Toyota Deals

[SummitsCalling]

Used car market is in free fall, lots of stealerships are upside down. I've been watching pretty closely after the covid shenanigans in the market for a vehicle for the wife.

I don't think it will be as bad as 2008 when people were giving away F250s but pre covid rate should happen. New vehicles however are expected to go up in price for 2023 due to suppliers/inflation 5-15%.

 

[Scrappy]

How patient can you be?

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This morning I discovered something *extremely* alarming happening in the car market, specifically in auto lending.

I'm now convinced that there is a massive wave of car repossessions coming in 2023.

Here's what I discovered (and what no one knows):
Background:

Over the past 2 years, many people took out exorbitant loans on cars.

Car values were inflated (and frankly, still are to some extent).

But many people simply had no choice and bought an overpriced a car.

Well...
Car valuations are now plummeting.

Some cars have declined in value as much as 30% y/y.

And these same people that took out these big loans are now "underwater".

Basically, they owe banks more on these cars than they are worth.

And the banks are well-aware of this...
But there is no easy solution.

You can't just put the genie back in the bottle.

This brings me to what happened this morning:
Every Friday I conduct a team meeting to recap our week.

This morning, one of our General Managers opened up DealerTrack — a portal that dealers use to communicate with auto lenders — and highlighted something very concerning:
9 of our lending partners have started WAIVING "open auto stipulations" for consumers.

Wait, wtf does that even mean?

Let me explain using a simple, hypothetical scenario:

1) Consumer takes out an auto loan in 2020/2021 on an overvalued car

2) 2022 comes around and that overvalued car is now rapidly declining in value

3) With the car declining in value, consumer now owes more on the car than it is worth

4) Consumer no longer wants the car. Maybe they outgrew it. Or maybe it keeps breaking. So consumer wants to trade it in.

5) But dealer can't trade the car in because the consumer owes WAY too much on it.

So dealer asks consumer for lots of money down to cover the difference.

6) But of course, the consumer doesn't have $1,000s to cover the difference between what they owe on the car and what it's worth.

And here comes the perfect storm...

7) Dealer can't sell consumer a car,

Consumer can't buy a car,

And, you guessed it, lender can't finance a car!

Everybody loses! Oh no

So what happens next?

8) Lender knows that most consumers are stuck in this situation, and does the following:

WAIVES THE OPEN AUTO STIPULATION.

Meaning, the lender lets the consumer buy the car KNOWING that they already have an open auto loan with another bank!

Why the f*ck would they do this?
Surely the lender knows that consumers that take out a 2nd auto loan are MUCH riskier and have a MUCH high risk of default? Right?

RIGHT?

Yes, but the lender does it because they know that the consumer will default on the other car !!!!

Dog eat dog style.

Let me be clear:
This is NOT normal.

But it's the only way lenders can finance cars and dealers can put cars on the road.

And the implications of this will be tons of repossessions.
I've been a doubter, but after what I saw this morning, I'm now FULLY convinced that a wave of car repossessions will hit in early/mid 2023.

If lenders are willing to backstab each other in order to put more loans on the road, we're in trouble.

This will not end pretty.


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The only thing I can say about this is the same prediction has been floating around for the last 18 months and it still hasn't happened.

 

[Coveyleader]

The 10k option above still smells new inside, I forgot about that…… new car fragrance in the used market easily adds 2 k….. 52 it is no wait!

 

[Scrappy]

I just totaled a 2021 highlander in a bad wreck, not my fault. The insurance settlement was for more than we bought it for new. Hopefully they come through on medical and other expenses once it's all said and done.


Now as far as finding a replacement my wife boarded a plane on a one way flight to keep from paying above msrp. Look at dealerships around the country for what your looking for. Huge differences from one dealership to another.

 

[ODB]

Buying a certified used Toyota gets you a better warranty 60,000 vs 100,000 power train. Get a low mileage 2022 and you can have most of the 36,000 mile warranty left with the added power train. 5 year vs 7 year also on power train. I opted not to get the extended warranty on the 36,000. It’s a Toyota you’ll probably never use warranty before the 100,000 7 year warranty runs out. Good luck in your search.

Good point - I got a 2021 Tundra with 3K miles on it,

 

[alaska_bou]

But many people simply had no choice and bought an overpriced a car. <---- this sounds like a poor excuse for a lack of personal responsibility. There are ALWAYS used vehicles available for every budget. Guys who are taking loans on new trucks that cost more than their annual salary, with little to nothing down, are stupid. There is no other way to say it. It would be a salesman's wet dream to have some simpleton walk into a dealership, willing to sign papers on a vehicle they really can't afford as long as the dealership can stretch out the loan long enough to get them qualified. An NO, they are not victims when their truck loses value faster than crypto and they find themselves upside down on the loan. Until Covid, vehicles have always been a depreciating asset. Finding that you owe more on a vehicle than it is worth is no justification for defaulting on a loan. The "I want it now" entitlement mentality is far more commonplace that fiscal responsibility, sadly.

The pricing peak has likely passed, but used trucks are still selling for a premium because auto manufacturers still can't match the demand for new vehicles. It will be years before anything meaningful changes, and Toyotas have always sold close to full msrp. This is nothing new. I would pay msrp for a Toyota but there is no chance in hell I would pay even close to sticker for any of the Detriot three.

 

[mthayr]

Just bought a ‘23 Tacoma and none of he dealers up here in the northeast would deal lower than MSRP - some are still asking over on TRD Pro & Trail editions. Looked at some 2yo Tacomas but they were within 2-3K of similarly equipped new with 40K on them. Not worth it IMHO.

 

[eddielasvegas]

If you have the luxury of time, this guy thinks there will be deal to be had.

Good luck,

Eddie

 

[hodgeman]

Best bet I've found is to pay cash and order it. My son totaled his Crosstrek and we replaced it with a Tacoma. We had to order the truck with a $500 deposit...and wait about 7 weeks for delivery. We basically paid MSRP, which at the time was the best I could find.

Buying new or used sitting on a lot for immediate delivery was $4-5k more. It's been a weird car market the last couple of years and valuations have been all over the place. Used cars are often a worse deal currently. We looked at several Tacos with 30-40k on the clock and 2-3 years old...all of them more expensive than the identical truck we bought but waited on. My local Toyota dealer is still selling out most of their new inventory before it ever arrives and that's driving used prices up.

 

[MattB]

But many people simply had no choice and bought an overpriced a car. <---- this sounds like a poor excuse for a lack of personal responsibility. There are ALWAYS used vehicles available for every budget.

Needing a car is an indication of a lack of personal responsibility? You learn something new every day.

Even used vehicles were overpriced during COVID.

 

[MattB]

If you have the luxury of time, this guy thinks there will be deal to be had.

Good luck,

Eddie

Didn't Warren Buffett once say "never take financial advice from a guy with a selfie stick."? Probably not.

 

[Kimber7man]

Methinks cash will be king by late summer/fall 2023, you'll be able to buy all kinds of vehicles for less than MSRP....

 

[PNW bow hunter]

Not sure what paying cash has to do with the price of buying a new car.

The dealership actually probably loses money if you just hand them a cashiers check. Almost all banks/credit unions PAY the dealership a percentage of the loan amount if they do the financing and you aren’t a sub prime credit customer. Sub prime credit customers the dealership PAYS the bank a fee to do the loan. Either way, your purchase price isn’t affected.

I think the days of getting a discount for paying “cash” was when the person you bought it from could cheat on their taxes, and pass some of the tax cheat savings on to the customer.

Pretty tuff to do that in this day and age on new cars.

 

[Buxman]

Hard to get a good new on a new car.

 

[dtrkyman]

Used car prices are still stupid, saw a nice rig at a dealer the other day driving by, looked it up and then went online and built a brand new one for the same damn price!

 

[treillw]

This new car borrowing, buying, lending, upsidedowning and repeat is just hilarious. It's disturbing and sad how many humans MUST buy a new vehicle rather than get caught dead in a quality used one resulting in the financial dumpster fire mentioned above.

I'd love to buy a new one, but prices are freaking ridiculous.

New is the better option from what I've seen.

 

[treillw]

Be careful on a 2022 low mileage. Good chance you’ll be paying OVER msrp and kbb/nada will justify the price. The only way to know is to pull the msrp.

I'm seeing new cheaper or same as used.

 

[Coveyleader]

Used Toyotas have always been high, especially if only a couple years old. every time I looked at a used, I simply bought a new one. Smart? Probably not, but I run them until they die.

 

[deltadukman]

I have a sneaking suspicion that car dealers have us right where they want us. During covid they had limited supply and marked up vehicles with a "market adjustment" for the shortfall and made money hand over fist. I think the car dealership model with lots of vehicles to choose from on the lot is a thing of the past. Limit supply, screw everyone who needs a vehicle with a BS "market adjustment" for the lack of supply and increased demand and have virtually no inventory overhead on their floorplan. The vehicles the dealerships had didn't cost them more, but they charged $5,000-$10,000 or more for these "market adjustments" and had less money in them and less work to do, less overhead with their floorplan, etc. Now you order, pay top dollar, get shafted with the "market adjustment" and wait for your vehicle to arrive. I may be wrong, but I foresee this being the new auto dealership model.

 

[Ferrulewax]

I have a sneaking suspicion that car dealers have us right where they want us. During covid they had limited supply and marked up vehicles with a "market adjustment" for the shortfall and made money hand over fist. I think the car dealership model with lots of vehicles to choose from on the lot is a thing of the past. Limit supply, screw everyone who needs a vehicle with a BS "market adjustment" for the lack of supply and increased demand and have virtually no inventory overhead on their floorplan. The vehicles the dealerships had didn't cost them more, but they charged $5,000-$10,000 or more for these "market adjustments" and had less money in them and less work to do, less overhead with their floorplan, etc. Now you order, pay top dollar, get shafted with the "market adjustment" and wait for your vehicle to arrive. I may be wrong, but I foresee this being the new auto dealership model.

This may be so, but at least Ford has actively come out against these practices and is taking action against dealers that use predatory tactics. Sounds like these bad apple dealers wont get their allotment of vehicles, etc. At least from the few interviews I have seen with the ford CEO. I wouldn’t be surprised if other manufacturers do the same.