When’s The Last Time You Made Money On A Car?

Jun 14, 2021 | Financial Planning, Lifestyle

Used car prices are up 30% in the past year. Karl explains why this is happening on The Trey Ware Show.

Trey Ware:

Let’s go to Karl Eggerss, creatingricherlives.com. He joins us every Monday at this time, we talk about money and markets. Good morning, man. How are you?

Karl Eggerss:

I’m good, Trey. Are they prepared for retirement or did they do a proper financial plan? On a serious note, I’ve talked to several people that the pandemic kind of nudged them into retirement. They were real close to retirement and they were like, “You know what? Now’s probably a good time.” However, we know that there’s a lot of people not working because they’re getting the stimulus checks and they’d been getting the extra unemployment checks. And we’re still hearing about this nationwide about this. There’s shorter hours at restaurants. There’s less menu items. [crosstalk 00:00:46].

Trey Ware:

There sure are. That is a fact.

Karl Eggerss:

That is a fact and that is happening. And I think over the next few weeks as some of those unemployment benefits roll off, let’s see how that changes. But the good news going on right now I think just in the last few weeks, since you and I’ve been talking about some of these prices going up at across the board, we’ve seen lumber prices now fall almost 40% since its high just a few weeks.

Trey Ware:

Why is that? What’s going on?

Karl Eggerss:

Well, part of our thesis at Covenant was that some of this was due to supply issues. Some of this was due to just a short-term spike in demand and that inflation would stabilize. We’ve been talking about that and not to say that we were going to get deflation or prices were going to go back to where they were pre-pandemic or anything like that, but that we’re going to keep this type of inflation pace up. And that’s what we’ve seen. We’ve seen it subside and you can see it because interest rates haven’t gone up. That’s the good news for our listeners.

Karl Eggerss:

If they are looking to go purchase a car or go refinance a home, interest rates are still very, very low. Normally, if inflation was a huge persistent problem that everybody thought it was going to continue at that pace, interest rates would be much higher and they’re not. So that tells you things are subsiding a bit, which is good. The other thing that’s happening, Trey, is go take a look at your used car right now. You may want to potentially trade that car in. Used car prices are up 30% over the line last year-

Trey Ware:

I wanted to ask you about that, Karl, because you’re right. I mean, the dealerships can’t get new ones right now because of the chip shortage, so they’re having a hard time getting new inventory. So the dealers are running the prices up on these used cars because the dealers are fighting and they’re willing to give whatever to get a used car. So yeah, it’s a sellers market. So I go trade mine in and I get a good price for it, but I’m still going to have to pay the incredible prices for something. I got have something to drive, so whatever I’m going to buy next, right?

Karl Eggerss:

Yeah, but here’s a little pro tip. What’s happening is these new car dealerships because they’re selling whatever new cars they do have so quickly, they’re actually discounting them. Some of them are discounting them because not paying the amount of interest that they normally do to hold them sitting on the lot. And because they’re turning them over every three, four, five days, they’re actually willing to give a better deal on the new cars. I’ve literally had people get a deal on a new car, trade in a two-year-old car and make money on the used car. That’s never happened.

Trey Ware:

Seriously?

Karl Eggerss:

That’s never happened.

Trey Ware:

I can’t tell you the last time I bought a new car. I always buy used, but now you’re telling me it’s a new car market, right?

Karl Eggerss:

It is. Again, from a deflation standpoint, you normally want to buy a used car and not pay up for all that depreciation. That is not the case right now. We’re in this very strange window of time. So just take a look at it. It may not make sense for everybody, but if you have a two or three-year-old car, you may be able to get a new car for literally you make money on your used car.

Trey Ware:

Well, honey-

Karl Eggerss:

The other thing, Trey, is that what’s happening with the used cars is that the rental car companies emptied their inventory and sold all their cars going into the pandemic because they were like, “Hey, we’re not going to rent these out.” Well, then when the economy started to come back, they started scrambling. So now they’re having to buy inventory back further putting pressure up on used car prices as well. So it’s not just a chip shortage.

Trey Ware:

That’s interesting. I did not know that aspect of it. “Well, honey, I’m going to come driving home in a brand new honking big truck today. I’ll find me a big honker. In fact, I’m may-

Karl Eggerss:

Or a new motorcycle. Or a new motorcycle.

Trey Ware:

Well, that could happen too. But at the very least, the big honking truck and I might even put one of those 18 wheeler horns on it so people know when I pulled in the neighborhood … Trey’s home. All right, good, killer. Well, thank you, Karl. Appreciate it very much. I’ll talk to you next Monday.

Karl Eggerss:

All right.

Trey Ware:

Have a good one. Karl Eggerss, creatingricherlives.com and he’s with me every Monday at this time. We talk about anything that’s going on with the money. I did not know that about the new car market. So I’m going to just have to kick some tires.

 

 

Schedule a Free Call

Receive a complimentary 15-minute financial evaluation with one of our wealth advisors.

Other Resources