Manheim Steamroller
April 26, 2021·16 comments·In Brief
I'm fed up with all this reading! You're a Wormwood, you start acting like one! Now sit up and look at the TV.
Matilda (1996)
A couple weekends ago I visited a car dealership to buy a new car.
Like most people, I look forward to this as much as I look forward to, say, going to the dentist or watching the Oscars. And like most people, I suspect you look forward to hearing someone complain about a car dealership experience about as much as you look forward to reading a rant about a bad airline experience.
Don’t worry - this is not that kind of story. But itis an unusual story.
I went to buy a car for a very ordinary reason. My wife is 8 months pregnant with our third child. Since my pickup truck can’t really accommodate three car seats, it was the obvious choice to take one for the team. So it is that I am now officially “regularly googling Korean-made three-row SUVs” years old.
Now, the whole car-buying experience is something I have more familiarity with than I’d like, having previously served in a professional capacity setting sub-prime auto loan pricing for one of the largest non-captive lenders in the space. Buy Rate shenanigans in the finance manager’s office, the economics of trade-ins, the loss severity impact of repossessed collateral - all of this garbage lives in the career-only skills section of my brain, next to dynamic named ranges, Black-Scholes formula components, state regulatory requirements for investment advisers and banking confidential information memorandum templates. In probably 90% of my life, I operate with barely enough knowledge to be dangerous. Lamentably, the world of purchasing an automobile is part of the other 10% where I have real knowledge - even if it is decidedly cursed knowledge.
All this, and still I left without a car. Which is not very interesting.
What IS interesting is why I left without a car. It wasn't because of lack of inventory or credit availability or too much "cargo net and window tint" lagniappe or some guy pushing the undercoating option like he was $1,000 away from topping the monthly sales leader board. It wasn't even because they wouldn't honor the deal their internet sales manager had agreed to before I walked in the door.
It was because they couldn't.
You have probably heard or read that used car prices are up this year.
You may not know how much used car prices have risen. For a variety of reasons (e.g. rental car company activity, some pent-up consumer demand, and yes, semi-conductor supply constraints), used vehicle values have skyrocketed since the early 2020 COVID trough. Manheim, Cox Automotive's wholesale auction and consulting platform, publishes an index of these values.
Source: Manheim Consulting
As it happens, some auto segments are experiencing this pricing pressure more acutely than others. These are, to put it bluntly, extraordinary times for this particular good..
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