Buying used in today's crazy car market

Looking for feedback on current used truck pricing. Tried searching, but not really getting answers to my question.

What, pre-Covid, was used truck pricing like? I mean, what percentage would a vehicle depreciate over a 2, 3 or 4 years on the road with average mileage based on age?

Looking at a used 2019 F150 with 10K miles. It is being offered at 33% under the sticker price. In 2019, what percentage would be a decent deal for a 2017 Truck with similar mileage?

I don’t HAVE to buy right now, but we have been holding off on replacing our SUV for over a year. It is fine, but kind of nickel and diming us right now with repairs. We also bought a new, larger trailer that while within the towing limits of the SUV, would be better with a full size truck.

I see lots of posts on Ford 150 specific sites with people saying that they bought their 2019 last year for $X, and it was a great deal. But that really doesn’t help as you could have a $30k 2019 F150 or an over $80k 2019 F150. I also read some articles on pricing trends, but saying that average used car pricing is up by 21% year over year is misleading. That could very well be because people are buying more expensive (newer, pricier brands or more optioned out) vehicles, and not necessarily a 21% price increase on the exact same car. That could be partly due to Covid money, low interest rates, consumer confidence, they wanted a new car but they didn’t have them so bought a expensive used car or other factors not the increase in the cost of a particular vehicle over a year. Was a 2 year old truck depreciation really 50%?

That seems like a really good deal unless it's some kind of weird spec that nobody wants (or a scam or already sold). Truck pricing has always been weird and they've generally held their value pretty well. I know very early on in the pandemic (like first month or two, when there was oversupply, not undersupply of new vehicles) used trucks were basically the same cost as new. Like that truck you're looking at would be maybe $5k less than a comparable new truck but it'd have 50k miles on it.

It is worth remembering that msrp on trucks is (or at least was, pre-pandemic) basically irrelevant. In 2019 if you were paying much more than like 15% under msrp you were doing it wrong.

I do this for a living.

Truck market was up 40% year-over-year at the peak in March/April. Prices have dropped considerably since then, but it's very dependent on what price range you're searching for.

Trucks in the $25,000-35,000 range are still commanding a premium, as consumer taste has shifted away from the expensive big metal. If you have deep pockets and are still on the hunt for a $50,000 truck, you can find them at slightly elevated prices, but you have a lot of negotiating room as they're largely rotting on dealer lots currently.

You may have seen the announcement last week that Toyota is slashing new vehicle production by 40% due to the ongoing chips shortage. That still affects all of the domestic manufacturers as well, so the used car market is expected to remain elevated into 2022.

tldr; wait a year and limp your SUV along, or pay a 20-30% premium

calteg said:

I do this for a living.

Truck market was up 40% year-over-year at the peak in March/April. Prices have dropped considerably since then, but it's very dependent on what price range you're searching for.

Trucks in the $25,000-35,000 range are still commanding a premium, as consumer taste has shifted away from the expensive big metal. If you have deep pockets and are still on the hunt for a $50,000 truck, you can find them at slightly elevated prices, but you have a lot of negotiating room as they're largely rotting on dealer lots currently.

You may have seen the announcement last week that Toyota is slashing new vehicle production by 40% due to the ongoing chips shortage. That still affects all of the domestic manufacturers as well, so the used car market is expected to remain elevated into 2022.

 

tldr; wait a year and limp your SUV along, or pay a 20-30% premium

This is exactly what I am going through right now.  I am a little concerned about towing for all of the 2022 season if waiting a full year is what would be needed to avoid paying a big premium.

So what would be your recommendation if waiting that long isn't an option?  Try to just order something new (I'd get a new Ranger IPO of a used F-150)?  Look in a lower price range instead?  Just bite bullet and cry?

Around me it is still lunacy.  Used prices are high enough that there is no way I'd buy a newish used truck today.  I'm not going to pay 75%+ of new MSRP for a vehicle that has already waved goodbye to the easier half of its life.  At that point, I'd just buy new.

In reply to nf650 :

Your initial post said you don't have to buy right now, so don't. Whatever you pay in maintenance will be far cheaper than the depreciation hit you take when the market normalizes next year.

If there's a gun to your head and you absolutely have to buy something, statistically Tacomas depreciate the least over their lifespan. Or try and find a sub $10,000 beater that will last a year (first gen Tundra with high miles, perhaps?). You'll still take a whack when the market normalizes, but it won't be as bad.

calteg said:

In reply to nf650 :

Your initial post said you don't have to buy right now, so don't. Whatever you pay in maintenance will be far cheaper than the depreciation hit you take when the market normalizes next year.

If there's a gun to your head and you absolutely have to buy something, statistically Tacomas depreciate the least over their lifespan. Or try and find a sub $10,000 beater that will last a year (first gen Tundra with high miles, perhaps?). You'll still take a whack when the market normalizes, but it won't be as bad.

 

Sorry, was not my original post. I thread jacked...

In reply to nf650 :

Another option would be trying to buy private party. Would've been much easier 3 months ago before everyone thought their used car was worth its weight in gold. Create an Autotrader account, setup a saved search for their "great deals", then provide your email address so they can alert you when one comes up. You'll need to have cash and be ready to buy it that day, but it'll increase your odds of scoring a not-horrible deal

I was the original poster - I have been putting off replacing the SUV, but I have spent over $1,500 this year on repairs including getting the AC fixed, rear wheel bearings and a new rear caliper that took out a rotor and pads while on a trip pulling the trailer.  Also had some issue with the radio amp going out, I was able to swap that out myself. Now the power steering is losing fluid, but I don't see any drips and there is a check engine light for the cam sensor. I wanted to offload it before I get hit with a really big repair bill. I normally would sell it private, but I don't want to stick someone else with potential issues, so I was looking to trade it in. 

Looking at a truck I found  kinda in the middle of nowhere at a Ford Dealership. 10,000 miles, stickered at $67,400 and they are asking under $45k. It is my first choice in color -  I always buy used and rarely get a car in the color I most wanted. I also wouldn't mind acting now as interest rates at my credit union are dirt cheap. 

Comparing a used car to sticker is a bit of a sucker's game. It's tempting to do in a market where 2018 and 2019 trucks are listed really close to MSRP.

Let's frame it another way. You buy this truck for $45,000 and the market normalizes in 7 months. It "loses" 20% of its value. It's worth $9000 less + time/mileage depreciation. If you go to trade that truck in this time next year, it's very likely they offer you less than $30,000. Where do you lose more money, fixing up your current ride, or from buying this one?

edit: This also applies to brand new cars in a normal market. Buyers too often willingly ignore the silent killer: Depreciation. Instead they focus on "what a good deal" they got versus MSRP. At the end of the day, buying a car is still largely driven by emotion and we're hairless monkey that love to rationalize our strange decisions. Probably preaching to the choir here since I suspect GRM doesn't buy new very frequently...

The used car market has burst. The only reason that you're still seeing elevated pricing is people that are trying to get in to cash out on the market having been high. But the wholesale market and auction market is back to where it was pre-covid. Don't take the bait, don't buy high in a market that has normalized. 

In reply to Rusnak_322 :

22% of the sticker for trucks  is profit for the dealer. You won't get the last 2% except in rare cases. When dealers are hungry you could buy at or even below costs if you knew how to deal. ( few do )   
Right now with nearly empty lots,  dealers can afford to be porky.      The first year's depreciation approaches 30% after the 20% discount. Ford a little less with Dodge close to the 50% number. 
   Used cars are seldom a deal when dealers sell them. I could sell a brand new truck with exactly the same equipment for payments that matched or were cheaper than a 3 year old truck with 55,000 miles. 
    Think about that.  That's normally the standard mark up in used trucks. Oh, they may give you an over allowance on your trade in. But it's just moving  money around to satisfy you. 
    If you want to beat depreciation, buy new and own it until it's ready to go to the junkyard. 

In reply to captdownshift (Forum Supporter) :

I agree with your advice, but not how you got there.

The market did burst, bottoming out in June. This was largely predicated on dealers anticipating new car inventory in late Q4. As they found out that wasn't going to happen, they began scrambling to source used car inventory again. As of today, MMR retention is roughly 102% and likely to continue climbing. Bear in mind, the wholesale market is climbing during what is traditionally the slowest time of the year for used car retailers.

In reply to calteg :

can you translate that into English? Even after a quick google, I still dont understand what that means relative to a used car price.

https://publish.manheim.com/en/whats-new/daily-mmr-retention.html

 Frenchyd - 

In normal times, what would be a decent deal on the truck I am looking at? something that doesn't screw over the buyer and allows the seller a fair profit? In other words - as I keep looking, when would I know that the market is back to normal? is 50% of the sticker a real number for a truck with low miles, not factory certified and I am guessing just about out of the 3 year warrantee period? So $34k is the magic number for a truck like I am considering? 

My current SUV is a 2008 that I bought in 2010. I don't run them into the ground, but I don't turn them over quickly either. 

In reply to Rusnak_322 :

It's the transaction price of the average used car in the wholesale market, relative to a baseline. 

Dealers prefer trade-ins as they have a much higher profit margin and typically fewer reconditioning costs.

When you see MMR retention remaining high, it's typically a sign that dealers are forced to compete at auction. Most of the time this is a seasonal event (tax time in Spring) but the fact that we're seeing it in Fall/Winter is unusual and indicative that there still isn't enough supply to meet consumer demand.

In reply to calteg :

On the graph above, what does 100% represent, specifically?

In reply to einy (Forum Supporter) :

from the link I posted. Still don't understand 

"When MMR Retention is below 100%, that means vehicles are currently transacting at less than MMR. Conversely, when MMR Retention is above 100%, vehicles are currently transacting at more than MMR.

For example, if MMR for a given vehicle type is $10,000 and today’s MMR Retention is 95%, then that vehicle type’s current transaction price at Manheim is approximately $9,500"

Just so people know MMR is Manheim Market Report. It's a tool dealers use to track auction prices. 

In reply to Rusnak_322 :

Very few guys can predict when when and what that markets going to look like when it does what that markets are going to be like. 
  Manufactures are getting bigger.  Big enough to figure out how to get around a "chip Shortage" So the market conditions  were most likely " created "   
So the trick is to figure out a winning goal for the manufacturers. I read someplace that Ford  is going to a custom order position. To me that means   they want to slow down production. That should create an artificial shortage. Driving profit per unit up while accepting less volume, probably deeply effecting annual earnings. 

In reply to Rusnak_322 :

Correct.

In reply to frenchyd:

Sort of not really.

Manufacturers make their money primarily two ways:

a) when they "sell" the units to a dealership

b) when a customer finances the car through them (Ford Motor Credit, etc)

They're strongly incentivized by volume and not margin. The manufacturer doesn't really care what the dealer actually sells the car at, hence why MSRP is a suggestion...it says so right in the acronym. A move to custom order production does benefit them, but not in a "clutching my bags of money and laughing" way. It's a step closer to just-in-time production, and will minimize manufacturing costs.

That being said, there are an absolute ton of variables that might not make customer ordering viable, but that's another discussion entirely.

In reply to frenchyd :

I doubt any individual company has the balls to try to create an artificial shortage.  They would get buried if the others didn't play along.  My guess is that they are confident enough in their production methods and ordering system that they believe it will have little to no impact on the manufacturing side.  Many big manufacturers are chasing Toyota's production systems and one-piece flow.  If they get orders and components to the floor properly, it's possible that they will end up net positive by offering customers exactly what they want rather than what is on the lot.  It also allows them to dramatically cut their inventory costs if everything is made to order.

Edit:  calteg beat me to it.

calteg said:

In reply to Rusnak_322 :

Correct.

In reply to frenchyd:

Sort of not really.

Manufacturers make their money primarily two ways:

a) when they "sell" the units to a dealership

b) when a customer finances the car through them (Ford Motor Credit, etc)

They're strongly incentivized by volume and not margin. The manufacturer doesn't really care what the dealer actually sells the car at, hence why MSRP is a suggestion...it says so right in the acronym. A move to custom order production does benefit them, but not in a "clutching my bags of money and laughing" way. It's a step closer to just-in-time production, and will minimize manufacturing costs.

That being said, there are an absolute ton of variables that might not make customer ordering viable, but that's another discussion entirely.

I do happen to agree with both of you.  Smaller companies can't  do it alone.  Yet they can certainly follow trends even if there isn't any outright conspiracy. Exactly how small  are we talking about too?  Morgan small?  Nissan?  Kia? Honda?  Aren't even some of those in bigger groups?  Global Ford isn't. Nor is Chrysler. 
  However there are savings to be made in bulk ordering. Which  is why police specials and fleet  etc.  ordering offer price breaks. ( and those aren't typically financed ).  Yet just in time manufacturing requires on hand inventory to meet the various individual requirements. How many manual transmissions do they have to buy to get a price  break reflecting the volume needed for the 2% of customers who order a manual transmission? 

Built-to-order negates a common new car buyer trait:  Instant gratification.  How many new Mitsubishis roll off the lot Friday night, right after getting that third consecutive pay stub and poundings a couple of 2-for-1 Margaritas at Chilis? It only works for car models where there is scarcity / high demand.  

At $45k, you're almost to a new truck price point.  I would wait until things shake out and try to get a new one, or buy more-used.  I like a truck that is new enough to be reliable, but old enough to knock around in, without worrying about scratches or dings.

That 2019 feels like an awkward niche between almost-new and new.  But if you like the truck, buy the truck.  If you're going to drive the wheels off of it, then any market correction doesn't really matter that much.

Older trucks are blazing hot. I listed an imperfect 1999 Silverado with 195k miles two days ago at high KBB value, and it's going to it's new owner on Friday. No haggling.

Tyler H (Forum Supporter) said:

That 2019 feels like an awkward niche between almost-new and new.  But if you like the truck, buy the truck.  If you're going to drive the wheels off of it, then any market correction doesn't really matter that much.

 

 

*market correct doesn't matter much provided you don't finance the purchase. Adding $10,000 to the principle cause you caught a bad case of the IGottaHaveIts is generally a bad idea