Need a new car for pennies on the dollar?

[No.23]

Just wait a few months... save a few pennies... and watch the floodgates open.

http://www.silverbearcafe.com/private/01.09/unsoldcars.html

"Auto Prices About To Crash

With unsold cars stacking up by the day, demand falling faster, and bailout silliness getting sillier, I have three easy to make predictions.

1) Hundreds of dealerships are headed for bankruptcy in 2009
2) The Fed Is Destined To Become World's Largest Auto Dealership
3) Cars are going to get cheaper, much cheaper. Auto prices will crash. Liquidation sales later this year after the 2010 models come out are going to be fabulous.

It makes no sense to buy a car now, no matter how good the deal looks. The deals will get progressively better as the year rolls on."

[kestrel91316]

1. The price crash couldn't come at a better time for me. My

20-yr-old Honda really needs replacing.....

[physioex]

2. Hehe....

I am driving a beater myself. The only thing I find sad is that it will hurt the auto workers.

[Muttocracy]

22. My 10yo Honda does too

My previous ones made it to 15 years and I cried when each rusted to death (engines were fine) - but I think the first owner didn't take good care of this one. It's had a series of hard-to-solve problems and now I've got a scary one. It doesn't happen often but could be really dangerous if I stall on the highway. :( I was planning on this car lasting me several more years :cry:

[glowing]

3. also a good time to take any current loans and negotiate or let them

come and get the old car, and pick up a newer cheaper version.

[itsrobert]

4. They will dump the cars in the second/third world

Before they will give Americans a deal.

[malaise]

7. No one is buying cars anywhere

You should see the car lots in Jamaica and the new car dealers are suffering even more.

[BlooInBloo]

15. If we're poor, the rest of the world is dead broke.

[itsrobert]

17. Than they will crush them down

like tin cans. And take the loss.

[customerserviceguy]

20. Y'know, that's not as unlikely as it first sounds

Think of all the times that agricultural surplus is destroyed to keep price supports up.

[begin_within]

5. I just might dig into my savings.

[RB TexLa]

6. No thanks the autos I own are just the right price.

[flvegan]

8. New Lamborghini Gallardo for $20k? Sign me the hell up!

Supercars ARE part of this too, right?

[Lost in CT]

12. Nope the car has to look like a jelly bean or something only a mother would drive

before they discount one penny.

[flvegan]

14. Jelly Bean? Okay, $10k Porsche 911 it is.

I'll have to learn to deal with it. :P

[Lost in CT]

16. You and I should both live so long...

Hell I would jump all over a 25k boxster...

[dweller]

9. get a horse

and compost the emissions.

dp

[screembloodymurder]

10. Good luck.

They said the same thing in Sept. The deals haven't gotten any better.

[customerserviceguy]

11. In the last four months

I've witnessed the stack up of automobiles at ports in the Baltimore, and Portland, Oregon areas, so that part rings true. What doesn't make sense is that all of these cars are going to be sold quickly at "pennies on the dollar". What is much more likely to happen is that automakers will just idle their plants, except for parts that would need replacing, while the inventory works its way down naturally. That's what's happening in the housing market to some extent, there is nowhere near as much new construction as there used to be.

If one were to be able to get a brand new car for only a few thousand dollars, then there would be significant ripple effects. The price of used cars would plunge dramatically, and while people are "underwater" more often than not when purchasing new vehicles, the problem would significantly worsen. Why make those next four $500 payments on the SUV, when those same payments will buy you a Malibu for cash? It'll take four months for the repo man to come around for the Cherokee anyway, you may as well get out of this thing with a paid-for car.

It would be economic pandemonium. I cannot imagine the government, or any sort of holder of these cars doing something to create that.

[No.23]

13. I've bought several items from liquidatioln sales in several stores.

For prices that would astound some.

And I'm sure that there are many people who bought the same items at the price that they were retailing for, before the liquidation sales took place.

And some of them, I'm sure, are continuing to make monthly payments to credit card companies for those purchases.

It didn't stop the stores from liquidating their stock at basement prices.

I think that the same will happen with new vehicles.

P.S. Just to use one example, I bought a gold necklace for my daughter for $19 at Mervyn's liquidation sale. It sold for $299 when the store was solvent. I'm sure that there are some folks who used a credit card to purchase that necklace at its retail price before the liquidation sale. That didn't stop them from getting rid of their merchandise at rock bottom prices.

[customerserviceguy]

19. There are some differences here

As for that necklace, the $299 price was just a sham full retail price. Jewelry often goes for 50 to 60% off of those "sticker" prices. The simple fact is, the $19 necklace really only cost about that much to make, the markups on jewelry are astronomical. I don't see the automobile industry taking those kinds of markups.

This routinely happens with clothing. I used to work in price-marking at Sears, and that $100 winter coat would go through a cycle where we'd sell it for either 30 or 40 percent "off" depending on which day of the week you came in, then it would go on a rack that progressively went from 50 percent to 80 (or even 90) percent off. And that was during the "good" times in 2005 when I last worked there. That $100 coat cost only a few dollars of materials, and a few dimes worth of labor in a developing nation, and maybe a few quarters worth of fuel to bring it over here.

And while jewelry and clothing are financed, they are done so almost exclusively on unsecured credit card financing, vehicles are always financed on secured loans that have the very real threat of repossession attached to them. That's why you can usually get auto loans for lower interest rates than credit card interest.

When the value of security for the loans drops to a fraction of its value, there are all sorts of ramifications. The collapse of the housing market showed us what that was like. But real estate markets are all local. New cars are the most portable thing that you can secure financing on.

[No.23]

21. A reasoned explanation. Thanks for that.

I always appreciate quality reasoning, irrespective if it is aligned with my view or not.

A question, then, if I may.

Right now, and in many parts of the country, houses are selling for less than some new cars. I've seen numbers that support that clearly.

If the housing situation doesn't change this year (I, personally, believe that it will get worse before it gets netter)... wouldn't it make sense for new cars to sell for less than significantly depreciated houses?

And wouldn't that be sort of a weird correcting consequence of some homes being presently sold for less than some cars?

Thanks again.

[customerserviceguy]

27. You're welcome!

I've spent a bit of time at various jobs, including the better part of two decades in the title insurance business, so I get some first hand experience in a few areas!

As for your question about some houses selling for less than new cars, you have to be talking about some very high end cars, and some very depressed real estate prices. I doubt that most folks in the areas that have suffered the biggest housing busts are buying too many of the ultra-expensive cars.

Other than mobile homes in rented parks out in the sticks, or inner-city crack houses in ill repair, do you really see any houses selling for less than the average new economy car?

I suppose there have always been some pricey sports cars that have sold for more than the average home, but that just means there is a market for conspicuous consumption on wheels. I would expect that to still be the case, no matter what. You can go to a car museum and look at the luxury cars produced during the Depression; when the only market for cars is rich people, you tool your factory up to produce what they want to buy.

Also, like I said, real estate markets are all local. If I buy a $10,000 run-down crackerbox in a bad neighborhood, it's going to stay there, I'm not going to tear it down and rebuild it somewhere else. But if I buy a cheap car in that neighborhood, I can take it anywhere I want to, even out of state if the financing terms permit it.

[No.23]

29. Will some cities follow Detroit?

http://mjperry.blogspot.com/2008/09/detroit-cheaper-to-buy-house-than-new.html

[customerserviceguy]

30. Perhaps

but if you look at that article, even during the 2003 peak, the average Detroit home was still under $100K, and I don't think there's a major city in America where you could say that. Every city over 100,000 people that had a decent employment base had prices well over that $100K threshold.

The point is, not a lot of people have ever wanted to live in Detroit. And since Detroit's number one industry is almost completely down the drain, taking the surrounding economy with it, even less people want to live there. I would imagine that there are indeed other cities in the US with one dominant industry that dies, that will resemble Detroit in that aspect, but there may not be the crime fears that residents (or potential residents) of Detroit have.

If an isolated place is considered safe and cheap, it might draw retirees. If you can only get $100K for the home that was valued at $400K a few years ago, and you can buy a decent place in East Bumfuck, Kansas, for $25K because the local meat packing place or the tractor factory pulled up stakes and left, then maybe you look to living there off your Social Security and the $75K that is now your life savings.

[2Design]

18. liquidation sales the prices go up and after they don't seem to ever

get as good as the best sale out there

[lumberjack_jeff]

23. That's the problem with deflation. It'll make no sense to buy a car then, either.

Think a $20k car is cheap? Wait a few months. When stuff is always cheaper next month, it makes no sense to buy anything today. That includes whatever it is that you do for a living too.

[No.23]

25. This is more problematic for people who...

principally use credit to make their purchases.

Much, much less so for people who save.

The price of things... and the interest that you're paying for their purchase... are the things that keep practitioners of the usery system awake at night.

The savers tend to sleep more soundly.

[grammysandie]

24. Shit

I just replaced my 13-year-old Honda Civic with a brand new one yesterday. I did get almost $2500 off the sticker price, though.

[Blue_Tires]

26. those clowns at Barrett-Jackson aren't gonna like this...

[1]

28. pennies? i don't think so...

good deals? yeah. pennies? no...