Will Coronavirus hit used car prices? (Vol 2)
Discussion
stabilio said:
I’m thinking a slump may not happen now and it’s just the usual fear mongering in the media for clicks.
Not one exclusive to the car market no, but I think we could see a slump in everything from the macro economic effects.In The Big Short, Michael Bury was shorting the housing market in 2006, he had to wait 2 year for it to eventually topple.
AlexNJ89 said:
stabilio said:
I’m thinking a slump may not happen now and it’s just the usual fear mongering in the media for clicks.
Not one exclusive to the car market no, but I think we could see a slump in everything from the macro economic effects.In The Big Short, Michael Bury was shorting the housing market in 2006, he had to wait 2 year for it to eventually topple.
Interesting article. Not sure what it means for use car prices, but I'm not convinced Cazoo will be here by Q2 2023.
https://cardealermagazine.co.uk/publish/cazoo-shar...
https://cardealermagazine.co.uk/publish/cazoo-shar...
It will be a shame if they go down the pan imho.
The no-haggle, no-quibble approach is refreshing and cut a lot of the BS out of buying s/h cars imho.
God knows why they expanded so quickly in to Europe before they were were completely established here. Perhaps they thought they had to do it before their competition did it.
The no-haggle, no-quibble approach is refreshing and cut a lot of the BS out of buying s/h cars imho.
God knows why they expanded so quickly in to Europe before they were were completely established here. Perhaps they thought they had to do it before their competition did it.
The spinner of plates said:
Interesting article. Not sure what it means for use car prices, but I'm not convinced Cazoo will be here by Q2 2023.
https://cardealermagazine.co.uk/publish/cazoo-shar...
Looks like they’ve disrupted all their investor’s cash.https://cardealermagazine.co.uk/publish/cazoo-shar...
swisstoni said:
God knows why they expanded so quickly in to Europe before they were were completely established here. Perhaps they thought they had to do it before their competition did it.
If I had to guess it's because investors want to see expansion and growth and for them to keep functioning they need money, so to raise more investment they either need to show profit or to invest further for expansion.They couldn't show a profit which leaves them with the latter.
The spinner of plates said:
They got into a lot of sports sponsorship as well… on one hand I’m sure a very well targeted and executed marketing brand building exercise.
But on the other though… kids in a candy shop when the floatation money rolled it.
Yup. They had to expand or die as competitors with deeper pockets due to wealthier parents were in the space and it was moving quickly. But on the other though… kids in a candy shop when the floatation money rolled it.
It's actually a good model and they made full use of the free money bonanza during Covid to raise capital.
However, the float was done at peak 'stupid money' and so was going to get hammered as money returned to having a value. And I'm not sure they really wanted to expand that rapidly via costly acquisitions but once they floated the clock was on them and to maintain the share price they had to show global expansion at any cost and obviously 2021 transpired to be the end of the QE, free money, loadsa debt, expand at all cost regardless bonanza that has driven supposed tech businesses to enormous highs only for them all to come back down to reality.
But that isn't the real problem facing this business. The real and utterly terminal issue is completely revealed when you look at where they have been advertising for customers. Darts, ITV, horses all the places where people with no money but a desire to shop using consumer debt are to be found.
What's going to kill then is that this is a business model that from day one has specifically targeted consumers with no wealth but a willingness to take on consumer credit but as of 2022 it no longer matters how willing they may still be to borrow money no one wants to take the risk of lending without pricing the interest rate correctly.
The problem facing Casio isn't that the world wasn't ready for online car shopping but because no one in their right mind is going to lend precious money to people who now stand very little chance of paying it back. And they're unlikely to be able to reorientate to target customers with money without a total rebrand which won't ever happen before the cash runs out and they close their doors.
The spinner of plates said:
Interesting article. Not sure what it means for use car prices, but I'm not convinced Cazoo will be here by Q2 2023.
https://cardealermagazine.co.uk/publish/cazoo-shar...
Cazoo founder Chesterman said: ‘Our strong growth and momentum in Q3 and our continued focus on cash preservation gives us great confidence in our ability to become the largest and most profitable used car retailer in the UK over time.’https://cardealermagazine.co.uk/publish/cazoo-shar...
Hmmm...
An optimist, me thinks.
Last quarter Cazoo binned 750 but that was including some here and some in Europe. This was a good read, and 6 months old too. A mate is a very big cheese at Cinch and I would love to know how they're doing too. He's on £200k+, and is one of many making that. They're all burning cash like it's gas in a care home, and they cannot all survive...
https://cardealermagazine.co.uk/publish/with-carza...
https://cardealermagazine.co.uk/publish/with-carza...
stabilio said:
I’m thinking a slump may not happen now and it’s just the usual fear mongering in the media for clicks.
Until the supply of new cars is more plentiful, demand will still be there regardless if PCP rates keep going higher.
I don't think the IMF agrees with you:Until the supply of new cars is more plentiful, demand will still be there regardless if PCP rates keep going higher.
"A third of the global economy will be in recession this year, the head of the International Monetary Fund (IMF) has warned.
Vroomer said:
stabilio said:
I’m thinking a slump may not happen now and it’s just the usual fear mongering in the media for clicks.
Until the supply of new cars is more plentiful, demand will still be there regardless if PCP rates keep going higher.
I don't think the IMF agrees with you:Until the supply of new cars is more plentiful, demand will still be there regardless if PCP rates keep going higher.
"A third of the global economy will be in recession this year, the head of the International Monetary Fund (IMF) has warned.
nickfrog said:
Vroomer said:
stabilio said:
I’m thinking a slump may not happen now and it’s just the usual fear mongering in the media for clicks.
Until the supply of new cars is more plentiful, demand will still be there regardless if PCP rates keep going higher.
I don't think the IMF agrees with you:Until the supply of new cars is more plentiful, demand will still be there regardless if PCP rates keep going higher.
"A third of the global economy will be in recession this year, the head of the International Monetary Fund (IMF) has warned.
What we know is that almost no household in the U.K. has any kind of meaningful savings. The post '97 cultural shift has been the end of saving habits and the ubiquitous adoption of spending habits across the entire cultural board.
Alongside that are much higher levels of consumer debt and in this metric we also have to include the off balance sheet 'nothing to pay' and 'zero interest' contracts. These deals have proliferated across society. PH loves to imagine that it's just RadioRentals players who have been partaking but the data clearly shows it is endemic with millions entering 2023 with ongoing obligations.
Rent and mortgage costs all rising.
Higher food costs are now embedded.
Cost of borrowing has spiked several multiples for middle income earners who at the start of the year were still being artificially booked as low risk but as they have no wealth entering the new financial phase they have switched overnight to being the higher risk they always were.
What you are seeing at Tesla is not unique to Tesla. They are merely seeing it first because their brand attracted the biggest shoppers with the least wealth. Their customer base is income powered only so have been hit the hardest and earliest by uncontrollable essential spending increases driving an involuntary contraction of non essential spending. Holidays, dining, beauty products and cars. These are just the first batch of heavy consumers waking up to the reality that the dollar shave club isn't a club and doesn't cost a dollar and some have even sobered up sufficiently to start realising they've been on a decade long princess shopathon for no sane reason at all.
All the more expensive cars are going to be hit with the exact same reality. It is practically impossible for them not to be.
Even the people with good incomes who haven't been playing at Ken & Barbie but saving money will be contracting their spending. Not because they have to like everyone else who is living paycheque to paycheque but because it is their DNA. Savers don't suddenly increase their discretionary spending when consumer spending goes into contraction but the opposite, they end up saving more just because their natural prudence slows their spending even more.
The car market is almost 100% debt driven in the U.K. post the 2011 lending restrictions in the mortgage market. After cutting back on leisure shopping, paying others to cook your food, expensive holidays the car is the big discretionary monthly ticket that drains the bank account.
People can't cut their utility bills. Can't cut their housing costs other than to downsize which shoppers never do unless it is forced upon them by the financial institutions who ultimately own every aspect of their life. So once the easy stuff like shopping and dining is cut most are left with the car cost as the major and only means to compensate for rising debt costs and to keep the books balanced.
I'm of the opinion that the 'supply' shortage hasn't been relevant for some time. It was super relevant post lock-down as millions came out with more money than they'd seen for decades due to not being allowed to go shopping but we're desperate to go back to shopping and with foreign holidays still being iffy the next best thing to hurl that money at along with a massive family bucket of greasy, KFC style debt was a better car than they'd ever had in their entire life. They came out of lockdown like Tesla apex shoppers, desperate for the big ticket purchases of their online heroes.
Fast forward to today and they're all completely f
ked. They've thrown away all that money on any old st they could get their hands on and now their borrowing costs, housing, utility and food costs, the essential costs of life that have been generally suppressed for decades (artificially in the case of property via near zero lending rates) have all increases and soaked up all the discretionary spending cash. The apex shoppers who were driving the ever growing demand for more and more premium/expensive cars have had their finances imploded and reduced to fighting for energy drinks in Aldi. Meanwhile the apex savers are seeing bigger returns coming for their money so are saving more.
The supply shortage of new cars is of no relevance because in reality the demand has gone. As a result, manufacturers are soon going to have to start discounting to find people willing and able to borrow enough money, taking them from each other in order to clear inventory build-ups from the factory gates just as Tesla has had to do already as it is so much further ahead than the others. And these discount on new will burst the bubble on used.
The market will be selective though. Affordable, new, non premium stuff could hold up well as consumers are either forced or voluntarily step down the size of their monthly car spend as well as typical monthly running costs. Maybe used premium cars will hold up well as a means for people with lower spending power to remain in the same marque etc.
It's hard to predict accurately where the hammer is going to fall hardest but there is no real debate that it is falling, has fallen for many already and over the next two years will fall on many more.
The U.K. is financially reverting to the market norm of functional interest rates. Markets that were created or redefined by the anomalous decade of zero rates can't stay as they were, they have to change. Hence why 2022 in the global stock markets all those businesses were sold down and were rebasing to fit the traditional norms.
It would take a really significant and permanent reduction on product supply or another massive, global taxpayer hand-out to shoppers to get in the way of simple market forces and reality.
In all likelihood we are starting to enter a buyer's market for some nice cars over the next 24 months. New or used.
DonkeyApple said:
The real and utterly terminal issue is completely revealed when you look at where Cazoo have been advertising for customers. Darts, ITV, horses all the places where people with no money but a desire to shop using consumer debt are to be found.
What's going to kill then is that this is a business model that from day one has specifically targeted consumers with no wealth but a willingness to take on consumer credit but as of 2022 it no longer matters how willing they may still be to borrow money no one wants to take the risk of lending without pricing the interest rate correctly.
I’ve bought two cars from Cazoo, one in 2020 and one in late 2022. They both came with full service histories, and were in very good condition. You need to be choosy, as there are a lot of poor quality cars on their website - if you look at the “imperfections” list on some of the cars, you can see they’re in rough condition, and a lot of the 3+ year old cars have picked up stupid MoT advisories or failed altogether on daft stuff like bald tyres or duff bulbs or badly cracked windscreens. What's going to kill then is that this is a business model that from day one has specifically targeted consumers with no wealth but a willingness to take on consumer credit but as of 2022 it no longer matters how willing they may still be to borrow money no one wants to take the risk of lending without pricing the interest rate correctly.
I feel like I’ve bought two good cars for good prices by being choosy and saying no to the finance. I like the convenience of buying online, and I was fully prepared to reject the cars if I wasn’t happy with them when I saw them in the metal. And they are well priced, if you are choosy and look carefully at the imperfections described in the online adverts. My most recent Cazoo purchase (2019 BMW X1) would have been £3k more from a BMW dealer, for comparable age/mileage/spec.
But Cazoo do seem to have been saddled with this reputation of “cheap cars, sold on low price and convenience, for people who don’t really care about cars”. Sometimes I think about buying replacement number plates for my two cars, so it’s not obvious where they came from.
Agree with others that Cazoo is facing an uphill struggle, despite my own individual efforts to keep them in business
DonkeyApple said:
In all likelihood we are starting to enter a buyer's market for some nice cars over the next 24 months. New or used.
For some nice cars, yes I agree. Overall though I am not sure we will see a slump on used or new. It has been comprehensively debated on the other thread. Uncertainty and divided views on the synthesis. 
DonkeyApple said:
Indeed. However, the consumer fallout from the cost increases of last year haven't really begun to hit the market yet.
What we know is that almost no household in the U.K. has any kind of meaningful savings. The post '97 cultural shift has been the end of saving habits and the ubiquitous adoption of spending habits across the entire cultural board.
Alongside that are much higher levels of consumer debt and in this metric we also have to include the off balance sheet 'nothing to pay' and 'zero interest' contracts. These deals have proliferated across society. PH loves to imagine that it's just RadioRentals players who have been partaking but the data clearly shows it is endemic with millions entering 2023 with ongoing obligations.
Rent and mortgage costs all rising.
Higher food costs are now embedded.
Cost of borrowing has spiked several multiples for middle income earners who at the start of the year were still being artificially booked as low risk but as they have no wealth entering the new financial phase they have switched overnight to being the higher risk they always were.
What you are seeing at Tesla is not unique to Tesla. They are merely seeing it first because their brand attracted the biggest shoppers with the least wealth. Their customer base is income powered only so have been hit the hardest and earliest by uncontrollable essential spending increases driving an involuntary contraction of non essential spending. Holidays, dining, beauty products and cars. These are just the first batch of heavy consumers waking up to the reality that the dollar shave club isn't a club and doesn't cost a dollar and some have even sobered up sufficiently to start realising they've been on a decade long princess shopathon for no sane reason at all.
All the more expensive cars are going to be hit with the exact same reality. It is practically impossible for them not to be.
Even the people with good incomes who haven't been playing at Ken & Barbie but saving money will be contracting their spending. Not because they have to like everyone else who is living paycheque to paycheque but because it is their DNA. Savers don't suddenly increase their discretionary spending when consumer spending goes into contraction but the opposite, they end up saving more just because their natural prudence slows their spending even more.
The car market is almost 100% debt driven in the U.K. post the 2011 lending restrictions in the mortgage market. After cutting back on leisure shopping, paying others to cook your food, expensive holidays the car is the big discretionary monthly ticket that drains the bank account.
People can't cut their utility bills. Can't cut their housing costs other than to downsize which shoppers never do unless it is forced upon them by the financial institutions who ultimately own every aspect of their life. So once the easy stuff like shopping and dining is cut most are left with the car cost as the major and only means to compensate for rising debt costs and to keep the books balanced.
I'm of the opinion that the 'supply' shortage hasn't been relevant for some time. It was super relevant post lock-down as millions came out with more money than they'd seen for decades due to not being allowed to go shopping but we're desperate to go back to shopping and with foreign holidays still being iffy the next best thing to hurl that money at along with a massive family bucket of greasy, KFC style debt was a better car than they'd ever had in their entire life. They came out of lockdown like Tesla apex shoppers, desperate for the big ticket purchases of their online heroes.
Fast forward to today and they're all completely fked. They've thrown away all that money on any old st they could get their hands on and now their borrowing costs, housing, utility and food costs, the essential costs of life that have been generally suppressed for decades (artificially in the case of property via near zero lending rates) have all increases and soaked up all the discretionary spending cash.
The apex shoppers who were driving the ever growing demand for more and more premium/expensive cars have had their finances imploded and reduced to fighting for energy drinks in Aldi. Meanwhile the apex savers are seeing bigger returns coming for their money so are saving more.
The supply shortage of new cars is of no relevance because in reality the demand has gone. As a result, manufacturers are soon going to have to start discounting to find people willing and able to borrow enough money, taking them from each other in order to clear inventory build-ups from the factory gates just as Tesla has had to do already as it is so much further ahead than the others. And these discount on new will burst the bubble on used.
The market will be selective though. Affordable, new, non premium stuff could hold up well as consumers are either forced or voluntarily step down the size of their monthly car spend as well as typical monthly running costs. Maybe used premium cars will hold up well as a means for people with lower spending power to remain in the same marque etc.
It's hard to predict accurately where the hammer is going to fall hardest but there is no real debate that it is falling, has fallen for many already and over the next two years will fall on many more.
The U.K. is financially reverting to the market norm of functional interest rates. Markets that were created or redefined by the anomalous decade of zero rates can't stay as they were, they have to change. Hence why 2022 in the global stock markets all those businesses were sold down and were rebasing to fit the traditional norms.
It would take a really significant and permanent reduction on product supply or another massive, global taxpayer hand-out to shoppers to get in the way of simple market forces and reality.
In all likelihood we are starting to enter a buyer's market for some nice cars over the next 24 months. New or used.
An interesting read. I wonder if there's more money about than that though. I live in a West London bubble where 2nd homes are still all the rage (not for me sadly) and therefore not representative at all. However for the last 11 days I've been in rural Suffolk and Devon where there seems to be no shortage of cash being sloshed about in antique places that aren't and all manor of food and drink emporiums.What we know is that almost no household in the U.K. has any kind of meaningful savings. The post '97 cultural shift has been the end of saving habits and the ubiquitous adoption of spending habits across the entire cultural board.
Alongside that are much higher levels of consumer debt and in this metric we also have to include the off balance sheet 'nothing to pay' and 'zero interest' contracts. These deals have proliferated across society. PH loves to imagine that it's just RadioRentals players who have been partaking but the data clearly shows it is endemic with millions entering 2023 with ongoing obligations.
Rent and mortgage costs all rising.
Higher food costs are now embedded.
Cost of borrowing has spiked several multiples for middle income earners who at the start of the year were still being artificially booked as low risk but as they have no wealth entering the new financial phase they have switched overnight to being the higher risk they always were.
What you are seeing at Tesla is not unique to Tesla. They are merely seeing it first because their brand attracted the biggest shoppers with the least wealth. Their customer base is income powered only so have been hit the hardest and earliest by uncontrollable essential spending increases driving an involuntary contraction of non essential spending. Holidays, dining, beauty products and cars. These are just the first batch of heavy consumers waking up to the reality that the dollar shave club isn't a club and doesn't cost a dollar and some have even sobered up sufficiently to start realising they've been on a decade long princess shopathon for no sane reason at all.
All the more expensive cars are going to be hit with the exact same reality. It is practically impossible for them not to be.
Even the people with good incomes who haven't been playing at Ken & Barbie but saving money will be contracting their spending. Not because they have to like everyone else who is living paycheque to paycheque but because it is their DNA. Savers don't suddenly increase their discretionary spending when consumer spending goes into contraction but the opposite, they end up saving more just because their natural prudence slows their spending even more.
The car market is almost 100% debt driven in the U.K. post the 2011 lending restrictions in the mortgage market. After cutting back on leisure shopping, paying others to cook your food, expensive holidays the car is the big discretionary monthly ticket that drains the bank account.
People can't cut their utility bills. Can't cut their housing costs other than to downsize which shoppers never do unless it is forced upon them by the financial institutions who ultimately own every aspect of their life. So once the easy stuff like shopping and dining is cut most are left with the car cost as the major and only means to compensate for rising debt costs and to keep the books balanced.
I'm of the opinion that the 'supply' shortage hasn't been relevant for some time. It was super relevant post lock-down as millions came out with more money than they'd seen for decades due to not being allowed to go shopping but we're desperate to go back to shopping and with foreign holidays still being iffy the next best thing to hurl that money at along with a massive family bucket of greasy, KFC style debt was a better car than they'd ever had in their entire life. They came out of lockdown like Tesla apex shoppers, desperate for the big ticket purchases of their online heroes.
Fast forward to today and they're all completely f
ked. They've thrown away all that money on any old st they could get their hands on and now their borrowing costs, housing, utility and food costs, the essential costs of life that have been generally suppressed for decades (artificially in the case of property via near zero lending rates) have all increases and soaked up all the discretionary spending cash. The apex shoppers who were driving the ever growing demand for more and more premium/expensive cars have had their finances imploded and reduced to fighting for energy drinks in Aldi. Meanwhile the apex savers are seeing bigger returns coming for their money so are saving more.
The supply shortage of new cars is of no relevance because in reality the demand has gone. As a result, manufacturers are soon going to have to start discounting to find people willing and able to borrow enough money, taking them from each other in order to clear inventory build-ups from the factory gates just as Tesla has had to do already as it is so much further ahead than the others. And these discount on new will burst the bubble on used.
The market will be selective though. Affordable, new, non premium stuff could hold up well as consumers are either forced or voluntarily step down the size of their monthly car spend as well as typical monthly running costs. Maybe used premium cars will hold up well as a means for people with lower spending power to remain in the same marque etc.
It's hard to predict accurately where the hammer is going to fall hardest but there is no real debate that it is falling, has fallen for many already and over the next two years will fall on many more.
The U.K. is financially reverting to the market norm of functional interest rates. Markets that were created or redefined by the anomalous decade of zero rates can't stay as they were, they have to change. Hence why 2022 in the global stock markets all those businesses were sold down and were rebasing to fit the traditional norms.
It would take a really significant and permanent reduction on product supply or another massive, global taxpayer hand-out to shoppers to get in the way of simple market forces and reality.
In all likelihood we are starting to enter a buyer's market for some nice cars over the next 24 months. New or used.
My view that I've voiced on the other 2nd hand car thread is we're about to really see the unequal distribution of wealth in society where the haves are perhaps more plentiful than realised but the gap to the have nots is massive, just recently disguised by the things you describe.
I think the poor supply is relevant as I still believe there is plenty of genuine cash about albeit held by a minority proportion of the population.
I genuinely hope car prices do crash as I'm one of those cash buyers who doesn't need a car but wants one.
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