Car Recession 2020: Is Now The Best Time To Buy A Car?

we’re going to be talking about how the auto industry is getting crushed right now specifically with used cars

so the pandemic is obviously affecting a lot of industries right now

and everyone’s talking about the stimulus package and stocks and cruise lines and all that stuff which is great however not many people are making videos about the potential recession in the car

industry so production is shut down factories are shut down

supply chains are being disrupted and obviously there’s lower demand with the quarantine going on right now so in this video we’re going to talk about the state of the industry we’re going to talk about how we can benefit as consumers and buying a used car

and we’re also going to talk about how we can benefit with certain incentives going on with new cars

stay tuned so let’s talk about the state of the automotive industry

everyone knows that new cars are getting more and more expensive and it’s not feasible for the average middle class person to be buying brand new cars so more people are leaning towards used so when it comes to used cars dealers know that this is going to be a huge profit center for them

used cars typically have higher margins and bigger profit margins than new cars because you can only relatively sell a new car within a certain price range without having to take a loss new cars are sometimes even the biggest lost leaders at a dealership just to get that customer to go to service financing etc etc

so think about it this way when you’re going shopping for a gallon of milk and you go to one grocery store

and the gallon of milk is priced at x you go down the street

the other gallon of milk is probably going to be very similar however used cars are different

the dealer is taking in these used cars at different prices and at much lower prices typically wholesale

and they’re marking them up and selling them to the customer at retail or what market price

is so where do these used cars originate as mentioned

they come in from trade-ins so when someone goes to the dealership they want to get rid of their old car and buy a new one

they typically don’t want the hassle of selling it privately so they just trade it in

they’re coming in from auctions which is typically wholesale pricing

they’re coming in from rental companies that are selling their current fleet and they’re coming in from lease returns people that don’t want to purchase their lease and just want to go back into a new lease or a different vehicle they return the lease the dealer cleans it up sells it as a used car on the lot however the issue in the crux of this whole video is that used car sales are plummeting

according to mannheim’s used prices they are down 11.8 percent in the first half of april

used car auctions are having prices fall significantly because people are simply not going to them

and supply is outpacing demand by a lot so use car prices plummeting creates pressure on the automotive industry in four different ways

the first way is that new car prices have to either be discounted heavily in order for new inventory to come in so if a dealer is sitting on 2020 models or potentially even 2019 models that still

haven’t moved they need to make room on their lot for 2021 models

so they have two ways of doing this by offering crazy incentives which we’re going to talk about at the end of this video

or by discounting the msrp pretty significantly

the second way it’s creating pressure is re is on rental companies

so rental car companies they sell their used fleet

to the public or to wholesale pricing after they’re done

renting that car out so they can’t offload their inventory at the price that they expected because the used car market is going down so much which is creating tons of losses in that industry

so if you’re following this video at the time of the recording hertz is actually fighting bankruptcy at the time of this recording

and they may potentially go bankrupt check out their stock if you want to look into potentially investing in that i probably wouldn’t touch it right now but it could be a good opportunity the third way it’s creating pressure is through lease residual values so if you don’t know what a lease residual value is residual value is basically just what the car will be worth at the end of a lease so these car companies

they have depreciation charts they know exactly what they think the car will be worth at the end of the three year lease however they didn’t expect there to be a quarantine and use prices to be discounted so much so just to give you some perspective

gm is sitting on 30.4 billion dollars worth of lease cars

and those have an expected certain value however that’s going to cause potentially

billions of losses if those cars are sold

significantly under residual value same thing with ford

ford has 27.6 billion dollars worth of leases on the road right now from last year

so as mentioned those financing arms are expected to incur

billions of dollars of losses and then the fourth way that the used car prices declining or affecting the automotive industry is obviously through dealership earnings

so dealer earnings make so much money on new cars

sometimes it’s a loss leader it’s just to acquire the customer into service and financing and warranties

however there is still sometimes profit made on new cars although the margin is very small

however this is still going to affect dealership earnings

so the next part of the video is talking about how to buy a used car

especially during this time right now a lot of people are reaching out to me on instagram on how to buy a used car during this specific time

and i can’t get back to every single person on instagram or on twitter so i decided to dedicate a whole section of this video

so pay attention so demand is obviously low right now people aren’t necessarily you know jumping out of bed at nine in the morning saying hey honey let’s go to the dealership you know i want to get you know the corona that’s terrible i shouldn’t even joke around about this but demand is low okay so we are in the driver’s seat

terrible pun edit that out no i’ll just keep it in

so we’re in the driver’s seat as the consumer meaning that

they need to sell a car more than we need to buy one okay

so what you want to do is you want to go on a website where it shows you how long the car has been on their inventory or on their lot

so you may want to check out cargurus.com i’m not affiliated with them i’ve just used it as a consumer for many years

and if you scroll down you can actually see the price history of the car how long they’ve had it and how much it’s been discounted so the longer a car sits on a lot that means the more the dealership is paying an interest in terms of financing that car meaning they’re accruing interest and losing profit so they got to move this inventory otherwise it’s going to go to auction

but wait auctions are actually getting crushed right now because inventory is outpacing demand so that’s your first um advantage to dealing in this environment

the second is this one you already know whether it’s during the pandemic or not be prepared to walk away so if they want to sell you the car

great you know if not no big deal walk away if they really want to sell you the car

they’ll call you back a day or two later and say hey marco we know you’re looking at this you know car

we’re going to discount it another blank will that work out for you and that’s when you can start to negotiate number three is you want to line up your financing before you get to the dealership

that way you know going in what your budget and what your payment is going to be and what your apr or your interest rate is

if the dealer can beat it with their financing great go ahead and take it if not

use yours but you never want to be pressured into a deal that you don’t want to take

and then number four don’t trade in your car during this time

there is no incentive for dealerships to take in your car at a reasonable price or reasonable value because they’re sitting on so much inventory anyway

that they’re gonna low ball the heck out of you okay so don’t trade in your car what i would recommend doing is selling it privately

there’s a million different websites you can do it and guess what i’ve i’ve bought and sold a million cars on craigslist and i’m still in one piece i haven’t been chopped up or thrown into a freezer or trunk okay

it’s not as bad as everyone makes it out to be so if if a used car is not for you let’s check out some of the new car deals that are going on

right now so if you are in the market for a new car and you decided that going used is not for you

there’s a lot of incentives going on right now in terms of new car deals do i recommend buying a new car probably not usually financially it doesn’t make sense because of the depreciation hit you take

driving right off the lot typically you’re going to lose about 30 just within the first couple of years however there are a lot of incentives going on right now

so the biggest thing that i’m noticing is that a lot of financial arms of these car manufacturers are creating incentives in terms of payment deferrals and also grants

so what do i mean by this so for example i’m going to list off about

seven or eight here just to give you an idea although i will link to a car and driver

article down below it has incentives from all the major manufacturers so ford is actually offering to make your first three payments

like literally just make your payments for you so if your payment’s 400 bucks you have 1200

right there for the first three months and then they’re gonna defer your payments for the next three months so meaning for the first six months you basically have no car payment okay although you do owe the last three fiat chrysler

don’t know anyone that would want to buy and voluntarily buy a fiat or chrysler product

other than maybe a jeep or a dodge ram but they’re actually offering uh 84 months at zero percent financing so the thing with zero percent financing is is that

yes you’re not paying interest on it and it basically is quote unquote free money but you’re obviously going to be paying a higher amount for the price of the car so if it makes sense for you you may want to put a little bit of money down finance that sucker out for you know seven eight years and there you go although i don’t recommend that whatsoever if you can make more money somewhere else than zero percent then mathematically it does make sense uh genesis is actually offering six months of payments uh they’re going to take care of it for you if you dig it laid off or lose your job during covid oh i just said covet ah videos monetize no

share the video with a friend it’s already the amount of time

i’m just kidding so if you lose your job and a couple other manufacturers are using this as well

if you lose your job due to the pandemic or during the pandemic

they will make up to six months of payments for you and they’re also offering zero percent financing on their g70 product

which after watching a bunch of reviews actually is a pretty decent car gm zero percent 84 months honda 1000 bucks towards the purchase of a new car and three months of payment deferral hyundai six months that will pay for job loss i mean genesis is hyundai so it’s the same thing

also with zero percent financing available kia

75 months zero percent and volkswagen actually sounds like it has the best one they’re gonna defer payments for six months and you’re gonna get zero percent interest for up to 72 months so do i recommend buying a new car i don’t know if the depreciation and the zero percent financing and you being able to invest that money and and something else that makes you more than zero percent actually preferably something that makes more than inflation

two to two and a half percent then i say go for it

but however you have to take the depreciation into account if this is a car you’re gonna keep forever until the wheels fall off

sometimes buying new does make sense although most of the time i am against it

so i hope this video brought you value i hope you didn’t get laid off during this time

however if you are in the market for a car or if you know someone that is please share this video on social media it greatly helps me when you do that and also give the video a thumbs up thank you so much and as always have a prosperous day bro fiat chrysler how are they still in business.

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