Car Dealerships: The Good & The Bad

[searcher]

The Used Car Market Is Imploding

Huge bankruptcies for used car firms have exposed Wall Street’s entanglement with the sector. Far from derisking after the Great Recession, banks rebuilt the economy on obscure financial intermediaries that are now sinking.

jacobin.com

 

[Casey Jones]

I'm not sure how we draw that conclusion. Are people all buying new cars, now? Because they're so cheap and reliable?

Or is it that people don't need cars anymore?

What's imploding, IMHO, is the overpriced chain-retailer model. Tricolor picked a market niche - Hispanics, mostly illegal (Hispanic-Americans could easily shop around and usually find a better deal elsewhere) and offering in-house financing. Their risk assessment was, Mexicans who were here illegally, nonetheless were reliable payment-makers. They needed their cars/trucks, both for work and for social status; so they paid.

The in-house financing model didn't predict a sudden enforcement of immigration laws, against people who've already jumped the border/been brought in by our helpful Elites. But disproportionate numbers of Tricolor buyers, either abandoned their cars when arrested, or took their cars across the border when self-deporting. Oops, big losses that were not factored in with their cost model.

Carmax is in trouble because, while they don't target an ethnic niche, they do look for the subpar credit risks. AND they overcharge. This is relatively new to them - when I needed a car in a hurry, three years ago, they had an old-but-sound Toyota with a price on it that was high, but not obscenely so. At least not compared to other used-car dealers' prices. Their in-house financing was lower than what my credit-union offered. I bought, and paid it off once I got the insurance settlement.

That's gone, now. Prices are insane. Interest ranges from 7 to 14 percent. You have to be DESPERATE to buy from them.

Carvana, they say, is doing all right, although that may be from Financializing their assets.

Prices may be dropping; but a used product is only worth what people will (can) pay for it. We're in a deep recession/depression, now.