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Re: 'Like house of cards,' used trucks fall

Sound like a great time to buy a new or used full size truck for those that need full size trucks

C. E. White wrote: >> 'Like house of cards,' used trucks fall >> >> Donna Harris >> and Arlena Sawyers >> >> Automotive News >> >> June 23, 2008 - 12:01 am ET >> >> Dealer Poncho Redfern sees big used trucks that were worth $20,000 just a >> few months ago valued today at $12,000. And he winces. >> >> "It's not like prices are just a little soft," says Redfern, president of >> Thomason Auto Group, of San Francisco, which owns seven dealerships in >> California and Texas. "The values have dropped extraordinarily. We are >> having a hard time adjusting." >> >> Many new-vehicle dealers grew accustomed to raking in big profits on >> large used pickups and SUVs. But now those trucks are sucking out cash as >> they gather dust. >> >> Soaring fuel prices have toppled the market for big used trucks "like a >> house of cards," says Tom Kontos, executive vice president of analytical >> services for the ADESA auction company. >> >> In the past three months, values of large used trucks have depreciated >> more than ordinarily would be expected in a year, according to CarMax >> Inc., the largest used-vehicle retailer in the United States. Some >> full-sized used trucks now fetch as little as half their wholesale book >> value. >> >> Dealers say they can't offer customers much for trade-ins of big trucks - >> and some are refusing to take those pickups and SUVs at all. >> Sales and prices of large used trucks continue to slump. >> >> Last month, used full-sized pickups sold at auction for an average price >> of $9,343 - a 21.3 percent decline from May 2007, ADESA says. The average >> wholesale price of large SUVs plunged 19.7 percent to $11,271. >> >> The market for big used trucks shifted "overnight," says Patrick Walsh, a >> Ford dealer in rural Atwater, Minn. "I don't think any of us were ready >> for that." >> >> Truck dump >> >> Wholesale prices of used big pickups and SUVs plunged by one-fifth last >> month. >> >> Change >> AVG. Price FROM >> MAY '08 MAY '07 >> Full-sized >> pickups $9,343 -21.3% >> Large SUVs $11,271 -19.7% >> Source: ADESA Analytical Services >> >> Earnings plunge >> >> Late last week, Ford Motor Credit Co. said it will take a pretax loss >> this year, mainly because of "further weakness in large truck and SUV >> auction values." >> >> Last week, CarMax said its net income for the three months that ended May >> 31 fell 55 percent from the year-ago period, to $29.6 million. Company >> CEO Tom Folliard cited a 25 percent drop in wholesale prices of big >> trucks in the quarter. >> >> The steep decline has continued in June, Folliard said. "This is the >> longest-lasting depreciation of a large segment we've ever seen," he said >> during an earnings call last week. >> >> DCH Auto Group, of South Amboy, N.J., owns 31 dealerships in California, >> New York, New Jersey and Connecticut. Last year, sales of large pickups >> and SUVs accounted for 25 to 30 percent of the private group's >> used-vehicle sales. Now it's 15 to 20 percent, the company says. >> >> "This collapse is a major issue for us," says DCH CEO Susan Scarola. >> >> Big losers >> >> How wholesale prices of some used big trucks fell between January and >> June. All vehicles are 2005 models. >> >> 15-Jun Jan. 1 CHANGE >> BMW X5 4.4i $24,200 $31,400 -22.9% >> Toyota Tundra Ltd. - >> Double 4wd $16,525 $21,425 -22.9% >> Ford F-150 Lariat - >> SuperCrew 4wd $16,100 $20,500 -21.5% >> Chevrolet Silverado - >> 1500 LT Crew 4wd $15,675 $19,875 -21.1% >> Infiniti QX56 awd $23,800 $30,000 -20.7% >> Nissan Armada SE awd $15,150 $18,800 -19.4% >> Source: Black Book >> >> Wreaking havoc >> >> Dealer Redfern says his dealerships typically have earned gross profits >> of $1,500 to $2,000 on the sale of a used truck, not including finance >> and insurance. On a new car, he says, the typical profit margin is $300 >> to $700. The collapse of used-truck sales is especially painful, he says. >> >> "You can't outrun it in F&I," Redfern says. "There's only so much you can >> honestly earn in that department. This wreaks havoc on the bottom line." >> >> In May, an informal Automotive News survey found that one out of 10 >> dealers no longer accepted big SUVs and pickups as trade-ins. Other >> dealers said they didn't have that option but were offering far lower >> trade-in prices. >> >> "We can't turn them away," says Ken Cooper, sales manager of Alex >> Chevrolet in rural Charles Town, W.Va. "We are in a small town. If it >> gets around that we weren't taking trucks as trade-ins, we wouldn't be >> doing any business." >> >> Customers who want to trade in a big truck for a fuel-efficient new car >> are having the hardest time, Redfern says. Some new trucks carry factory >> incentives of several thousand dollars, he notes, while the incentive on >> a car might be just a few hundred dollars. >> >> Owners who owe money on their sharply depreciated big trucks are in for >> an even bigger shock, he adds. >> >> "We see people with $10,000 in negative equity," Redfern says. "A dealer >> does not have enough room to help the customer out of it." >> >> Alysha Webb contributed to this report > And if the June sales forecast is fulfilled it will be a catastrophic > decline in sales and value. > > -- > Civis Romanus Sum
Reply to
Mike hunt
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Don't forget to get the bankruptcy filing kit and learn to love your negative equity.

Reply to
Jim Higgins

I have a feeling that in 2 to 3 months, when Ford, GM, Dodge, Toyota, Honda and Nissan are trying to get rid of the last of 2008 trucks, the prices will even be better. Of course, Ford is offering employee pricing on pickups, but it sounds like Ford is still having problems selling them. Toyota is having problems selling its trucks (although the Tacoma gets 25 mpg - I think it is the best of all pickups but with 2WD and 4 cyl). Considering that the Honda Ridgeline is not really a work truck, I imagine that there may be big sales on those, as well. I'd like one myself, if the price of gas goes back to about $0.40 per liter.

Jeff

Reply to
Jeff

I'm waiting until next week, when they'll sell for just $1 above the cost of the fuel left in the tank. ;)

Reply to
beerspill

Reply to
Mike hunt

I think they will go up too. However, there is also a glut of used trucks on the market, which may both drive down sales of new trucks and depress the prices.

We'll see.

Jeff

Reply to
Jeff

Reply to
Mike hunt

Either that or they just don't want to tie up more money in a truck than necessary. You ONLY drive a new truck ONCE. Then it's a used truck too. The 0% deals have made new trucks the same cost as many used trucks if you are financing - but with used prices dropping, saving the first year or so of depreciation can still be a bargoon.

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Reply to
clare at snyder dot ontario do

This might be true in the corporate world, but I know pleanty of smaller farmers who buy used trucks all the time. This is particualrly true for trucks that see only seasonal use. The farmer that picks my crops has two tractor trailer rigs, and several 10 wheel straight trucks - all were purchased used. His ride around truck was a new vehicle, but he has several work pick-up trucks that were purchased used.

I would argue that the smart operator would evaluate the new/used decision and purchase the most cost effective vehicle. I suspect many smaller non-farm buisness also purchase used vehicles. In some cases I suppose they can't afford new vehicles, but I am sure there are buisness that buy used becasue it fits their buisness needs at a lower cost.

Ed

Reply to
C. E. White

Perhaps you friends may need a new account. A truck, that is just another "tool" in ones business, must be considered at the total cost of ownership over the life of the tool. If one intends to keep that tool till it is not longer dependable to be used in the operation of that business, buying one with mileage is unwise.

Think about it in the case of a vehicle, when does one begin to spend the most money to keep that tool at the point where it will not fail and be out of service, the first 50,000 miles or the last?

Reply to
Mike hunt

You certainly are entitled to your own opinion. ;)

Reply to
Mike hunt

If I can buy a lightly used vehicle with 60,000 miles on it for $6,000 or a new vehicle for $40,000, and I only put 6,000 miles a year on the vehicle, I will have the vehicle for TEN years to put it up to 120,000 miles. If I but it new, I will have it TWENTY years to get it there. It will rust out long before I get the mileage on it - so for me it makes a lot of sense to buy used.

I have bought vehicles 6 years old and driven them 12 years without major expense. Friends buy brand new vehicles and have more trouble while they are under warranty than I have for as long as I own mine. They sell them when the warranty runs out - and the problems are all fixed.

Sadly, with a lot of new vehicles, the first 50,000 is every bit as troublesome as the last 50,000.

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Reply to
clare at snyder dot ontario do

I've owned exactly ONE brand new vehicle in 40 years. More trouble in the first year than any of my used vehicles (except one POS I knew I should not have bought)

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Reply to
clare at snyder dot ontario do

You certainly are entitled to your own opinion. ;)

Reply to
Mike hunt

How would you know that? You just said you only buy used vehicles ;)

As fro me I have owened more than 70 new vehicles and never had a problem with any of them.

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Reply to
Mike hunt

I've been a mechanic since the late sixties. Not working in that field any more - but have a brother still in the business. I've seen enough new "junk" to have formed an "educated opinion"

And how ong have you owned them - I generally own my vehicles for 6 to 12 years - getting rid of them at

10 to 18 years of age. Used to put a LOT more miles on them than I do now. Generally never got rid of a car with less than 200,000 miles on the clock.
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Reply to
clare at snyder dot ontario do

There was a time I too could not afford to buy new cars, but I did not try to kid myself into believing it was a GOOD idea.

Like a large portion of Americans, that must commute to work, I knew I could not always count on my used car to go the fifty miles I needed to travel one way to get to work, no mater how well I maintained the car. ;)

Reply to
Mike hunt

And I could count on the fingers of one hand the times my used vehicles let me down before last month. Then twice in one day - and my daughter driving, not me. The one (A 14 year old GM) bit the dust for good at 375,000Km. The other ( a 10 year old Ford with about 62000 miles) took about 3 hours of labour and $75 in parts to replace some rusty brake lines.

Bought another used vehicle to replace the dead TransSport. Six years old, 60,000 miles, for $6000.

Even if money was no object, I'd likely still buy used vehicles.

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Reply to
clare at snyder dot ontario do

I'm interested in how you could have owned more than 70 new vehicles. Man you've got to be old ....... or a car salesman or?? A curious mind just wondering.

Reply to
RJ

Sure, for those who need a good truck the price will continue to drop and the deal gets sweeter. But with housing/construction/consumers in the septic tank a lot LESS people are going to need trucks.

Reply to
johngdole

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