Reaction & Commentary
Speed on the other hand many buyers that purchased their vehicles at inflated prices are now underwater on their loans which is creating a crisis that is wiring even Elon Musk and other big names in the industry due to its size and scope with experts warning that Financial turmoil is ahead that’s what
We’re going to expose in today’s video but before moving on WE kindly ask you to support our work with a thumbs up and don’t forget to subscribe vehicle prices especially of used cars are about to come crashing down after almost two and a half years of record
Highs as new Supply starts to make its way into the market from 2020 to 2022 wholesale prices for used cars adjusted for seasonality mileage and age shut up roughly 88 in January the average used cars sold for 27 156 1.5 percent decrease from the prior month according to Kelley Blue Book new
Car prices meanwhile are still historically high but the rate of price growth is also slowing down the average transaction price hit a record 49 507 in December falling down to 47 681 in January according to car pricing site admins since June 2020 used car prices have spite due to the combination
Of easy credit provided to Consumers at very attractive interest rates and constrained production of cars due to semiconductor shortages millions of drivers had no alternative other than taking exorbitant loans on cars given that new car inventory was at historic lows consumers have seen the average
Used car costing more than a new one in other words the used car bubble is even bigger than the new car bubble while the average interest paid over the life of a new car loan reached a record 8436 dollars the average interest paid over the life of a used car loan reached
An all-time high of 10 204 but now that interest rates are rising the supply of semiconductors is increasing and Americans curbing discretion respect ending used car prices are in a free fall plummeting 8.8 percent in the past month alone and marking the highest monthly decline since June 2009 when
General Motors in Chrysler were both in bankruptcy proceedings and the economy was hemorrhaging a half million jobs a month it was a completely Wild Ride said Ivan Drury director of insights at edmunds.com Inc about the rapid surge in the cost of used vehicles some cars have
Already dropped in value by as much as 30 percent since the peak of the bubble and despite some in-demand vehicles that are still commanding higher than retail prices industry analysts say the value of second-hand cars is on its way back to pre-pandemic levels consequently falling used car prices mean that the
Vast majority of consumers who took in the past two years are now underwater silly oh more to the banks on these cars than these cars are actually worth all of these factors are likely to spark another automobile crisis that’ll have disastrous consequences for instance if today a buyer that’s underwater on their
Loan purchased their vehicle at the top of the bubble wants to trade it in dealers would ask them to spend thousands of dollars to cover the difference between the loan and the car value but the consumer doesn’t have that money on hand this is the perfect storm
The dealer can’t sell the car the consumer can’t buy a car and the lender can’t finance a car wrote financial analyst adamaya for their part lenders that are now seeing consumers struggle with this situation are starting to wave the open auto stipulation Clause simply put they’re accepting landing on a new
Car purchase knowing the consumer has an open auto loan with a different bank oh yeah that’s incredibly risky because this consumer is very likely to default on the first loan but this is the only way lenders can Finance cars and dealers can put cars on the road hence why we
See a wave of repossessions hitting the used car market in 2023 I added we are of the view that the upcoming wave of repossessions will most likely be similar to the auto loan downturn in the 1920s or early 2010s the analyst highlights in the 1920s when the Auto
Industry was still shaping up to become the market that we know today car manufacturers and dealers offered easy credit to Consumers which resulted in a surging Car Sales however after the market crashed many borrowers found themselves unable to make their loan payments leading to decreasing car sales and economic depression in the 1990s
Another car loaned bubble emerged fueled by low interest rates and lacks lending standards that provoked a boom and car loan originations but most of these loans were sub-prime meaning they were issued to borrowers with poor credit so when interest rates began to rise in the economy slowed subprime borrowers
Defaulted on their loans causing a decline in the value of their loans and a downturn in the Auto industry Zaire explains the most recent car loan bubble occurred in late 2000s and early 2010s in the wake of the global financial crisis with the economy still slumping auto manufacturers and dealers once
Again offered easy credit to Consumers but this bubble was different from the others in that it was driven more by demand for new cars than by easy credit the current bubble is unique in its formation but still has elements of the previous ones for craigmore from craigmore wholesale cars who’s been in
The Auto industry for more than 30 years the latest drop in prices means that the car price bubble has definitely burst he said good cars and in-demand cars that are in short supply are still holding strong but run-of-the-mill cars are either back to pre-covered prices are on
The way back to pre-covered prices and it’s happening very quickly he said during an interview with drive.com he added that there was always going to be a reckoning because used car prices could not simply continue to climb as the bubbles started to deflate finance companies wouldn’t approve certain loans
And insurance companies wouldn’t ensure certain used cars because in reality when the dust settles they’ll be worth less than what someone was asking for them and what some buyers were prepared to pay he continued more revealed that during the pandemic he could barely Source one or two cars a
Month to sell now I’m getting a dozen calls a week from people wanting to sell their cars and I get to take my pick of the best of them another car valuer and wholesaler the 34-year veteran of the Auto industry exposed that used car prices have fallen by about 15 in the
Past three months with the exception of hard to get in demand near new cars with long waiting times such as the Toyota Land Cruiser 70 series Ford Ranger Raptor and Suzuki chimney the second used car expert who asked to remain anonymous told the outlet that most used
Car dealers are offering low prices for trade-ins because they need to make up for the losses they’re now experiencing having paid too much for trade-ins over the past two years a lot of used car dealers are now upside down so the car is worth less than what they paid for it
He said when you’re offered a trade-in you ain’t low because you need to be able to make sure you’re not going to go backward the expert continued highlighting that nobody really knows where the bottom of this bubble really is that’s why trade-in offers have started to calm down dramatically I’m
Looking at my used car lot right now I’ll have to sell about half of those cars at a loss because the market has turned I need to get rid of them the emphasized every day those cars sit there they’re costing me money the wholesaler admitted that the past
Two years have been the most turbulent and unpredictable time of his career none of us know what’s around the corner when it comes to prices he told Drive the market has never been so hard to predict a third Source interviewed by driveset at the height of the pandemic
When things were crazy we were making up to five thousand dollars profit per used car on average now we’re back down to less than two thousand dollars profit per car or making a loss of up to five thousand dollars to get it off the books a fourth industry expert a dealer
Principal of a network of multi-franchise showrooms outlined that used car prices are settling but they still have a waiter for what we’ve seen evaporate almost overnight is people paying five or ten thousand dollars over retail to jump the queue to get into a near new car people have been conditioned to wait he’s
Stressed Moody’s Analytics and JP Morgan seem to agree with their forecast in a new statement researchers at Moody’s pointed to additional downward pressure on used car prices coming from weaker domestic demand as the combination of rising borrowing costs and elevated inflation erodes the ability of households and businesses to make big
Ticket purchases meanwhile JP Morgan says that used car prices are set to fall another 20 to 25 percent in 2023 and new car prices could drop by five to ten percent in the coming months at the same time we still have an alarming number of Americans with auto loans
Scrambling to make monthly payment moments auto loan performance saw further deterioration over the past 30 days and Loan delinquencies have also jumped of all loans severely delinquent ones have reached the highest rate since the financial crisis about 15 years ago new bone chilling data released by Cox Automotive sheds light on the rapidly
Deteriorating auto loan Market the report said loans delinquent by more than two months increased by 5.3 percent and jumped 26.7 from a year ago loan delinquencies and defaults sending shock waves through financial markets in its latest earnings call Wells Fargo reported a higher loss ratio from auto loans compared to a month ago
Ally Financial the biggest car lender in America saw charge offs quadruple in the third quarter which pushed its stock down by roughly 50 percent year to date Capital One which historically finances a lot of people lower on the credit spectrum is taking a beating two with its stock losing almost 30 percent of
Its value many other car lenders that made a bunch of bad loans with used car values artificially high in 2022 will see their shares going down and start reporting negative earnings and face a probable dilution if they take heavy enough losses this situation is Raising concerns of some big names in the
Industry in the past few weeks on Twitter Elon Musk Tesla CEO and famous investor Kathy Wood agree that disaster is coming they’re both warning about the Ripple effects of this potentially explosive situation Arc invest has been concerned about the impact of declining residual values on the one trillion
Dollar Plus Auto Loan Market was commented potentially the biggest fight financial crisis ever Tesla’s CEO added conditions are deteriorating alarmingly fast so if you have an extra car you don’t particularly need now is a good time to sell it while prices are high and falling but if you’re looking to buy
A car you should probably wait a little longer with used car prices falling around two percent per month the value of anything you buy right now is gonna melt like an ice cube in the sun and the last thing you want is to be caught up in this colossal mess
What do you think about all this we look forward to reading your comments under this video and thank you for watching
