Used Cars: A Tale of Pricey Sticker Shock and Wholesome Wholesaling
Nov. 7 (UPI) — It seems that car dealers are continuously fine-tuning their ability to jack up sticker prices while finding the *sweetest* wholesale deals on used cars, leaving consumers with their wallets wide open and their mouths agape—and not necessarily in a good way.
According to Manheim’s Vehicle Value Index—a name that sounds like a bureaucratic cover for an underground car auction—used car prices have taken a nosedive, landing 10.6% below last year’s figures. They even dipped by 2% from September to October, which is rather tame considering how much they’ve plummeted previously. But don’t let that lull you into thinking you’re getting a deal; it’s mainly setting the stage for a bonanza of dealership profits.
What’s a wholesale price, you ask? Well, it’s the amount dealerships cough up to manufacturers or auction houses for a used car, like a secret handshake among traders for the privilege of reselling their shiny metal boxes. As these wholesale prices dip, you might expect a deluge of used car bargains. Spoiler alert: sales are projected to plummet by 9% compared to just last month, and by a staggering 13% year-over-year. All this as we reminisce about the pre-pandemic good old days—when used car sales dropped by a mere 32% since October 2019. Ah, the nostalgia of plummeting sales!
For many consumers, the prospect of acquiring a used car may now seem more like a cruel joke than a viable option, driving some to consider new cars that feel even *fancier* and possibly—gasp—more affordable! Inventories of new cars resemble the ‘after-Black-Friday sales aisle,’ sparse and forlorn, as manufacturers recalibrate their production lines while still trying to shake off the pandemic cobwebs. Add inflation and those delightful interest rate hikes from the Federal Reserve into the mix, and you’ve got a recipe for one snazzy financial disaster. Sure, dealerships could pass on their savings to consumers, but as Claudia Sahm, a former Federal Reserve banker once said, they are under no obligation to turn into Santa Claus.
“They can make bigger profits,” she pointedly remarked. “Welcome to capitalism! Whether they’re a quaint mom-and-pop shop or the corporate giants, their priorities lean more towards profit margins than altruism.”
Meanwhile, the consumer confidence levels in this high-wire act we call the used car market tanked more dramatically than the ratings of a bad sitcom, taking a dive of 4.9% in October, with experts only predicting a minimal drop of 1.9%. The biggest shock? A 7.5% decline in positive sentiments about the current market situation. In layman’s terms, people are not optimistic about what’s in store for their wallets.
“With the Expectations Index lingering below the critical threshold associated with recession—a delightful little zone below 80—it seems the word ‘recession’ is finding a cozy home in consumers’ minds,” announced the Conference Board Consumer Confidence Index. But do consumers already know how to live on ramen? Surprisingly, despite all this doom and gloom, their intentions to purchase a vehicle are suddenly bouncing back, reaching heights not seen since July 2020. Perhaps desperation really is the mother of invention—or, in this case, the mother of procrastination in car buying.
