Lack of trade-in value burns car buyers

[UpInArms]

http://story.news.yahoo.com/news?tmpl=story&cid=676&e=11&u=/usatoday/5301537

DETROIT -- A large number of auto buyers owe more on their trade-ins than the vehicles are worth, making it tough for dealers, and expensive for buyers, to finance new purchases.

<snip>

The Consumer Bankers Association reports 82% of new vehicle loans last year were longer than four years; 31% were longer than five. In California, some dealers are writing seven-year loans.

<snip>

Mark Eddins of Friendly Chevrolet in Dallas estimates that 90% of his customers are upside down, often owing $10,000 to $15,000 more than the trade-in is worth. ''It's an awful thing for our business,'' Eddins says.

...more...

[Old and In the Way]

1. In my neck of the woods

there is a real glut of "used car" dealers. I have to wonder just what the real inventory is of available cars. I'll bet there are 6-7 cars available for every driver in the US. I really wonder when the overbuild finally catches up with the automotive industry?

[MercutioATC]

3. The biggest issue in used-car pricing is the cost of NEW cars...

With the current economy, manufacturers are being forced to offer substantial rebates on new cars. This, obviously, reduces the calue of used cars.

Low interest rates also make it more affordable to purchase new cars.

I, myself, always buy used now. I let somebody else take the biggest of the depreciation hit and (because of the very low trade-in value for the sellers) can usually get a great deal.

[Heddi]

4. 2 years ago

my hubby and I were going to sell our 93 Civic before we moved to seattle.

Okay--it was rough looking on the outside, and didn't have a muffler, but it was in great condition.

BlueBook value for our car was $1600 in that condition.

we went to a few used car lots to sell before we tried selling it ourselves in the paper.

The HIGHEST offer we got at the lots was $800 and from that he'd have to subtract $200 to get a new muffler.

fuck that.

Especially considering that every car on these lots were POS (just like ours), some without mufflers, some without wheels! And NONE of them were listed for under $1200...and this is a nasty-ass dirt lot too.

WE ended up selling it for $1400 to a private party via our newspaper ad

[catzies]

14. That's SOP for car dealers. Buy low and sell high.

They offered you below wholesale, same as how they prob. got all the other POSes on their lot.

[trogdor]

7. Most of those used cars aren't worth the wax to prep them for sale.

I wouldn't touch any of 'em.

[sirshack]

2. No surprise there

As far as I'm concerned, when you go longer than four years, you're asking to get upside down on your loan. Especially when you have to buy at sticker to get a lot of the 0% offers and incentives. I took out a four year loan on a $16,000 dollar car, and I'm about $900 upside down at this point (on edit: 2 years in). I can't imagine having a six or seven year loan on something costing $20k to 30K.

The other big problem is that, with all of those incentives, dealers just can't move used cars to begin with. Why buy used when for a couple grand extra plus some kind of incentive you can buy new? Dealers aren't offering that much because there's no real market for used cars at this point.

[trogdor]

9. Depreciation on GM cars is a mothereffer.

Why does GM still lose market share? Because there isn't a Chevy made that's worth 20 grand, new or used. Honda and Toyota are beating Chevy up and taking its lunch money.

Have you seen the "new" Cavalier? Godawful ugly POS, and it's the same goddam car as last year - or 1985 for that matter. Guaranteed, your teenager wouldn't be caught dead behind the wheel of one - or even riding in it.

Then you have the problem with rental cars. Unlike imports, GM and Ford flood the market with rental cars, which depress prices for domestic used cars still further.

So, why buy a used Chevy when a used Accord is more likely to still run two years from now? Why pay book when the dealer has a couple hundred used Chevys on the lot?

[hussar]

5. New car, never again

I got burned when I came over from England, I had a lovely car, couple of years old, there was a big hoo-ha in the UK just before I came over about new cars being cheaper in the rest of Europe. The outcome was that all the manufacturers brought down their prices and so a used car came down too, I more or less had to give it away but my best buddy had it so it went to a worthwhile cause.

Cars suck........just a hassle whichever way you look at it !

[VolcanoJen]

6. It's highway robbery. Literally.

Last spring, I had finally grown tired of my 7-year-old Dodge Neon and decided to get something spiffy. After hunting around a bit, I ruled out a new car purchase and started looking at quality used cars. I found a wonderful, low-mileage, dealer-certified 2000 Acura Integra and jumped on it.

I thought I'd get a nice trade-in offer on the Neon (book value at the time was $2400). You know what they offered me? Nothing. They wanted absolutely nothing to do with the car. They said they'd give me $800 if I was really desperate just to get rid of it!!

I was shocked. As the car was paid off, that wasn't so much of an issue, but I really thought I'd get something for it. I ended up donating it to charity (Goodwill), and can at least write off the book value that way.

- Jennifer

[trogdor]

10. Neons are disposable.

Cavaliers and Focuses, too. US manufacturers do this on purpose so you'll buy something else, instead - like a Blazer. I was car shopping last year, and I find that the base Cavalier has the same powertrain it had in 1985, and it was junk back then.

Anybody who has ever driven a Honda Civic knows that small cars do NOT have to be flimsy pieces of shit.

I've seen THREE year old Neons sell for less than five grand. Don't know what's the matter with 'em, but I direct your attention to the first paragraph - it's Detroit's fault for deliberately producing an inferior product.

[EOTE]

8. It's a double edged sword....

Whereas I won't be getting much for my '95 Aurora, atleast I'll be getting quite a deal on my next used car. Does anybody here own an Audi? I've been looking for a used A6 2.7T and it appears you can get quite a deal on them nowadays.

[Maeve]

11. The auto industry has been carrying the economy

Not entirely, but to a great extent the past couple of years. It's not surprising that there is a glut of newer used cars, therefore...some have been predicting it since the beginning of the "0% interest, $0 down!" promos started.

Add that there is a limit to home mortgage re-financing and better hope the economy turns around real soon...

[BiggJawn]

12. Well, THIS news sucks a bit....

Just ran my Ranger through Kelly's...It's worth 12 kilobucks, with a 14 kilobuck pay-off (I bought it a little over a year ago)

I'm leasing the next one, no shit....

[BadGimp]

13. This is why I have done Closed End leases since the early 90s

Every 2 or 3 years I drive my car back to my dealer and hand them the keys. End of story.

I'm never upside down.

[stevedeshazer]

15. Don't buy OR lease new

It's a huge ripoff.

If you know anything about cars and don't mind taking care of a few things on your own, the used car market is the best it's ever been.

My family's cars are all over 10 years old. Who needs a $500/month car payment?

Like never before, there are nice used cars available.

I'll consider buying a new car when 1) the US starts making decent, reliable cars again, or 2) OK, never mind, they won't. We'll eventually be like Cuba, driving and repairing aging shitty cars until Amerika looks like a scene out of Mad Max.

[Nottingham]

16. Yes it is! It says that cars are Way to overpriced!

They need to come down to make them affordable

:bounce: