Tangentially in the business. Two recent stories told to me:
1) Saw at Manheim Auto Auction (one of the largest) 300 Nissan Leafs run through the auction line in one afternoon ahead of some of our cars. Drop in "value" of leafs went down 10%+ in one day. All were recently off lease.
2) For similar reason, Santander is holding 4000+ cars on auction lots "waiting for pricing to stabilize". Reality is, when they run those cars through the auction, they will have to book the full losses. Say they anticipated 20% repossession rate and that they would get 80% on the dollar when auctioned on those losses. When they run them through now and get 50% on the dollar, their securitization pools will be creamed.
Leaf is a special case because of the battery degradation issues. 100k miles on a Leaf is basically end of life (unless you buy the $5k battery replacement). That being said, you can pick one up in California for $5k in perfect condition with <50k miles and ~75% of battery life remaining right now. When you factor in zero cost of maintenance and zero cost for fuel over a lifetime of 2-3 years, and HOV access, it's the single most perfectly designed commuter car to ever exist IMO. I just bought one last month and it's the best car I've ever owned. Having a bunch of free chargers nearby means my total monthly cost to commute ~20 miles a day is a $75 insurance payment.
Definitely a niche thing for heavy urban areas that have the charging infrastructure though. I can't imagine owning one in the Midwest.
Any advice on how to make sure you're getting a good one, or where to get one? We considered Leafs several years ago, but the range wasn't quite good enough for our needs.
Since then, our needs have decreased and range has increased a bit. Would love to trade in one of our 25 mpg vehicles for a Leaf. Plenty of chargers around Palo Alto, including at work!
Make sure the battery has at least 8 bars left. There's two gauges on the dash: current charge and battery capacity. Capacity is the skinnier one on the right [0]. If you find one still within the warranty window below 8 bars, Nissan will even replace the battery free [1]. Also make sure you get one with a quick charge port, it's worth every penny. Other than that you really can't go wrong.
Not an owner, but I think those two points work against each other a bit. How much, I'm not sure, but slower charging does preserve capacity. If you have no plans for long trips where you need to charge during a meal, and will always be charging overnight or while at work, batteries that haven't had to deal with faster charging could be better.
You're not wrong however all of the studies and research out there shows the degradation is hundreds or tenths of a percentage point. In other words it's insignificant.
* there's generations of Leafs, and later ones are better in terms of battery management
* there's a device you can buy and an iPhone app to get better, in-depth info from the battery on a car you intend to purchase
* It was high temperatures that were the achilles heel for early Leaf's so watch out if you live somewhere like Pheonix or if you suspect the car came from somewhere similar
* make sure to check out all the various rebates available for new leafs (from state, federal and utility companies, and group buy offers) to make a fair comparison with a used model.
75% battery life on a car that has a 90 mile range? Talk about range anxiety! I'm not sure who looks at those cars, but they sure don't use cars like I do.
I don't even commute and I can't imagine the stress of driving something like that.
In the Bay Area it's never really an issue because of quick charging. 30 minutes gets you an 80% charge from 0. When you realize that point-to-point the longest possible drive around here is ~40 miles, and there is guaranteed to be a quick charger within a few miles of your destination, it changes things. I admit it's a total mindset shift from driving an ICE but I love it.
I've heard stories over the years of "plausibly desirable car X is selling for around price $Y!" - yet when I look around a bit, prices are always much higher.
It's that the trading market is sufficiently thin that even a few hundred units of freshly off-lease vehicles will crash the price.
David Gerard makes a similar point of Bitcoin in Attach of the 50 Foot Blockhain -- that "market capitalisation" of crytpocurrencies is complete nonsense, due to market thinness. Rather, you want to look at total transaction volume. A large player can move the market significantly on a very small number of trades.
Price, it turns out, is far more like pressure than volume. Punch a large hole in something, and it falls rapidly. Squeeze it to a small point, and you can keep it quite high, but on very small total quantity.
I can confirm that used Leafs from the USA are very popular here in Kyiv. They sell for something around 18000 USD, are about three years old, and are said to have freshly replaced batteries (which may or may not be true).
As well as private owners, both places have a car club using them too [1] - I guess it’s possible the low value makes them more attractive for that use.
I mean does this really shock anyone? There are like no less than 20 used lots in my city alone (which is hardly a metro hub) all of which have probably at least a hundred used cars on the lot. And that's JUST the used dealership market, not even counting the new dealers, the private sellers, the rental places getting rid of cars, or anybody else I'm not thinking of.
There are actual quantifiable fuckloads of cars in the states. It's really a wonder there's enough customers to feed this industry at all, ability to pay the financing notwithstanding.
In 2012 there were actually less cars per capita in the US than many parts of Europe including Italy. The difference is that in the US, auto financing is ridiculously easy for purchase and lease, combined with the general financial irresponsibility of the population, you see a lot of new and expensive cars driven by people with below average incomes and they return the lease and get a new car every few years whereas in other countries people drive their cars into the ground.
The local CarMax may have auctions for the local "Mom & Pop" dealers - you won't be able to bid, but if you talked to a registered bidder ahead of time and told them what you are willing to pay (in cash) for a Leaf that day, they may bid on one for you. Point out that they won't have any lot insurance fees on it, since you'll be taking delivery immediately.
Yes that works pretty well. My wife wanted a specific model of used car several years ago so we told our regular mechanic (who has a dealer license) to find one in good condition at the local auction and bid up to a certain price. It was worth paying him for his time to attend the auction and filter out the cars with problems.
There are pretty massive subsidies on new Leafs now. $10k reduction by dealers as well as $7500 federal tax rebate (and potentially CA rebate if you are low income).
Manheim policy may vary across the world, but here in the UK they're open to private buyers on most lots.
My nearest auction house is Saltash, Plymouth and twice/weekly sales and upwards of 200 vehicles go through the books. It's quite something to see a car brought to the line, bid on and sold in 2 minutes.
Private buyers pay a larger commission per sale compared to bulk buyers, but hammer price is the same.
There's a twice-yearly plate change in the UK also, so in the coming weeks (from Sep 1) there will be a glut of used cars traded as part exchange for new vehicles.
Opening up the auction to private individuals doesn't bring more buyers, as the brokers are just middlemen -- all the cars they buy get passed on to end customers in a matter of weeks. It may bring more money, if people are willing to pay more to disintermediate the brokers.
However, this adds a lot of headache and risk for the auction operator - tons of uneducated customers who won't be able to pay, try to back out of bids, get pissed when the car has defects (auctions are typically as-is affairs), crowd the lot, etc.
However - if you see a car you want coming up, try asking a local broker to buy it for you for a flat fee, a few hundred bucks over the closing price. It's a guaranteed sale for them with no hassle ...
This is what I do. Friend of a friend is a dealer. He's at the auctions every other day. I just put in an order with him and he'll call me when he finds something good. I trust him. Having had a bad deal yet. Charges $400.
In CO you could get a Leaf for $8K with tax credits, at least until the end of June this year. There were tons of brand new ones on eBay going for ~$10K when I checked.
With UBI, you get money. You can spend it on whatever you need or want.
With "Universal Cars" you get a car. If you already had one, you probably need to sell one or the other. But now everyone has a car, so the resale value crashes to nearly scrap. If you keep it, you need to pay for insurance, maintenance, and actual usage, which may or may not be a net positive.
Let's suppose you don't already have a car. Why not? If you live in a city, you may not have a need for a car. Selling it won't help much. Parking may be impossible or too expensive. Perhaps you cannot drive a car. This car is going to be useless to you.
On the upside, it bolsters the car manufacturing industry. On the other hand, many mechanics will go out of business because it will be cheaper to get a different car than fix the one you have.
On the gripping hand, expect gigantic traffic jams, rising fuel prices, and soaring pollution levels.
"With UBI, you get money. You can spend it on whatever you need or want"
As long as you have a slave class doing the producing who are forced to take your money. Otherwise you just get inflation because you haven't added anything to the supply of production side.
If your mental model is based on a single self-sufficient town plus outlying farms that does no trading and never improves their technology, I can see how you would come to that conclusion.
In the UK, many cars sold in the past few years are under a so-called Personal Contract Plan (PCP). These are basically sub-prime loans for cars where you lease the car for the difference between its purchase price and its projected depreciated value at the end of the term.
One of the UK regulators recently warned about the exposure to these loans. "An initial fall in prices
could lead to a surplus of used cars coming to the market, which could further weaken prices and
cause material losses to lenders through their GFV risk." (http://www.bankofengland.co.uk/pra/Documents/publications/re...)
British PCPs are very similar to the car leases that have been very common in the United States for many years (in both prime and subprime markets). There has been a lot of recent discussion about the risks associated with PCPs is mainly because they are relatively new in the UK, and because they have grown so quickly lately from almost zero. That means assumptions about the “residual value” (to use the American term) of the cars at the end of the contract, which are based largely on data from before PCPs became so popular, may not be so accurate.
That’s probably less of a concern in the US, where the lenders have more experience with these things, although car sales (and leases) have also grown rapidly in recent years, so there is still something to worry about.
In both countries, as I understand it, it is the lender who loses out if the resale value is less than rejected. So at least individual car owners are somewhat protected, and the biggest risk might be having to return the car and not being able to get a new lease/PCP with attractive terms.
"That means assumptions about the “residual value” (to use the American term) of the cars at the end of the contract, which are based largely on data from before PCPs became so popular, may not be so accurate."
When you put it like that, it reminds me of the endowment mortgage situation in the UK which led to people having serious issues at the end of their mortgage term [1]. Obviously not at the same scale, but it'll still alter the market considerably.
About 85% of new cars 'sold' in the UK are either PCP or Hired Purchase[0].
Anecdotally, it's really apparent amongst my peers; many are driving new (less than two years old) BMW, Audi and Mercedes that would probably cost a whole years wage or more outright.
Luckily, for people like me who buy almost new for cash, this is a good thing.
I've noticed this same thing, but don't quite follow the logic fully.
Like, why don't they just PCP or Hire Purchase a cheaper car. They'd get whatever benefit the PCP provides, and spend less money. What about the PCP convinces them (rightly or wrongly) that they can afford those cars?
There's so many people doing it I feel I must be the one that is wrong, and there's some tax dodge or something they are taking advantage of.
There is no secret trick or advantage to it. They buy the nicest car they can (barely) afford the monthly payments for, not one that makes most financial sense.
> What about the PCP convinces them (rightly or wrongly) that they can afford those cars?
At the end of the PCP plan, you don't get to keep the car (it's more of a rental than a purchase). Therefore the monthly payments on a 3-5 year PCP are going to be lower than on just a loan for the full price of the car. That makes it more "affordable" to people than actually buying a car - and the issue of what to do in 3 years time, when you will have no car, is conveniently forgotten.
Everyone wants a nicer car, but usually there's good reasons why they haven't bought one. It seems like something has shifted recently and many people have cars nicer than they would have previously.
Possibly nice cars are just cheaper, or everyone is richer or people can get credit for cars where before they couldn't.
It might just be me, I thought people spent too much on cars anyway, and now they seem to have nicer, newer cars, so I assume they're spending even more, but as a non-car guy maybe that only seems weird to me.
It's a straightforward effect of financialisation.
It's because you get the benefit of the part exchange value of the car in three years time now, rather than in three years time.
That simple discounted present value trick allows you to have a nicer car the first time you get on a PCP plan, because it lowers the total amount of credit on that plan vs the alternative.
As interest rates keep getting lower and auto loan terms now as long as 7 or 8 years. In 3 years, when the people that got those long loans want a new car, they will find their car loan still underwater. They will likely have to stick it out with their "old" car for awhile.
They are only sub prime if the borrower has a greater risk of default than a prime borrower. There is a real issue of mis-selling of these loans in the UK, but the loans are not always sub prime
Sure, as far as basic transportation goes, but you can't get the vastly improved safety features in a used car that you can in most new cars today. Buy a new Toyota? It comes with automatic emergency braking, collision avoidance, blind spot detection, adaptive cruise control, and built-in backup camera, standard. Buy a used 2014? It has none of that.
I just bought a new car for the first time in my life. The safety of those features was worth the $10k premium for a new car.
>It comes with automatic emergency braking, collision avoidance, blind spot detection, adaptive cruise control, and built-in backup camera, standard. Buy a used 2014? It has none of that.
Don't run into stuff? Most of that tech is only useful if you are an absent-minded driver and even then it only covers some cases (e.g. emergency braking doesn't help if the car in front of you slammed into something and you were following too closely). They are selling this tech by exploiting your fears, don't get caught up in it.
Getting in a wreck in a 2014 Corolla is still incredibly safe due to the crumple zones and airbags. The $10k you blew on those features in the new model could easily pay for the damages to a 2014 and would cover all of the cases those features didn't (e.g. someone running into your car in the lot).
First of all, I think the word "accident" is crap. It should be called crash in most cases, and crashes are more often than not avoidable. Predominant cause: Driver error. If you glance in the mirror, something might catch your attention there, and if someone cuts in front of you at that very moment, that's when AEB (or the "normal braking" + warning from dynamic cruise) can come in real handy.
Also having Dynamic Cruise might teach you what a proper following distance is; hint, most people have no idea about what 2 seconds gap actually equates to. The DCC distance is typically set in seconds, or at least in the Mazda it is (1,2,3 or 4). Even 1 second is more than most people give, in Melbourne Australia.
Speaking as a 2014 Mazda 3 Astina owner, this tech works. Including if someone cuts in and then slams their brakes. Autonomous braking functions is the biggest safety invention since the Dynamic Stability Control. Try to Google effectiveness of AEB, and it's quite conclusive.
I'm excited by the new Tesla cars extra sensor and autonomous driver tech packages, which includes so many more ways of reading the environment than what my "mere" Mazda 3 radar + cameras offer. If I had the budget, I'd definitely be getting into that.
Don't run into stuff??? You realize it is called an "accident" for a reason. The backup camera and blind spot detection are worth real dollars in my experience.
> backup camera and blind spot detection are worth real dollars
I agree on the camera.. it's been especially useful in more than a few places on my work truck, but I worry that features like BSM go along with a trend of designing more "stylish" interiors that have significantly reduced visibility along certain angles.
The difference between my small Japanese car and my sisters American SUV is amazing. I can physically see everything around my car, in her car, there are huge chunks of surrounding space that are blocked by pillars and other design considerations. If you feel you need BSM, then you may just be driving a horribly designed car.
Calling it an "accident" is doublespeak so you can wave your hands and go "I had an accident, oops, it couldn't be helped."
Making it seem like it was just your fate that day. Which if it was at-fault, it certainly wasn't. It sounds a lot better than "I am either negligent or incompetent and shouldn't be trusted with piloting a 2-ton hulk of metal."
If you checked your blind spot every time like you ought to, the blind spot detection is at best a minor additional safety backup. I see a lot of people relying on it instead of actually doing that, and the systems aren't perfect. (One good example: Someone else is starting to merge into your blind spot but hasn't gotten in the lane yet).
> If you checked your blind spot every time like you ought to, the blind spot detection is at best a minor additional safety
This is not true. On some freeways in my country, idiots have a habit of driving 2x the speed limit. Checking your blindspot at the time you started the maneuver is no guauantee it will still be empty a half a second later. The blind spot detector is pretty helpful IMO.
Btw .. I don't understand what perfect world some people live in. Do you live in a world where programmers write bug free code every single time like they have been taught?
This is one of the biggest points that I have seen taught in driver training courses and repeated throughout my life. Most of the events people refer to as car accidents are crashes/collisions.
And if you buy a used luxury sedan, you can have all that stuff now. Go pick up a 2006 Lexus LS430 with 150,000 Mike's on it for $10,000; they were $70k new and have all those whizbang safety features and it's a Toyota Avalon underneath. You can put 400,000 miles on them if you treat them right.
You can do the same thing with the big German luxury sedans, but upkeep will be more. Those aren't Toyotas underneath. It's still pretty reasonable for the amount if car you get; just budget for it.
But the LS430s aren't really comparable to the current gen Toyota safety systems. The LS430s have dynamic cruise control but they won't bring the car to a complete stop, the dynamic cruise control in the 01-03s is a little weird (and I think it has some reliability problems). And the dynamic cruise control is bundled with the Ultra Luxury package which has a lot of stuff to break (an extra A/C unit for the rear, air suspension, and double thick glass that can fog internally if it cracks).
The Modern Luxury trim cars have the dynamic cruise control without the air suspension, a/c unit, and a few other gizmos but they're really rare.
And I'd be remiss if I didn't mention it, but the 01-03 LS430 is probably the best used car value in America. You can get a decent one for 5k (they'll ask for 7k but tell them to pound sand) and they're unbelievably nice. They're not Avalons, but they drive like every Toyota ever just with more poise and fluidity.
Is there something special about the LS430 air suspension? I own a Town Car with rear air suspension and it is my favorite feature of that car. Parts don't seem to be expensive and there is a large aftermarket. I have been recommending rear air suspensions to others interested in comfortable road trip cars.
It's a volume thing - the LS430 is a relatively rare car, air suspension is a relatively rare option (only available on the top two trip levels), and the replacement parts are only available through lexus. There isn't anyone who rebuilds them or sells them private label.
For the price of 1 air shock replaced at the dealer, you can get an independent mechanic to put the car on conventional suspension and it'll still ride good enough on smaller wheels.
Why is it worth 10k? Do you get in a lot of accidents? I genuinely would not want any of those things, I don't want my car making decisions for me, I'm smarter than it. On top of that it's just junk to break you can't fix.
I have never been in an accident.
I drive a pickup I paid sub $1000 for. Been driving it for three years no issues. That $10k could buy me ten trucks.
Would I take it on a trip? No, I rent a car for less than a car payment.
In my opinion buying new vehicles is a foolish waste of money I could be spending on something else.
Much less a serious accident where important safety features make a difference is one of those things you won't generally hear the reverse being said since, you know, you'd be dead.
Gambler's Fallacy. Prior incidence has no effect on future occurrence.
A lot of the new safety features are for low-speed collision protection, automatically sounding horn and applying breaks when your car gets close to another, say in traffic. Unless you go top-range you generally won't get actual driving automation. Other than that it's just convenience; Climate control instead of air con, reversing sensors and camera instead of (as well as) mirrors and turning your head around etc.
Instead of barking the names of logical fallacies at people, perhaps consider why the auto insurance industry employs scores of actuaries and takes driver history into account so heavily.
It is still a fallacy. Insurance companies don't look at someone who is 40 with no accidents and insure them for free because even the lowest risk drivers get into accidents sometimes.
Gambler's Fallacy. Prior incidence has no effect on future occurrence.
We’re not gambling, we’re driving cars. And the fact that the current F1 champion has won some races means that he is more likely to win the next one than I am. And the fact that I have a lower-than-average rate of driving collisions means that I have a lower-than-average chance of having a collision in the future. If you doubt me, ask an insurance actuary.
There is something to be said for simplicity but it gets worse with time and exposure. Many of these older cars have first run issues like exotic oil types or vanos type engines + known mileage warts and expensive replacement parts.
I used to drive old used junk all the time and the truth of the matter is that the newer the better and you will miss what you don't have. Yes, the car industry is a racket but keep in mind that a car is not an investment except in some wealthy circles.
All that extra tech is unnecessary junk, though. I like the backup cameras, but just recently had an near-incident where that didn't help either. It's up to you what you want in a new car, but I'll tell you from experience, all those extras are just going to break and have problems and cost big bucks to fix (or you'll have a Christmas tree of warning lights on the dash while you ignore this or that malfunctioning feature).
My Mazda 3 Astina (sedan, mt) which I bought in 2015 as an ex demo 2014 has all of the AEBs, dynamic cruise controls etc. (You forgot to mention rear cross traffic alert, which is brilliant.)
This bubble has been building for years now. Wholesalers and other exporters have been hiding the problem for a while now, and but somethings got to give. The problem is multifaceted:
1) Lease rates arent necessarily in sync with the used car market
2) Buyers are keeping cars longer if they purchase
3) Subprime loans and buy here/pay here dealers are multiplying.
THIS IS A BUBBLE. I wont call when its going to burst, and it wont be like the housing bubble, but the fallout will be great...
(i) car manufacturers are big enough parts of the market that they can buy up used cars and scrap them/export them, putting the cost of that onto new cars
(ii) they can lobby government to introduce environmental standards. Japan exports a good part of its used cars because of the cost of maintaining a used model.
The difference with cars over houses, is that cars are mobile.
So the issue, if there is one, is just the usual one of over-lending via agency originators and securitising those bad loans onto muppet pension funds searching for yield. But that's not unique to the car market.
Any predictions on how the popping bubble will ripple through the economy? With the housing bubble, there was a huge pull-back in consumer purchasing, as people lost hundreds of thousands of dollars in home equity. That caused a drop in consumer confidence and purchasing, which led employers to cut back on wages/hours, which led to further drops in consumer purchasing.
Do you think we'll see the same domino effect here, but just at a lower magnitude? Or is there a different path for this bubble to ripple out through? Perhaps when people lose cars they lose jobs that they can no longer commute to?
I don't think that it will be as severe. The big banks are largely insulated from this. I do think that it will be a buyers market for late model used cars for cash buyers. I'm already seeing signs of this. It's just not quite there yet but I bet I can get a car at 50% traditional market price soon.
I think the banks as in the car manufacture's finance arms will be hit the most: when it hit they are the ones who are suddenly owners of a car that they owe more on than it is worth. They will have to sell these cars at a loss. If they try to make up for that loss by raising lease rates those who turned their car in will be forced buy a used car at greatly reduced rates (few have the ability to afford much larger payments)
Those who buy their car have a known payment, they might owe far more than the car is worth but that payment won't chance and other than an accident they eventually have a paid off car. They might not be able to trade their car in as soon as they would like, but they at least have a car.
Agreed. All the credit arms of the manufacturers will be hit hard. I didn't mention this in my parent comment but you alluded to another great point. 60+ month loans can mean that those who drive more than 20k miles can use their car up before it's even paid for.
I really found the opposite last month when I was truck shopping. The prices at carmax weren't much lower than buying new. I even found one case where it was cheaper to buy new!
I'm wondering if people hate the dealership experience so much they're driving up the price of used cars?
I'm still just utterly confused by the used truck prices I was seeing.
Trucks are used as work, and puzzlingly, luxury cars in the US. They hold their value well because of the new standards seem to be making long term maintanince harder and more expensive. Pre-DEF Desiel engines, Normally aspirated V8 engines, Thicker sheet metal, Less sensors to replace over rough use are a great example of factors making many used trucks sell for more than new.
The higher power requirements make them pretty crappy when it comes to range, particularly if you are actually using it to tow or carry something heavy. Compare gas mileages of trucks to cars to see what I mean.
Trucks are known for being incredibly reliable and fitting almost every niche all at once. Need to haul 5 people? You can have a pickup or a sedan. Need to haul lumber? You can have a pickup or a van. Need to drive down a 2 track road once or twice? You can have a pickup or an SUV. Need to move a refrigerator? You can have a pickup... well really just a pickup. Need to haul a trailer? You need a pickup. Need to park downtown? We invented rear-view cameras for that, no need for a subcompact anymore. Need good gas milage? Why? Gas is cheap.
They last forever, are known for being inexpensive to maintain, and in the rare occasion you actually need a pickup, now you don't have to rent one. There's no situation where you need a sedan but a four-door pickup won't also work. So they hold their value very well.
All of these are true. On top of that, they're lifestyle and identity products. That carries a massive premium. Those yoga mats you see suburban moms hauling around probably cost $0.30 to make, but they'll easily sell for $20+. Ditto the pickup. When your daily driver is also a powerful class and in-group signal, it's suddenly worth a lot more.
Trucks are very expensive if you buy the same silly trucks that everyone has. The four door short bed truck is a gas guzzling inadequate tool. In large trucks, 3/4 ton and up everyone wants to buy an expensive to maintain diesel engine. A lot of fleets are moving back to gas because the economics of diesel don't make sense with the much higher maintenance costs. You can use all of this consumer behavior to your advantage by buying unpopular but incredibly useful trucks at low prices. Get the longbed regular cab models with gas, they are hard to find but super cheap when you do. In the past 4 months I bought a 2004 F250 with 89k miles in great conditions (no scratches in the unlined bed) from a dealer for $6800. I also bought a 2000 GMC 2500 with lift gate (body was ok, lots of small dents, mechanically super skookum) with 56k miles for $5000 from a private seller. When I looked for trucks, I regularly saw 2500/F250s with over 150k for over $20k (those were diesel, 4x4, crew cab). Yes the trucks get around 14 mpg and can only hold 3 people. I'm not that popular, in the 65k miles I put on my old car over 3 years, less than 1000 were with more than 2 people. I have enough money left over that I will probably be buying a prius or a leaf for my second car.
> The four door short bed truck is a gas guzzling inadequate tool.
Those little truck beds are so cute. They look like a toy truck bed. Can't even put a sheet of plywood in one. Since the cabin is basically an SUV, the truck bed is basically an open-air trunk.
Afaik trucks are the strongest US auto segment (iirc Toyota can't make enough of them right now and are increasing production capacity in their Mexico plant), so maybe you hit an outlier segment.
A 4dr crew cab can haul the kids to soccer and move furniture all while requiring one parking spot. It's a good multi-tool at the expense of operating costs. The cost of insurance, registration and (possibly) parking buys a hell of a lot of gas.
Think of a vehicle as having indoor storage, long term comfort (space to not be cramped) outdoor storage and passenger capacity. Crew cab trucks are used like full size sedans with outdoor storage instead of a trunk. That's a pretty good blend for most use cases since most people can use the second row as a trunk when not carrying passengers.
Insurance, registration and parking costs are a disincentive to buy specialist vehicles (like the electric commuter cars HN loves).
>Certain segments are shedding value even more quickly. Subcompact cars, such as the Honda Fit, and large sedans, such as the Chevrolet Impala, are depreciating faster than average. Big SUVs, vans, and pickups are holding their value a little better, and imports tend to drop more quickly than domestic models.
With many countries tabling laws to outlaw the sale of diesel and gasoline cars around 2030, this is going to accelerate extremely quickly.
In 5 years (2022), everyone will know it will be illegal to buy a gasoline car in just under 8 years.
I think there will be very little demand for the regular old gas powered car. (excepting maybe exotics, or "pleasure drives", which much be a tiny fraction of overall sales)
That car you have to fill with liquid cancer is going to be worth extremely little, very soon.
Getting down to the point, can you imagine the political fallout from crushing the value of a gas car? It's a truck sized political landmine, and no party is willing to touch that thing with a hundred foot stick.
Gas still has significant advantages that electric has yet to match. Worst gas has 53x the specific energy of the best Li-ion, and even with a hundred % efficient induction motor and a 10% efficient motor (try closer to 30% realistically), gas is still a much more energy dense fuel.
Still, gas has a ton going for it. It's quicker to "charge" by an order of magnitude; it's easy to carry an auxiliary supply to double or triple range. Cold weather and reliability are excellent (hundreds of thousands of miles with a minimum of maintenance). There are no concerns about cell wearout (batteries will last for 5 years, maybe). Virtually everywhere on the planet, there's someone in any population center who knows how to work with gas cars.
The network for gas is highly developed and highly entrenched. No one is giving up trillions in value without a fight. In all honesty, I expect to see gasoline powered vehicles on the road for the next 100 years, barring an unprecedented revolution.
Mostly you are right, but not entirely. Many of your concerns about electric cars are growing pains which means they need to be separated.
Cold weather reliability for electric cars will get better.
Battery wear out will be a problem we learn to solve - replacement batteries already exist, they just need to be factored into the cost of the car.
Most of the things you need to work on for electric cars are exactly the same as gas. You still have brakes, tires, a suspension system. The rest are things that those mechanics will learn, just as their learned to work on gas engines.
When there are enough electric cars on the road the network will follow.
You are correct that in 8 years the gas/diesel car will still dominate. It isn't clear if buyers will switch to electric cars by enough that all new cars are electric in 8 years (if the buyers don't switch the politicians will blink and repeal the 8 year law). However as buyers switch to electric cars the infrastructure will follow.
The real question is will non-cars switch to electric. The fuel density difference is just a minor annoyance for cars. For truck, trains, tractors, and other heavy duty operations the energy density is much more important.
I think you might be a bit off here on the extent to which the average driver will be needing gasoline.
Tesla's have less than 10% battery degradation after 8 years so far.
What will happen is people will buy an electric car as a second car. They'll get comfortable charging every night and then buy a Chevy volt like car that usually won't need gas but can range extender as needed. A large portion of those users will realize you don't even need the range extender most of the time.
Precisely! If you need an exemplar, just look at lead... an element that was known for centuries to make people crazy, which was formerly a gasoline additive. And what about all those other additives and emissions? Then you start looking at bunker fuel. This stuff ain't good for you by any stretch.
Germany's upper house passed a non-binding resolution about how they want it to happen in 2030. What others are there?
There are bunch of countries talking about 2040 and a few including the UK have legislated. However, that is safe enough that the current bunch of legislators will be long gone. It might also be like repeatedly missed emissions targets and so on.
Also, called petroleum liquid cancer is inflammatory.
Indeed, 0-emission target (i.e. no car, truck, bus, train new or old circulating emitting CO2) for London is 2050.
However, there is a trend at the moment both in local government and national one. If that is followed by actual investment in charging infrastructure, sometimes between 2020-2030 electric cars could reach critical mass.
At the same time, some region and countries of Europe are already thinking going backward on fiscal encouragement to buy an electric car. In Europe the major part of the fuel cost is taxes, and at some point they will need to find something to tax electric cars on, doing it too early could kill electric cars momentum ... so wait and see.
Aren't all those laws focused on new cars? I can't imagine the backlash a government would receive by zeroing out the value of most people's most expensive possession.
When new car sales move to electric from gasoline, you'll start to see gas stations go out of business...slowly at first but accelerating as the percentage of gas powered vehicles declines. You'll still have your car and be allowed to drive it, but the days of just finding a gas station wherever you need them will be over. Much like early days of electric cars, people will need a concrete refueling plan for every trip, which is going to make those cars a lot less attractive to own and a lot less valuable on the resale market.
Or we'll see "gas" stations incrementally change to "gas-n-charge" stations. As society moves from liquid hydrocarbons to electrons for personal transportation I can see no reason why these locations won't adapt.
After all, people will still ingest their liquid fuel and expel their waste. ;-)
Maybe that is true in rural and suburban environments, but I doubt it in dense urban environments. Adding a charger to every spot in residential parking garages and on every residential street is a bigger infrastructure project than converting over gas stations to chargers. You also have to consider the time it takes to recharge an electric car is much higher than the time to refuel an ICE car.
Interesetingly in the Nordics this is already done. Practically all the parking spots (excluding street side) have 230VAC outlets for engine block warming.
Meh, how much does a regular old 15-20A 120V outlet cost to install? $200 per plug, maybe? Just need a relay inside that talks over Bluetooth to a cloud-connected app on the user's phone (or just city wifi), and you've got a smart outlet that can handle payment. Another $20 (based on costs I've seen online for similar products), total $220. People can use their own chargers as all electric cars come with level 1 chargers. Cost is low, so could use residential electricity rates (slightly more expensive than commercial) and still make profit.
We already have lighted parking, don't see why adding outlets is that hard. We're talking slow overnight charging here for the most part.
> You also have to consider the time it takes to recharge an electric car is much higher than the time to refuel an ICE car.
True, but for most drivers on most days they will be able to charge up at home overnight. Charge time won't matter as much then. Drivers in dense urban environments will likely move towards a car sharing model since, as you noted, the costs and practicality of infrastructure retrofitting will be exorbitant.
Disagree. Just need an outlet, like the engine block heaters on light poles in Minnesota. Infrastructures costs are low of people use their own chargers.
Considerable amount of parking here in the UK is on-street. None of the homes built in the post WW2 rebuilding have dedicated room for cars, or any of the 10s of 1000s of homes built before that.
By "post WW2 rebuilding" do you mean a specific limited time period?
Because otherwise, "None" is a bit strong - there's hundreds of new homes and apartments within 5 miles of me that have dedicated parking spaces.
Even my block (seems to be 1960s) has dedicated off-street parking for 8 cars (admittedly there are 12 flats but I suspect 8 cars for 12 flats in the 60s was an outlandish estimate.)
Gas stations don't make much money on actually selling gas - consumers are irrationally price sensitive when it comes to the price of gasoline, so the stations are generally selling it at or near cost.
As long as people still pop into the convenience store to get a soda and a candy bar, it doesn't matter if they're filling your tank with gasoline or charging your battery.
I'm thinking gas stations will stop selling garbage and start selling actual food, since charging takes longer and people will be hanging around for a little while.
There are likely other factors at play. For example, if the more expensive fuel station has brand associations it triggers (e.g. Shell [1]), the higher pricing likely benefits them more so than it hurts, as their target market discerning customer is likely to interpret the price as a proxy for quality.
Can you provide a concrete example? I can't recall ever seeing such a disparity in the US having lived in the midwest, northwest, and east coast. Perhaps you're in a different location?
The Burlingame A&A is notorious for being the one of the cheapest -- if not the cheapest -- places to fill up between SF and SV. In this case, it's likely that the Chevron literally across the street just decided it's not worth playing that game, hoping instead to appeal to the crowd who wonders if the cheap competitor is actually up to par.
The fact that the Chevron gets any business at all seems to validate this strategy at first blush.
Also the Chevron at grant and el Camino is $3 when the shell a block away on grant is $3.60 or so. The Chevron is one of the highest trafficked gas stations in SV and operates on volume. The shell can't play that game so charges a pronoun to grocery shoppers.
Costco is 20% cheaper than all other stations in Toronto. So either Costco is selling at a loss (unlikely) or there's plenty of profit in gas for gas stations.
Given that you have to pay an annual membership fee to get access to that gas, it's likely subsidized by the fee and used as a loss-leader to bring people to shop at Costco.
It's an older link, but they still do much the same. There have been court cases brought against them by consortiums of other gas stations here and there, but AFAIK Costco has emerged victorious so far.
It's similar to when Color TVs were invented. What happened to the re-sale value of all the B&W TVs that were already out there? They plummeted, because they had been superseded.
This scenario will be even more aggressive, because laws will ban the sale of the "old tech".
That's not really comparable at all. A color tv is a fundamentally more distinct product as compared to a b&w tv than a ICE cars is compared to an electric. Especially for the foreseeable future.
Because a colour TV is fundamentally and objectively better at its primary use case (watching TV). A petrol powered car will get you from A to B just like an electric one.
Range lower, maintenance costs higher. The argument goes both ways but whichever side you are on, we are on the same side that EV are fundamentally different than gas cars, at least as much as color TV vs b&w.
In my mind, just as getting 3x more colors gives you exponentially richer storytelling, 3x more range (way more than that actually, since a gas car can be in almost continuous use with brief stops for fuel) gives you the freedom to go exponentially many more places, do things etc
Oh don't get me wrong - there are advantages of course. But people are underinformed / bad at calculating whole of life costs / don't have the extra cash available so a cheap petrol vehicle will look appealing. There isn't the "wow" factor of comparing colour vs B&W TV - especially at the low end. The Nissan Leaf was a nice car to drive but it wasn't impressing anyone because of how cool it looked.
Because the primary function of a TV is displaying moving pictures while the primary function of a car is not related to its fuel type. The general public has not yet shown a dramatic interest in electric over ICE, but improvements to TV picture have been shown to be major drivers of adoption from color, HD, 4k, and so on. That is the whole reason why these laws are being considered, to help move people off ICE cars quicker than they would in a normal market.
I mean laws will ban the sale of new ICE cars, which by then will be the "old tech".
So when you can't even buy one new, why would someone want a used one? (unless, like I said, it's a pleasure driver or some exotic, which is a tiny fraction of all cars sold)
Think of all the things that have been replaced and superseded in history - once the new thing exists, the old one drops in price dramatically.
I think you underestimate the financial burden of buying a car. As long as a gas vehicle runs, they'll be a market for it. If they depreciate even faster, they'll still be a market. People don't care about resale at the bottom of the market. They care about reliable transportation which I assume gas cars will continue to provide.
There are plenty of 20 year old vehicles out there with plenty of life left in them.
> So when you can't even buy one new, why would someone want a used one?
If people would want to buy them before considering availability of new ones, banning new one increases market clearing price of used ones by eliminating an obvious alternative.
Now, as the number on the road dwindles, you'll start to see reduced support infrastructure (gas stations, parts availability, etc.) which will make ownership less attractive, but that's likely to be a slow and lagging process. So, if there are still utility advantages to gas cars, I'd expect used ones to become more expensive initially with a ban on new ones, but drop sometime later.
> So when you can't even buy one new, why would someone want a used one?
Because the prices of non-collectable ICE cars is bound to plummet unless we haven't solved the battery charge speed issue (as in, in practice, supposedly it was recently solved in theory).
Kinda curious how electrical vehicles will fare during a mandatory evacuation or disaster. If you don't have a full charge, there's not an easy way to get a full charge, and so you will just not have transportation the full route.
Interestingly, my observation here in Bend was that the worst shortages were in the middle of last week as locals rushed to fill up so they wouldn't run out... Could have been worse up near Madras, though, which is smaller and had a lot more people.
> I'm guessing that if the number of electric cars surged by 25% for a few days, it would be much less of a problem.
Some parts of the US aren't able to easily meet energy demand they can forecast when it goes up by amounts like 25%. For instance, Pepco pays to install thermostats where they can turn down/off your air conditioner[0]. Same with Dominion Energy[1]. I would be unsurprised if an influx of people of the size to cause gas shortages would also cause problems for electrical grids in many parts of the country.
That doesn't follow. There is a vast difference in cost of different forms of electric. The grid has a lot of built in ability to scale by turning on more expensive sources of power. People want low prices, and so the power company does what it can to stay on the low cost sources of power even while higher cost sources exist and could make up the demand without those tricks: it make customers happy.
My company maintains an old boiler from the 1880s connected to a steam engine/generator from the 1920s. Because we have it maintained and can start it up with 12 hours notice the power company gives us a substantial discount on our power. I understand we actually did turn it on about 5 years ago when something major happened to the grid. We were able to power our [small] town alone. This is one of the least efficient power plants in the country and thus one of the most expensive.
200+ miles ought to be enough to get you out of the disaster area. Plus if you can charge at home you'll almost always be near full, whereas most people let gas tanks get low before filling them back up.
You generally don't leave disaster areas at highway speeds. Electrics should be better at this if you don't run the tunes or the ac. Also there are a lot of disasters that will be bigger than 200m. If Rainier goes off it will have a very large ash spread mostly east depending on prevailing winds. Seattle was just blanketed by smoke from way up in bc all the way to Portland. Way more than 200 miles. Imagine if it was a foot + of air intake clogging ash and low visibility.
There's a non-negligible chance that everything will be self-driving by 2030, and you'll call a car from a car-service on demand instead of owning one.
(Yeah, I just got stuck behind a Waymo self-driving vehicle on El Camino again today. They are annoying, but much further along than anyone who doesn't live in Silicon Valley realizes.)
> I think there will be very little demand for the regular old gas powered car.
Nobody has addressed the infrastructural problem of recharging massive fleets of privately owned electric vehicles. It's a pipe dream that this will all be fixed by 2030.
This will never happen in the US for the foreseeable future. Considering how our broadband surcharges have been siphoned off with nothing to show for it, no amount of government intervention through taxation will fix this. That leaves market forces as the only factor in play for the US. The market is going to stick with ICE cars.
Lots of utility grid providers have addressed exactly these problems.
Recently in the UK there were some headlines when the usual suspects in the media published their worst case scenarios as "EVs could destroy the grid!" and the grid had to publish a clarification
They're going to be repealed very quickly in my opinion.
The laws were written by incredibly over optimistic people with zero understanding of the actual science or practicalities.
Unless some fantastic new battery is invented very soon, there literally isn't enough lithium on earth to support the electric car market and lithium ion batteries are soon going to become prohibitively expensive.
> Unless some fantastic new battery is invented very soon, there literally isn't enough lithium on earth to support the electric car market and lithium ion batteries are soon going to become prohibitively expensive.
And unless the power networks from a lot of countries are not modernized. Not sure about the States, but over-here in Eastern Europe we get power-cuts from time to time during summer months because everybody has their AC turned on (they usually don't last long, but it happens). If half of the 1 million cars that are now driving on the streets in my city were to be electric then I'm pretty sure that the local power network will just give up spectacularly.
> there literally isn't enough lithium on earth to support the electric car market and lithium ion batteries are soon going to become prohibitively expensive.
A friend who is a materials engineer told me that there aren't enough rare-Earth metals in the world to supply the demand for magnets to replace all of the current petrol based cars with electric cars. No sources unfortunately, but this thing might not scale.
That's part of the reason why practically all electric cars currently in production use induction motors, which only require copper.
Yes, it would require more rare earths than are currently economically feasible to mine if we replaced every fossil fuel engine with a permanent magnet electric motor of equal power.
The only real difference between the two is the design difficulty of the drive circuitry for the VFD to run the induction motor. That's largely a solved problem.
I think it's likely some other resource might be a constraint in that tight a timeline though. Either something for the cars themselves, or the infrastructure for charging them.
Almost all car charging is done at night, when grid load is far lower. Charging will not be a problem, and there is no material shortage likely in the near future.
Brand new flat or house built today in Madrid, Spain are fitted at best with a 20A connection. The standing charge alone is more than what I pay for electricity (standing charge and consumption) in a 2 bed flat in London. The vast majority of flat and house I have seen in Spain have 15A or 20A. That includes city, and country houses.
It is a cost cutting measure rather than an infrastructure limitation (people chose a 20A connection because of the standing charge cost) in the
newer building, but I suspect that if a significant portion of the population need to double their contract and maxed it out during the night, there is going to be some work needed.
Seriously, 20A? How do you even run an air conditioner on that, much less an entire house? 200A (at 240V split phase) is standard here in the Midwestern US. It's easy and cheap to get more if you want a better connection, such as for an EV or a home shop with welders and large motors.
> Seriously, 20A? How do you even run an air conditioner on that, much less an entire house?
The poster mentioned Spain, which uses 230V (unlike the USA, which uses 120V), so 20A should be around 4600W if I did the calculation correctly. With a quick search I found a window AC with 18000 BTU using only 1700W, so even with 15A it would be possible to run one AC with plenty to spare.
The USA uses 120V for outlets and lighting, but most buildings have what we call "split phase" where 240V is available between two opposing sine waves. A neutral down the middle gives you 120 from either of these phases. Large appliances run on 240V dedicated circuits, the rest are 120.
And 4600 KW is only a couple tons. You'll need more than that for a 5-ton central HVAC to cool an average house in a hot or humid area.
No, as the other poster pointed out, the US is 240 volts not 120 for this discussion. 120 volts is what you get to your general use outlets, but when we say a house in the US has 200 amps of mains service, we mean 200 amps at 240 volts, or 400 amps at 120 volts. The split to 120 volt happens in your mains panel after the main breaker.
I've certainly run into homes that couldn't add a clothes dryer circuit without major renovation involving the city.
Not saying it will be be an issue everywhere, but the span is too short for it not to be an issue in many places.
Given the short time frame, proof that there aren't issues would seem more prudent. Whether that's manufacturing capacity for batteries, or grid shortfalls in certain areas, or whatever.
Too bad your materials engineer friend has no idea that the most hyped EV car company, Tesla, doesn't even use rare earths in its motors because they're all induction motors.
And you could of course replace the copper with the incredibly plentiful aluminum, which actually has superior conductivity per unit mass to copper. (Copper is nice because it's volumetrically more compact and is easier to make electrical connections with, but if it were seriously in danger of a shortage, none of these are anything like showstoppers to switching to aluminum.)
World production is almost 20 million tonnes annually so that shouldnt be an issue. Its also not like electric cars use that much more copper than normal cars: normal cars have both a starter engine and an alternator plus all the engine wiring.
Also, electric motors can use aluminum wiring, and many induction motors have aluminum rotors since they can be cast at a lower temperature than copper.
I keep hearing this rubbish. Do you know how well entrenched big oil is in the govt? How many wars have we fought over oil? Gasoline cars will still be a thing 20 years from now.
And the price of gas might plummet as big oil realises no-one is buying.
Eventually this will end up costing more - all the gas stations will close as it gets too expensive with reduced economies of scale, but until they go out of business they'll cut prices.
If what you say becomes true, then those 911's and R8's (I'm guessing that's generally what you mean by exotics/pleasure drives) will actually go UP in value, no?
It will be a replay of the 1970s when a combination of new emissions and safety standards locked a lot of niche manufacturers out of the US market. Pre-1975 exotics held value and even appreciated. The gray market, which imported high end used cars, became popular until NHTSA banned it.
Its looking even worse (Or better for a buyer) for electric cars. A cursory craigslist search shows a 2014 Fiat 500e for ~7.5k @33k miles and Nissan Leafs for as little as ~5k @42k miles. All with clean titles.
A used Model S 60 (2013) can be found for ~40k @60k miles, which I think is good but not great, especially considering the quality issues early on.
I'm waiting to pounce on 1st generation electric cars that will be hitting the used market when the Model 3 is mass produced. The reason I haven't bought yet is that my current hybrid is fine and I expect used electric car prices to drop even further.
From my understanding, a lot of it has to do with a combination of the subsidies that are being offered and with the rapid increase in range of newer models.
For example, my buddy in Boulder, CO bought a brand new Nissan Leaf for ~$12k (MSRp ~$30k). In addition to the state/federal credits, the local utility was offering $12k rebates or something like that.
Combine that with the fact that some of the early models had really low range (I think the early Leafs were below 80 miles) and I could see why the used market is behaving the way it is.
Potentially. But I think it's also the fact that dealerships are leasing out the 500e at $99 or even $59 a month for 3 year deals. So why even buy a used 500e when you can get a brand new one for <$100 a month or $1200 a year.
All other articles and GM comments say that the extended summer shutdown is to increase Bolt supply, not because there is too much supply already. The Bolt outsold both of Tesla's vehicles last month. The Sonic has weak sales, so during the shutdown they're reconfiguring the plant to make 1 Bolt for every 1 Sonic, where it was 1:2 before.
>The Bolt outsold both of Tesla's vehicles last month.
The article says GM sold only 7,592 Bolts in the first six months of this year. Tesla sold way more, and it makes a much higher profit per vehicle.
I don't know why Bolt sales are so low. When it came out the reviews were all very positive, and they said it would be strong competition for the Tesla Model 3. But the Tesla already has several hundred thousand pre-orders, whereas the Bolt is basically going no where.
I was responding to "I don't know why Bolt sales are so low"
The reason is that people don't really want electric cars per se, but they do like the idea of owning a Tesla. And yes, the Model 3 is a status car still, because of the Tesla name and relative rarity, even though it's more mainstream in pricing.
If people wanted electic cars, Bolts would be selling better. Chevy sells tons of regular cars.
>The Bolt wasn't even available in most states for the first six months of the year.
It's been nearly a year since it was released. If they still can't ramp up production, then the whole project is pretty hopeless.
Besides, the article says they are halting production because it isn't selling.
In any case, are you predicting that in another few months it will be selling tens of thousands a month and finally be a real success? Well, we will see.
Do you have a link to support this? My comment/link wasn't a dis of EV's, it was pointing out the glut of inventory GM are sitting on, including EV's.
If you are interested in a Bolt now would be an excellent time to bargain for one at the dealership...
Wow. I wonder how much of it has to do with the Model 3 (supposedly) being right around the corner. My wife's next car will likely be electric; we haven't looked at the Bolt YET but when the Model 3 hits of course we'll be shopping all of the competition.
I'm hanging on to my 2001 Honda Civic because I'm hoping self-driving cars make taxi services cheap enough to render it obsolete before I have to replace it.
Exactly what I was thinking. We have a gently used, 10 year old Fit and have been casually considering an upgrade in the next few years. Looks like our timing couldn't be better...
I drive a 2000 Jeep Wrangler, and while I don't ever plan to sell it at some point it will get too expensive to keep on the road to justify using it as a daily driver. I expect that will be somewhere around 300k miles, since I just put in a new engine at 160k.
I'm kind of in the same boat, but I'd really like to get an electric model that's been produced for a few years, which means there won't be much on the used market.
About two years ago I bought an off lease 2012 Nissan Leaf for about 12k including all taxes and fees. It had 20k miles on it, very good condition, and battery at about 90%.
So far I have been very happy, and have spent nearly no money on the car besides insurance and registration since my employer offers free charging.
Obviously range is an issue, but is mitigated since I am married and have a gas car as well to use on longer trips. My wife and I never both drive further than the leaf can take us in a normal work day.
Anyway, I tell this story because I was surprised to find that there were a huge number available in the Bay Area where I live. It seems that uncertainty over future models with increased range and the lifespan of the batteries has made many people reluctant to make a purchase leaving quite a glut. The retailer I purchased from had about 25 Nissan Leafs in his lot.
I've been thinking about picking up a lightly-used leaf, but the prices are plummeting, and I'm willing to bet they'll drop further still once the longer-range 2018 model comes out. And you're right about how many are around the bay area. Even here in Gilroy, there are a half-dozen used ones sitting on the lots.
* Even Steve McQueen's 917K only sold for $14.08M the other day.
* A 956 with five LeMans wins sold for $10.12M.
* The L&M sponsored 917/10 sold for $5.83M.
* A RS60 Spyder with an amazing pedigree sold for $5.40M.
* Jerry Seinfeld's 550 Spyder sold for $5.33M.
* Paul Newman's 935 sold for $4.84M.
... and the list falls from there. As usual, the most valuable Porsches have pedigree as winning race cars. Even the rarest road-going Porsches (959 Sports) I believe are all worth under $2M (save for wacky stuff like the flat-8 904), and only until recently (past 10-15 years) have Porsches really appreciated in value.
I love the 956 as much as the next guy (more, even) but the only model to ever win Le Mans five times was the Audi R8, and it wasn't with the same chassis, I'm sure. Did you mean they sold a Le Mans chassis that won five races, more generally? Not trying to be a pedant, I'm honestly curious which car you're talking about.
> The L&M sponsored 917/10 sold for $5.83M
That's a surprisingly small figure. Which really speaks to your point, I guess.
You are correct. 956-003 won LeMans in '83, and won five races overall.
Regardless, most "classic Porsches" sell for under $100K. As I mentioned in another comment, the bulk of what's sold are 1978 - 1993 911s. 964s trade hands around $50-65K, and SCs more around $20-35K. Yes, there's stuff outside of that (Very good 993s commanding ~$100K now, 930 Turbos definitely not cheap, all RSs definitely not cheap due to rarity, 993 GT2s very expensive as well), but the bulk of non-supercar classic Porsches are very affordable until you get into the rare top-shelf stuff or the very old: in which value is dictated by pedigree, condition and rarity.
Additionally, with ~22 million used cars sold and registered in the US every year, a single 8-digit sale does not materially affect the average selling price of used cars. Never mind the fact that no used Porsche commands anywhere near $30M (and I believe only five Porsches are in the Top 100 most expensive cars sold of all time), which is where I had serious issue with the OP.
One cool thing about Porsches that is likely to keep the price down: 70% of all Porsches that were ever built are still on the road. That's a Porsche figure, and "on the road" begs definition with some of those more expensive cars, but the fact that they're maintainable cars (and worth repairing) means the supply doesn't diminish the way it might with some other marques.
The other thing is Porsches aren't anywhere near as rare.
Until very recently, Ferrari limited worldwide production to 7000 total units (now it's 9000). Historically that was limited to demand (being unable to SELL 7000 units). Porsche sells about 20 times as many vehicles, so they're far less rare. Porsche sells more 911s in the US every year than Ferrari sells all its models combined worldwide, and has recently pushed 911 #1,000,000 out of the factory.
That's actually why we are in a Porsche bubble. It's difficult to get into very old Ferraris, Alfa Romeos, Lamborghinis, and other special cars of bygone eras because they've gotten too expensive. Collectors simply moved on to the next best thing -- Porsches, which also have very reasonable running costs in the scheme of things. The non-survivors are mostly transaxle cars and older Cayennes.
The Porsches worth good money are top-shelf performance, end of an era, rare as hell (< 500 produced/surviving), and/or have pedigree. The rest are nice cars with great dynamics and build quality (a few exceptions aside), and there's enough to satisfy demand. Modern stuff lives in a bit of a bubble as supply was less than demand, but usually that settles down after a few years when the "latest and greatest" that everyone wants comes out. Supercars and limited production top-shelf stuff aside, it'll be 30+ years before anything newer than 30 years really appreciates, and I say that having an odd one that is currently trading hands for 10-15% more than I paid for my custom order (new) 2 years ago (but I'll never part with it).
No, that's about right. Take some time and go through autotrader.com. $15k isn't unusual for a used mid-value sedan with ~25,000 to ~65,000 miles. For example, look up Hyundai Sonatas, 2013, with that mile load, you'll see prices around $14,000 to $18,000.
Or check out Toyota Camrys, 2012 model year. You'll typically pay around $14,000 to $16,000 to get into one with 40,000 to 60,000 miles. So that's a 5+ year old car, a mid-value sedan, with a fair bit of mileage.
I bought an Audi off lease last year. It's still under warranty, free maintenance (until 80k km), low mileage (37k km), fully loaded with options, and I saved $20k vs a new one.
CPO cars have a warranty, which sharply limits your downside risk. Buying a used car from a manufacturer is a much better deal than buying it from a third party.
"If the car falls apart as you drive off the lot, you're out $35K."
Obviously, cars rarely fall apart as you drive them off the lot. Yes, there could be unexpected expensive repairs. But there's basically no realistic scenario in which you're going to be out the entire $35k.
I understand that you're exaggerating for effect, but it's this kind of thinking that convinces people to purchase expensive warranties that aren't (statistically) worth the price.
The manufacturer warranty has a mileage limit which at least in my case was 80k km (less than 60k miles); that's probably why it's missing from the listing you linked to.
> Why is it so dumb to buy a used car off the lot?
It's not. The parent doesn't appear to understand the used car market in the US. Most people are not buying their used cars for $6,000 off of craigslist, that's a good way to end up with a pile of junk. It's a bad idea to buy a mid-value or higher used car outside the CPO or remaining original warranty programs if you can help it, ideally from a dealer.
Not my experience at all. Do a little research on which brands and models are reliable. Find a nicely maintained example of one of those offered by a private seller. It's going to be way cheaper than a dealer in my experience.
> But who would be dumb enough to buy a used car from a lot?
Tens of millions of people. It depends entirely on what you're buying. For example if you want to buy a certified pre-owned vehicle, you're frequently going to buy it off the lot from a dealership. The CPO programs from the major manufacturers are typically excellent. If you're buying a nice used car, with relatively low miles & a recent model year, it's more often dumb to go any other way than a reputable dealer + CPO.
Isn't looking at Craigslist selection bias around people looking to buy/sell cheaper cars without warranties?
If I had a used car worth 20K still in a maintenance window I wouldn't sell it on Craigslist. Autotrader if I wanted to private-party to max my upside, dealer if I was lazy.
Very much selection bias. Even if we add auto shopper, and the like you won't get most of the expensive cars as they are not advertised.
Your 20k used car is 2-3 years old and coming off lease, or the same car as a trade in. The dealer will put it on the lot with a "just off trade" sticker and sell it. It might or might not go on Craigslist. (if it is listed the ad finishes with "and many more cars like this so some in and see") If the dealer gets too many in on trade the rest go to an auto auction.
Remember, the dealer knows all the numbers that the leaser isn't told. The company who backed the lease 2-3 years ago did their best to make sure that when the car was turned in the dealer would look at the remaining value and think "profit if I buy that and sell it". The dealer is going to pay the lease company for the rest of the value of the car. If the dealer decides there isn't enough money in selling it the lease company has to send the car to an auto auction and see what price they can get. (I suspect that a lot more goes on in these cases but I don't know what)
> But who would be dumb enough to buy a used car from a lot?
Me, because it came with a 7 year warranty. The price was good and the dealer offers a shuttle to and from my work (or my home) when it is in for maintenance.
> But who would be dumb enough to buy a used car from a lot?
Someone who needs a loan? I've bought/sold several cars on Craigslist, and it's always all-cash. Perhaps it's possible to get a loan from a bank to buy a car off CL, but it's easier to do so at a dealership.
You will get a much better idea of what real used cars cost when you look at the manheim numbers. Going to a retail website like Autotrader or cars is going to add a few grand to the price at least. Manheim is what the dealers pay at auction. True used car prices.
Each of those cars is being resold for the first time, most likely. How many times is a car sold in its lifetime? Eventually it's sold to a scrap dealer for $500, and I'd bet that transaction is not included in the 15k average.
In any case, anyone considering a new car and concerned about depreciation should consider leasing instead. That way you only pay the depreciation (which you'd pay anyway) and after 3 years you have the option of buying it as a used car for the remaining cost or moving on to a new car with no hassle trying to sell it.
They might be measuring the "average used car", not the "average used car for sale." So immediately after you buy the car, it becomes a used car (or maybe a year after, not clear from the article).
If you have an outlier like that you can skew the slope greatly by where you pick your starting point. E.g. if I were to measure the drop in used-car prices from when C4C was at its peak, I would expect to see a big drop; much bigger than if I measure from just before C4C.
How many used cars are sold in a year? It's got to be more than a million, doesn't it? So, yes, that $15 million Porsche drives up the average price... by $15. That's not significant.
In the US, ~45% of car registrations are new vehicles. In 2016 around 17.6 million new passenger vehicles were sold in the US with a combined transaction price between $500B and $600B.
That puts used car sales (including private sales) at around 22 million units, and nearly 40M total cars sold and registered in the US in 2016.
Regardless, if someone wants to complain about expensive classic cars, Porsches aren't the ones to complain about, with most (bulk being 911s from '78 - '93) trading hands well under $100K (964s being more like $50-65K, SCs more like $20-30K) despite the Porsche bubble that's been growing for a long while now -- since Ferraris long ago got too expensive for first time classic car buyers.
$15 due to a single sale seems very significant. Correct me if I'm wrong, but by your reckoning just 100 super collectable sales (average $5m) could raise the overall average by over $500.
Need to also be careful how they've defined 'used'. Dealers will sometimes buy the cars themselves to hit sales targets set by the manufacturer. They then sell off those cars 'used'.
If the rate of depreciation has increased, wouldn't that make price as a function of age more convex than before? Meaning that new car depreciation is accelerating, but used-car depreciation is slowing down?
Could you tell us more? Was this in some niche segments of discontinued but popular models (like certain Subarus) or were run of the mill cars also like this?
Short version, a couple of things hit at the same time. I don't think Cash For Clunkers was involved as those cars were much older than the 1-2 year old ones, but it was more a factor of:
* shrinking new car demand in a post-financial-crisis buyer market that was very cost sensitive and had internalized the "cars lose 20% of their value the moment you drive them off the lot" type stuff, so started ruling out even cross-shopping new cars because they wanted to save money
* banks and dealers having more aggressive incentives and better loan rates on new cars (which is true even in non-recession-times, but they had to get more aggressive as new car demand dropped)
Combination of really low interest rates on new cars, and used cars becoming more rare due to cash-for-clunkers and maybe other programs.
I don't think is was the case that used cars were literally more expensive, just that with 0% financing everywhere vs paying cash for used, or vs used car loan rates, you were probably better off getting a new car.
I'm a few months from paying off my car which I got a 2% rate on. Financing a decent used car would have been a rate of around 8% - it about broke even with expected depreciation, and it was hard to find a good used car to begin with.
Essentially the cash for clunkers program took a lot of serviceable old cars off the market permanently by destroying them. Here's a write-up I found on some of the issues with links to more details: https://www.bostonglobe.com/opinion/2014/08/31/cash-for-clun...
I think it was circa 2012, and I may be exaggerating somewhat, but I particularly remember seeing new, lots-of-option Kia Souls selling for ~$18.5k new (window price) right next to used ones going for ~$18.5k used (window price) with nearly the same options on both. I think I also saw something similar with a few models of Honda, but my memory is most vivid with the Souls. And if memory serves, even when used was cheaper it was often not a whole lot cheaper. I also remember at least one dealer marking up all their new cars in the $17k to $25k MSRP range to new MSRP + $5k, and interspersing them with used of the same model at new MSRP (obviously sticker price is supposed to be negotiated, but it was still kind of ridiculous).
I think for the most part there just weren't very many quality (workhorse model, a-la Prius, Civic, etc.) used cars for sale in my area at the time that weren't 4-ish years old or more or which didn't have more than 64k miles or significant and obvious problems.
And yeah, interest rates on new cars loans were sometimes sub 1%, rarely more than 2%.
Keep in mind that a new car dealer is the worst place to buy a used car. Of course the dealer over prices the used cars to make the new cars look good, that way new or used they make a good profit.
Cash for clunkers pulled lots of used cars off the market but my understanding is plummeting manufacturing of new cars after the financial crisis was responsible for a much higher percentage of the gain.
Cash for clunkers pulled like 700k out of the market.
The auto industry was making millions less cars and trucks per year from 2008-2012.
Backwards-bending supply curves, among other things.
If the only thing an auto manufacturer has available to meet liquidity requirements is selling cars (and they've got access to absurdly low interest), then the price of those cars will fall.
Owners of used vehicles have use-value, and are similarly cash-squeezed (financial crisis), so hold on to those.
That doesn't even make sense, unless there are not enough cars being produced. The only situation I remember like that was with the Prius, when gas prices were $4/gal.
Right after the recession, maybe a year, or two later, there wasn't an inventory for used cars and the prices were high. It seemed people were not selling their used cars because they couldn't buy new ones. All the used cars, few years old, were almost the same as MSRP (This was in Canada).
This may be temporary, as services like Uber/Lyft increase, and the possibility of Autonomous Vehicles driving down the cost of those services. This would cause the volume of new cars needed to dramatically fall, leading to increased cost of those new vehicles. This would increase the value of used vehicles that are currently priced in.
> This would cause the volume of new cars needed to dramatically fall [...]
I don't disagree with you, but when reading the article you'll notice that the auto industry is pushed to sell more cars, year after year. Like a number of industries, now that they've had years/decades of growth, I'm not sure how they would handle significant loses.
Heck, even stabilization. I'm over 35, but consider myself young; was there even a time when the majority of companies didn't care so much about year-over-year growth, and weren't seen as weak if they were stable/flat?
> was there even a time when the majority of companies didn't care so much about year-over-year growth, and weren't seen as weak if they were stable/flat?
Since the Industrial Revolution, I don't think so. Now that you mentioned it, I think the concept of "corporation" is intrinsically related to growth.
> No... less demand leads to less supply at a lower optimum price.
Not always.
If I make fancy handkerchiefs, and I can sell 2 per month, I will make 2 by hand and charge a high price.
If there is demand for 100,000/per month, I'll develop a way to mass produce them and charge a lower price per handkerchief (which may further increase demand.)
But if demand fades, I won't be able to sustain the equipment/workers that produced the 100,000/ month, and if I continue to produce any, it will probably drop back to a higher price, even at a lower demand.
This can occur because of consumer surplus and differing marginal demand. At the mass-producing volume, people who are willing to pay 100x for the product get what they need for a price of 1x. The marginal consumer gets it for exactly the price he is willing to pay.
All those less motivated customers drop out at the higher price which is necessary to support a limited production, leaving the 100x customers paying at their maximum price, because no supplier can profitably produce that small an amount for a lower price.
For example, obsolete technologies may increase in price as demand goes down.
That's a bit simplistic. Substantial demand makes economies of scale possible which can lead to lower prices. The opposite is also true (i.e. lack of demand leading to increased production costs).
The opposite really; cash for clunkers mostly just moved existing demand forward a year without increasing it in even the medium term. Rather, it did put a lasting dent in the supply of used cars, artificially increasing used prices.
Ever since that pg post, I can't help thinking about how much of a role PR plays in stories. Did Black Book and Cargurus just happen to get mentioned here? Or did they reach out to the journalist, or vice-versa? Did they pay for the privilege? (Doubt it, but possible.) Always tough to know, since the best PR is subtle enough that you at least wonder whether it was involved at all.
I just bought a new van. It was rediculously easy for me to get a loan for 105% of the retail price (and I didn't even pay retail). I opted not to get the full loan for obvious reasons.
But the fact that I could is frightening. There will be so many people underwater on their loans.
The car bubble is coming and it's going to pop hard.
I thought anyone who finances a new car is underwater as soon as they drive off the lot. Don't new cars depreciate something like 20% the day you buy them? EDIT: I was wrong it's closer to 9% [1]
Why wouldn't you take the loan on your van? Interest rates are under 3%, which is definitely cheaper than any mortgage or student loan you might be carrying.
Auto loan risk is significantly mitigated by modern advancements in GPS & tracking technology. No other collateral is as easily repossessable as a modern car.
> What’s more, an increasing share of those sales came with a lease, so there’s now a rising tide of machines flowing back onto the market when their three-year contracts run out.
Hopefully the 1%'s lobbyists won't figure out how to plug this loophole in their rentier serfdom.
Interesting that this has nothing to do with ride sharing (or at least the article doesn't cite that as a reason). I think autonomy and ride sharing will drive used cars nearer to the value of scrap metal within the next 5 years.
Your comment displays the incredible social and economic compartmentalization between the Silicon Valley/tech hubs of the country and everywhere else. Uber is not a viable alternative to vehicle ownership for the majority of places in the country, particularly in poorer and more rural areas, and likely never will be. When you've got to drive 20 miles to reach town, ordering an Uber doubles the time required to get there.
As far as automation goes, in the consumer market, I highly doubt it will be anything more than a rich person's luxury for a good long while, since most people can barely afford a $10k vehicle, let alone a $100k one.
80% of the U.S. population lives in urban areas of at least 2500 people, and 71% live in places of 50,000 or more[1]. So most people don't need to drive 20 miles to reach town.
You're right that Silicon Valley lives in a cocoon, but more than a few occasions where I thought a SV idea or trend was stupid, unaffordable, and unneeded, it turned out that a few years later the entire world had adopted it. I remember thinking who the hell needs a smartphone and who'd pay for that. Then 6 or 7 years later I saw beggars in a third-world country with smartphones. Beggars.
I'm not ready to say that autonomous cars and ride sharing will be the norm in 5 years, but just because there are poor and rural people in middle America doesn't mean it won't happen.
Uber/etc. make a difference at the margins but don't drastically reduce car ownership. I'd believe the effect is greater with those who don't buy new cars but still limited effect.
I expect full autonomous driving to be much further out. Where it could have an effect though is this. To the degree that new vehicles become much more attractive because of new sensor and software features, that would likely drive used car prices down. These could certainly increase the perceived value of a current model year car vs. one from five years ago.
How many miles will an Uber driver drive in a year - how many miles are they putting on the car? It pushes their value down, similar to taxis or police cars.
Consider 2 similar 2015 Priuses, one with 32,000 mi, the other with 92,000 mi. The one with lower mileage will usually net a higher sale price.
checked the KBB for my car back in may and it said $10k (2010 a4), checked again last month and it was down to $8500. I'm not really depending on the car to retain any value at all, but it's interesting to see how quickly that price is dropping.
Car leases commonly rely on some expected value at the end of the lease. Even when it is some relatively down played value then this information means that it would become even lower.
This should also then mean that the lease should become more expensive.
Eventually lack of information should cancel itself out.
Pretty much everything is an expense, even mortgages, most of the time. The liberal use of the word "investment" in America is irksome. Marketing has hijacked our minds.
Honestly a car can been seen as an investment in the classic sense. If you buy a car for its utility, i.e. to help you get to work or otherwise be more productive, you will get a return you may not have been able to otherwise. Of course most people spend way too much or buy cars they don't need, so the return can be terrible.
This is true, but the value of your car plays an important role in that expense. And expected depreciation is an important factor to consider when buying a car.
That's only if you intend to sell it for more than scrap value some day.
Any car I buy is getting sold to the junkyard for $500 in 10+ years and 200k+ mi. How steeply it's paper value declines between now and then doesn't matter much to me.
True. And in all reality, this is great for consumers and bad for holders of inventory.
There's a tendency among people in business to mark everything to market. This helps avoid otherwise hidden losses but it doesn't actually make sense in some situations. For example, in the case of a family that owns two cars and replaces one every five years.
Ha! Good luck with that. Scrapped cars are down to like $60/ton.
It seems reasonable that the scrap steel and used car markets would be correlated... If self-driving cars cause a drop in car ownership, it will be a good time to figure out a previously-uneconomical use of steel.
1) Saw at Manheim Auto Auction (one of the largest) 300 Nissan Leafs run through the auction line in one afternoon ahead of some of our cars. Drop in "value" of leafs went down 10%+ in one day. All were recently off lease. 2) For similar reason, Santander is holding 4000+ cars on auction lots "waiting for pricing to stabilize". Reality is, when they run those cars through the auction, they will have to book the full losses. Say they anticipated 20% repossession rate and that they would get 80% on the dollar when auctioned on those losses. When they run them through now and get 50% on the dollar, their securitization pools will be creamed.