Car-mageddon?? Auto Insider Predicts Car Prices To Fall This Year | Lucky Lopez

I keep telling people the best time to buy a car is in the second quarter of 2023 welcome to wealthyon I'm wealthy I'm founder Adam Taggart car prices went bananas after covet hit propelled by inventory shortages from disrupted Supply chains and the unprecedented stimulus sent to businesses and households now here at the start of 2023 the boom May well be ending used car prices which nearly doubled post coveted fell for much of 2022 though they still remain much higher than their pre-pandemic lows also lacks lending standards and extending auto loans during the recent boom are coming back to bite lenders the percentage of loans that are at least 60 days delinquent hit 1.65 percent in the third quarter of 2022 the highest rate for 60-day delinquencies in more than a decade where is the auto market headed from here and will patient buyers be rewarded with better values in 2023 to find out we're fortunate to welcome lucky Lopez to the program an automotive of Industry YouTuber whose boots on the ground reporting has recently cast him into the mainstream media Spotlight lucky thanks so much for joining us thank you so much for having on looking forward to our conversation good good lucky I know we've been trying to get you on the program for a while you've been a man in very high demand so super glad that you're finally here um real quick can you just give our viewers a quick rundown on your background how have you come to know so much about the automotive industry um it started back in 2000 when I opened up my first shop here in Las Vegas I just had a passion for cars first with auto repair then I opened up a body shop then from there opened up a car rental company and then basically transferred out to a dealership and I was just fascinated by the whole industry so I just had to go even deeper and I started getting into lending going out and buying paper portfolio which is what we do to go buy auto loans from Buy Here Pay Here dealers other Banks stuff like that and I just try to immerse myself totally with the car business and that's pretty much how I started back from 2000 so I got a little over 20 years of just doing it day in day out every day and it's not only something I do as a living it's just a also a passion of mine I absolutely love the car business okay and and your YouTube channel is is great evidence of that it's a great Channel you get a really big audience there um where one of the reasons I'm really excited to talk to you lucky is um the audience here at wealthian has been wanting to get an update on the auto market for a good while and while I was trying to get you on the program um I had the opportunity to bring on Charlie chesborough who's the senior Economist at Cox Automotive uh he was on the program last December or so a month ago and folks if you want to you know hear his point of view on the auto market I'll put up a link to that video right here um but but Charlie you know he's an economist so he looks at a lot of reports and and that's sort of his view of of where the auto Market's headed and and to a certain extent anyone doing that is looking at data that had to get collected compiled put into a chart what not so there tends to be a bit of a lag to it where you're right there on the front lines right you're there seeing what happens at the dealerships seeing what's happening with the lenders um you're you've got a real-time view what's going on a real boots on the ground view so um very interested to hear that in my my gut from watching your channel is that your opinion might actually be pretty different from the mainstream economists like the folks at Cox Automotive so really looking forward to diving into that with you so with that backstory which um what is your current assessment of the auto market right now um without putting any curse words in the phrases I would say is absolutely going down it's you know when I see stuff like Cox Automotive saying that the economy is fine that the car Market's fine there's not going to be any drops it's going to be a slow steady correction everything I'm seeing is the complete opposite I know they're taking data from just one or two sources but where I collect my data from is multiple things one as a dealer I'm literally going out there to the auction every day buying cars which Cox Automotive that's where they get most of the information but also as what's called a portfolio buyer where I deal with banks my job is to go out and actually knock on Bank stores and try to purchase auto loans from them and I get to actually see behind the curtains of how auto loans are actually performing how a lot of these are not being reported to the public how they're actually bundling them in different sections and selling them off to Banks uh different banks and it's almost like a game of hot potato with bad paper so what I'm seeing right now is the biggest thing is too many people have cars they simply can't afford with Rising interest rates and how inflation just got simply out of control it's gotten even worse and you know I like to tell this story back you know in 2020 when people started getting the stimulus money you know they were going out and buying these cars with a thousand dollar car payment so let's just say a Dodge Charger that's one of the things we saw these people just going out buying these over inflated cars and back then they're like well I can afford a thousand dollar payment because I'm getting four thousand dollars a month from the government and I have no bills I don't have to pay my rent well fast forward to 2022 and 2023 back then they probably could afford it you know with you know not paying their rent and everything else but now they're back to the regular jobs they're making half of what they used to um they basically everything is doubled since then the cost of rent the cost of gas the cost of insurance and we're watching more and more Americans I think it's one out of every four is uh 30 days late and it's one out of every I think six that are 90 days late which is real alarming and normally we don't get scared because like oh there's people that are always going to have bad credit and there's going to be repos and so on and so forth but the big indicator is the prime customers the customers with good credit we've seen default rates go from averaging of like one to two percent doubling up to three to four percent which doesn't seem like much in the scheme of things that's why these Cox Automotive people don't say anything but that's nearly double than what it used to be so that's some of the alarms that I was Raising over a year ago and it's so funny because people thought I was nuts back then and and everybody laughed and then all of a sudden as this thing started crumbling I just watched all these views like kind of growing my channel and a lot of the stuff I've been saying over and over again and now it's the news uh I guess videos that I recorded for like CNN Fox News and everything else now they're starting to play so we're slowly starting to see some of this stuff come to fruition uh gosh that's so interesting and I will say that is a different a pretty different story from the discussion that I had uh with with Charlie at Cox Automotive um and again it's something against him but it's just differences of perspective here right and his perspective was sort of um the the prime buyer has really not shown you know any signs of weakness and seems well positioned to keep things supported out as far as they're currently looking right now um yes maybe the premiums for buying a brand new you know Ford F-150 um may come down a bit um but uh doesn't seem to be any worry on their end about people still being able to buy F-150s at the current rates you're definitely telling a different story and yeah I was shocked when you told me that the the default rate on the prime uh buyers is jump from one to two percent to three point four percent because you're right that's that's a doubling right it's it's yeah relatively low percentage but when you see that in what should be the strongest a doubling of weakness in which should be the strongest player that's something that really should catch tension here you mentioned one out of four folks are 30 days late one out of six or ninety days late um I'm just curious can you put those into context are those bad numbers from what we've seen over the past couple years are they it's it's worse than back in 2008 that's what kind of threw me off is when when I go buy auto loans they'll have a bulk of loans anywhere from like a thousand loans to 50 000 loans and as we take the numbers we assess it and I haven't seen numbers this bad since 2008 and this was back in I believe January of 2022 is when we first started noticing the trend that all the loans that were originated in 2020 2021 and 2022 were almost a double uh the rate was doubly I didn't say doubly it was double the the default rate of what it was back in 2019 18 and so on and so forth and now we've already passed the uh 2008 levels where the record default rate was 14 we're hovering around like 13.5 I think across the board with subprime everybody else and mid Prime and Prime custom so this is actually works and that's why I'm shocked that more people are not talking about it I feel like it's being kind of swept under the rug because you know the car business yes that that is kind of scary and it's it's scaring dealers but people like Cox Automotive they're always going to think well people with good credit are always going to buy cars that's true but the problem they're not thinking of is as Banks start having massive defaults they're going to have these big deficiencies and this is the problem this is the thing that I'm telling everybody this is the the thing that breaks the the straw that breaks the camel's back Cox will sell the same amount of cars every single month at Manheim Auto Auctions but when me the dealer purchases this over inflated car let's say the retail on this car is worth 55 000. if I'm paying 55 000 at the auction I have to find a customer a consumer that's crazy enough to pay me maybe 60 65 000 so now these inflator prices get out of control well what's happening now is the repos are starting to come in and let's say I sold that 55 000 car for 60 Grand over MSRP or over inflated prices well now the bank takes this repo brings it back to the auction and they sell it and let's say wholesale auction price is forty five thousand dollars but they still owe you know sixty thousand dollars on this car so that ten fifteen thousand dollar deficiency the bank has to eat it and little by little every month that banks are eating more and more of these deficiencies so what's going to happen is the Cox can say whatever they want the banks control how many cars us dealers sell because they have the ultimate power if they do not want to lend to Consumers at 130 140 150 LTV like they normally do this is going to be I call it the credit news that's going to tighten around dealers next and is driving sales down and it's already started yeah I talked about this about six months ago Banks were cutting off like crazy financing like 96 month financing on a brand new F-150 Silverado 84 months you know these crazy options as banks are taking more losses almost like the 2008 housing crisis they come up with new rules new regulations whatever they can do to balance their books and this is the thing that I don't know why dealers are not scared of and people like Cox Automotive because once the banks stop lending which they're slowing they're going down and they're only lending book it's just going to crush companies like Cox Automotive Sonic Auto Group AutoNation all these people stuck with really high overpriced inventory and and it blows my mind that I hear these people like the Market's fine the Market's fine I literally feel like we're living in 2008 again you get the 10 that are screaming from the hilltop so it's going to be bad and then you have the 90 of the people like it's fine it's all sunshine and rainbows it's not that bad yeah um all right so super fascinating and yeah I mean part of that's just human psychology right I mean a lot of people I don't want to admit to themselves uh that they may be poorly positioned for the future um and then in certain cases there are people that maybe don't want to publicly admit this because uh if they do people are going to change their their purchasing behaviors which is probably going to exacerbate you know the arrival of the problem um but you mentioned a ton of great things there um I've got so many questions I guess first is uh before we get to the dealers let's let's get to the the lenders right um you deal with them on a daily basis like you said from what you've told me I would think they would be beginning to freak out here um how much are the lenders freaking out at this point when I so about four months ago is when I stopped buying paper usually Banks always sell auto loans back and forth it's something that we all do every Bank gets x amount of dollars every quarter to lend out and if they don't lend it out they get less and less every every quarter so their job is to go out and buy paper this is the first time in history that I've known of in 20 years that they stopped buying paper every bank that I deal with doesn't want to touch it a lot of the bank managers I spoke to are upset they're freaking out because their bonuses are structured on loans getting new loans and also the performance of them they're talking about not getting bonuses for the next like year or so they're hiring more collection agent Specialties our Specialists because they have such a high default and the sad thing is is they're literally told because I was going to get a few of these people on my my channel to talk about how bad it is because this is the stuff that I want to show the public the public can't see unless you're in my position and they were told flat out from multiple companies that they are not allowed to speak publicly about this situation that it falls under the Fair Credit act we cannot share consumers information because it's illegal and so the time we try to get some sort of data from them so I can show people they always hide behind the oh it's consumer rights it's it's Consumer Credit we can can't show you because it's private information which is absolute BS it drives me nuts but that's why I think these banks are so scared because like you said if everybody knew that the market was crumbling it would drive the prices down even faster so right now I feel like they're trying to use this false hope and and prerogative of like a limited Supply there's not enough cars propping up the market praying the god that people don't start using their heads and just wait and watch how this basically facade crumbles well like you said earlier to me this just smells so much like what we saw in the housing market back in 2008 even down to the point where you know all the executives as you said their incentive is on you know making loans right um yeah and what that does is it it that incentives Drive bad outcomes right so you had as I understand it and that's what I'd love to talk with you about right here is um especially between 2020 and 2021 you know it seemed like lending standards for auto loans just dropped you know down into the core of the earth I mean it was just like they would give a loan to anybody with a pulse uh who had a stimulus check to spend right um just like we did with housing you know so so my concern is that like what we're going to see this time around like like this Market cycle subprime is going to be the auto market the way that the housing was back in 2008. oh 100 I mean you you hit a nail on the head as you know when when we were starting to go into the res or not recession but the uh uh pandemic we were buying cars back a book operating the same principles and then all of a sudden we started hearing multiple Banks saying hey you know what we're going to give you instead of let's say on a Prime customer we're going to give you 110 of LTV so if the customer has good credit they don't want to put no money down we can cover sales tax and maybe a few bucks of aftermarket products warranties Etc um they were going up to 150 160 percent so I was like okay maybe they're going a little extra because people just don't want to spend the money in their their stimulating sales that's originally how we thought it was they were just going out of the way to stimulate sales but then all of a sudden they brought the subprime markets into it people that we usually would lend 90 of LTV giving them 130 140 150 percent uh loans of value and it blew my mind so all of a sudden this Rush of all these we call them stimulus Ballers on my Channel people that you know that didn't pay their rent that waited three months got a big stimulus check from the government had ten twelve thousand dollars to spend just showed up to the dealerships and we were open here in Las Vegas during the pandemic like we never even closed I think we closed for like one day and then we were back open because we were considered essential and we were selling cars left and right we had the dealership that bought my dealership I sold out to them and I stayed on as a transference for the next three months before I was going to leave and I wind up getting stuck there because of covet and we sold 110 cars a month for like the next four months which usually we sell about 30 to 50 cars oh wow and the scary thing was is normally you know if if people show up with like big chunks of money and everything else and they can't proof of income um banks will say hey you know what you're a subprime customer we need to see pay stubs we need to see bank statements we need cw2s we want to make sure that whatever your say you're making is something that's continuous like it's gonna stay there like if you were let's say a college student and you just graduated from college and now you have a degree and let's say I know you're an engineer you know you were working at Denny's before so if you show up to my dealership and you're working at Denny's for a year and a half but you just graduated college and you got an engineering degree I can sell that picture to the bank and the bank will give me more money to lend to an individual like that there's got to be some sort of purpose for the bank to increase lending amounts when it came to stimulus money they didn't ask for like past bank statements they didn't do a lot of the same things they just saw all this free money coming from the government and they're like we're gonna pump these loans out get them and then we're just going to hold on them for a little bit and then sell them to another bank to to see who wants to take you know the loss and so the frenzy began everybody was just buying deals left and right the prime Banks got into it first subprimes got into it now and then all of a sudden they collected all these auto loans all these Auto portfolios bundled them off and they started selling them off to each other basically almost like a deadly game a hot potato to see right onto this really bad paper that's probably going to be worth 50 of what it's going to be in 2023 and it just made the market ridiculous and unfortunately a lot of the consumers got stuck with this stuff because there's no bailout there's nothing else and to hit your point about the housing Mark in 2008 I'm really scared because when this Fallout happens which it's going to happen um I believe that people are going to cry and they're going to scream and they're going to whine and say the auto business is crooked that they need to have some sort of government Regulatory and that's what's going to screw people because if you think about it today if you want the government to step in and tell you how much you can afford and what you could buy you know they did that with housing a lot of people are upset now because they can make 100 Grand a year but if you buy a house here in Vegas you can't afford a decent house you have to go buy a condo if you're making a hundred thousand dollars a year a car a a basic Tahoe today a brand new Tahoe a family vehicle is ninety five thousand dollars so it's like if the government says well you know what you make 100 Grand a year you can afford a 35 000 car what is the automaker is going to do they're they're pretty much Sol they can only sell you uh something very affordable something cheap and it's going to totally tank the auto market um all right totally thank the art of Market okay that that's that's part of the the risk that we're talking about here is sort of a you know a systemic um Reckoning in the auto market that that you know damages consumers damages the the players in the auto market um good for nobody in the end except maybe you know affordability might get better but but before we get to that part of the story I want to stay here on kind of the main um trends that are coming into play so we're talking right now about the lending right which was we well we had we had two bits of of um things that were enabling people to buy that were probably extraordinary right when we had a lot of the the cobit stimulus coming in but we also the lender is really taking down their lending standards and just letting pretty much anybody in the door you know with a pile of bills walk off whatever car they wanted and they didn't do the the homework to say is this guy really going to be able to afford his payments and real quick um because I'm sure you know the stat I I've heard a stat that like the percentage of auto loans that defaulted on like the first payment was never made is like higher than it's ever been is that is that true yeah it's it hit record highs back and I believe it was May of uh 2022 and then it's just it's continuing the same Pace um I did a video on my channel where I walked around I was at a repo yard and one of the things that startled me was we were looking at all these cars that were in the repo yard some of them were up for repo for over a year and one thing they all had in common they had paper plates from when they drove off from the dealership now a paper plate is only supposed to be there for 30 days some of these cars haven't been registered since 2020. so they they didn't register them they never made the payments half these cars didn't have insurance and the sad thing was is a lot of the banks which I feel sorry for people would go to the dealerships and this is how bad the car business is there's forms on there on how to screw Banks and dealerships so they would go buy a brand new car use your stimulus money to buy the car and as soon as they got it in the loan was processed they would call the bank and say oh um I can't work because of uh covid so you need to put my car into forbearance and some banks had up to a year of forbearance on customer payments so that's why I made that joke that a lot of these things it's like a snowball that's getting out of control because first the banks had to do the forbearance to make the government happy so they can keep pumping the money out but now they're trying to repo these cars the forbearances are showing up and a lot of these forbearance programs didn't show as negative payments on the credit history so a lot of the stats that we we talk about like the one out of four that's up for repo that's all from experian.com a lot of their numbers are skewed because they technically can't report how many people are truly late until the next falling quarter and so I guess that's that's why I'm so excited to see the after this first quarter we're going to see the numbers for the last quarter of uh 2022 and I think it's going to be way worse than what people are thinking it's going to be way worse than even the numbers you mentioned to us at the beginning as they can't include those forbearances until they actually become like defaults and by a forbearance these are people obviously trying to gain the system in the way that you described um but when they get up forbearance they can still drive the car right they're they're yep they can drive the car the the government will basically tell whatever state they're in that they're not allowed to repo these vehicles and so it it completely caused a pause where traditionally that was part of the search normally we get repos in every week and we just put them up for sale and we go to the auction and buy them and I sell them to new consumers when they stop that and we're not talking regular Banks I have title loan companies pawn shops um Everybody nobody could repo during this time so that's why there was such another shortage of the market of used cars all right so we're going to talk about this in a bit but obviously from what you've said there's got to be like a tidal wave of repos coming down the road I imagine oh they're already here all right well let's put a pin on that because I sense that's going to be a really juicy story but getting back to to what I'm trying to set up here is we had um some extraordinary situations that were enabling people to buy cars they really had no business buying right the stimulus money the the lower Bank lending standards um going forward the banks are going to have to start tightening their their standards obviously and maybe you can talk to that for a second um but I want to I want to pair that with this is my estimation I'm curious if you share it or not but because we made it so easy for people to buy over the past couple years we pulled a ton of transactions from the future from today you know into the past right and so now there's going to be this purchase drought where a bunch of cars that otherwise would have been purchased in 2023 the the purchasing demand is not going to be there because those cars were already bought last year or the year before right um so you're going to have this this squeeze between this the banks approving less loans to buy stuff and fewer people showing up anyways to buy stuff um you're kind of smiling and smirking and nodding as I'm saying this are you seeing the same thing here yeah I called it robbing the future and they didn't understand me and I was actually at a dealer convention and I made that joke I'm like you guys buried your consumers I mean this was a 2022 and 2021 was record profits for everybody we're talking independent dealers franchise stores they made less cars and we made double the price profit than any other years so just keep that in mind but the problem is now is like you said the lending is getting tighter the Market's changing cars are going down and traditionally we expect consumers every two years to purchase a new vehicle that's what US dealers rely on every two years we have this cycle of new customers as we sold these cars for over inflated values let's say 150 LTV as this Market is is slowly going down these customers are getting further and further buried into these vehicles so now most cars out there I think it was one out of every three has at least five to ten thousand dollars of negative equity it's something ridiculous so now these customers they're already trickling in they bought at the Peak at 2020 and 2021 oh I'm ready to get a new car we had a guy come in just the other day had a Silverado I think it's got 2015. you know and we're like okay Blue Book on it's like around like 16.5 let's see what he owes 35 000 some dealer put this poor guy together gave him 84 months financing on a 2015 at 18 interest and he's buried there's nothing we can do and he's he I feel bad because he's like well can I refinance it because my payment's almost a thousand dollars a month I'm like no you can only refinance 15 000 because that's your vehicle value right so now all these consumers are stuck in these overpriced cars dealers have also overpriced cars there's no equity to transfer and it's just it's just making the market bad so we're projecting they basically robbed at least two years of their future from the pandemic of you know pushing all this over-inflated uh inventory onto these consumers and like you said it's going to be a drought for the next at least 18 months and not only from a demand aspect but also from a lending aspect because as these Banks take these massive losses it's going to get harder and harder to lend I mean I've never seen Banks do a 180 so fast where before as long as you had a pulse and like a 650 credit score I get you whatever you want now they want to see the big down payments they want to see you know multiple bank statements that match pay stubs that match previous auto loans they're only going they're going back to very traditional rules what they used to so yeah you said it best I mean they literally they they robbed the future and there's going to be a really bad sales drought that's going to affect everybody okay so we robbed the future purchased route the credit it lending sphincter is is tightening hard um let's get to the point that I think everybody cares about who's watching which is prices right so um because of the easy lending uh and the excess stimulus and everything like that and a little bit of the fomo that comes along with it right because there were supply shortages which we haven't even really got into yet but we can talk about that in a bit and how big a factor that's been um but people were were just insane chasing car prices right and and uh you know lots of cars going for way over uh MSRP in the used Market you hear stories about people that were basically being able to trade in their their five or six year old cars at the current MSRP for a new car I mean just crazy things that we really hadn't never seen before um I got it I gotta think just lost supply and demand if we see a lot less purchases over the next 18 months um then we're going to see prices come down incorrect especially if we start seeing an increase in Supply from all these repos you know these cars that people are walking away from um also I don't know if if we're going to see an increase in Supply anyways just because chip the chip shortage is declining and we're able to ship new cars more now whatever I'll let you comment on that but when it comes to the highly elevated state that auto prices have gotten to when you look over the next 18 months how much of a decline well do you see a decline and if so how much of one is it going to be mild moderate or severe it's it's going to be mild I mean we had a severe one like that's my number one asked question when are the car prices going to go down as of 2022 the last six months the market lost 30 percent of vehicle values they lost 12 to 14 in November alone now I I show these people numbers there's an MMR chart which I'll give you which shows uh wholesale auction prices and this is what US dealers live by just in the month of November we lost 14 so let's just say 35 40 percent is what we lost just throughout the whole year of 2020 from current prices now that's not going to get us back to where the prices were at Double which there are now but if we take a section of that off as we fast forward to 2023 we're seeing another 30 to 40 percent coming off of vehicles and it's funny because people are like well uh that's not enough we need more and it's not going to happen it's going to drop it's going to be a slow steady decline in pricing because there's a few factors one dealers have a lot of cars they just don't tell you about it I love new car stores this is one of my fun things I love to tell people if they tell you they only have two Silverado trucks you got to buy them you got to pay over MSRP drive to the back of the lot you're going to see like 30 40 of them just sitting there they all have inventory they all have that but also dealers they overpaid for these cars if they paid thirty thousand dollars for a twenty five thousand dollar car dealers are going to wait months and this is the problem with dealers they're dumb they will wait months before they will actually take a loss on a vehicle now we pass that on to the banks we have all these repos sitting in big pools all over the United States they will literally take let's say they have 100 cars they will take 10 out every week and take them to the auction they will not put them all in the auction once because they know the price will crash so they just slowly spoon feed a trickle them out and so it takes months and months for as the stuff to unfold so back in beginning of 2022 we talked about how prices are going to drop because all the repos are coming in people thought I was nuts but as we watched you know every week the more and more cars going at the auction the supply filling up dealership slots filling up people started realizing that okay there's more inventory there's everything out there and one statistic or one stat that we use is what's called days on lot or days on Market you guys can look this up on CarGurus it's very simplistic back during the pandemic average day was about seven to ten days cars were flying off the shelves as soon as you get them they were gone now we're hovering around 60 days as average on days on Market Which is higher than pre-pandemic levels which is letting us know that cars are sitting longer and taking more time to actually sell and there is nothing I like about CarGurus you could track a car and you can do this on carvana too you could put favorite save this car and it'll notify you every single time there's a price drop in the car and you can literally see on their chart like it started at thirty six thousand 33 32 31 and it just it's going down and down and down so the problem is is people going to the dealerships and they don't think prices are going down because they ask once and dealer says no and they get upset they throw up their hands and they walk out oh they're not gonna they said they're not gonna work with me I was like that's their job they're going to lose money so they're going to tell you they can't budge this is the price because they're buried in it they can't sell lost unless they absolutely have to so we tell people if you want a good deal all you gotta do is go on car gurus you can even go to some of their websites and it'll show how many days it's been on there after like 60 days that's when you'll get a deal because a lot of these dealers gotten bad habits of keeping these cars because of the supply and demand they can't replace it where now every week there's more and more cars I just did a video the other day every week there's about 30 000 cars going through the auction back in the beginning of January of 2022. fast forward to this January there's a little over 75 000 cars rolling through Mannheim this week and that's just one uh major uh Auto Group there's Odessa there's thousands of other small independent auction houses around the United States so that's just the sliver so every week this snowball is getting bigger and bigger from trade-ins from repos for people just walking away with their cars one of the hottest businesses right now which nobody's talking about is car purchasing I do it myself but I just stop because everybody's out there buying cars and take them to the auction and selling them but the problem is is they keep buying but they're not selling AutoNation has buy centers all over the US and they just keep buying cars and now they're basically they can't sell them at the auction so they're bringing them back to their own stores to see if they can sell them because they don't want to take a big hit right right um you're making me think of this article I read a couple months ago about car flipping and um I'm just curious you know I mean to me that's the sign of of a bubble top right I mean that was you saw that in the Home Market right everybody was flipping for a profit and then all those flippers got got crushed when the market turned right oh 100 um so uh was that sort of new this cycle or is car flipping always just kind of been a thing we just haven't heard of it before I mean it was always around but it's it was very it wasn't as popular and it was more to like experience people where all of a sudden this Rush came and we saw so many people jump into the automotive industry almost like real estate like I'm sure you saw back in 2008 people that could be a Walmart org reader all of a sudden they're a Real Estate Mogul they got five houses with Ninja loans that they couldn't afford same thing with the car business we had all these tech companies like carvana and and all these other ones jumping into the car business thinking that they can rerun the whole system and we had all these companies coming out we buy your cars online site unseen you know the the Zillow of the automotive world and they just got crushed I can't remember how many businesses there were I think we counted at one time there's like 100 websites I think it's down to like four or five major ones because they they can't they're taking losses they can't it sustain what they're doing they can't keep buying and losing money every single month and so now this hot Trend that was making Easy Money buying cars sight unseen pretty much crushed it I mean it almost took CarMax I mean they took a massive hit carvana is pretty much dead because of it and AutoNation is having major ramifications because you know some of their stores can't get rid of this inventory so AutoNation I tell most people look that's the biggest Auto Group in uh United States they have more deals than anybody else because they simply just have more inventory more inventory so let me ask you that you say they can't they can't move the vehicles um but that's a function of price right they can't move vehicles at the current price and you gave the example of the the Tahoe right a family car that that's right now MSRP for 95 000 right which until not that long ago was like an entry level price for a family home I mean in certain places right I mean it's we we have this I guess maybe there's multiple questions packed into this maybe I start with the first part of it which is do we have just an affordable affordability issue in the housing market these days um I don't have the data but maybe you do but just sort of as a share of family income has the price of a car you know increased dramatically as a percent of share of family incomes I just I don't know I just can't imagine the rationale for spending a hundred thousand dollars on a car that's supposed to be a functional tool no I mean it's they're saying that the average household income back in I think it was 2012 had to make a little over I think 65 000 a year to afford a house you know regular bills and a brand new car fast forward to today it's a hundred and twenty thousand dollars uh household income is what you need to get a regular car not we're not talking Mercedes BMW we're talking the the ninety thousand dollar Tahoes you know I mean even a Camry I think some of the the cameras go all the way up to seventy thousand dollars now it's just 70 000 Camry yeah it was um that's the the TRD version one I remember seeing it online it was 70 grand and they even asked for an MSRP markup you know and uh I remember the funniest one we saw was Toyota RAV4s that were selling for like 30 40 Grand they had a thirty thousand dollar dealer markup so people were paying almost eighty thousand dollars for a Toyota RAV4 but is that because they had like a solid gold steering wheel I mean I I I couldn't rationalize it like I don't get me wrong like I I like I bought an Audi R8 which was my dream car and I paid MSRP but I refused to pay anything above that because I know with depreciation and how much I'm going to pay for it where I'm going to be at but you fast forward to today these dealers you know they simply can't people can't afford the car so not only is the sales price High because my my loan for my car is 1.9 I got it for a steal it's not costing me anything where today if you have a 750 credit score and you came into my dealership I have Maybe One Credit Union if you bought a brand new car that will give you like five six percent but all my other Prime banks are at seven to eight percent and you should see how upset people get I'm in a bunch of dealer groups all over Facebook and they lose so many deals because these seven 800 credit score people show up to the dealership and not only do they want way over MSRP they're gonna have to pay a crazy high monthly interest which makes the car simply unobtainable 100 like affordability for a brand new vehicle is totally gone the American Consumer is has no choice but to purchase a used car because the new cars are just ridiculously overpriced oh good sorry so this is where when in talking with Charlie chessbury he was sort of like and it seems that there's a cohort of Americans that are wealthy enough to just kind of keep that thing going do you agree or do you think that no this is going to hit you know a limit where just no one's going to be showing up to to pay these prices at some point I mean there's always that uh I call it the greater full Theory there's always somebody willing to pay more than what what you're going to pay but that's what these major manufacturers are even banking on for Honda Chevy Toyota they all came out and said that in 2023 they're gonna make less cars to keep profits High to get grosser and they keep saying supply chain that's why they're going to build less but if you think about it they've made record profits these last two years why are they going to build more cars to make less money when they can make less cars and make more and so they're thinking the same way of Cox Automotive oh there's there's going to be a few high-end consumers that are going to overpay for these cars it's going to work until somebody like Volkswagen or Hyundai come in there and just flood the market full of cheap cars we call it dropping their pants like somebody's going to drop their pants to eat up market share they're going to realize that they don't even care about making a big chunk of profit they just want to eat at market share I mean Ford pretty much told everybody they're no longer making any type of economy cars it's all right so now there's more market share for these other manufacturers to get so a lot of them are still thinking that okay there's going to be all these people making all this money this is the way we're going to go I mean the same thing was in 2008 all these crazy models all these crazy Concepts all these extravagant things were still going on I don't know if you remember like the ca Corvette they were supposed to build that in 2009 10 and 11. they were already in constant building because they were going to charge an extra sixty thousand dollars for a mid-engine Corvette because the economy was great and and they believed that there was always going to be an upscale consumer that can afford this car it was going to be called the Zora back then same thing all this stuff collapsed and then now they're back to building basic cheap cars same thing's gonna happen they're going to say they're gonna talk a big game and there's going to tons of high-end consumers but when they get slapped like right now new car sales are down 40 percent I don't care how you scream and say that you're great 40 over the next year is going to crush dealers because they're gonna have no choice but to sell more used cars used car values are going down so it's more of a benefit I think the thing that people forgot was when used cars went nuts dealers franchise dealers were still selling cars at regular MSRP so why would you pay forty thousand dollars for a two-year-old Toyota RAV4 when you could buy a brand new one for ad MSRP but then dealers got smart and then halfway through 2021 that's when all the ridiculous msrps came came about so now all this stuff's coming to roost and the market is not what they think it's going to be I mean at the end of the day it's all about affordability economics like we're going into a recession there's less money lending laws like I said is what's going to tie up everything else so they can save high prices and whatever else but it's just the Market's going the opposite way okay and then um on inventory uh part of the story and you tell me if it was an a truly accurate one or not was that um hey there's a dearth of new cars because they can't get the chips and the component tree they need uh and therefore dealers are running out of new cars and so if you you know need a car you get to go into the used car market and that's what really stoked demand in the used car market um a was that really true because you mentioned that dealers will say they only have two you know Broncos on the lot but they've got like 50 more back in the back yeah and uh it is it is inventory um not just equilibrating but maybe maybe expanding in the used car market um because first there's not the spillover from the New Market anymore because the new Market's kind of recovered volume wise but also because you know these people that bought cars they had no business buying uh they're finally getting repoed they're finally having to dump those things because they just can't afford the the the um the lease fees and stuff or the the loan fees um so you know could we see a a much better selection in the used car market going forward um 100 I keep telling people the best time to buy a car is in the second quarter of 2023 the supply chains were affected quite a bit I know in 2020 and 2021 once everything dried up it got very very hard but at the the second quarter of 2022 everything was back to normal I used to love getting in debates with people like there's a chip shortage I'm like okay the I can't remember the name of the Taiwanese company that makes 90 of the chips in the world but you know all the smartphones every computer everything else all those chips come from that one major manufacturer and so I I would call dealerships on my show or I would convince people like when I'm in person I was like I'll tell you what call Chevy right now and say hey the computer for my brand new Corvette died I need a brand new PCM that has more chips than anything else they can call and within seven days they'll have a new one this whole Mystique of oh there's a chip shortage oh the supply chains yes that was a big deal back then I remember seeing cars in Michigan lined up that couldn't be shipped out because they were waiting on chips they're waiting for certain modules to come in because they could release some cars that was a total thing but now the supply chain it's complete BS everybody's manufacturing everything there's only one company that's still affected and it's BMW and I think Volkswagen is because the major company that made all their wiring harnesses is in Ukraine and unfortunately due to the war that's why they're having a little bit of a supply chain but they've already subbed that out to Mexico and a few other countries so the fact that I keep hearing people play this oh it's the it's it's uh like you said fomo that's all these dealers are doing fear you know I'm gonna make you scared you're gonna miss out fear of missing out and they're going to keep the prices High that's their tool to keep this fake Market propped up okay a great answer by the way tsmc is the name of the the Taiwanese chip manufacturer um so uh you know two main ways to buy a used car you you go to the used car dealer and you see what they have around um or you buy in the secondary Market from a private individual do you have a sense whether one of those one of those two is going to be a materially better Market to buy in this year it's 100 consumers so I would buy off of Facebook Marketplace Craigslist offer up that's currently where I buy I get better deals from people on Facebook and Craigslist than I do at the auction dealers have lines of credit they overpay for cars they don't care and the reason why you're going to get better deals buying from people is because a person doesn't have the capital to withhold months and months and months right it's depreciating they're willing to cut a loose because they have other bills other expenses where these dealerships they don't care some of these dealer groups I mean I don't think people realize how much money dealerships have like some of these owner groups are multi-millionaires and they'll sit on a car just for ego's sake because they refuse I don't lose money on cars I only make money on cars and this is the same greed and arrogance and pride that's going to make them crash down at the same time so for anybody that's watching if you're looking for a car you'll get a much better deal from a regular consumer looking to move that inventory and I think you're going to see a lot more of that now because as I'm watching people fire sell cars left and right when I went to CarMax there was a line of people trying to sell their cars I was going to make a video just as a joke taking my R8 in there to see what they give me for a you know 200 000 car but the line was so long it was a three hour wait for them wow so I just I just drove off but uh that's how bad it's getting all right well lucky look um one of the questions I was going to ask is you'd make a lot of videos sort of on the the dirty tricks that that car dealerships use on people you know to manipulate them when they they come into the dealership um rather than than do that short shrift right here at the end of our discussion um I'd be really interested in having you back on at some point just to do a deep dive into the best practices for buying a car you've already rattled a few off here but I'm sure you've got an awful lot more um so if you're if you're game for that folks if you'd be interested in in having lucky come back on to do that do me a favor let me know in the comments section below and if there's enough interest I'll definitely see if we can get lucky back for that um all right so um yeah a couple other questions about about topics that you talk about on your YouTube channel which at this point I think I'm just gonna have to direct people to go there since we're running to the end of our time here lucky but this has been a great discussion um uh so it sounds like you know wrapping up you think prices are going to get better this year if someone's looking for a car patience is going to help them at least in the near term Q2 of this year it sounds like you think may be really the right time to strike if you're going to be in the market probably buy from a private individual off of a site like Facebook or Craigslist um is there anything else that we didn't talk about yet that you just want to make sure we put on the table here in your first appearance on this channel um one would be whatever price that you see everything is negotiable then now that the market is slowing down don't be afraid to negotiate I'm not sure why people are just they they talk a little bit to one dealer and they just get discouraged and they walk away pin dealers against each other really negotiate send out 10 15 20 offers it's okay that's part of the business just whatever you do to get the better deal and the one thing I'm going to tell you the dealers are tricking people about Everybody's scared about high interest rates if you get somewhere like let's say Toyota and they say hey you know what we're going to sell you this car at two percent or three percent be scared because only the banks that are only on the dealerships franchises that have their in-store banks are allowed to sell over what banks are allowing for which means that if these in-house Banks Toyota financial GM Financial Ford Motor Credit if they're the only ones coming to you with a really low rate that means that they're charging too much money and the other Banks don't want to accept it so interesting you're getting a sweet deal you're not you're getting railed if say you know what I don't like Ford Motor Credit give me another one I'll tell you what I'm gonna go to my credit union get pre-approved your bank's going to say hey here's a 50 000 check that's all the car's worth and then you're gonna go to a Ford Motor Credit they're gonna try to sell you that same car for 60 Grand so just for your people if you're getting a really low interest rate really look at that deal because there's something there there's a reason why they're sending it to a captive bank is because they're over extended in that vehicle and it's they're selling it for more than what other banks are going to give them for for it got it got it they're they're they're overpricing the vehicle and trying to make it sweeter by giving you a sweet deal on the financing um great thank you so much for putting that down there all right well lucky it's been great having you on here um for folks that would like to to follow you and and learn more about you and and follow your work where should they go um my YouTube channel is pretty simple just lucky Lopez if you go to Instagram it's at lucky Lopez as well and I just do two times a week shows just talking about the automotive industry and we've got some other fun stuff coming up soon awesome um all right well look when we edit this lucky I'll put up the URL to your your channel there so that folks and your Instagram handle as well or your Twitter handle as well so that folks know exactly where to go um all right well look this has been great um just a reminder for folks if you are especially looking uh to potentially buy a car this year and prices are still you know you know higher than we like at this point in time it's a big uh purchase for most families uh you know feel free to talk about it with your personal uh financial advisor um to make sure that you're not overextending yourself on the price you know go in basically forearmed with you know what your maximum expenditure should be if you've got a good professional financial advisor that can help you make that decision great stick with them if not or if you want a second opinion from uh one of the ones that wealthian endorses just set up a free consultation with them and have that discussion by going to wealthyon.com filling out the short form there you have a quick conversa consultation with them doesn't cost you anything there's no commitment to work with them it's just a public service that they offer if you've enjoyed this conversation with lucky half as much as I have and you'd like to see him come back on this program again in the future please do me a favor and support this channel by hitting the like button and clicking on the red subscribe button below as well as that little bell icon right next to it Bucky this was really wonderful I'm so glad we could make this happen went even better than I was hoping for really just a total pleasure to have you on thank you so much for having me it's been great and looking forward to the next one great same here everybody else thanks so much for watching foreign

Channel: Wealthion

Views: 904,779

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Id: Z1gIaumlinw

Length: 51min 18sec (3078 seconds)

Published: Tue Jan 17 2023