[syd34]

I came across this article today and thought I would share. There is no new information and most members here are already well aware of the points being discussed.

My only takeaway is the last part about one company breaking the trend and resorting to discounts, which would then trigger many other companies to follow suit and fall back to a pre-pandemic level of discounting.

Assuming semiconductor component supply chain issues are resolved by 2023/2024, I would assume that people in general will tend to hang on to their cars longer given there is no wiggle room on pricing for new vehicles, which would then lead to automakers reintroducing pricing incentives. Do you guys see this happening?

https://ca.finance.yahoo.com/news/ca...111500729.html

[zx10guy]

Nope. Because with the ridiculousness that is going on with mark ups and dealer required add ons, people are still buying cars that are wants and not needs. If people would stop changing cars like underwear and not pay these inflated prices, then pricing will go down. It's all a basic supply and demand issue. Cut out the demand. Supply goes back up and then prices start falling to stimulate demand again.

[chassis]

Yes average vehicle age is at an all time high. People are holding on to vehicles longer than ever.

Vehicle production is at or below natural replacement rate from obsolescence and collision. Not to mention growth in new drivers. The balance point is in the 16m-17m range for vehicles per year sold.

Until new vehicle production+imports is meaningfully above the natural replacement rate for a year or more, supply and demand will not come back into some kind of equilibrium.

[chad86tsi]

This will really start to hurt in 3-5 years when supply side resumes some sort of "normal" but people are still holding a large balance on a car that is worth well below it's then-current value. Market conditions have raised current value and people are justifying purchase on present conditions. Tomorrows equity scene will be very different.

We saw the same thing in the housing industry, buying a house in 2006 at 2006 prices, and then needing to move in 2009 only to find they had no equity. They had no choice but to take a huge loss, go bankrupt, or be foreclosed on to get out of the home. Same will happen with cars in 3-5 years when people want to move on. A lot will just stay in their cars beyond their expectations which will hurt demand for new cars. It will be a 1-2 punch to manufactures just as they regain full manufacturing capacity.

[NickyC]

I'm not even attempting to guess how much longer this insanity will continue. I tried to time what I thought peak insanity was around this time last year when I traded in an F82 on a G82, when it fact this nonsense was just warming up. I have BMW dealers all the time contact me about used cars which have come in, and 100% of them want like 10-15% more than the car cost new (talking 21-22 models) with 10k miles on them. There is no way in hell I'm buying a used car for these inflated prices, nor will I ever pay over MSRP for new. When things do get back to normal, or even close to it, people are going to get BURNED. I'm sticking with my F80 until either the new M2 comes out or if I have the ability to fit in an Emira.

It's just mind blowing to me people are paying the prices they are for these cars right now. I have to imagine people are taking out 7 year loans on used cars with 10k miles on them, $15k+ over original MSRP. I'm sure there's all kinds of lying going on regarding loan applications too, just like the 2000s mortgage blowup.

[chad86tsi]

Originally Posted by NickyC

It's just mind blowing to me people are paying the prices they are for these cars right now. I have to imagine people are taking out 7 year loans on used cars with 10k miles on them, $15k+ over original MSRP. I'm sure there's all kinds of lying going on regarding loan applications too, just like the 2000s mortgage blowup.

1. Blame the sellers
2. Blame the buyers
3. Blame the lenders
4. All of the above.

The correct answer is 4

[syd34]

Yes, it's crazy. My dealership offered me $4K above my residual if I returned my lease. But the problem is that the G26 M440i is priced at about $15K more than what I paid for my F36 440i. So no thanks, I still have low mileage after 3 years and will just buy it out and keep it for a few years.

The deal I got for my 440i in 2019 isn't happening any time soon.

[Germanauto]

Pre-pandemic, weren't people getting F80s at a healthy discount for like $800/mo with $0 DAS? And weren't M4 CS' just collecting dust on dealer lots? My how times have changed.

[Suds]

I bought my 2019 M4 Comp for $60k with 6k miles less than 2 years ago with a $92k MSRP.
This was when the economy was feeling COVID coming on and job fear.
I have pretty much decided it is time to sell it back to a dealer with 24k mikes on it because I’m getting crazy dealer offers.

[RM7]

Originally Posted by Suds

I bought my 2019 M4 Comp for $60k with 6k miles less than 2 years ago with a $92k MSRP.
This was when the economy was feeling COVID coming on and job fear.
I have pretty much decided it is time to sell it back to a dealer with 24k mikes on it because I’m getting crazy dealer offers.

Yeah, but you will get royally screwed on any new/used car you buy now due to the extreme limited supply. Getting a lot more money for your used car only helps you if everything else is cheaper...but it's not, it's more expensive.

I too capitalized on those early COVID days with 0% financing, but those days are long gone.

[NickyC]

Originally Posted by RM7

Yeah, but you will get royally screwed on any new/used car you buy now due to the extreme limited supply. Getting a lot more money for your used car only helps you if everything else is cheaper...but it's not, it's more expensive.

I too capitalized on those early COVID days with 0% financing, but those days are long gone.

Yep, only option is to hunt for new and hope to pay MSRP. Selling used to buy used is a losing game right now.

[Suds]

Truth, this is a car I don’t need and should sell.
My office is 3 miles from my house and could drive a track car or another car.

Originally Posted by RM7

Yeah, but you will get royally screwed on any new/used car you buy now due to the extreme limited supply. Getting a lot more money for your used car only helps you if everything else is cheaper...but it's not, it's more expensive.

I too capitalized on those early COVID days with 0% financing, but those days are long gone.

[Germanauto]

Originally Posted by NickyC

Yep, only option is to hunt for new and hope to pay MSRP. Selling used to buy used is a losing game right now.

I'm such a non-believer in paying MSRP, especially when the market will likely begin to correct itself in 2-3 years.

[NickyC]

Originally Posted by Germanauto

I'm such a non-believer in paying MSRP, especially when the market will likely begin to correct itself in 2-3 years.

Ahhh I agree, just meant it's the BEST you can hope for right now. A lot of BMW dealers I've been speaking with are charging anywhere from 5-20k over MSRP. That's just insulting.

[Germanauto]

Originally Posted by NickyC

Ahhh I agree, just meant it's the BEST you can hope for right now. A lot of BMW dealers I've been speaking with are charging anywhere from 5-20k over MSRP. That's just insulting.

I recall when the F87 M2 first hit dealers like 5 years ago it was low $50Ks. I'd imagine the G87 will be like $10k more. Boxsters easily running at $80K+ nowadays.

Screw this hobby lol.

[RM7]

Originally Posted by Germanauto

I recall when the F87 M2 first hit dealers like 5 years ago it was low $50Ks. I'd imagine the G87 will be like $10k more. Boxsters easily running at $80K+ nowadays.

Screw this hobby lol.

M2Cs are going for around 80K, it seems like the 2, 3/4 and 5 place the 20K game, 80, 100, 120. Years ago it was more like 60, 80 and 100. Hell there was a time when a 335i was around 40k...but again, days long gone. Packages are optimized to force you to spend thousands for that one thing or the few things you want and rationalize the other stuff it comes with or what you have to have added to make it work, etc.

But there's also no guarantees that prices will come down in 2-3 years and if you want a car and have the money...that's just 2-3 more years you are kicking yourself.

[Theruleslawyer]

2020,2021,2022 were all low production years.

2023 is more than likely a low production year and I wouldn't be shocked if 2024 is too.

Used prices are, in large part, driven by the lack of new cars right now and general impatience. Its mostly constricted new supply. However there is going to be a large impact of those low production years coming soon to the used market.

Cars that would normally be coming off lease soon are the 2020s. However there are going to a whole lot less of those than in a normal year. Low mileage off lease cars are going to be scarce for at least 3 year, likely at least 5. I wouldn't be surprised to see a higher than normal buyout rate as well. That bubble is just going to be traveling downstream for the next decade or more.

Even if production fully recovers it is going to have to cover demand for both new cars as normal and people who would normally buy an off lease car. I think relatively new low mileage cars are going to remain expensive for quite a long time.

Then there is the whole pressure from the EVs and if gas prices remain high. For enthusiast cars, pure ICE cars are going away. Hear about the poor c63? That will distort the market in fun ways too.

[M3WC]

Inventories will eventually recover and the same old brands will go back to fighting it out every year to sell the most units.

[eluded]

Originally Posted by M3WC

Inventories will eventually recover and the same old brands will go back to fighting it out every year to sell the most units.

I don't think MSRP will ever come down. You might get better deals. Lots are empty. Day of reckoning is coming !

[heavyD^2]

Originally Posted by eluded

I don't think MSRP will ever come down. You might get better deals. Lots are empty. Day of reckoning is coming !

Sure it will providing we get past these times of parts shortages. A lot of people seem to think that dealers will not go back to lots full of cars but those days will return. Lesser brands won't be able to compete in that market and will take the road of having inventory to seduce buyers that don't want to wait forcing the hands of their competitors. There will likely be an overcorrection in the parts chain where we have more chips than we need and prices will decrease accordingly making it cheaper to manufacture vehicles. If we have found out anything over the past few years it's that today's consumers want their cars and they want them now so automakers that have ample supply will sell the most cars and automakers that expect buyers to wait months will do so at the expense of losing customers. There's no such thing as "the new normal" as this is just part of the ebb and flow of constant change.

[Alfisti]

They will return, I agree, but this is going to take way, way longer than people realise. As someone said above, the "3 year off-lease, good shape, one owner, well serviced but 40% off new with 30K miles" market has been decimated. Without this near-new inventory, there will remain huge pressure on new vehicle demand for years. This could take 5 years to sort itself out.

In 2016 We bought a 2013 X3, really nice vehicle, nicely loaded, 24K miles, CPO for 2 years, off lease, $42K drive away. Brand new was $67K. Without that market, pressure on new car demand will be crazy high.

[chad86tsi]

Originally Posted by Theruleslawyer

2020,2021,2022 were all low production years.

2023 is more than likely a low production year and I wouldn't be shocked if 2024 is too.

Used prices are, in large part, driven by the lack of new cars right now and general impatience. Its mostly constricted new supply. However there is going to be a large impact of those low production years coming soon to the used market.

Cars that would normally be coming off lease soon are the 2020s. However there are going to a whole lot less of those than in a normal year. Low mileage off lease cars are going to be scarce for at least 3 year, likely at least 5. I wouldn't be surprised to see a higher than normal buyout rate as well. That bubble is just going to be traveling downstream for the next decade or more.

This all happened to the used car market in the few years that followed the "great recession". Fewer cars were built 2009-2012, so used car values held and even rose as the supply of off-lease and other nearly new cars didn't hold up with the natural demand.

For a short while it was cheaper to buy new than used on some models as manufacturer incentives increased to move product and secure their business interests, and it took a little while for people to come to their senses and stop buying used when new was a good value. Undulations create opportunities, but few come out ahead.