Image Credit: Vlad Kochelaevskiy/Shutterstock.com
I talked a lot on the Car Pro Show last week about trade-in values. I feel like part of my responsibility to my listeners is to tell you when there are market changes that could benefit you. This sudden spike in trade-in values can save you a ton of money if you have a vehicle to trade.
I spouted a lot of prices on the show last week, and I know that is hard to follow, so thought I would recap for you the vehicles that caught my eye during the auction I watched last week. We were on deadline this Wednesday, but I did get to see about 100 vehicles run through and prices remain through the roof, even more so than last week. I thought we might see a slight drop off in prices this week, but it went the other way: even higher.
New versus Used pricing
Just this week, our friends at iSeeCars.com studied average new vehicle prices as compared to a comparable used vehicle. As I would have guessed, the prices are really close on many vehicles. Bear in mind, the new prices used in the article are averaged. Car Pro Show listener pricing would put these numbers even closer together.
Here's a look at the Top 10 vehicles and the percentage a used car is cheaper than a new one:
If you would like to see the entire study, you can do so by clicking here.
Some used vehicles actually cost more than a comparable new one
I know it sounds impossible, but I have seen many times when a new vehicle sold for less than a similar used vehicle. We see this when, in times like now, used prices are sky-high and new vehicles have big rebates.
Here is an article I wrote a couple of years ago, explaining how this can happen:
Actual Auction Prices
I monitor the Manheim auction in Dallas, but this trend of high prices is the same all over the country. Most auction buyers are online since the start of Covid-19, and many thought that would hinder pricing, but it does not seem to have had any effect. In fact, auctions have changed forever due to the Coronavirus.
Manheim sells roughly a car a minute in every one of their auction lanes. In just Dallas, on Wednesday, they are running 26 lanes at the same time. Do the math, it's an incredible number of vehicles and these type auctions are running all over the country. When I logged into the site this morning, Manheim had sold 22,181 vehicles in the last 24 hours.
How it works: A vehicle picture pops up on the screen with pertinent info, like mileage, a condition number ranging from 1-5, and any other important notes like a CarFax caution. The main thing dealers look at is MMR (Manheim Market Report). MMR is the guide price car dealers use to know the current market values, unlike the old days when dealers used the Black Book or NADA guide. Dealers like MMR because it is real-time data, based on actual auction prices in the last 30 days.
Just a few weeks ago, most vehicles sold at about MMR or maybe slightly over or under that price. Below is what I saw last week. I picked vehicles at random in all segments. As I said on air, this spike wasn't just on pickups and SUVs, or exotic cars, but across the board, including some very common sedans. This is what I saw with my own two eyes (for simplicity, I rounded the mileage to the nearest thousandth):
This is a bubble in the making with used car prices, and we all know bubbles burst. We saw this last summer. Prices spiked at the auction, lasted a few weeks, then got back to normal.
Fueling these crazy used prices is the shortage of new vehicles, due to parts suppliers not being able to keep up with the auto factories. Dealers are also speculating that stimulus checks and tax refunds rolling in will spur sales. Finally, if they can't get the number of new vehicles they need, they'll switch their marketing to used and push those. Dealers have to have something to sell.
Also adding to the competition and high prices are the big box used car dealers like Carmax, Carvana, Drivetime, Vroom and others bidding against each other, trying to keep their lots full and their growth plans in place. When these guys bid against each other there is no telling where the bidding will stop.
If you are thinking of buying later this year and you have a trade-in, you'd be wise to look now. The difference in your trade value could be thousands less in just a few weeks.
April 01, 2021