When I sold my car to a dealer last month I got what I thought was a fair deal. Looking at the data I’m wondering if I could have gotten a better deal by holding out a little longer. Wholesale prices of used cars are on the rise, but that doesn’t necessarily mean you’re going to pay more for a used car. This is capitalism, manifest.
In other exciting news, if you were enjoying a succulent Chinese meal in Beijing you might have noticed a lot of new plug-in vehicles. In fact, more than half of the new vehicles sold in China last month were either full EVs or some form of PHEV. That hasn’t happened in the United States and may not for a while, but more than half of automakers will be replacing their limp CCS cords with mighty Tesla NACS cords for reasons beyond just supercharging.
And, finally, before we say tata and farewell to this Morning Dump, our favorite Chevy dealership in Malta, NY goes corporate.
Used Cars Are Worth More And Less At The Same Time
I feel like studying modern economics is like thinking super hard about a Christopher Nolan film. Up is down. Down is up. The deeper you look the more complex and contradictory it seems. Overall, I think the questions are more elucidating than the answers, which are generally quite straightforward (Cooper is dead, Cobb is stuck in the dream).
Prices for used cars shot up dramatically during the pandemic as new car supply was limited. You can read more about this effect in my Trimflation article, but it makes logical sense. With fewer new cars being made, more people were holding onto their old cars for longer, reducing the amount of used inventory. The lack of new inventory also meant fewer people were trading cars in, compounding the issue. If that wasn’t bad enough, leasing went down, therefore reducing the number of off-lease cars available now (for 2-3-year lease terms).
Somewhat inevitably, new car inventory climbed back up and incentives soared, causing wholesale used car values (a reasonable proxy for the price that a dealer pays for a used car) to come down from their peak. The main measure of this, the Manheim Used Vehicle Value Index, started to flatline this summer and even went up last month. What’s happening? Are used cars just getting more expensive again?
Not quite. According to Cox Automotive/vAuto, the average listing price of used vehicles has similarly flatlined this year, but actually started to go down in July!
How is it that it’s more expensive for dealers to buy cars and yet they’re selling them for less money?
There are a few reasons and it shows why it’s getting harder to be a dealer and easier to be a customer.
First, we can’t dismiss that there’s probably some CDK Global Ransomware attack noise in the numbers as transactions were impaired at the end of June and the beginning of July. Cox Automotive says they think the outage “appears to have had less of an impact on the used-vehicle market” and that seems correct, though I’m sure it had some impact.
Second, the same economic factors that are impacting new car sales (rates, consumer confidence, inflation) are hitting used car purchases as well, though in slightly different ways. People are still keeping their cars for longer out of an inability to purchase or out of economic fear and one way to pull people off the sidelines and into a new car is to offer a good price on a trade-in. This, of course, inflates the cost for a dealer to get a car but doesn’t necessarily inflate the sales price if the dealer then has to try and sell the car to another wary consumer.
Third, we’re coming to the end of all those three-year leases run in 2021, as Cox points out:
“We are just beginning to see lower lease maturities for the key 3-year-old segment, and that impact will be felt over the rest of this year and into 2025 and 2026.”
This is further constraining supply.
Fourth, and this doesn’t get enough play usually, but dealers or private party sales used to be the only game in town for selling your used car. Now there are a plethora of online retailers like Carvana who, even though I sold my car, keep bugging me to buy my Forester.
Dealers basically have to have used cars to keep their businesses running and those cars have to come from somewhere. Car Dealership Guy had basically the same thought in his newsletter when he saw the data, and got this great quote:
Cars are a supply/demand business and retailers are dealing with both a lower supply of good cars and also weaker demand. This sales rep in Atlanta makes clear the impact as he notices dealers holding onto trade-ins that aren’t even that good just to have a car, rather than passing it onto auction.
This isn’t a great market for dealers, but it could be great for consumers. This means you can get a better deal on your trade-in when you go to buy new or, potentially, get a nicer deal on a used car. I’m hedging a bit here on buying a used car because there just aren’t as many good-quality off-leased cars as there usually are so quality is going to vary.
New Energy Vehicles Accounted For 50.7% Of All Sales In China Last Month
China is, by far, the biggest market for vehicles with a plug. The country groups all plug-ins (whether extended-range EVs, battery electric vehicles, or more traditional PHEVs) into one category called New Energy Vehicles, or NEVs.
Last month, NEV sales were up 37% year-over-year, which means that they hit a record market share of 50.7% of new car sales. That’s a big deal.
Reuters does a good job of putting this into context:
NEV sales accounted for just 7% of total vehicle sales in China three years ago, but its heavy investments in EV supply chains have propelled the growth of domestic EV industry, leaving many established foreign brands scrambling to catch up.
By contrast, the share of electric and hybrid vehicle sales in the United States amounted to 18% in the first quarter of this year, according to the U.S. Energy Information Administration, a research firm.
It’s a vast understatement to point out that the Chinese marketplace is different from the European or American marketplaces. Still, it does show that with a massive push, it’s possible to switch consumer behavior.
The Other Reason Why Everyone Adopted Tesla’s NACS Plug
More than a year ago I wrote that Ford was right to switch over to the Tesla NACS standard. My reasoning was largely that companies like ElectrifyAmerica had so dramatically screwed up the rollout of the alternative CCS charger that giving EV consumers access to Tesla’s superior supercharging network was worth trusting Tesla on this one thing.
I still stand by that, but Automotive News makes another great point about why the switch is good:
While the real prize for EV makers was access to the Supercharger network, analysts said there are concrete advantages to the North American Charging Standard connector over its Combined Charging System counterpart.
Tesla’s plug is smaller and can be used for DC fast charging on a public network and AC slow charging at home. For non-Tesla vehicles, the bulky Combined Charging System plug is used for fast charging and a smaller J1772 connector is used for AC charging.
“The more uniform you can make the charging experience with every vehicle and every charging location, the better for consumers,” said Teske. The Tesla plug is more like a gasoline nozzle in terms of size and maneuverability, creating a more familiar experience for consumers transitioning from an internal combustion engine vehicle to an EV.
This is quite logical. I’ve never had a big issue using the different cord styles, but I also can’t charge at home so all of my home charging is limited to freeloading off of friends. Being able to use one simple, clean plug for everything is a nice advantage.
Mary Barra Gets It
We’ve already pointed out that the single-camera parody of The Office produced by a Chevy dealership in upstate New York is probably the best new TV show. Someone at General Motors seems to have noticed and so we get a Very Special Episode where the team goes to GM HQ in Detroit.
In fact, CEO Mary Barra even makes a cameo (as do a bunch of other GM C-Suite folks). It’s cute. It’s fun. If you can’t see the video above click here.
These videos have been a success on TikTok and the key is the effervescent and ridiculous Grace, who came up with the idea and stars in these short films.
Enjoy the Rado!
What I’m Listening To While Writing TMD
Just in case David didn’t get a joke, here’s the original “Succulent Chinese Meal” guy. RIP Jack Karlson.
The Big Question
Have you ever traded a car into a dealership? How was the experience?
Higher wholesale prices inevitably lead to higher retail prices. If you’re in the market for new right now, higher wholesale is good. If you’re in the market for used? If it’s not a certified pre-owned (the only used cars that have incentives from the manufacturer), it’s very bad.
I was going to be shopping for a new pickup in the next few years, but with the prices in the stratosphere, powertrain options becoming awful, and the non-stop reliability issues post-pandemic vehicles seem to have (I’m a technician, I see it daily at work), screw it, I’ll drive the wheels off my pair of 1996 beaters I ended up with over the last couple of years (GMC Sonoma and Toyota Avalon). They run perfectly, I’ve replaced all of the common wear and maintenance items over them in the past year, and they don’t quit. Screw a $1000/month payment, I paid all of $4000 for the pair of cars, and added all of the modern features I wanted (TPMS, Android Auto, USB charging, remote locks, backup cameras) for just a few hundred more.
I’m leaning towards keeping my car we’d likely replace, but seeing how Toyota is going with the Grand Highlander, it is going to be a while.
My daily has 160k miles on it, having a backup isn’t a bad idea, and the other car isn’t going to net much via trade in. Maybe I put it up for private sale and see what happens. I believe a 2012 is too old for Carvana or Carmax to show much interest, even though it has low miles.
Hi I’m Hugh Honey. This is my partner Vick Vinegar. We’re partners in real estate and partners in life.
Can you please reconsider your use of video on this site? The content is fine, I don’t even mind the adds, but this stuff popping up and auto playing all the time while we are reading is a terrible user experience. I purposely don’t use add blockers to make sure your revenue stream is supported, but this crap makes me want to resort to them. Just default them to pause and don’t have these windows bouncing all over the site.
Cancelled my subscription because of this. Autoplay video is a scourge on the Internet. Fun fact: those videos stream in HDR by default, which causes weird screen brightness issues as you scroll on modern Android phones (to be fair, this is partially Google’s fault).
Nope! We just keep our vehicles.
When my wife traded her 02 Sentra on her 2013 Sienna, she got $200. I could have sold it for more, but she didn’t want the hassle.
I then sold her snows (on rims) for $250.
I sold my old car privately. It netted a good chunk more than the scrap value I was going to get on trade and surprisingly sold the same day I listed it. In this instance it was worth my time. I also wanted to give it a good sendoff, so it was detailed and photographed well.
The previous car to that I’d traded and got scrap. Which was fair because it was a rustbucket only good for the scrapyard.
Had one trade in where right at the end they told me to keep my car I was going to trade in and they still gave me the value, which would’ve been about $750 since it was an old car. I sold that car for $1k later that week.
I’ve traded in one car to a dealership. It was in L.A. and the market was soft at the time (2011-ish) for the ’86 ranger I REALLY wanted out of. Otherwise I sell or trade privately save for a few I have donated to NPR.
If I could figure out how to offload this albatross Sportsmobile at a dealer I would. I don’t need another car to replace it, though.
I think I’ve done 2 trades and 2 private sales, but all were Craigslist, pre-FB marketplace. The trades I didn’t want to bother with some kind of fix that would have been needed for a viable private sale or more seemed like it was going to be a slippery slope of needing more things. If I did want to bother with it, I probably wouldn’t have been thinking of getting rid of it anyway. Even something that doesn’t need anything, I know how picky I can be, I’m not sure I want to deal with the same from people who may or may not even be realistic either about a used car.
Below a certain valuation point like V10 said below it does make more sense to go private party if you can swing the time/energy/logistics, but I don’t know that I’ll keep my current car long enough for it to reach that point, compared to just being done with it. We’ll see what valuation looks like with the Carvanas etc. when the time comes, if they are giving more to purchase cars. I think most people I know that have gotten new cars in the last few years have gotten at least a quote from them, and at least half sold to them instead of trading in at the same sale as they gave much more for the old car than a dealer would, more than enough to offset the sales tax.
Back in my touring band days I had an ’04 Astro, which was big enough for our 3 piece band and our gear. It did the job, but was overall a giant piece of shit. I traded it in because if I was to be a private seller, I could not for the life of me look anyone in the eye and say they should buy it. Let the sleazy dealers do that.
I’ve traded multiple vehicles to dealers. I hate dealing with idiots who call, text, or walk up thinking they’re going to get a truck that showroom new with 100,000 miles on it
I traded my GTI in on my Kona N and had discussions with dealerships about trading it in on a Camaro and BMW 3 Series before that. The experience varied pretty significantly between dealerships. The Camaro was at a Mazda dealership and they gave me an offer that was on the high end of market value and, annoyingly, kept calling me for weeks knocking little increments off the Camaro to entice me.
By the end it would’ve been a good deal but my wife and I had started house shopping at that point and I didn’t want anything on my credit that made it look like I was impulsive. As you all might expect my wife also came out as staunchly anti pony car around that time and probably would’ve found a way to stop me regardless. This was during the peak COVID price insanity as well, so the GTI essentially didn’t depreciate in the two years I owned it…and when that combined with all the issues it was having I was like “hmmm of all the times to take a mulligan this seems like a good one”.
I then test drove a few certified BMWs after all the house stuff was settled and they did not want to make a deal at all. They tried to low ball me significantly on my trade and when I mentioned I was offered several thousand more a few weeks earlier the salesman rudely told me I should go sell it to them then. He was a real jackass. I tried my usual approach of leaving and reaching back out later to try to get a better deal but all he was willing to do was try to con me into some sort of exotic financing scam.
The issue wasn’t that I couldn’t afford the car, it was more that I didn’t want to get ripped off. Unfortunately I was also small potatoes for them. They’re not going to prioritize a guy with excellent credit who’s looking to get a deal on a $40,000 car when people are coming in every day and financing six figure cars at 12% APR. When I overhead the sales that the employees were trying to close on both sides of me each person was potentially taking on a $1,000+ payment. That’s patently absurd to me but for salesmen it’s great business.
Eventually the dealership I got my car at was fair and straightforward. They pretty much offered me exactly what the car was worth as a trade in and knocked money off MSRP/gave me an incredible interest rate by current standards. Was it a GREAT deal? Probably not. But it was a good one, and those were hard to come by in 2022.
I find the way people are treated at the various levels of dealerships to be fascinating.
Normally, I find that the luxury dealers are used to dealing with people that have more disposable incomes and therefore more choices so they don’t really bullshit with you much and it’s a more straightforward transaction with fewer games.
The flip side of that is the game being played in the trade-in part of the transaction. This may only apply to where I am in GA and other states that work the sales tax or registration taxes the same way:
In GA, you will pay a one-time, 7% tax on the sale of the vehicle for new and used cars at a retailer (does not apply to private party). But, if you trade in a vehicle the trade value is subtracted from the purchase before the 7% tax is added. So if you buy a $30K vehicle the tax would be $2100. If you traded a car for $5K you pay tax on $25K at $1750.
In my experience the average buyer at a normal car dealer (Chevy/Ford/Hyundai/VW/etc) is less likely to understand this math where the luxury car buyer is more likely to understand it.
So, at the “normal” dealer you get games on the purchase price playing around the four square game and showing you only what your monthly payment is, etc. At a luxury dealer I get gamed on the trade in.
They know that I will save dollars on taxes and they know I know this. So the trade offer will be much below what I could get elsewhere but within the range of still saving a few hundred in total due to the tax difference.
I almost always just trade the vehicle in. The hassle that’s saved is always worth it to me and really the difference once everything is calculated is negligible. If I had more rare or interesting cars that have a following in the enthusiast market I might play differently but I just don’t want to spend my Saturday morning with someone going over every paint blemish telling me how much he’ll have to spend at the body shop repairing whatever I’ve ignored for the past few years.
We only have so much time to live, why spend it like that?
In my experience selling cars, selling to someone with shit credit did not net me any more money than the 0% deal. New car sales were about volume. Used car sales were about trying to maintain the profit margin. I got a piece if you financed through us or bought any of the junk sold in the F&I office. Also got a bonus for a good customer service survey.
If anything, I liked the 0% deal better because there was no drama. They were getting a loan, they could buy the car. People with garbage credit might not even get offered a loan, so now you spent 2 hours working a deal just for them to have to walk away because no one will finance them. Now, some people with shit credit were just happy to get offered a loan. They’d buy the car for any price basically, if you could just get them a loan. So in that case, it could be an easy deal if the banks played along.
Even more frustrating, people with bad credit would lie about it. Then when we ran their credit report, you saw they had a bankruptcy six months ago. Come on man, we’re going to see it at some point.
I traded a Ford Escape with 60K miles that started to feel tired and we needed more room for the whole family growing, they gave me around 4K less than market price if I sold privately but I avoided the headache of selling in Facebook marketplace.
People will poo poo you for losing out on the money. But in my opinion, avoiding FB marketplace is worth at least $10K.
I have never traded in nor purchased from a dealership. I can make my money go farther in the private market. Dealer fees just reduce the amount of actual car I can purchase.
I traded-in once. It was fine. I got a trade-in offer from CarMax and the dealer I traded in to matched it.
Other than that, I’ve held onto the outgoing car or sold it private. I wish I had traded in my Forester, because it got bumped from garage parking by the new car and tree branch fell on it. Dented the hood, small dent in a-pillar and smashed side mirror. So now I have to fix it to sell it.
Edit: I have to fix it MORE. It’s a Subaru, so I have to replace at least 2 wheel bearings before I pass it on.
I got into a scenario where I was bidding against myself for the same car. I test drove my brand-new Fiesta ST at one Ford dealer then went to test a used car at another. I decided I wanted the Fiesta, but the used car I was testing happened to be at a different, larger Ford dealer. They decided to throw their weight around and would just sell me the other dealer’s car and do an inventory swap or whatever.
Now I’d ridden my KTM 990 to this test drive and we ended up filling out all the purchase paperwork right at closing time for the dealer with the sale being contingent on them seeing my trade in person to assess final value.
Next morning I get a call from the first dealer that possessed the car, and they were super motivated to sell me the car that the other dealer was taking from them (for me!). This was a desirable new car, and I was getting 0% financing for 72 months, so I knew there was no negotiating on price or financing. Only avenue was trade-in value. I basically told them exactly what I wanted for my trade-in (KBB private party sale value) and even texted photos of all the flaws to confirm they wanted to proceed, and they took it!
TL:DR Pit two dealers against each other to get the best trade-in value (even if the buyer from both dealers is you lol)
I’ve traded in a couple of cars when making a purchase at the dealer but it has been a while since the last few cars that were replaced were then handed down to my MIL, already given to my Daughter, or I wasn’t replacing a car just adding to the fleet. The last car I did trade in I did try to give to my Daughter but at the time she still wasn’t driving that many miles and she really loved the P71 that she had at the time. (There were still a lot in-service at the time so she enjoyed the fact that she could part the sea, make people drop their phones and put on their seat belts.)
Regarding the fact that wholesale prices are rising while retail used car pricing has stayed flat is certainly somewhat due to the market conditions, but I suspect some of it is due to the delay factor and a bump in retail prices for used cars is likely coming. So if you’ve been on the fence about a new to you used car now is likely the time to act.
I’ve traded in twice and I was pleased with both of the times I’ve done it. Each time I ended up getting offered more than I was expecting for my car and never had any other hassle or anything along with it.
I havent traded in- mostly because i buy private sale, or didnt have a car when i went to the dealer (of 16, only 2 were dealer cars). The only time it was even asked, i was looking at a 2011 Mazda 6 at a lexus dealer (3.7 v6, nice car. But i didnt love it.). That conversation-
“What do you have? Im sure we can make a deal”
“No you dont want it”
“Yes we do, what is it?”
“An 03 accord with 230,000 miles”
“Yeah, we dont want it”
I ended up selling that car to my step sibling when their X5s ecu committed seppuku, and bought my dads 3.5 accord coupe.
I’ve never traded-in a car at a dealership. I’ve sold them privately or gave them away.
I want to buy a new car right now, but prices and interest rates are too high to justify it. I’m a half down, half finance buyer.
I did have a good experience when I bought my Kia. I know all the terrible stories about them, but this one was good.
Have not traded anything into a dealership as I have never bought a brand new car and both my FJ and fiances Tourx were around 25k each when I bought them but bother those dealership experiences were decent. FJ from a Toyota dealer and the Tourx through a fjord dealer. Any other vehicle I have sold or bought has always been from a private party. Even bought a vehicle on eBay before which wasn’t a bad experience. Oh I forgot the Javelin I had was through a classic car dealer in Florida that I had shipped to Indiana was a simple easy experience also not your typical dealer experience.
I’ve only ever traded in one car, the rest I’ve sold private party. It’s far more hassle but you make more selling it private so it’s just a matter of weighing the trade-in amount vs your time and effort dealing with people who apparently can’t read your ad.
The one car that I traded in had experienced flood damage while at the dealership for an oil change which they offered to “fix” and I was young and naive enough to go along with. Over the next year the car lost its radio, both front seats rusted into position and would no longer adjust, the driver’s side door handle rusted internally and broke, the transmission lost 2nd and 4th gear, and the CEL came on continuously each time with a new code. I couldn’t bring myself to sell that car to an individual without feeling guilty but I had no qualms resetting the CEL and trading it in to the dealership.
For me, it’s worth trading it in every time for the exact reason you specify. Dealing. With. People. No. Thanks.
I have the ability to be actively looking for a car right now, and I am waiting for those leases to arrive, because inventory for certain segments of cars is pretty thin.
I’ve traded in a couple at the dealership, mostly because trying to sell something for more than about $10K privately has always seemed harder, plus the sales tax offset makes up for some of the difference in asking price.
Not sure I will in the future.
If I’m ever arrested (I hope not) I hope I can make as big of a scene as Jack Karlson.
Of course I hope I’m never arrested.