Home » While New Car Supply Stays Tight, Used Car Wholesale Values Continue To Cool

While New Car Supply Stays Tight, Used Car Wholesale Values Continue To Cool

New Car Dealers July 11

New car supply stays tight while used car values drop, EVs seem to be growing legs, BMW tries subscriptions again. All this and more in today’s issue of The Morning Dump.

Welcome to The Morning Dump, bite-sized stories corralled into a single article for your morning perusal. If your morning coffee’s working a little too well, pull up a throne and have a gander at the best of the rest of yesterday.

New Cars Stay Hot, Used Cars Cool

Car Dealership On Western Ave 2 values
“Car Dealership on Western Ave” by David Hilowitz is licensed under CC BY 2.0.

It looks like we’ll be waiting a little bit longer for supply chain shortages to ease in the automotive industry. Automotive News reports that according to Cox Automotive, monthly national new car inventory has been stuck around 1.1 million for six months on the trot. I know that 1.1 million new vehicles per month sounds like a lot, but it really isn’t anywhere near enough to satiate buyers’ demands. See, even at June’s supply of 1.1 million vehicles, we’re down 160,000 units over June 2021 and 1.5 million units over June 2020.

Now, I didn’t major in economics or even minor in supply chain management, but I’d imagine that people would be pissed if market supply of anything declined by around 57 percent. Could you imagine if 57 percent of Doritos just vanished? Every single house party would be in absolute shambles. Indeed, the new car market is in similar shambles, particularly as high fuel prices hike demand on efficient vehicles. However, despite tight supply of new vehicles, the used car market shows signs of easing values.

The Manheim index of used car wholesale values continued to fall through June, now sitting at its lowest level since last September. While wholesale values are still up 9.7 percent year-over-year, a 1.3 percent decline over last month isn’t exactly peanuts. More importantly, Manheim notes that Manheim Market Report (MMR) values for three-year-old cars dropped 2.5 percent over the past four weeks. However, late-model vehicle values falling doesn’t necessarily mean that values of old clapped-out project cars will fall. It seems that current market pricing relief is mostly out of lower consumer confidence. Hey, we’ve recently been bombarded with recession fear rhetoric, so response is likely a good thing. Besides, even if a recession doesn’t happen, wouldn’t a lower debt-to-income ratio be nice?

EVs Grow Legs In America

Ford Mustang Mach E GT pulling a drift
Photo credit: Ford

While many automakers have been committed to electric vehicles for years now, consumers weren’t so sure. EV consideration has been historically low in America, with most car shoppers clinging on to the low cost and solid infrastructure of internal combustion. Now though, things might be changing. Consumer Reports surveyed 8,027 Americans regarding electric vehicles, and the results are enlightening to say the least.

According to the survey, 14 percent of respondents said they would definitely buy an EV, while 22 percent said they’d strongly consider buying an EV. On the other end of the scale, 28 percent of respondents said they wouldn’t consider buying an EV. Hey, it finally seems like EVs might have traction with American consumers. However, arguably even more important than surveying EV adoption is surveying what consumers want in a car, and this survey implies that many automakers are sending out the wrong messaging. See, the fourth question on the survey let respondents pick up to three of eight desired traits in a car. Care to guess what was far and away the most popular pick?

At 54 percent, more respondents desired “The vehicle’s power and performance” than any other trait. Of equal importance, “Emotion (how the car makes you feel when you drive)” takes fourth place behind carbon footprint reduction and design. The death of driving is greatly exaggerated, people! Honestly, this is a fantastic sign for the Porsche Taycan, Ford Mustang Mach-E, and any other EVs with performance cred. The people still want great-driving cars that go fast. Hell yeah.

Oh For Fuck’s Sake

2023 Bmw 330i 1
Photo credit: BMW

Look, I don’t have to tell you that paying subscription fees for hardware already built into your car is absurd. Remember when BMW tried putting CarPlay on a subscription plan and everyone chewed them out so hard that owners got refunded? Well, it seems like the Bavarian automaker hasn’t learned its lesson because CarBuzz reports that terrible subscription features have been rolled out in Korean-market BMWs starting this month.

So, what sort of features are available via subscription? Well, heated seats work out to roughly $18 per month, while a heated steering wheel comes out to around $10 per month. Want advanced driver assistance? That would be roughly $38.95 per month. Of course, some of these stupid subscriptions get discounts when bought for a year or three. Heated seats clock in at $176 per year or $283 for three years. While that’s cheaper than month-to-month, it’s still ridiculous considering heated seats don’t require internet access to work and the hardware is already built into the vehicle. I reckon that in due time, enterprising aftermarket companies will be able to bypass BMW’s paywall, but the whole thing just seems ridiculous. Automakers, stop making built-in hardware a service.

Ford Issues Fire Risk Recall

Ford Maverick Hybrid Xlt 03
Photo credit: Ford

It’s no secret that Ford’s tiny Maverick pickup truck is hot right now, but usually a hot car doesn’t mean it could self-immolate. Still, Ford’s recalled a whole bunch of vehicles packing the 2.5-liter four-cylinder hybrid powertrain over risk of vehicle fires. So what’s going on here? According to Reuters, here’s what Ford said about the recall.

In the event of an engine failure, significant quantities of engine oil and fuel vapor may be released that could accumulate near ignition sources, resulting in a potential under-hood fire.

I mean, let’s be honest, setting things alight after enrolling a rod or two in astronaut training is a known risk for most cars. CNBC reports that Ford had some machining issues with the 2.5-liter hybrid engines that resulted in a failure rate of 0.17 per 1,000 vehicles on models with affected engines, so it seems like this recall may be quite necessary indeed. The fix consists of alterations to grille shutters and underbody shields, and is reportedly coming to around 100,000 electrified 2020-2022 Ford Escape compact crossovers, Ford Maverick small trucks, and Lincoln Corsair premium compact crossovers. Owners are expected to be notified of the recall starting Aug. 8, so until then, Ford says it’s find to just carry on.

The Flush

Whelp, time to drop the lid on today’s edition of The Morning Dump. Happy Monday, everyone! Apologies for being away on Friday, nearly half of Canada lost internet and cell reception, and remaining networks slowed to a crawl. Trying to find a Starbucks that was empty enough to support high-res image downloads was an absolute nightmare. Worse still, our banking network largely went down, with ATMs and debit card readers out of commission. Shout-out to Jason for holding it down, I definitely owe him a drink after that weird national connection emergency. Anyway, while the internet was down, I saw this.

Car Carrier with combined vehicle values of like two dollars lol
Photo credit: Thomas Hundal

Have you ever seen a weirder car carrier in your life? Anyway, let’s play a game. You have to consolidate this car carrier down to as few vehicles as possible. What sort of shenanigans would you pull? Maybe you’d take a sawzall to the Smart Fortwo in order to make the dune buggy body fit. Maybe you’d stretch the 917 replica body over a Fiero to create a Poorsche of sorts. Maybe you’d keep it simple and make one nice Fiero from two. Whatever the case, I’d love to hear your hypothetical plans.

Lead photo credit: “Honda car dealership sign” by yonkershonda is licensed under CC BY-SA 2.0.

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41 Responses

  1. Semi-anecdotally, but my employer (along with some of our competition) has reacted to new car shortages not just by not selling off current fleet (instead of normal disposal cycles), but also by buying used cars at auction to compensate for any write-offs. However, we’ve seen fewer order cancellations than last year, a handful of cancellations that ended up hitting production after all, and are currently planning to start resuming normal remarketing operations in the fall. I expect our competition will do similar. That should be a glut of used inventory starting to hit market that’ll start to push used values down. Perhaps not to 2019 levels, but I fully expect the market to level out in time.

          1. Vehicle condition – renting out higher mileage cars is a pretty big customer service detractor. In an ideal world, we’d likely run most core fleet longer as the effective depreciation would be lower (high end product is a bit harder to sell if it’s kept too long), but under normal times, we’re pretty obligated to keep our fleet fresh.

    1. I still have a reservation for a Bronco, but yeah. At the current rate of deliveries, I’m looking at the end of 2023, so I have time to decide whether to hold onto it. Either way, I’ve put in for the Silverado EV. Every story like this makes me lean further to the latter.

  2. “Could you imagine if 57 percent of Doritos just vanished?”

    Yep, that’s definitely what happened to 57% of the Doritos at my last New Year’s Eve party. Poof, gone. You can’t prove otherwise. 😛

    “Ford had some machining issues with the 2.5-liter hybrid engines”
    “The fix consists of alterations to grille shutters and underbody shields”

    The engine has a problem that may cause it to blow up, but the fix is just to make sure when that happens all the fluids can safely escape. That would make me feel real good if I were a Maverick owner. Hope this recall comes with an extended powertrain warranty.

    1. In Canada there actually were Doritos access issues because Loblaws (one of the biggest grocery companies) got in a fight with FritoLay which resulted in Doritos being pulled off of Loblaws shelves.

    2. If the failure rate is .17 per 1,000, let’s see what that would look like on a whole vehicle level.

      So for every 100,000 vehicles, 17 are expected to fail, or 1 failure for every ~5,900 vehicles.

      Of those, not all are likely to create a fire, so a simpler fix to allow safe exit of fluids is probably the better choice from a cost/benefit analysis, for both owner and Ford.

  3. What BMW doesn’t seem to realize is that subscriptions only make sense if there is continuing work happening to make a subscription necessary.. Subscription navigation? Then you get stuff like updated maps and things, though Apple/Google maps isn’t making that as tenable. Subscription music? You get music, frequently updated playlists and what have you. Subscription road side assistance or emergency stuff? You get access to that and know that they have to pay the tow truck driver if needed, it’s peace of mind. But doing it on heating elements doesn’t work because BMW doesn’t have to do any more work.

    Anyway, in summary, hack the planet.

    1. I’d subscribe to heated seats if they release a massage feature at some point during my ownership. Not sure how they’d accomplish it, but it’d be a helluva trick.

      1. I mean if the heated seat subscription had a skilled massage therapist show up at your house every few weeks that would totally justify it.

  4. I’m surprised that carrier wasn’t surrounded by people throwing money at it.
    Loved your Poorsche spelling. My wife once had a 1997 Mazda MX-6 Coupe. It came a large spoiler which looked pretty good. Feeling whimsical we got a license plate that said Poorsch (seven letters in this state). Some people said, “That’s not a Porsche.” Others said, “That’s not how you spell Porsche.” My reply was usually, “Gee. I didn’t know.”

  5. So Ford is recalling the cars so that they won’t catch fire when the engine makes a window in the block but they are not fixing the source of the windowing, which is bad crankshaft machining….

    I’m guessing the resale value of “around 100,000 electrified 2020-2022 Ford Escape compact crossovers, Ford Maverick small trucks, and Lincoln Corsair premium compact crossovers” just cratered.

    1. Likely related to the earlier Escape Hybrid recall over a batch of 25 crankshafts that had a bearing journal unpolished due to the emery cloth breaking on the polishing machine. The ‘0.17 in 10,000’ units affected figure approximately correlates with the 163 vehicles recalled as part of that action.

  6. “Well, heated seats work out to roughly $18 per month, while a heated steering wheel comes out to around $10 per month.”

    This shit is going to get hacked so fast….. I hope they end up losing money over just selling it up front as an option.

    1. Thomas didn’t tell you the whole story. BMW Korea has 3 options to lease OR you can just buy them upfront:

      The heated seats are either $18 per month, $176 for a year, $283 for 3 years, or $406 to buy.
      The heated steering wheel is either $10 a month, $92 per year, $161 for 3 years, or $222 to purchase.

      Buyers choice. I actually like this idea because it gives the 2nd or 3rd owner the option to aid features the original owner didn’t want.

  7. This year I was gonna fulfill a long dream of buying my first new 3-series. If this article is correct about the pay subscription services BMW will be implementing, I would never buy one of thier cars and would shake this company off forever. I cannot imagine a more cynical, greedy cash grab than consumers paying for features they already have, or which the manufacturer is not supplying with more value. Absolutely disgusting.

  8. I can see some subscription or monthly payments for some hardware if it lowers the overall cost of the vehicle, like Vinfast doing separate battery payments for their EVs so you get the car cheaper and if there’s a battery problem they take care of it.

    But heated seats is crazy, but I think the a la carte deal may be a Korean thing, like that’s how cell phone providers there do services instead of the ‘everything unlimited’ kind of deal.

    It also may explain why my Korean made(‘merican ‘assembled’) Chevrolet Bolt has the heated seat buttons in the infotainment instead of designated hard buttons, such a pain when it takes a minute to boot up and I’m in reverse so the camera view takes over and I can’t activate butt warmage! Next car will have hard buttons.

    1. Putting heated seats in every car is cheaper than having a heated and non-heated version. So BMW is putting them in and leaving it to the customer to decide if they want to activate them or not.

      Contrary to what this story says – paying by the month is NOT the only option. The heated seats are either $18 per month, $176 for a year, $283 for 3 years, or $406 to buy outright. Buyer’s choice.

      So the original buyer can just buy the seats when they buy the car like today. The difference is that there are after-sale options for the original owner or future owners.

  9. “Ford’s tiny Maverick pickup truck” – if 16’8″ long and 3,600lb is considered tiny, I am feeling very inadequate right now.

  10. Man just so many people not thinking. Unless the federal government comes up with a law requiring BMW and others keeping a vehicle updated for 15 years or so it allows BMW to trash a vehicle before parts required ends. Also after support stops those BMWs suck worse than similar aged crap they put out.
    Now I have 2 business degrees Business Administration and Sales Management. The more expensive the item the longer term you have in inventory. Any big grocery store you are in is filled 3 times a day by Frito Lay merchandisers. They do not want any space left empty. But my guess is no dealer is selling their entire lot 3 times a day.

  11. One of my vehicles that I barely use right now is my 17 Chevy Volt. I paid 14K for it, low miles, back in January 2020. I posted on Facebook Marketplace for 24K and people went crazy, my inbox was full of messages. After talking to my spouse, we decided to keep it and get ride of one of the SUVs

    The market is crazy, I guess efficient vehicles will keep the value for now

    1. At the same time you bought your Volt I paid slightly more and bought a 6-speed Honda Fit brand new. It’s still worth more than I paid for it. But if I sold it I wouldn’t have a car.

  12. Can’t wait for used car prices to come back down to earth. Heck, they could even loiter around a thousand feet or so above the ground if they want. I just sold our aging SUV last weekend and will be gutting it out with 3 kids (two in car seats still) crammed in the back of a midsize sedan until used minivans with under 100k miles are affordable again. I am NOT paying 20k for a 5-6 year old van.

  13. What’s next, turn signals as a service? One cent per flash. Not much of a profit center for BMW but GM and Toyota would rake it in from all the retirees driving Buicks/Avalons.

    1. I am pretty sure the bohne-counters in Munich realized it would cost them more to process the billing of turn signal use than they would actually rake in from turn signals being used.

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