Just how much longer will everyone be gouged?
Welcome to Clown World, where your clanky Hyundai Elantra with 200,000 miles on the odometer is worth a considerable sum. Yes, we’re talking about the ridiculous price inflation of used cars created by what some term “the perfect storm of conditions.” We’ve highlighted the possible drivers behind why you’ll be selling your firstborn for a crappy used car before, so if you missed those insightful reports and want to learn more about how we got to this point, check out our extensive reporting here and here and here.
Meanwhile, high used car prices mean thieves are even more determined to steal your ride. Learn more about it here.
Instead, I’m here to give you all an update about how none of the so-called “experts” seem to know anything and yet know everything about what’s going on with used car prices. Like I said, welcome to Clown World where nothing makes sense and nothing certainly is what it appears to be. Ready? No? Good, let’s begin.
Perusing some of the top news stories about the current used car market conditions, there are all kinds of conflicting opinions provided by analysts. These guys are supposed to know what’s going on better than the rest of us, but it’s not unheard of for them to disagree. In fact, I’d be even more concerned if they all were saying the same thing, because that would be incredibly suspicious. Still, their insight seems a little... interesting.
In a Bloomberg report, Jeff Schuster, senior vice president of forecasting at LMC Automotive, stated we’re not likely to see used car prices fall until the end of the year. That’s not what anyone who’s wanting to buy an affordable car wants to hear. The Bloomberg report then goes on to highlight some New York City dealerships with incredibly low supply, including one with a 6-day inventory where the salesmen are all sabotaging each other because they’re so desperate to make sales. But not every dealership is that way, so you’re getting a purposely skewed perspective with the silent implication that’s how it is all over the country.
CNN Business ran an article about who’s really winning out with the sky-high used car prices, claiming the answer is dealerships and nobody else. That’s an interesting conclusion we’re sure many mom and pop dealers would hotly dispute. In that article, CNN Business spoke with Ali Faghri, an analyst at Guggenheim Partners, which “follows dealership stocks” weighs in on the issue.
Faghri claims all dealerships “will deliver record earnings” this year, so if the local dealer you know starts wearing flashy jewelry and buys a Ferrari, you know why. But the real gut punch Faghri delivers is this duesy: “I think prices have probably peaked. But these market conditions will probably continue until 2023.” That’s nice he leaves himself an out with two “probably” statements, both of which could easily not age well. At least I hope they don’t age well for the sake of American households which are feeling the financial squeeze.
By the way, the CNN Business article hangs much of the claim that dealerships are really driving high used car prices on the fact AutoNation reported record earnings recently. But in the same article the fact AutoNation only constitutes 2% of dealerships in the US is also admitted. Just because AutoNation is doing great doesn’t mean all dealerships or even the majority are rolling in the dough, but don't let facts get in the way of a juicy story.
But the most ridiculous, hyperbolic statement is published by Business Insider. They ran a piece recently about used car price inflation, which apparently won’t go down, because thus sayeth Business Insider. The opening two sentences are meant to drive that hot take right through your heart: “Not too long ago, you could pick up a worn but decent used car for something like $5,000 and hit the road. Those days may be long gone.” You hear that? The days of buying an affordable car are over, peasants! As they say in journalism, if it bleeds it leads. Saying that this awful situation will never turn around might be generating clicks, but why would used car prices continue to stay this high?
Sure, there’s a possibility through rapid inflation we’ll be paying high prices for used cars indefinitely. But we would be paying high prices for just about everything else, so it wouldn’t be solely about the used car market anymore but instead the entire US economy. Like we’ve reported before, the price inflation supposedly was caused by a convergence of some unique conditions, most of them imposed by the pandemic and strict government restrictions slapped on a good portion of the country. As those conditions change and go back to normal, why would used car prices persist on their completely insane trajectory if those prices were fueled by factors which have reversed? It makes zero sense. Saying that doesn’t get the clicks, yet here I am.