Welcome back to the CarDealershipGuy newsletter. Where you can get all the top automotive news in roughly 5 minutes or less.
- 🪓 The Great Depreciation Of Used Cars
- 💰 Buick Offering To Buy Out ALL Its U.S. Dealerships
- 🐦 Tweet Of The Week
- 🚗 Does Carvana Offer Lower Prices?
- 📖 Articles I Read This Week
Read Time: 5 Minutes & 13 Seconds
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The Great Depreciation Of Used Cars
This chart by Cox Automotive shows the average wholesale and average retail price for used vehicles manufactured in 2019.
The dotted gray line (2021 Wholesale Index) and the dotted blue line (2021 Retail Index) show that used cars manufactured in 2019 were going up and to the right for both retail and wholesale prices.
This is the chart way of telling us that prices were crazy high the last year for used vehicles. But you already knew that.
If you take a look at the solid gray line (2022 Wholesale Index) and the solid blue line (2022 Retail Index) you can see that they are coming down from the 2021 highs.
More specifically the 2022 Retail Index line stayed the same this week. But this was after a 0.2% decline the week before.
And the 2022 Wholesale Index line shows a decrease of 0.8% last week. Which is actually the same exact decline as the week before. Giving us a total of 1.6% decline in the last 2 weeks for wholesale prices for cars manufactured in 2019.
Showing us that we are seeing high depreciation values for used vehicles in the summer of 2022.
And who doesn't love some more data around decreasing used car prices?
Buick Offering To Buy Out ALL Its U.S. Dealers
Buick recently stated that it is transitioning its brand into a fully EV lineup by the end of this decade.
This is not unheard of. There are lots of automotive brands that have made this claim.
But what makes Buick stand out is that they sent out an offer to buy all of their current 1,963 U.S. dealerships. The caveat is that Buick will only buy out the dealership if the dealership does not wish to make the necessary investment to comply with the EV standard that Buick is pushing.
This is VERY strategic.
Buick knows that the cost to a single dealership to upgrade to be fully EV compliant is high. For example, when GM did this same strategy with their Cadillac dealerships the necessary investments to meet EV standards were roughly 200K a dealership. This is an upfront price that most of these small town Buick dealers are not going to want/be able to pay. Especially because most of these Buick dealerships sell other vehicles. Meaning they can take the buyout offer from Buick and focus entirely on the other brand of cars they sell.
So is this part of Buicks plan to become a more DTC (Direct To Consumer) brand? Is it to help cut off some of the fat? Or is it really just about EVs?
In all honesty, it is probably all of the above.
But I will keep my eye on this and let you all know what comes from this.
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Tweet Of The Week
This got a lot of attention so I wanted to talk about it in a little more detail here in my newsletter.
Carvana one of the largest automotive businesses in the country has a variety of different services. One of those is buying used cars from people almost entirely over the internet.
But, as we all know the last couple of years has been crazy for used car prices. So Carvana has been offering tons of money for used cars. In some cases, they were even offering more for the used car than what people paid for the car new a few years prior.
But, everything that goes up must come down and if you have been reading this newsletter for the past couple of weeks and following my Twitter account (@guydealership) then you know that used car prices are starting to budge and trend downwards.
Because of this, it looks like Carvana is now offering substantially less for used vehicles than they were just a few weeks ago.
Now I have only discussed this with a few people and they have all confirmed that this is what they are seeing.
But what are you seeing?
Reply to this email and let me know.
Does Carvana Offer Lower Prices?
Jeremy Alicandri wrote an article about this in Forbes called Does Carvana Sell For Lower Prices?
Here are the key points:
- Carvana used to offer people savings on each purchase of on average $2,199
- Carvana said it has saved its customers over $130 million compared to traditional dealers
- Average profit per vehicle in 2021 at Carvana was $4,566
- Average profit per vehicle in 2021 at traditional dealers was $3,700
- Carvana said it saved you money on bogus traditional dealer fees like doc fees but then just created their own fees to add to the bill
- Carvanas in house financing average finance rate for 2018-2021 was 13.41%
- Experian average used car financing rate for 2018-2021 was 8.76%
- Carvana spent an average of $1,126 per car sold on advertising
- AutoNation spent an average of $307 per car sold on advertising
So, what do you think?
Carvana is definitely convenient. You don't have to go into a store. You don't have to talk to anyone. No salespeople pressuring you to buy.
Which is great!
But it is not always the cheapest way to buy a used car.
Articles I Read This Week
- Lucid looking for more capital. Will that help?
- Why should Tesla be responsible for ghost taking over the breaks?
- Acura's sales were horrible in August. Only one car did well and it was the new Integra.
- Looks like I am moving to the UK if this prime minister candidate wins the election.
- President Biden is making his return to the Detroit auto show for the first time since he was Vice President.
Thank you for joining me again here on the CarDealershipGuy newsletter. See you next week!
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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.