By Tim Hunt
What an unusual market for carsUploaded: Jul 26, 2022
This week we bought out the lease on our 2019 Honda Accord.
We were in-and-out of Dublin Honda a couple of times and were struck by just how empty the vast parking lots were. The same was true for other nearby dealerships. Our rep said they had no new Accords on the lot and almost everything that was coming in from the manufacturer was already reserved by customers who had put down a $5k deposit.
I’d been reading about how strange the car market is, but saw it first hand. Our buyout price after three years was just under $16k on a car that was worth $30k or more as a used vehicle. Of course, if we decided to sell it what would we pay for a replacement and where we’d find one would be both big open questions.
When was the last time you drove a car 20,000 miles and it was worth more as a used vehicle than it was when you drove it off the lot new?
It makes for strange pricing on the few new and used vehicles dealers have in stock. With used vehicles such as mine now selling for more than they cost new, dealers are ignoring the manufacturer’s suggested retail prices and marking up the new vehicles so there’s a reason to purchase a new car vs. a used one. Those mark-ups, on modestly priced vehicles, can be $6-8k. With the inventory shortage, dealers are getting it because consumers simply don’t have any choices.
What a difference the pandemic and related supply chain issues have made in this industry—as well as many others.
Chatting with the finance person, he estimated they’d lost more than two-thirds of their sales volume and our sales rep said that team had shrunk by that same percentage as the dealership struggles to stay in business in these truly strange times. The service department has been the one area that provided steady cash flow, although if we hit a nasty recession and cash gets tight, that could change as well.
If you’ve been following the news at all, you’ve seen independent truckers doing their best to shutdown operations at the Port of Oakland. They’re justifiably upset at the 2019 law, AB5, that set out to make gig workers employees instead of independent contractors. It was driven by then-Assemblywoman Lorena Gonzalez, a labor organizer by profession who was serving in the Assembly. She hammered the bill through the Democrat-dominated Legislature and Gov. Gavin Newsom signed in despite business opposition.
Remember, Democrats’ closest allies and biggest funders are labor unions and unions want more employees that they believe will lead to more union members.
If you had enough political clout in Sacramento, you got an exemption such as the real estate sales industry. Tell me the difference between a real estate broker and a court reporter or an independent trucker—none except political juice. The truckers challenged the law all the way to the Supreme Court and lost. It’s now ready to take effect and the governor and Gonzalez, now head of the California Labor Federation, have publicly suck it up and comply.
For the truckers, there are no good options—if this drags on and substantially impacts port operations in Oakland and Southern California ports and damages the economy then perhaps Newsom will intervene and consider amending what’s a truly bad law. As of Monday truckers suspended their walkout and port activities were resuming.