Car-mageddon Update: Expect Lower Car Prices Soon | Lucky Lopez

Banks right now are starting to go into critical thinking when it comes to covering their losses and we see down the road the death of uber Postmates Lyft all these other companies because there's so many of these cars coming to repo with so many miles they're losing millions of dollars every single month now [Music] welcome to wealthyon I'm Wealthy on Founder Adam Taggart if you're planning on possibly purchasing or selling a car in the near future or just curious about how the latest gyrations in the auto market are impacting your current car's wealth you'll want to listen up to today's guest Automotive YouTuber lucky Lopez returns to the program to give us his latest boots on the ground reporting on the key trends driving Supply pricing and lending in the car market right now lucky thanks so much for joining us today thank you so much for having me looking forward to getting back into the conversation thanks um lucky it's always great when you're on the program um your first appearance uh which was I don't know eight months ago or so in the program or so um has become wealthians most watched YouTube video ever so not to not to put any pressure on your shoulders for this discussion uh but it's good to have you back you did come back about a month and a half ago and talked to our conference goers at the The Wealthy on Spring conference um now some more times gone on wanted to bring you back to talk to the general public about where things are headed in the car market they've largely been progressing along the lines that that you have been kind of you know telling us in in some of your warnings on your previous appearances on this program but um I'd love to get some updates from you before I do though just to kick this off general question for you um what is your current assessment of the U.S auto market right now uh when it comes to the health of the automarket it's actually stabilizing which is a good thing and a bad thing I'm seeing dealers starting to realize that cars are just simply not moving and they're getting a little bit more aggressive with pricing I've seen inventory slowly start to fill up at franchise dealerships the only two manufacturers that we're seeing that's not keeping up with demand is Honda and Toyota so if anybody's watching this looking for a Toyota Sienna or a brand new truck that's from Toyota or Honda unfortunately you have to wait a little bit longer but one of the surprising things that I thought would probably drop about earlier this uh or later this last year was the credit news we talked about it a little bit on your program before but that was something that I was really worried about everybody got so caught up in pricing and everything else and I told them at the end of the day it's the banks and the credit is what's going to basically dictate how the market adjusts or crashes or quote unquote corrects and this is one of the things I've been kind of like screaming from the hilltops for the last year and a half and finally it's starting to come fruition but I don't want to dive too deep into that until you until we get to that part but that's kind of what we're seeing right now is the credit crunch has started and it's starting to affect a lot of dealers and a lot of people across the United States okay and I'm sure the tightening of lending standards um that has resulted since the recent bank failures probably not helping that situation either you're smiling as I'm saying this all right um we'll look we'll get to lending in just a moment um so you sort of already touched there on Supply um but you know the first time you're on the program we were still kind of coming out of a lot of the the tight supplies from the missing chips and all that stuff uh from the supply chain disruptions created by the pandemic with the exceptions of Honda and Toyota is it fair to say that that inventory is not that much of a problem anymore for um most other car manufacturers I believe so I mean when we first talked I think the the supply chains were already caught up like if you had a brand new Corvette you can literally go to a Chevy dealership and order a brand new computer and it'd be in stock in a week so I did this a few times on my channel to show people that there is no lag when it comes to support supplies but a lot of Manufacturers came out literally saying that why are they going to build more cars when they can keep profits higher and keep the demand low and they're trying to keep that happy balance of not producing too many cars well fast forward to today you know you hear people like oh they're not using the chip thing anymore they're using like um limited uh availability they keep saying limited availability which means that they're just gonna not make as many cars as they have now there are some manufacturers that are starting to produce more to kind of eat up that market share and some are doing really well with like Volkswagen they're taking up a lot of like Honda Toyota's market share but then you have manufacturers like uh Jeep Chrysler and Dodge that are really getting you know so the screws put to them because if you go to any state in any town you can see multiple dealerships with full lots of Jeep products Dodge products the new Rams everything else and they're selling below MSRP these are one of the very few brands that I've seen that started a trend of actually giving rebates and giving people discounts on MSRP Vehicles which was the first since this whole pandemic started okay and is that is that Supply driven meaning uh their production just sort of cut up with them and all of a sudden they had many more cars than they they expected or is it more demand driven where just consumers just aren't showing up to buy the cars at the previous prices I think that it's a little bit of both like they knew that the supply was gonna was gonna catch up so they figured they would line their stores a lot of my friends that run Dodge stores said that they were going to get in certain allocations of new trucks which would fill them up but the demand was so high they just figured that it would just keep going like this but once rates got out of control and the prices just got so ridiculous regular Americans just simply couldn't afford you know some of these trucks are 70 80 000 that's not even the fancy ones you can go all the way up to a hundred and something thousand dollars in some of these Dodge Ram trucks so the market is just simply not there as I talked to a lot of these uh companies they just they they keep saying the same thing over and over again they're selling out of cheap used cars but their new cars are starting to pile up on the lot and not only that people are walking away from their allocations they had a lot of these limited edition hellcats and and some of these Redline uh excuse me red eye uh supercharged Challengers and all this other stuff stuff that people were putting ten twenty thousand dollars down for a security deposit are now coming back to these dealerships and taking it back and because they know that why waste the money they're just going to wait prices are going to come down so instead of paying 30 40 000 over MSRP for a truck now they're able to get them under MSRP just by literally taking their deposits back and coming back so this is kind of the trend that we're starting to see now it's starting to favor the buyer instead of the seller okay and that's really interesting um probably music for the years of folks who are watching this given how absolutely bananas car prices went during the pandemic right where you had limited availability and people were getting stimulus checks and you know burning a hole in their pockets and they were going out to spend them um all right I want to dig into this a little bit further but I just want to underscore something really important that you said which was that there's a pretty big difference right now between the Dynamics of the the new Mark new carb market and the used car market right where if I understood you correctly and this this corroborates um I had a car dealership guy on the program two months ago or so um and for folks that are familiar with him uh he is a car dealership uh he owns several car dealerships and uh uh you know he speaks out anonymously because he doesn't want the industry in all the you know partners that he deals with in his regular day to to you know it doesn't want any retribution from speaking the truth um but basically he was saying what I believe you're saying here lucky which is that we're we're seeing um a very visible slowdown in in demand in new cars or at least willingness to pay the prices that that they were getting up until you know a year ago um but we're seeing we're seeing I must say necessarily more demand but strong demand in the used car market and and let me explain why I think that's the case and then you can correct me if I'm wrong here but it's basically as as people are looking for more quote unquote affordable cars there weren't all that many in the uh in the new car market and uh I remember car dealership guys said something like I can't remember the exact price but he's like if you're looking to buy a car that's under like 20 a new car that's under like 25 000 or 30 000 in the US can't remember what the exact number was at the time we were talking he said there's like less than 2 000 of those cars in the entire country right now just inventory wise so people who are looking to buy a more affordable car are then going into the used car market and so you kind of have an increase in demand where the supply is still you know fixed and that's what's pushing up used car prices right now am I am I getting the story correct no pretty much you you got it exactly the the affordability just got ridiculous where um you know like these dealers I I'm trying to say it nicely but basically they took advantage of the American consumers they figured okay we're just going to Rack these people for twenty Thirty forty thousand dollars over SRP we're going to get these people traditionally financed for 84 months no big deal low interest rates we'll just kick the can down the road and I remember last time we talked on your channel we kind of had the similar opinion that dealers are robbing their future for the next two to three years now I said two years ago and everybody thought I was you know losing my mind and now I'm starting to hear this even on the news where they're like yeah they believe that dealers are going to outsold themselves for the next two three years and it's true because when interest rates gone up now I think the average rate is anywhere from Seven uh percent on a new car all the way up to 11 for a used car if you have good credit so to buy something now is just is just getting tougher and as these Bank regulatory start coming in they start now they're with all these Banks collapsing uh financers hedge funds and even the government are starting to double check the criteria of what they're getting approved for so now they're being more strict on steps which is proof of income you got to have not only your bank statements but your W-2s your pay stubs got to match you got to manage your job for maybe six months instead of the three months that were before um you know full coverage insurance they're just they're double checking everything and it's getting harder and harder for people to get approved back in the pandemic I remember our last time I mean they were giving these Dodge Chargers and Challengers away thirty thousand dollars of MSRP with like fifteen hundred dollars down a thousand dollars down just letting these people drive away it blew my mind now the same dealers I'm talking to you know they're selling under MSRP even with four or five thousand dollars down and the banks are asking for more uh down payments and I believe this is going to be the final push to get the car market back to normal because as this credit crunch starts to happen dealers just simply can't afford to uh basically Finance these cars they're going to have to either lower their prices or customers are going to have to come up with money and unfortunately the American public does not have any money I know credit cards at record high they're actual uh savings deposits there's so many savings amounts are record lows and the American uh population so now it's they're pretty much the only thing dealers can do is lower prices or give some sort of incentives to actually get this done I remember that stalantis Lithia and a few other ones I think AutoNation they're creating their own um the captive lenders kind of branching about adding more money to there so this way they can start financing all the cars that they overpaid for because Ally Wells Fargo Bank of America they're not going to keep taking these massive losses at the auction these things go to repo um with these 30 000 deficiencies for people paying over MSRP so now I believe that this is going to be the force that's going to correct a lot of the headaches that we see right now okay um so lots of things wrapped up into that so you know when you look at the market today versus you know two years ago a few years ago you had at least in the new car market you had restricted Supply right from the supply chain issues you had a lot of Demand right you had people that were were buying you know with those the hot money in their pockets um and you had really loose lending standards I mean I remember the first time you're on this program it really did kind of sound like if you could fog a mirror they would find a way to get you into a car right um now it's almost the opposite of all those factors right you got your tight lending standards you got no inventory problems anymore and the consumer is in a you know substantially worse place um well ability to buy wise and affordability hasn't come down that much though so the affordability issue is still pretty big right correct so um you would expect in this environment that um you know you would you would start to see an increase in defaults which you were uh you have been the last couple times we've talked about I remember you were nervous one of the things that caught your eye was was not only were defaults on on the low end of the quality scale going up um but you had seen a doubling now it was from a very small percentage but a doubling of prime borrowers defaulting um have those Trends continued since we last saw you yeah they've actually gotten worse the Prime customer is I believe now at 4.9 percent hovering almost at five percent which is double then uh than 2021 and 2022 so it's starting to get up there um the one thing that's that I've seen that's really scaring me is I've talked to a number of banks um and a lot of their uh how do I say it a lot of their management is starting to figure out ways to work out some sort of programs like a forbearance now a lot of these people we talked about bought these cars and literally didn't make a payment for for a whole year they called in claimed the whole pandemic thing well now they're starting to make these payments and the banks are noticing that people simply can't afford them so a lot of the numbers that they're they're saying in the news and what experian.com and a lot of these other companies are saying are literally they're not correct they're they're backed a little bit from I said about a year behind in data but one thing that that they started talking about is they're actually working out programs where they can put payments from the front of the loan to the back so this way they can give people a fresh start so they don't have negative credit they they can just start back over and so instead of repoing a car which traditionally most banks they just want to get their collateral and get it out of the customer's hands and sell it they're taking such big losses at the auction that they decided to make up these new programs where they would add on months to the end of these auto loans and give customers a break or breathing room to get back on track now this is the first time I've ever seen this done by any Bank like they're that's how scared they are is they're so afraid that if they don't do this they're going to have record high defaults and if they do the banks that give them the money like Wells Fargo Bank of America or some of these other hedge funds are not going to continue to give them money because their their books are going to be so in shambles because what their actual portfolio is worth to what it's actually like truly worth is going to be you know a significant number apart and as I talk to these Banks they're really really scared one local bank here in Nevada they literally just hired 400 collection agents and they're renting out one of these companies that just went out of business uh this telemarketing company and literally they're just going to fill a full of collection agents they they know that the worst is coming we've only seen the tip of the spear they think it's just going to go all the way downhill they've already started collecting several investors to have money on the side so they can keep lending just in case if like Wells Fargo or Bank of America pull their lines it's it's pretty significant like I said the the credit crunch is finally here and before I did that uh if you have any questions I'd like to talk about how now the credit crunch is affecting the dealers as well go for it I got plenty of questions but you finish it okay so you know we've been talking about like I said the credit news tightening around the consumer they're not going to have as many uh abilities to fund well little by little Capital One next year capital and AFC these are the three largest what's called flooring lines or lines of credit that us dealers use to purchase cars most dealers that you meet used cars and even franchise cars uh don't actually own their inventory a lot of those are purchased on credit lines now traditionally um you know we only try to buy a certain amount but during the pandemic they were giving low interest rates they're extending payments their extending credit they were just giving everybody and their Grandma free lines to buy as many cars as they can because of course Cox Automotive owns next gear which owns uh Mannheim which owns AutoTrader Keller Blue Book blah blah blah so it behooves them to basically sell more cars at their auction brings up Kelly Blue Book brings up MMR more money for the um the dealerships and for them themselves but the problem that we're having now is Capital One is pulling out of the flooring lines as well as I heard I heard rumors I haven't I haven't seen it yet but Ally is starting to pull out of the flooring line as well so that's going to leave next gear in AFC which are the two biggest ones left over now here's the problem with these flooring lines they're on an adjustable rate so just like an adjustable mortgage stuff like that it goes up every time the points tick up now people think that dealers are getting really low prices or really low interest when it comes to these things it's the complete opposite we're talking anywhere three to seven points over Prime is what your average flooring line is even if you have good credit I had a two million dollar line and I was paying Four Points over Prime and and this was I think back then I was paying maybe seven to ten percent now I've seen dealers paying anywhere from eight to twenty two percent interest on them 22 hey lucky real quick keep going but just can you define what a flooring line is for viewers that aren't familiar with that term yeah so a flooring line is a line of credit that dealers use to purchase cars at the auction also like if you were a customer and you came in you traded in your car I would use that line to pay off your car with the bank so unfortunately a lot of dealers don't actually have money they they're it's all credit they're literally shuffling around money and numbers that's that's little ninety percent of dealerships they're operating on a shoestring budget and this is why I believe that this is the second Domino to fall with the car business we already have the credit crunch but as these dealers start losing their lines of credit like they've already announced that their Capital One is pulling out so I know a few dealers locally that have you know a million two million dollars of lines of credit with these vendors now just imagine you get called hey you have 90 days to pay off your million dollar line of credit what are they going to do they have to sell the cars so that's one more thing that's hopefully it's going to push dealers to lower prices but the the even more I guess insane thing that to add insult to injury is now we're at an all-time high when it comes to interest so every new company that that basically that they have to get a new vendor line excuse me um how do I say this Riley now that they've lost Capital One they have to go shop for a new flooring line a new line of credit and whoever's going to give that new line of credit is going to tax the hell out of them with high interest so now it's going to become even more unaffordable for dealers to hold cars which it should be that's the way we our interest rates are so high it's because it's incentive for us to get rid of the cars to get them off our uh our dealership lot to sell them to Consumers so it's kind of a win-win for everybody but I believe this is one other nudge that's going to start pushing people and getting rid of these cars now the big thing that I'm really worried about is if next gear in AFC start closing down a lot of Independence because the franchise guys they have tons of money they have millions of dollars in the bank they have backers that's no big deal but I honestly believe the death of the used car dealership is not too far along a lot of my friends right now they're overpaying for cars trying to compete with franchise dealers and they simply can't when you're a franchise store you have the ability of all this money cheap cheap money to borrow for your flooring lines but then also when we sell a car a lot of people don't know this if you have let's say you're a subprime borrower the bank's going to charge me two or three thousand dollars a fee to sell you that car so if I sell you a thirty thousand dollar car they're going to charge me 3 500 to do it so your loan's still 35 but I'm only getting whatever 26.50 for my actual check or 27.50 and unfortunately franchise stores they don't have that they can just push that deal through on top of that they can lend 160 170 of LTV now the credit crunch is on a lot of us rent our independent stores can only go maybe 110 120 so we can't give you the same deals and the same rates as some of these big franchise stores so little by little these independent dealers are being squeezed from both ends not only from the consumer side but the credit side and so I think that this is one other Domino hopefully it's going to fall that's going to make a lot of dealers lower their prices on cars okay um and that could be good in the near term I am curious though you know we've seen this happen in many many other Industries where the the smaller Independence just increasingly get squeezed out and and the concentration just gets bigger and bigger in the hands of the few big folks who kind of run the industry like a cartel yeah what does it look like if if there is a washout or a die-off of these uh these more smaller and independent players here um does that end up in a system that offers less choice and competition and pricing benefits to the consumer 100 I keep telling people that competition is healthy you want as many used car dealers in your area as possible a lot of people I know they they hate us they don't like us I totally understand most uh dealers are jerks and idiots but they are a vital part of your I guess your your economy most people don't know this but majority of your sales tax if you collect sales tax in your States come from used car dealers you can shop at the mall all day long and you're only going to get maybe 100 200 in sales tax where if you buy a 90 000 truck for me we're going to whack you at eight point you know what here in Vegas 8.25 sales tax so four or five thousand dollars goes straight out the door to to the government what helps feeds our state so that's one thing the second thing is we want competitive pricing when it's small independent dealers they're more now I would say desperate but they're more likely to get rid of an expensive truck on their lot compared to somebody like a big franchise store you know where they have the capital to sit on it and they have the capital to basically Force somebody to overpay what I mean by this is if I bought the truck for thirty thousand dollars and it's only worth Thirty my bank will only give me thirty thousand dollars to lend on it where these franchise stores can force maybe 50 60 000 of financed amount on that thirty thousand dollar car and they will find a bank that will push that negative equity or that bad debt into the consumer's hands and then get it off the Dealer's hand so they can walk away free and clear and this is something I keep telling people we want to have independent dealers going around and not only Independence the one thing I'm really scared of is the death of the Mom and Pops franchise stores you know um I'm not sure what what's what state are you guys based out of our city I'm in California I'm out by about Santa Rosa is the biggest city out near me okay I guarantee you if you go to your main Town you're going to see uh some like Bob Smith's Ford that's been there for 70 years his grandfather owned it now it's ran by the grandkids blah blah blah little by little these franchise stores are being bought up by Auto groups like AutoNation Penske Lithia and little by little they're becoming I call them zombie entities they're literally just eating up the market share they don't care about building anything with the community they're not working with anybody their whole goal is to basically just push out cars at a certain value amount and then take all the fun out of it like don't get me wrong CarMax is great but when it comes to buying a new car a lot of these people all my my father bought from you my my mother bought from you my sister bought from you now we're coming back to buy a car from you there was some sort of of um like local and social economy now with these big franchise stores they're killing all of that I've been to four Auto Nation stores because I've just been shopping for a car myself and you know I asked them hey the car's been on the lot for 180 days I'll buy it for this much no we don't lower our prices this is our price non-negotiable and they would not budge a single bit it was ridiculous I it and then I tell them I have financing I have a check oh that's fine we still want to run your credit we want to do this it's you to negotiate with some of these corporate stores that are owned like that is almost impossible so I believe we're heading towards a trend where we're going to start to see the death of a lot of these not only small Independents but some of these locally owned locally ran businesses and they're going to slowly start turning into these autonations these lithias these Sonic Auto groups that are just soulless zombie dealerships that are just going to kind of just hey here's the price if you want it great if not we have enough money we'll sit here and wait until somebody else changes their mind sort of the wall modification of uh of car dealerships yeah and and people don't think it's that bad but just those groups alone over oh excuse me own over 16 000 dealerships across the United States and it's growing every single month they're buying not one not two at a time we're they're buying handfuls at a time so don't be surprised that little by little you're going to see these companies take over your local area all right um okay uh topic I'm sure we'll be talking about more and more uh as you appear on this program um getting back the Dynamics of what's driving with probably most viewers care about at the end of the day which is just hey what's going to happen to the price of the car I either want to buy or the car I want to sell soon um what I've heard you say is is um look consumers are you know beginning to tap out on on the pricing of of you know there's a big affordability issue still in the car market consumers beginning to tap out um banks are really restricting their their the loans they're giving out now dealers are freaking out because uh the banks don't want to get caught with holding a bunch of ours right that get defaulted on that they've got a repo right and they don't want to be owning these fleets of of cars but it sounds like you think they probably are going to do that the dealers don't want the banks to be in that situation because the banks will then start flooding the market you know with these cars that at auctions and whatnot and then you also mentioned the number is the dealers lose their financing uh from the banks uh more and more dealers are going to struggle and perhaps be in a position where they get forced to liquidate like you said right where the their lender calls them up and says I'm getting rid of your floor line and you get to pay me back in 90 days or whatever so there are all these things that sound like they could be conspiring here to reduce the number of people that are showing up to buy cars anyways but also pushing a lot of discounted inventory onto the market even much more so than we've started to see now so if I've summarized that correctly certainly seems like you knew that car prices are going to have a lot of downward pressure on them going forward I'm curious if that's true and B in the used car market you know as we talked about earlier there's sort of a flood of people that that were going to buy new that are now buying used and that's been pushing up used car prices since the start of this year do you see that hitting some sort of Maximum at some point as you get more and more discounted inventory just sort of you know getting flooded everywhere plus maybe we get into a recession we haven't even talked about that a possibility yet uh so I guess my question is do you see this rise in used car prices as short-lived or there are more sort of secular things that are going to keep supporting the used car market going forward no I believe this was just a temporary Spike from the end of 2022 till now we've seen prices decline anywhere from two to five percent weekly they were actually going down but I knew that there was going to be a small Spike during tax season traditionally this is a great time for dealers to sell inventory to get some big down payments because people are getting their tax returns so that caused a temporary Spike due to dealers going out to the auction once again I thought that the the economy learned you know it's like what is it it never repeats but it Rhymes so I was like I watch dealers literally go to the auctions and overpay for cars all over again it was like the pandemic the they were complaining they couldn't sell anything customers didn't have down payments and as soon as they heard the word tax season they went out and bought all this inventory to fill up their lots and thinking the tax season was going to be great which we talked about it's not I was one of my talent people it's not going to save Yahoo industry it's going to go the exact opposite way and unfortunately it did right after that every news Outlet people are getting you know 30 percent less 50 less 60 less on their taxes so now dealers are stuck with these overpriced units they can't do anything of and now that we're seeing not only dealers start to come down in price The Lending restrictions coming in but we're starting to see customers actually starting to walk away from their cars this is something I haven't really I talked a little bit about in our last thing um remember in the 08 recession people started walking away from their houses because why are you jingle mail yeah yeah and so I've actually heard and I'm not even joking about this when we're at an automotive conference here in Vegas people are talking about doing short sales with cars it blew my mind I never thought in a million years I would hear people talk about this and the first brand they bought up were Dodge they had these crazy cars that were Thirty forty thousand dollars over MSRP they had a few companies in there that were financing strictly Hyundai's and I don't know if you know what the Palisade to Telluride are the very popular SUVs with Kian Hyundai they were selling them for thirty thousand dollars over MSRP wow now you could buy a brand new one under MSRP at certain dealerships so imagine going to a dealership to service your car and you know most Americans every two to three years they purchase a vehicle so imagine coming in you bought your car in let's say 2020 here we are 2023 you're ready to trade it in your car's got 30 000 miles the car is worth 60. you paid 90 because you're an idiot and you paid 30 000 over MSRP now you're going in they're telling your car's worth 40 but you're 30 or 40 000 upside down and negative equity so they're actually starting to see more and more of these people literally going out buying another car and then as soon as they get that other car on their credit they just let the other one go because why are you going to pay eighty thousand dollars for a car that you can literally go to the dealership brand new and buy it for 60k and I believe we're going to start to see this trend more often um and now banks are starting to worry about this so the whole jingle mail thing of coming back I believe we're not that far away so that's another reason why I believe that the market is gonna something's got to get either they keep lowering prices the the interest rates are going to get higher or these banks have to do something creative to offset their risk now I really want the banks to just repo the cars and get them back there and take a loss but right now Banks Banks will not take a loss unless they absolutely have to so right now they're going to cry and scream that it's so bad praying to God that the government's going to jump in and come in but we talked about last time on your program you do not want the government to jump in because once they do they're going to start regulating auto loans and everybody that we know can't afford their cars whether due to income debt to income ratio whatever it is so I'm praying to God that these Banks just take it into shorts they learn their lesson don't over lend let the market correct itself because even a lot of the the one of the videos that popped up on my YouTube channel what we still talked about I think how we met is you know we go to the auctions all the time there's thousands I'm not joking thousands of cars all across pretty much every major city sitting and holding lots and when they're when they repo these cars they don't flood the floors because they know they'll drop the market they take a handful they run them at the auction they take another handful they run them at the auction for them it's better to offset the depreciation of the car with running them at the auction slowly then dumping them all at once and so banks are starting to learn this the repo companies that I know they're buying acres and Acres of storage Lots just for this thing because they believe it's another 2008 2009 recession where they're going to have all these people walking away from their cars now this is only the auto loan stuff that are public information you can tell buy here pay here lots or literally people are just throwing their keys walking away I work with a lot of payday loan companies here in Vegas and title loan companies record amounts of defaults they've never seen it this high it's almost triple what they normally see wow okay they can't afford it they're just they bought these cars cash and we're talking like new cars I I just picked up a 2022 Mazda uh six I only had like 10 000 miles they paid cash for it during the pandemic but then you know as a few months went around the money all the stimulus went away they had to go get a title loan on the car for ten thousand dollars at God I don't even know what it is like 200 or something percent interest but they're paying like 700 a month for this car they simply can't afford and they don't qualify for traditional financing so these people are taking these cars to the payday loan stores to try to get some money out of them and it's just it's just bad bad so everything culminating just seems like there's enough downward pressure on the market to lower car prices in the future but for some reason I feel like there's always some sort of event that props up the market and keeps it from falling I literally thought last year was the end of it and we'd see a steady decline like rapidly but now it just feels like it's a slow steady correction yeah and I remember you know when we talked uh the first time you had thought that Q2 2023 was going to be like the right time to buy a car where you'll get get the best deals it seems like that's been pushed out for a lot of the reasons that you you've mentioned here um and I'm guessing as you said you you see it less now that there's going to be a capitulation in the moment in the market and prices all of a sudden just drop hard it sounds like you're seeing it more of just sort of a slow grind downwards is that true correct yeah so um let me ask you this in terms of what you think should happen and you know we'll we'll have you back on the program again and again lucky to give us updates so you can tell us what actually is happening along the way but in terms of what you think should happen you know if somebody's in the market for let's say buying a car at some point in the next year um where do you think prices should go down to based upon all the major issues we've been talking about here well the good news is is I believe that consumers will get better pricing but the downfall is is the financing part is probably going to be the biggest hiccup so even though you save five ten thousand dollars if interest rates go up another two to three percent you're still going to pay that on the back end so the affordability problem is still there I think that now that more manufacturers are actually starting to offer rebates and kind of give some of these cars away I think that's a great incentive I do see people towards the end of the year getting a much better deal because as these Banks start to really tighten down on that lending all these captive banks that these manufacturers have like put a financial GM Financial stuff like that they're going to be so desperate to move cars that I believe not only are they going to give you cars at or under MSRP but they're probably going to give you low single digit interest to capture that business to get that car off their dealership's floor and we're almost going to get back to where we were in 2019. now people thought we're nuts for saying this there's no way it's going to happen but you can literally I'm not even joking you can drive by any Dodge Jeep dealership they're full of cars I've seen Nissans piling up Mazda Mazda just came out of the blue uh the Woodworks actually the third of those cars you talked about the 2000 cars they're under 25k the third of them are all Mazdas Mazda has the cheapest affordable Economy Car the Mazda 2 hatchback um I mean it's a nice little car for the money and it's the only thing you can buy that's 20 25 Grand Whoever thought that you can't even buy anything like I went to go look at motorcycles the other day I knew motorcycles 25 000 so it's it blows my mind so as we move forward in this economy I think that's the only way you're gonna get a deal is want to buy a new car which is seems ridiculous and two to get a captive lender that'll give you um special financing hopefully single digit interest and give you 72 and just don't do 84 months I know a lot of people are doing this just to afford the payment but stay away from that so I'd say hopefully at the end of this year even myself that's what I'm looking to buy as well um that's probably what we're going to be going into okay uh from a from an MSRP standpoint just putting the financing element aside for a second and then I'm just asking to prognosticate here no one's going to hold it to this but percentage-wise what do you think but how much better a deal could you get than end of the year versus now if things go the way that you think they they should 10 20 more or less I I think it's going to be a higher percentage rate um I'd say probably 20 the reason is is you know we kind of touched on this back in the day I remember when 08 procession happened nobody wanted to talk about it everything was fine but once I heard on the news the people started talking about our session they publicly announced it then I watched everything drop we're kind of here already last two months we're talking about recession I've heard them use the auto crisis which is hilarious makes me laugh um I'm starting to I'm starting to hear this stuff and I'm starting to see the trend and you'll see dealers all across the United States starting to walk back their prices now there are a lot of dealerships that are holding over MSRP now if you're trying to buy a Corvette or something like that something where they know that it's going to be a more financially secured customer they're not going to give you a discount they're going to try to still sell above MSRP until enough people walk away but if you're looking for a regular car nothing that's a rare Oddball model you should be able to get a great deal and one thing I also want to tell your viewers the people that are shopping is don't be afraid to call multiple dealers I don't understand the mentality of the Shopper but when I'm looking for a deal I call multiple dealers and multiple States I throw dozens of offers you know the worst they could tell you is no I've seen people literally like go to one dealership and like in California hey this dealership in Riverside they don't want to give me a deal on my truck they want ten thousand dollars of SRP okay well why don't you go to uh you know San Diego there's one right there that you can get at MSRP save 10 grand they won't drive or or fly two three hundred miles to go get a deal to save ten thousand dollars it blows my mind so I tell people now start calling multiple States different things if you're looking for a convertible not even gonna lie call the east coast in the winter time if you're looking for a 4x4 truck try to do something here in the desert or somewhere in the uh that's not really that doesn't have snow and everything else think kind of outside the box and look for the better deals because I promise you a lot of these franchise dealers are so worried about the future that they're pushing out these inventory to keep their allocations coming in because we've heard Whispers of Manufacturers like Ford Honda Chevy Toyota are going to punish dealers for selling over MSRP they're going to take their allocations away which is how many cars they're allowed to get so if this truly comes to fruition a lot of these dealers that have been screwing the consumers are really going to reap what they sow they're not going to get as many units as they traditionally would and all the dealers that decided to sell under MSRP to give customers a good deal are going to reap the benefits and they're going to get more allocations for more affordable cars and it's going to kind of balance the scales again so wow so there's going to be pressure from the manufacturers on the dealers to actually sell below MSRP yeah wow yeah Different World um so it sounds like what you're saying to be sort of a Savvy buyer and a lot of this just makes common sense but is is you know talk to multiple uh dealerships and it sounds like you're saying you know obviously do your homework but call it sounds like I think I heard you say kind of like call with an offer right like hey I'm looking for this car here's what I'm willing to pay willing to take it yes or no let me know um and sounds like you're saying the trend is your friend here we're increasingly more and more these dealers are going to be coming under pressure just to move the product right and um uh this is similar to you know frequent Wealthy on viewers will know Lance Roberts uh is one of wealthians endorsed financial advisors he sold his house about eight months ago or so in anticipation of lower a housing crisis he lives in Houston Texas and uh he has been spending excuse me he's been spending the time since um basically doing what you've just said he's got his Target area and he's been finding homes that he you know is willing to buy but he's putting in uh anyways say lowball offers but but but you know Market correct offers yeah yeah exactly yeah correct offers and and they look lowball to you know people that have been looking at yesterday's prices or even some of today's existing prices but all he needed was one to say yep I'll take it and he he got a seller that finally said yep I'll take it you know give my personal situation I just need to move the house so he succeeded exactly using the strategy that you're talking about here um all right so uh one thing that I'm really curious about is uh yeah you said Mazdas were the majority of those the few thousand cars that were available new under 25 000. um you know it kind of blew my mind and I think many people's minds a few years ago when Ford came out and said you know we're not making cars anymore right we're just we're just all trucks and SUVs from now on it's kind of crazy to think that Ford doesn't actually make sedans anymore so as people are looking for more affordable cars to drive um you know de facto trucks and SUVs are more expensive than a traditional economy sedan then you kind of have to you do have to go into the used car market right so you you have a um you have a dwindling Supply I guess is what I'm saying of of economic cars and right now people are competing for them and and they're competing for an aging Fleet of used sedans I'm curious do you see at some point here the manufacturers ever going back to manufacturing more sedan model more economically affordable cars or is this a new world where they're really just trying to go for the new unit they can sell for the most price yeah I hate to say it it's all about profit and all about stock prices they they gross far more in SUVs and trucks and they could sell them for a much higher price because it what they cost them to build a Ford Focus is the same price what it costs them to build a Ford Escape but they can sell a Ford Escape for you know eight to twelve thousand dollars more than a Ford Focus so why would they waste their time and you know Ford dropped this news about three four years ago saying that they were going to start walking away from the economy section and that's why I believe like companies like uh Mazda especially Hyundai and Kia I believe they're going to eat at but probably about 70 percent of that market share but it's very interesting because I thought all like Honda Toyota everybody would jump into this bandwagon and try to eat up that market share that Ford's leaving there but Pond and Toyota are kind of going with this thing well why are we going to make more cars when we can make more profits so we're going to keep demand low I mean keep demand High keep supply low and keep our profits extremely high but now people like Mazda are trying to wrap up production you have people like Volkswagen that are coming out with all kinds of new electric models Volkswagens can have I think by 2020 uh five they're gonna have 14 different electric models not even going to get 14 electric models across the United States in the world that they're going to have available which is absolutely insane so all these companies I believe are going to start eating at this market share I want to see how fast Honda and Toyota pivot can start making cars again so it's one of those things like you know they want to keep profits high but eventually if you lose so much market share you know they're going to have to do something and unfortunately I think that's what we're waiting for it to happen is just like I think Ford Chevy all these manufacturers ever since the same thing we're not going to build as much they're trying to do a bill to direct the model which I think will fail where like a Tesla like if you order a Tesla they build it if you don't order Tesla they don't build as more our business always ran with Supply you've got to force people in there and get them to buy a car they can't afford or they they want they get excited for or you know but is it a consumer-based uh economy so if we can't get them to purchase this stuff and it's not sitting on the showroom floor I think that sales are going to drop tremendously so it's very interesting to see what's going to happen the next three to five years in the car business okay um well looking forward to having you coming back on frequently to update us on us all as it happens um all right so I intuited from your feedback here that uh if somebody is in the market for a car right now um that they should they should take their time meaning patience is on their side here uh and then employ the strategies we talked about earlier where we're letting competition in the increased motivation of the dealers to move product work in their favor if you're somebody who's been sort of thinking about selling a car um not necessarily A trade-in because then you have to think about buying at the same time but let's just say you have an extra car you're thinking about you know eventually selling I'm guessing you would say probably sooner the better is that true yeah as as values are still high I would do it I mean they are dropping two to three percent you're not going to notice it tremendously but if you wait just like I did I waited six months on my R8 and I lost 40 000 in value on my car whoa that's on a 200 000 car so when you when you start looking at some of these smaller cars people like oh it only dropped four or five hundred bucks but every month it starts dropping four or five hundred dollars in six months it's gonna look pretty ugly so that's why I would get rid of what you have now and especially if you're a consumer that's got a 22 or 25 interest rate you need to refinance now because your vehicle value is still somewhat high if you try to refinance in a year from now guess what's going to happen your vehicle value is going to be below what it's actually what you owe on it and no bank is going to refinance and you're going to be stuck with high interest and a lot of negative debt so try to refinance that get lower interest and then on top of that pay you're still your same car payment so you can bring that deficit down to what you actually oh what the value is so I think that's the next Fallout that's happening because we see a lot of people with 22 interest loans they can't refinance it because they owe more than what the car is worth because they put zero down so that just hurts my head to hear 22 percent interest charge Not Alone um all right uh we'll look lucky this has been wonderful before I ask you where folks can go to learn more about you and follow your work um is there anything else we haven't talked about yet that you think is worth just putting in people's minds before we wrap things up here yeah I mean I think you hit a nail on the head with just being patient and making offers and one thing that I kind of do is if you go to CarGurus you can actually sort cars by how long they've been on the platform so the oldest car there don't look at the prices look on what car is the oldest and make your offer because more than likely if the car's been sitting there for a hundred days 200 days you're gonna get a deal but if you're trying to make a lowball offer on a car that's been there for seven days it's not gonna happen so I would definitely look at time on Market that's what US dealers really worry about because the more the longer it sits there the more interest I pay the more fees I pay with my credit lines my flooring lines so it benefits them to get it off so don't be afraid to shoot those really great offers on cars that have been sitting on Lots substantially longer and try to get pre-approved first before going uh to the actual dealership because some way or another they're going to try to add something on there so I would just watch out for that all right lucky love the Practical advice uh thanks so much for sharing all your expertise with every viewers here before I forget there's something I definitely want to bring up for for you and your Watchers your viewers is Banks right now are starting to go into critical thinking when it comes to covering their losses and we see down the road the death of uber Postmates Lyft all these other companies because there's so many of these cars coming to repo with so many miles they're losing millions of dollars every single month now this is something that I've been dealing with for the last five years usually when we do an auto loan the first thing the banks ask me is are they doing any type of ride share delivery service or anything like that and usually we say no and as long as their income doesn't say Lyft or Uber Postmates they go ahead and let it through well now they're having so many losses because there's so many cars that are two three years old with a hundred thousand miles on there so people are just racking up these miles collecting all the money from Uber and Lyft and putting their car on turo just beating the hell out of it and then once basically they try to trade it in they're upside down in their car are they're just walking away now traditionally if you use a car for commercial purposes they will give you a shorter term 48 to 60 months and it'll be higher interest 10 to 12 percent that's to incentivize you to pay down the car faster to offset the risk of adding miles beating it up and stuff like that but people are not doing that they're going out buying these cars with zero down 84 months at you know whatever back then at four percent interest and they were just juicing these uh these cars and now it's getting to the point where banks are trying to put in their new riding where if you buy a new car and they catch you using it for Uber Lyft Postmates Arturo they have the right to take your car back from you wow huge and so people people are like oh they can't do that yes they can they can protect their collateral it's just like if you don't have insurance on the car they can charge you an additional fee now banks are going to do two things they're either going to charge you an additional uh uh Insurance fee or a binder to cover their risk for you using it as a rental car or they're just going to totally take your car away I know several leasing companies actually are doing that right now there's luxury leasing partners that if they find out you're doing any type of rental Rideshare or anything else they just take your car from you I know BMW financial is starting to put those things in place because they were financing a lot of these Rolls-Royce ghosts Phantoms raids and people are using these things on turo rental cars and just beating the hell out of putting them thousands of miles on them and just giving them back and you know they're eating a hundred thousand dollars in deficiency from the negative equity the miles they put on it and just beating the car up and so I believe all these things are going to come to an end and this is something that's very big because I know we haven't talked about it but this is just one more small thing that's going to start affecting the economy because now you have less people out there doing Uber doing left so there's more unemployed people and as this starts to roll into like the tech sector now we're talking even more layoffs once Uber starts losing drivers they're going to lay off more people Postmates a lot of people don't know this but Amazon hires a lot of third-party independent companies to do deliveries as well so this is going to trickle into the economic sector where it's just going to have more people losing their jobs losing their money and it's just going to spell Doom and Gloom for the car business super interesting I hadn't even thought about that that knock-on effect of what would happen to the industries that are dependent upon you know independent um you know ride share or people that are providing basically their own vehicles um and of course it makes a ton of sense like if you're a bank you don't want to get stiffed with a with a car where the guy just basically sort of jingle mails the car back to you and you've got a car that's only a couple years old but it has a tremendous amount of mileage on it right so it's much harder to sell versus other cars of the same model and make and age that weren't beat on like that yeah exactly and so I think that people need to listen to this if you hear this you need to call your bank let them know if you have to pay additional fees do it refinance it get it out of that bank's name find a bank that actually will be okay with you doing that you may get a shorter term you'll get higher interest and also something they need to know about you need to tell your insurance company there are so many people driving people on Uber and Lyft that don't have the correct insurance if they get hit somebody gets sued injured it's just going to be bad so the out of market like I said it just it has so many problems going on right now I'm still shocked that like half the the the the economy of the automotive industry is functioning but I feel like something is going to happen it's going to really really change the market for folks that have really enjoyed this conversation and would like to learn more about you follow you and your work where should they go um you can follow me on Instagram at lucky Lopez also on YouTube as well as lucky Lopez and it'd be a huge favor if you guys learned from this video and you enjoy me and Adam's conversation please comment below it means a lot I actually read every single comment and I know Adam does too and so I want to see if we can beat our last video so I know interaction is probably one of the biggest things that people want so I'll try to answer as many questions in the comment section below if that's okay Adam that's wonderful I really appreciate that folks are going to love it I also love the competitive nature to be that the previous video too lucky so it's great um all right lucky well look thanks so much buddy uh this has been wonderful like I said door is always open here for you to come update us when you see something going on in the market that you think is notable um really appreciate it folks if you did please comment below like like you said and do us a favor support this video and this channel by hitting the like button and then clicking on the red subscribe button below as well as that little bell icon right next to it lucky can't thank you enough buddy everybody else thanks so much for watching foreign

Channel: Wealthion

Views: 234,186

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Id: IC0QIJbD268

Length: 54min 14sec (3254 seconds)

Published: Tue May 16 2023