Resale value - Will we see a disaster?

[Quark]

As we see these overly inflated prices on used cars and even new cars where dealer ask for thousands over MSRP I'm seriously wondering what it does mean for the resale value and appreciation down the road.

What do you guys think?

1. Which Trim Level (or even what specific features) will help to hold the most value?
2. Will the market continue to be crazy and given that fact the resale values in line with the craziness? Meaning we will still get more for our cars in a few years than usual? Or will we have to take very big hits, even more than usual?
3. Will the Diesel in particular hold its value and be stable? Or will the 6.2 be much more wanted since it's one of the last naturally aspirated big V8 engines?

Thoughts? Assumptions?

Never order a vehicle with resale in mind, that $4,000 option will be worth 50% what you paid for it along with the rest of the vehicle. That stripped down version will return better.

 

[firsttimetahoe]

Never order a vehicle with resale in mind, that $4,000 option will be worth 50% what you paid for it along with the rest of the vehicle. That stripped down version will return better.

This guy sounds like he should
Just be leasing

 

[Quark]

This guy sounds like he should
Just be leasing

Who me? Never lease always cash.

 

[Polo08816]

The wholesale auction price for these vehicles are dropping on Mannheim. I wouldn't want to be a dealer carrying used inventory at this point.

 

[GoHeels]

The resale crowd crack me up. Yes, resale is worth considering but should not be the deciding factor.

I'm a frequent visitor over on a boat forum. Been a few years, but some mega rich ordered a boat with every single color option they offered, interior & exterior. It was appropriately nick named "Skittles". Think he gave a crap about resale or just got what he wanted? Point being... get what you want as long as you can afford it.

 

[firsttimetahoe]

Who me? Never lease always cash.

no I mean't the guy looking to buy to later resell.

 

[Quark]

no I mean't the guy looking to buy to later resell.

By leasing he would know his losses up front.

 

[Stbentoak]

This sounds like Dave Ramsey talking with his "debt is bad" approach. No it isn't. People definitely overextend themselves by only considering the monthly payment. But saying financing is bad and most pay with cash is just wrong.

We financed (not for 84 months) but were given a rate of 2.02%. I'll take that rate all day every day for as long as its offered. I can invest my money elsewhere and make more money than I'm paying in interest.

Well that sounds great except cash and bonds are paying next to zero and market volatility is a given for the next year min. We are only one nuke away from the market dropping 25% min. Don't think it can't happen.
Could I make more? Possibly..could I lose more? Possibly to Probably..
And you don't know what your situation will be 5-6 years into a stone around your neck.
With no loan I'm free to buy and sell at will, and if something takes a dump I have a relatively new vehicle in the garage eating no hay.
Mostly the people who don't like Dave Ramsey are the ones who don't have the discipline to put your ducks in a logical financial row like he does..
And I was doing it long before he existed...

 

[GoHeels]

Correct. And in 3-4 years when the time comes when your monthly finance payment is high relative you what your car value depreciates to you should pay off your loan

I'm not so sure I agree with this. To me, it all comes down to where the cash is most valuable. On a 0% loan, I'm a firm believe you are not getting a penny of my money until its due regardless of the value of the asset in my possession. You gain nothing by paying it off early other than the satisfaction of being debt free which admittedly is a good feeling.

The same applies to low interest rates. $70k loan at 2% for 84 months would cost you about $5100 in interest. By year 3, you will owe approx $40k in principal and $2k in interest. Regardless what the vehicle is worth, if can make more than $2k over the next 4 years with $40k cash, you need to invest $40k.

 

[firsttimetahoe]

We are only one nuke away from the market dropping 25% min. Don't think it can't happen.

I think if that were to happen we’d all have bigger things to worry about, including the car we drive/want to purchase

 

[firsttimetahoe]

I'm not so sure I agree with this. To me, it all comes down to where the cash is most valuable. On a 0% loan, I'm a firm believe you are not getting a penny of my money until its due regardless of the value of the asset in my possession. You gain nothing by paying it off early other than the satisfaction of being debt free which admittedly is a good feeling.

The same applies to low interest rates. $70k loan at 2% for 84 months would cost you about $5100 in interest. By year 3, you will owe approx $40k in principal and $2k in interest. Regardless what the vehicle is worth, if can make more than $2k over the next 4 years with $40k cash, you need to invest $40k.

I completely understand what you’re saying when it comes to reinvesting your principal where you can generate more income to offset the costs of financing.

I guess my point was when you’re several years into your financing….your monthly interest payment is still based off the MSRP, despite the fact your vehicle may be worth half. You can technically owe more money left on your financing than your car is actually worth. That’s not ideal.

 

[Doubeleive]

What’s the alternative? Leasing, where you’re paying anywhere from 40-60% of the MSRP of a car for 3 years and then you’re starting over? Not to mention - all of the hidden fees and baked in high interest rate on the loan they disguise?

Ehhhh, not necessarily. If you can finance at close to zero % interest rates, you should do so and invest the principle.

I bought my 2018 in 2019, pre-covid- made double payments, have the title already, it's still worth what I paid for it currently.
now to buy newer again no way, I bought the 12 in 17 made double payments, have the title. paid less than half the price of NEW.
I don't need a 2022, I might like a 2020 if it was reasonably priced but in the current market they are easily 10k over value, but that will change and that's when I get to bite.

 

[Stbentoak]

I think if that were to happen we’d all have bigger things to worry about, including the car we drive/want to purchase

I said ONE. If the was an “Exchange” yes, we are all in trouble then. But as devastating as it would be, the world would survive just one.
But the markets wouldn’t. It would put a lot of consumerism into perspective, that it ain’t all about stuff anymore and that a simpler life just might be better. And it would be for humans, just not for investments…

 

[R32driver]

If you have to finance anything for 84 months, you are buying the wrong vehicle. Most people pay cash for these and don't really care about what it's worth in 6 years. They just get something else. This is not a lower income, 3 kids and a mortgage, Paycheck to Paycheck, I can't afford the gas, vehicle.....

I think many people buy these with cash but to say "most" people do is a stretch. There are a lot of keeping up with the Jonses types that are drowning in debt but in their mind they NEED the latest and greatest ride for appearance sake.

We put a large down payment on our '21 and financed for 84 months even though we could have paid cash for the entire purchase. Brought the payment down substantially and plan to pay the remainder off in the next couple years. Been using the $50k or so we did not hand over to GM to do home and land improvement projects that will net a much higher return down the road than what we will lose in depreciation selling the yukon. I have no issues at all carrying a bit of debt here and there as long as you do it wisely and don't get carried away things work out just fine.

 

[UsualSuspect]

No one should be paying over MSRP, but some are. I tend to keep mine longer than a few years, and expect depreciation. I doubt you will see the auto's produced today take a huge hit depreciation wise, there will be less available for resale due to the lack of high production numbers, and price is supply vs. demand.

 

[Wwes]

The wholesale auction price for these vehicles are dropping on Mannheim. I wouldn't want to be a dealer carrying used inventory at this point.

Where can one find this information?
I've been watching a '19 Yukon Denali XL at our local dealer, they started out at $63k and are now at $59k, make offer. It's been there for almost 5 months now.

 

[Quark]

I think many people buy these with cash but to say "most" people do is a stretch. There are a lot of keeping up with the Jonses types that are drowning in debt but in their mind they NEED the latest and greatest ride for appearance sake.

We put a large down payment on our '21 and financed for 84 months even though we could have paid cash for the entire purchase. Brought the payment down substantially and plan to pay the remainder off in the next couple years. Been using the $50k or so we did not hand over to GM to do home and land improvement projects that will net a much higher return down the road than what we will lose in depreciation selling the yukon. I have no issues at all carrying a bit of debt here and there as long as you do it wisely and don't get carried away things work out just fine.

I said ONE. If the was an “Exchange” yes, we are all in trouble then. But as devastating as it would be, the world would survive just one.
But the markets wouldn’t. It would put a lot of consumerism into perspective, that it ain’t all about stuff anymore and that a simpler life just might be better. And it would be for humans, just not for investments…

Here's to the simpler life when things could be repaired and we weren't always running after the new thing. It's starting to come back to me.

 

[firsttimetahoe]

I said ONE. If the was an “Exchange” yes, we are all in trouble then. But as devastating as it would be, the world would survive just one.

 

[Cryptocap]

Mostly the people who don't like Dave Ramsey are the ones who don't have the discipline to put your ducks in a logical financial row like he does..
And I was doing it long before he existed.

I'm not so sure I agree with this. To me, it all comes down to where the cash is most valuable. On a 0% loan, I'm a firm believe you are not getting a penny of my money until its due regardless of the value of the asset in my possession. You gain nothing by paying it off early other than the satisfaction of being debt free which admittedly is a good feeling.

The same applies to low interest rates. $70k loan at 2% for 84 months would cost you about $5100 in interest. By year 3, you will owe approx $40k in principal and $2k in interest. Regardless what the vehicle is worth, if can make more than $2k over the next 4 years with $40k cash, you need to invest $40k.

I have no issues at all carrying a bit of debt here and there as long as you do it wisely and don't get carried away things work out just fine.

All great points and I think it shows the multiple ways things can be done to accomplish something. IMO it takes just as much discipline to leverage debt. With a good planned out budget, all the money going in or out is categorized and allocated for. I use credit cards for nearly all my purchases. They offer better protection and I earn lots of points/rewards. Whatever the max down payment a dealer takes on credit I do that and the rest of my down payment with a money order. But each and every one of my cards are setup to be paid in full by the payment date, so that I pay 0 interest and rack up a ton of points. Those points cover flights and hotels for vacations. It takes discipline to do and I get a few thousand in rewards each year, for things I would have bought anyway.

Have the cash for it, but leverage debt to work for you. My ROI is much higher than interest rates, even when averaging it out over market downs. Sure the market could take a huge hit, but those losses only exist if the shares are sold.

 

[garymyman]

Most people pay cash for these and don't really care about what it's worth in 6 years.

Respectfully, this is a ridiculous statement. 85% of all new vehicle sales are financed. You are living in a bubble if most around you are paying cash for Yukons.