It’s increasingly dawning on me that we’re probably never going back to a time when there was a large pool of reasonably priced and decently reliable used cars. There are many factors contributing to this and few of them look like they’re improving.
I don’t want to scare you. If you take a lot of time and do your research you’ll eventually find something. You might even get lucky and score a good deal from a friend. But we’re now at a point where good used cars are rare enough to keep prices high.
It’s Monday, so it’s time for The Morning Dump, and today we’re talking about timelines. How long before we get affordable used cars again? How many more years (or months) before Stellantis decides to bail out of Michigan? How many trips around the sun will it take for Europe to stop subsidizing gas-powered company cars? And, finally, how long before Indonesia becomes a big part of the battery supply pipeline in the United States?
Let’s see how many of these questions we can answer this morning.
The Used Car Market Might Not Truly Stabilize Until The End Of The Decade, If Ever
Both used and new cars increased in value rapidly during the pandemic as carmakers suddenly stopped producing as many cars as they had planned. A somewhat self-imposed semiconductor shortage exacerbated this problem.
If you look at the graphic above you can see clearly that the average used-vehicle listing price started a rapid ascent in April of 2021 that would peak in September of the following year. Prices have come down since, though they are way higher than pre-pandemic and don’t seem to be dropping much further anytime soon.
Part of this is due to a shortage of good quality used cars. As Cox Automotive explains, inventory levels are constrained mostly across the board, but are particularly rough for affordable vehicles:
Affordability remains challenging for consumers, and supply is more constrained at lower price points. Used cars below $15,000 continue to show low availability, with only 33 days’ supply, which is four days lower than the same time last year and 29% less than the industry average.
How? Why?
The first big reason is simply that there were fewer cars produced and, therefore, a large number of available used cars that would have been built between 2021 and 2023 were just never made. It’s hard to sell a car that never existed in the first place. A series of hurricanes and severe storms in the last few years have also taken potential quality used cars out of the inventory (though some do appear again).
Trimflation is another issue, with carmakers choosing to make more expensive trim levels over more affordable ones, thus skewing the inventory of younger used cars upwards in price.
The biggest potential issue? Leasing. The number of cars leased during the pandemic dropped a ton, reducing the number of off-lease vehicles entering the market. This is bad for the used car market and isn’t going to improve anytime soon.
Starting next month and for most of the next two years, the number of lease turn-ins — which fuel new-vehicle sales, provide valuable feedstock for profit-rich certified pre-owned programs and lure loyal customers back to the dealership — will decline rapidly.
And unless dealers, automakers and their financial partners figure out ways to get once-loyal lessees back on their formerly semipredictable three-year cycle, the long-term impacts on the industry could metastasize into something far worse than a temporary headache, some analysts say.
“In our forecast, we don’t get back to 2023 in terms of used-vehicle supply until the end of the decade,” said Tyson Jominy, vice president of data and analytics at J.D. Power. “We had fewer leased vehicles in 2021, so we have fewer people coming back in 2024, which means that in 2027, we still will not be back to normal. We’re losing a very loyal turnkey customer who moves from one lease to the next very fluidly, and we’re going to have to work harder to get them or else there’s a potential sales risk.”
This is a big issue and I’m not sure what the solution for it is.
Well, I think I know one potential solution (or huge headache in the making):
That’s a graphic from S&P Global Mobility showing lease penetration among non-Tesla EVs, which is super high. Because of a quirk in the Inflation Reduction Act, most new electric cars do not qualify for the $7,500 tax credit if purchased. However, the credit applies almost universally to leased electric cars. This is why most non-Teslas EVs you see on the road are leased and why we say you should either buy a used EV or lease a new one.
In the next few years, there will be at least one pocket of good quality used cars and those will be EVs, though whether the market wants that or not is another question. Assuming good battery condition and some kind of warranty it might be worth considering, though I am concerned about off-lease rideshare vehicles given that many rideshare drivers tend to charge vehicles to 100% as often as possible, thus potentially degrading the battery.
Stellantis Shutting Down Its Arizona Proving Grounds, What’s Next?
The shutting down of the Stellantis Proving Grounds in Arizona, announced this week, wasn’t a surprise. An earlier version of the company purchased the property in 2007 and the larger Stellantis already had facilities elsewhere, including in Michigan.
[Ed Note: I once visited APG! It was shared with Harley Davidson, so I remember seeing bikes out there. I was a 21 year-old new-hire testing the then-upcoming Jeep Cherokee KL, and my god was it hot. I remember looking at an old-school thermometer under an awning showing 116 degrees. We were putting those KLs to the test! I remember thinking how lonely it probably would be to work there; it really was in the middle of nowhere near Yucca; I still have my APG visitor card somewhere around here…-DT].
What everyone wants to know right now is: What’s going to happen to all the Stellantis properties in Chrysler’s Auburn Hills, Michigan home?
Recently, speculation has ramped up over the fate of the company’s 5.4-million-square-foot Auburn Hills complex, with Gov. Gretchen Whitmer saying earlier this month she was in discussions with the automaker about its Michigan footprint, without providing specifics.
This week, the Michigan Economic Development Corp. responded to questions about whether Stellantis had asked for or been offered any incentives related to the Auburn Hills complex or other Michigan operations.
Spokesman Otie McKinley said in an email that “Stellantis has a longstanding history in Michigan as a significant employer, and as such, the MEDC is in regular communication with the company about how Michigan can be a core location for them for generations to come.”
That’s… encouraging.
Europe Is Spending Billions Subsidizing ICE-Powered Company Cars: Report
Environmental group Transport & Environment (T&E) commissioned a study of Europe’s six biggest economies to determine how much money was being spent subsidizing the purchase or leasing of company cars for employees.
Specifically, T&E was curious if European countries were continuing to support the purchase of internal combustion-powered cars. Why? Because all of these countries have, generally, expressed concern over global warming and passed laws to limit the use of fossil fuels.
With the exception of the United Kingdom, most countries do spend a decent amount of money helping companies buy gas or diesel-powered vehicles. As Stef Cornelis, director of the electric fleets program at T&E points out, this is kind of contradictory:
Taxpayers are paying billions every year in tax benefits so company car drivers can drive polluting petrol cars. Many of which are expensive, high-end, high-polluting SUVs. This is bad climate policy and socially unfair. Governments in the UK and Belgium have introduced green tax measures and are phasing out benefits for polluting vehicles. But Governments in Europe’s largest automotive markets are failing to address this absurdity. This is why the European Commission needs to take action.”
Right now, governments in Continental Europe are probably happy people are buying anything given how crappy the European car market is this year. The fact Britain is being more aggressive here just goes to show how much of a different trajectory that country is post-Brexit.
Having seen its car companies sold to foreign entities and watched production bleed away, the UK is now in a position to make decisions that EU countries cannot. This extends to the environment and the introduction of Chinese cars.
Indonesia And America Are New Best Friends
For all its advanced battery technology, China still imports large amounts of materials to keep its battery industry running. One of those key commodities is nickel and China has historically imported it from Indonesia.
Now, according to Reuters, Indonesia is about to start exporting nickel precursor to the United States:
Indonesia aims to develop its EV industry and has for years been wooing Tesla to invest in battery making and car manufacturing in the country, trying to leverage its rich reserves of nickel, which can be processed for use in EV batteries.
Tesla did not immediately respond to a request for comment.
In order to qualify for tax credits, American-made EVs will need batteries with materials not sourced from the no-no list (China, DRC, Russia) and this gives Indonesia an opening to build out more supply partners.
What I’m Listening To While Writing TMD
MF Doom’s “MM… FOOD” was a revelation to me, 20 years ago, when it debuted. I’m not sure where I first heard it. I’m guessing my friend Dan got it as a non-Pontiac torrent and played it in his Volkswagen Golf. Either way, I was into it. It’s hard to pick a favorite so I’ll just pick “Beef Rap” as a good entry point. With its wild mix of samples (Logan’s Run and Frank Zappa) and Doom’s effortful yet laconic rhymes, if you like this you’ll love the rest.
The Big Question
Are you seeing what I’m seeing in the used car market? Is it not as bad as it seems?
It wasn’t too long ago the company SUV was applauded by Obama and his billions of dollars cash for clunkers because new SUVs were cleaner than old 20 year old cars. And the 3 year turnover allows everyone to upgrade to something newer cleaner and safer. Now apparently those billions were a scam?
But no fear I have the answer. Buy the factory and rights for the 2010 Toyota Camry and Corolla. Restart production for these great cheap transportation vehicles. Label them as used 2010 Toyotas with zero miles. You still have a great car, clean operation, dependable and since they are used 2010s no regulations after 2010 are needed to be considered. And so many old unreliable dirty cars get off the road and poorer families can upgrade their transportation.
On a final thought, now that everyone at Autopian is going all fancy I was wondering. Since you didn’t find an Autopian transport RV are you still trying to source a manual bus/RV with certain things or do you have a new wish list?
I have the answer. Buy the factory and rights for the 2010 Toyota Camry and Corolla. Restart production for these great cheap transportation vehicles.
And move that factory to China.
That picture of the stellantis building has a building line just in the correct place that I read the banner to be “there’s only gone er”. Which appropriately sums things up?
As Autotrader keeps informing me, I think it’s getting better, as what they’ll give me for my 10 year old Forester, and what Carvana will give me for my 7 year old Bolt EV is in the 4 digit range now, and they’re both running fine.
Granted we keep throwing money at the Forester, now it’s decided one of the headlight connections isn’t very solid so will randomly flake out, that’s fun. The Bolt is super solid, small dent in the front fender but otherwise excellent condition and only 3 year old battery that’s never seen a fast charger.
I’ve been seeing small, but measured improvements in the used car market. Granted, I mostly browse the four-figure and under category, so ymmv.
One thing I noticed in relation to that graph up there is that if you combine it with the CPT Inflation calculator, it’s not as bad as it first seems. $22,000 in January of 2022 equals $24,672.49, which is less than $1,000 lower from where things are actually at now according to the graph. In other words, we’re currently not that far from 2021.
With that out of the way, I do things are going to really suck in around ten years or so when all of the various cars having batteries of some sort begin to drop off. Whether they’re hybrids, PHEVs, or BEVs, no one is going to want to spend the money it takes to return them to the road once the battery packs crap out.
The aftermarket may come up with some creative solutions, but the days heading to RockAuto and spending $500 to easily return a car with “good bones” to the road are likely numbered.
Apparently EVs are the perfect vehicle for bringing back kit cars. And with 3D printing maybe allow everyone to design their own vehicle. You buy the used skateboard cheap recycle the plastic body and print out a new plastic body from a catalogue spec based on your skateboard. Damn who knew this car journalism stuff was so easy? Or is it car manufacturers stuff is so easy? Maybe both?
I think it’s only going to get worse. Nothing is over-engineered anymore, so cars that go 300k are going to be few and far between. Just look at the “lifetime” fluids in transmissions. Nobody makes that claim believing their stuff is going to last a long time. It just has to make it through the warranty period.
Because of that, there can’t be good, cheap cars. If it’s cheap, it’s old and unreliable. If it’s good, it’s too new and costs a lot. The overlap between when a car is still good and when it gets cheap is going to continue to shrink.
May I point out it wasn’t that long ago when cars had 12 months 12,000 mile warranty. Now 5 years and more are available. Now they are rolling it back but the days of cars celebration at 100,000 miles is gone and buying cars at 200,000 miles for more than pennies is still around.