Is The Market Going to Crash?

Some of the most frequent questions I get these days are:

1. Is there a crash coming with used car values?
2. Where is the market heading?
3. How aggressive should I be when appraising and buying cars?

1. Is there a crash coming with used car values?

Nope, there’s no crash coming in the used car market. The bottom isn’t going to fall out. Things are going to level off, and values aren’t going to keep soaring. Unless of course, the new car manufacturers have additional chip issues, or their workers can’t come to work due to a major covid outbreak.

The number one thing that has impacted the rising prices of used cars is the lack of new car inventories. Therefore, any dealer with half a brain is going to keep a close eye on their new car franchise’s production.

2. Where is the market heading?

The same place it always heads this time of the year. In most markets sale volume starts to trend downward as we roll into the fall and winter months.

If you take a look at your used car sales volume over the past 5 years on a month-by-month basis, you’ll see a consistent trend of sales volume by month. The number one problem for most dealers is they stock the same inventory in December as they did back in May.

That’s not to say we shouldn’t always be looking to improve our business month over month, year over year, but it does say, “Hey, pay attention, look at the numbers and start to make some seasonal adjustments with your inventory levels.”

3. How aggressive should I be when appraising and buying used cars?

If you’re well-disciplined and using life-cycle management, you can keep doing whatever you’ve been doing.

That said, you’d be well served to be somewhat cautious with the high-dollar stuff. Everybody has a different definition of what high-dollar means and it is often tied to your new car brand.

On the cheaper stuff. Go for it! It’s hard for you to screw up much when you put $12,000 or so in a used car.

From time to time, I’ll see a cheaper car in a dealer’s inventory that has aged.
For this example, let’s say the dealer has a car with $8000 in it. Think about it, if a car like that has aged there has to be something wrong with it. How many people in this world do you think are looking for an $8000 car?

Let’s go back to the being aggressive part. If you’re aggressive on a $65,000 car and you keep it too long and the market makes a shift, you’re going to lose a lot more money on it than you ever would by being high in a $12,000 car.

Everything I’ve said here you already know.
Sometimes you want to be stupid.

Don’t be stupid. That’s all I’m gonna say, Tommy Gibbs.