default

2000-2004 model year cars are "gently used"?
n2oiroc is online now   Reply With Quote
Old 01-16-2020, 05:22 PM   #10
godfather2112
Papi Chulo
Moderator
 
Member#: 53794
Join Date: Jan 2004
Chapter/Region: RMIC
Location: Boner kill city
Vehicle:
... 2017 BMW M2
2017 F-150

Default

Quote:
Originally Posted by dwf137 View Post
Okay, great discussion, but did anyone catch the fact that they're comparing brand new car sales to sales of 15+ year old cars? WTF even is this article about? People can't afford brand new $40K cars, so instead they're buying a $3K piece of crap?
Wrx pulls a premium a week before race wars.
godfather2112 is online now   Reply With Quote
Old 01-16-2020, 09:12 PM   #11
turboblew
Scooby Newbie
 
Member#: 508225
Join Date: Nov 2019
Chapter/Region: South East
Location: North FL
Vehicle:
2006 Subaru
Fusia

Default

Quote:
Originally Posted by arghx7 View Post
the whole economy is built around low interest rates now (6 and 7 year auto loans). If they go up more than a point or two the auto industry will really be in trouble.
I hadnt been to elementary school in a real long time... what kind of an idiot finances a vehicle beyond 4yrs???? I thought people were joking about 72 or 84 month terms...

We really need 14% vehicle loans and double digit mortgage rates again. Think about it... banks are paying <2% for savings deposits... thats pathetic!
Apparently cash isnt king anymore.
turboblew is offline   Reply With Quote
Old 01-16-2020, 09:20 PM   #12
Skylab
n00b Moderator
Moderator
 
Member#: 4263
Join Date: Feb 2001
Chapter/Region: SCIC
Location: Encinitas
Default Gently Used Cars Posing Harsh Threat To New Vehicle Sales

18.9%!!!
Oh the huge manatee.

-You have money, but poor credit (doubtful).

Or

-You have no money, and no credit, and this car loan will further widen that gap.
WTF.

18% x 84mos ≠ affordability
Skylab is offline   Reply With Quote
Old 01-16-2020, 09:33 PM   #13
oichan
Scooby Specialist
 
Member#: 492327
Join Date: Oct 2018
Location: A garage in the Midwest
Vehicle:
19 WRX / 16 STI
17 Golf-R / 16 FiST

Default

Quote:
Originally Posted by n2oiroc View Post
2000-2004 model year cars are "gently used"?
Yeah, my thoughts exactly..
oichan is offline   Reply With Quote
Old 01-16-2020, 10:12 PM   #14
SubaDuba420
Scooby Specialist
 
Member#: 102793
Join Date: Dec 2005
Chapter/Region: NESIC
Vehicle:
2016 WRX
Ugly Sedan

Default

Quote:
Originally Posted by Dex View Post
I know it's unrealistic, but there should be a required personal finance class before you're allowed to finance a car.
Quote:
Originally Posted by Skylab View Post
18.9%!!!
Oh the huge manatee.

-You have money, but poor credit (doubtful).

Or

-You have no money, and no credit, and this car loan will further widen that gap.
WTF.

18% x 84mos ≠ affordability
Just for S#!ts & Giggles:
$35k @ 18.9% for 72 months = $816/month payment, actual vehicle cost of $58,765, for total interest cost of $23,765
SubaDuba420 is offline   Reply With Quote
Old 01-16-2020, 10:34 PM   #15
turboblew
Scooby Newbie
 
Member#: 508225
Join Date: Nov 2019
Chapter/Region: South East
Location: North FL
Vehicle:
2006 Subaru
Fusia

Default

Quote:
Originally Posted by Skylab View Post
18.9%!!!
Oh the huge manatee.
-You have money, but poor credit (doubtful).
Or
-You have no money, and no credit, and this car loan will further widen that gap.
WTF.

18% x 84mos ≠ affordability
credit ratings...lol. Assets are better.
turboblew is offline   Reply With Quote
Old 01-16-2020, 11:05 PM   #16
n7slc
Scooby Newbie
 
Member#: 443545
Join Date: Mar 2016
Chapter/Region: RMIC
Location: SLC, Utah
Vehicle:
2015 WRX Limited CVT
Lightning Red

Default

Gently used to me means something no more than a few years old. 2000-2004 is worn out.

I had this discussion with a family member recently. There’s no truck or suv that’s worth more than $50k (even that is debatable). The manufacturers are getting it because banks are willing to loan 84-months. If loans were 5-years max, then manufacturers would have to bring prices back down to reasonable levels otherwise nobody would be buying. I wouldn’t be a bit surprised if there’s more than 100% markup in most new high-priced vehicles.
n7slc is online now   Reply With Quote
Old 01-17-2020, 09:03 AM   #17
Sid03SVT
Scooby Specialist
 
Member#: 183032
Join Date: Jun 2008
Location: CT
Vehicle:
1983 HeelToeExpress
changes daily

Default

I've purchased 14 year old cars before, they were called winter beaters and were about $500+/- each; but I was in high school/college. once I started adulting i did not buy older cars anymore because I had a job so I needed something reliable.

I did buy a 32 year old car once, but that was a 1966 mustang, I was deliberately looking for that car, not "oh gee I need a car, this is what I can afford".

As for new vehicle prices; agreed, they are ridiculous.
Sid03SVT is offline   Reply With Quote
Old 01-17-2020, 09:28 AM   #18
Angelus911
Scooby Specialist
 
Member#: 89967
Join Date: Jun 2005
Chapter/Region: NESIC
Location: MA
Vehicle:
2012 Impreza Sport
DGM

Default

IMO grabbing cars just off lease is a good balance between depreciation and still owning a newer car. Low miles, already a decent depreciation hit, but still a newer car.
Angelus911 is offline   Reply With Quote
Old 01-17-2020, 09:35 AM   #19
godfather2112
Papi Chulo
Moderator
 
Member#: 53794
Join Date: Jan 2004
Chapter/Region: RMIC
Location: Boner kill city
Vehicle:
... 2017 BMW M2
2017 F-150

Default

Quote:
Originally Posted by Skylab View Post
18.9%!!!
Oh the huge manatee.

-You have money, but poor credit (doubtful).

Or

-You have no money, and no credit, and this car loan will further widen that gap.
WTF.

18% x 84mos ≠ affordability
Hell, even first time auto buyers with low / no credit can get under 10% on a new car. Usually Nissan and Honda have these programs. I’m guessing it’s **** credit and rolling in negative equity multiple times. Morons.

Quote:
Originally Posted by Angelus911 View Post
IMO grabbing cars just off lease is a good balance between depreciation and still owning a newer car. Low miles, already a decent depreciation hit, but still a newer car.
Eh, depends on the vehicle. German vehicles you’re 100% correct to buy off lease or 2-3 years old. American trucks you’re better off buying new than 2-3 years old, same Toyota trucks and SUV’s. Passenger cars seem to take a nice hit though.
godfather2112 is online now   Reply With Quote
Old 01-17-2020, 10:00 AM   #20
alape8
Scooby Newbie
 
Member#: 337748
Join Date: Nov 2012
Location: Denver
Default

Quote:
Originally Posted by n2oiroc View Post
2000-2004 model year cars are "gently used"?
Beat me to it...thought it was a typo, but they repeat it. Wtf? Good condition or not, those aren't "new car" substitutes
alape8 is offline   Reply With Quote
Old 01-17-2020, 10:02 AM   #21
Sub!eDr!ver
Scooby Newbie
 
Member#: 88924
Join Date: Jun 2005
Chapter/Region: South East
Location: Atlanta, GA, USA
Vehicle:
2014 Cadenza, Sedona
Past: Tribeca LGTx2 Justy

Default

Based on the wording, that article was likely written in 2014. At that time a 2004 was only 10 years old, still rather old. When I was young, my dad never kept a car beyond 8 years or 100,000 miles. Once they reached 8 years, he'd sell them for ~$500 or less.

I usually buy my used cars at 1-3 years old, not 10 or more.

On the 100% markup: On Trucks, absolutely. On cars, really doubtful, unless in the luxury range.
Sub!eDr!ver is offline   Reply With Quote
Old 01-17-2020, 02:32 PM   #22
White out
Scooby Guru
 
Member#: 46277
Join Date: Oct 2003
Chapter/Region: MWSOC
Vehicle:
** LP640
Viper GTS

Default

My "gently used" 20 year old daily driver . . .



. . . it's a much better buy for the next person than a new car.
White out is offline   Reply With Quote
Old 01-17-2020, 02:54 PM   #23
subyski
Scooby Specialist
 
Member#: 202642
Join Date: Nov 2007
Chapter/Region: RMIC
Location: Centennial, Colorado
Vehicle:
08 Impreza,80Vette
68 Impala, 15 SantaFe

Default

When I first bought used, it was 7 yrs old, when I bought my next used car, it was 40 years old (68 Impala, and still have it) but not a DD. Then next two cars were new. Next time, looking used/CPO.
subyski is offline   Reply With Quote
Old 01-17-2020, 02:58 PM   #24
arghx7
Scooby Specialist
 
Member#: 232940
Join Date: Dec 2009
Location: cold
Default

Automotive OEM's net profit margins are in the 5 to 10 % range typically across the full lineup. The sticker prices are high but consumer demand for features and regulatory requirements play into that.
arghx7 is offline   Reply With Quote
Old 01-17-2020, 03:27 PM   #25
Doobie Scoo
Scooby Specialist
 
Member#: 116123
Join Date: May 2006
Chapter/Region: NWIC
Location: Seattle
Vehicle:
93 MR2 T
Blue metallic

Default

I only buy used cars. I am also mechanically adept enough that the only work I have ever had done at a shop is getting wheel bearings pressed out and in, and rotors turned due to lack of equipment at home.

I also have 6 cars, so if something decides not to work, it takes 3 or 4 minutes to get into something that does. When you have a few spares it is not a big deal for your main car to go down for two weeks while you pull things apart, wait for parts to arrive, and put it back together.

Soon we will be getting rid of our newest car (15' Mazda 3) for something older. Wife is looking at 2008 ish 335i or Z4. Doing so will cut out about $350 a month in car payment and insurance costs.

If you buy a 3k to 7k "beater" instead of a cheaper new or lightly used car you can save anywhere from 500 to 1000 per month on payment and insurance. After a couple months you have a nice vehicle repair savings or enough to afford a second reliable fun spare (like a miata) to drive in case your main goes down.

Having multiple cars if you're an enthusiast is a boon as it lets you not be so picky about the daily car. There's 5 sports cars at my house, so it wouldn't bother me to daily something craptastic and safe like a 2006 Chevy Impala, or efficient like a prius.
Doobie Scoo is offline   Reply With Quote
Reply

Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Forum Jump

All times are GMT -4. The time now is 11:53 PM.


Powered by vBulletin® Version 3.7.0
Copyright ©2000 - 2020, Jelsoft Enterprises Ltd.
Powered by Searchlight © 2020 Axivo Inc.
Copyright ©1999 - 2019, North American Subaru Impreza Owners Club, Inc.

As an Amazon Associate I earn from qualifying purchases.