Used car biz sucks. Ian could provide a boost.

[John Ranalletta]

So, let's check in on the health of the used car business. 

 

[chrisolson]

Isn't that more the health of Carvana rather than the used car industry as a whole ?  It's a marketing strategy that never caught on (as well as they overpaid for inventory) vs the hundreds/thousands of small used car lots not to mention the factory dealers used lots that continue to turn inventory ?

[roadscholar]

Agree with Chris, more Carvana than the whole for the reasons mentioned. The entire used car biz did slow some starting in Spring but was really just reverting back to normal because it had been booming for a year or so before that. I'm guessing because of supply chain issues new car dealers couldn't meet demand so people were buying a lot of used cars, many of them from big national independents like Carmax, Carvana, etc.as it makes them feel like they have recourse if something goes awry. 

 

I keep pretty close tabs on the high end independent market through some buddies that run a small dealership in the neighborhood, they've been on fire the past year or so although slowing some of late, still doing fine. Sold them a few classic Mercedes, they do their magic to them and make a ridiculous profit although with a good location in a nice part of town and little competition, there isn't another car dealership within I0 miles. Mostly late model super clean stuff with some classics and sports cars thrown in.

 

 

 

 

 

[chrisolson]

I'll take the Chevy 

[John Ranalletta]

9 hours ago, roadscholar said:

Agree with Chris, more Carvana than the whole for the reasons mentioned. The entire used car biz did slow some starting in Spring but was really just reverting back to normal because it had been booming for a year or so before that. I'm guessing because of supply chain issues new car dealers couldn't meet demand so people were buying a lot of used cars, many of them from big national independents like Carmax, Carvana, etc.as it makes them feel like they have recourse if something goes awry. 

 

I keep pretty close tabs on the high end independent market through some buddies that run a small dealership in the neighborhood, they've been on fire the past year or so although slowing some of late, still doing fine. Sold them a few classic Mercedes, they do their magic to them and make a ridiculous profit although with a good location in a nice part of town and little competition, there isn't another car dealership within I0 miles. Mostly late model super clean stuff with some classics and sports cars thrown in.

 

 

 

 

 

 

Collectors with FU$ are in one class.  With used car financing >11%, layoffs aplenty and a recession in view, fewer non-FU$ buyers will show up at the F&I window IMO.  

Every trend reverts to the mean.  During COVID, I reached out to the "cash for your car" companies out of curiosity.  Offers were off the hook for a pretty ordinary car.

[realshelby]

Spent plenty of time in the car business. (Yes, there IS a way to run a dealership that earns respect and more importantly repeat business...).  I watched Carvana from the start. With the Capitol they had to invest to build their vending machines It just did not add up. They would pay retail for some vehicles which means they have to sell them for often $5000 over what I would consider the market price. Yet plenty of buyers would fall for their "up front no haggle pricing and return policy". 

Same with Carmax, they charge way over market price but don't have the overhead of Carvana. They also move a LOT more inventory. Zoom/Texas Direct has flourished due to being unique in the market. But that model is changing too. People finally realize that a few hours spent shopping for a vehicle will get you thousands in savings. Sometimes at least. But some are too lazy to work at it. 

[roadscholar]

23 minutes ago, John Ranalletta said:

 

Collectors with FU$ are in one class.  With used car financing >11%, layoffs aplenty and a recession in view, fewer non-FU$ buyers will show up at the F&I window IMO.  

Every trend reverts to the mean.  During COVID, I reached out to the "cash for your car" companies out of curiosity.  Offers were off the hook for a pretty ordinary car.

 

True, was just pointing out the high end used market (all I’m familiar with) took a similar dip to the Carvana graph although not as severe. And yeah, bleak economic outlook is probably the biggest contributor for that segment.

[John Ranalletta]

1 hour ago, realshelby said:

Spent plenty of time in the car business. (Yes, there IS a way to run a dealership that earns respect and more importantly repeat business...).  I watched Carvana from the start. With the Capitol they had to invest to build their vending machines It just did not add up. They would pay retail for some vehicles which means they have to sell them for often $5000 over what I would consider the market price. Yet plenty of buyers would fall for their "up front no haggle pricing and return policy". 

Same with Carmax, they charge way over market price but don't have the overhead of Carvana. They also move a LOT more inventory. Zoom/Texas Direct has flourished due to being unique in the market. But that model is changing too. People finally realize that a few hours spent shopping for a vehicle will get you thousands in savings. Sometimes at least. But some are too lazy to work at it. 

Some have opined that Carvana and its owners are suspect. https://medium.com/swlh/reminder-carvana-sells-debt-not-cars-6e07c17a7ffb

Local buy-here-pay-outfit placed large billboards showing a car stuck, nose down, in a vending machine without naming Carvana.

 

I had dozens of dealership clients and learned a lot.  A his annual managers meeting, the owner of one 28-unit chain said, "The only reason we sell new cars is to be in the used car business."  The average gross margin on used units exceeded new because the dealership is competing with every other dealership for the retail customer. 

The remainder of the meeting revolved around used inventory, margins, auction strategies, etc.  In some dealerships, the internet guy moved more units than inside sales guys but the F&I guy always made the most $.
 

[John Ranalletta]

Looks like US economic policy is working.

[Red]

10 hours ago, John Ranalletta said:

Looks like US economic policy is working.

It's working for the upper income folks more so than the lower end of the mid income group.  Wages have not kept up with cost of living for quite some time.  This latest round of inflation is out pacing wages again.  The low end of the spectrum, well their 'income' in most give away programs is indexed for inflation, but has a 1 year lag thyme.