Car values dropping
06-19-2022, 01:33 PM
#196
Burning Brakes
It's not so much the direct impact of the loan cost, more the overall pieces of the wealth effect, such as:
1) One factor propping up stock prices in the past many years was buybacks. Companies used to issue a lot of debt to raise cash to do buybacks. Higher rates and wider spreads -> more expensive buybacks -> less buybacks -> less heroin in the veins of the stock market -> lower returns -> people's wealth grows less (from taxable accounts to RSUs to 401k to 529s) -> they spend less on discretionary items
2) A big component of the wealth effect is tied to real estate prices. Higher mortgage rates -> fewer people affording a mortgage for the same dollar notional -> fewer buyers for the same house -> house prices adjust to lower demand -> home equity for homeowners goes down -> people are less rich and do realize it and tap the brakes on discretionary spending. You bought your house for $1m 5 years ago, you mentally marked it up to $1.5m at the end of last year, if you have to mentally mark it down to $1.3m maybe you go "I'll keep my old Porsche another year and then we'll see".
2) Zero interest rates for many years meant too much cash looking for a home, which fostered the growth of the whole crypto ecosystem and led to a huge misallocation of capital such as many so-called "unicorns" which will never turn a profit in their life. Money is more scarce -> money is allocated more efficiently -> less never-profitable "unicorns" being created and propped up. Also, dollar money gets more valuable -> people demand more crypto units for the same dollars -> less cash being converted to crypto -> crypto prices correct -> people who bought during most of the runup lose money and spend less, particularly on discretionary items
1) One factor propping up stock prices in the past many years was buybacks. Companies used to issue a lot of debt to raise cash to do buybacks. Higher rates and wider spreads -> more expensive buybacks -> less buybacks -> less heroin in the veins of the stock market -> lower returns -> people's wealth grows less (from taxable accounts to RSUs to 401k to 529s) -> they spend less on discretionary items
2) A big component of the wealth effect is tied to real estate prices. Higher mortgage rates -> fewer people affording a mortgage for the same dollar notional -> fewer buyers for the same house -> house prices adjust to lower demand -> home equity for homeowners goes down -> people are less rich and do realize it and tap the brakes on discretionary spending. You bought your house for $1m 5 years ago, you mentally marked it up to $1.5m at the end of last year, if you have to mentally mark it down to $1.3m maybe you go "I'll keep my old Porsche another year and then we'll see".
2) Zero interest rates for many years meant too much cash looking for a home, which fostered the growth of the whole crypto ecosystem and led to a huge misallocation of capital such as many so-called "unicorns" which will never turn a profit in their life. Money is more scarce -> money is allocated more efficiently -> less never-profitable "unicorns" being created and propped up. Also, dollar money gets more valuable -> people demand more crypto units for the same dollars -> less cash being converted to crypto -> crypto prices correct -> people who bought during most of the runup lose money and spend less, particularly on discretionary items
More on topic for this thread, I happen to really like my current 911 but let’s say I wanted to “trade up” for a new one. A like for like replacement would probably take over a year to get and would cost me $40k more (maybe more). That’s propping up values as well I think.
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Freddie Two Bs (06-19-2022)
06-19-2022, 02:52 PM
#197
Racer
06-19-2022, 02:58 PM
#198
06-20-2022, 02:17 PM
#199
Here is my experience in the last 1-2 weeks. I decided to sell my .2 C2 MT slick top. I initially thought I would not get many hits due to the fact that a manual 911 needs a specific enthusiast. And even more so since it was not an S or GTS. For me, my fun car is usually more on the minimalistic side with lightweight high on my list. And its hard to get that fun car with modern cars. But I got many hits from day one. To the point where I didn't even list my car here, on this forum. My car was around 30K miles, and I posted it for 97K. I got asking and highest offer I got from a dealer was 85.2K. Unsure if my experience is an outlier or not.
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jbendaou (06-30-2022)
06-20-2022, 10:05 PM
#200
Burning Brakes
Here is my experience in the last 1-2 weeks. I decided to sell my .2 C2 MT slick top. I initially thought I would not get many hits due to the fact that a manual 911 needs a specific enthusiast. And even more so since it was not an S or GTS. For me, my fun car is usually more on the minimalistic side with lightweight high on my list. And its hard to get that fun car with modern cars. But I got many hits from day one. To the point where I didn't even list my car here, on this forum. My car was around 30K miles, and I posted it for 97K. I got asking and highest offer I got from a dealer was 85.2K. Unsure if my experience is an outlier or not.
06-20-2022, 10:15 PM
#201
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Freddie Two Bs (06-20-2022)
06-20-2022, 10:27 PM
#202
Rennlist Member
Here is my experience in the last 1-2 weeks. I decided to sell my .2 C2 MT slick top. I initially thought I would not get many hits due to the fact that a manual 911 needs a specific enthusiast. And even more so since it was not an S or GTS. For me, my fun car is usually more on the minimalistic side with lightweight high on my list. And its hard to get that fun car with modern cars. But I got many hits from day one. To the point where I didn't even list my car here, on this forum. My car was around 30K miles, and I posted it for 97K. I got asking and highest offer I got from a dealer was 85.2K. Unsure if my experience is an outlier or not.
06-21-2022, 10:02 AM
#203
Prepandemic is when i decided i wanted to get a porsche.
My requirements at minimum 991.2 C4 (doesnt need to be an S), automatic with less than 50K miles. I have more wish list items but i dont put them in searches.
I saw at least 20 listed for sale fitting my minimum criteria, back then.
Right now on cars. com or car gurus i see only 4 under $100K.
I am going to keep an eye on this. If more and more start showing up, i think its a sign the prices are dropping. (at least in my mind). Goal is to pull the trigger late 2023.
My requirements at minimum 991.2 C4 (doesnt need to be an S), automatic with less than 50K miles. I have more wish list items but i dont put them in searches.
I saw at least 20 listed for sale fitting my minimum criteria, back then.
Right now on cars. com or car gurus i see only 4 under $100K.
I am going to keep an eye on this. If more and more start showing up, i think its a sign the prices are dropping. (at least in my mind). Goal is to pull the trigger late 2023.
06-21-2022, 11:43 AM
#204
I'm not sure anyone can read what is or isn't about to happen to the economy right now. Inflation is high for sure, though inordinately affected by energy prices. Which, let's be honest, there's a money grab happening there by the oil companies taking advantage of uncertainty in their situation.
My sense is that the Ukraine war is affecting the economy like a flame near the skin - the heat from the flame itself will cause some pain, but you only know for sure how much damage the skin sustained when the flame is removed. If any. We need that situation to resolve itself, and the cost of Porsches is by far the least important reason why. Then let the manufacturing industry catch up with demand in a few areas and we'll see.
Corporate profitability isn't anywhere near as bad as it was in 2008 or even in 1992, and where it is weak it's mainly sector-specific. Last year tax revenues to State & Local Government were much higher than expected by result, so they are spending. Other hand, there's been massive money creation in the last 2 years to float us out of the pandemic and the cost of that probably hasn't been fully realized.
Nothing we know about the past describes this situation. At best it's a combination of previous situations that did not occur together before now. We're in for a slowdown, but whether it's mild or severe is yet to be seen and anyone who says they know for sure is probably selling something.
My sense is that the Ukraine war is affecting the economy like a flame near the skin - the heat from the flame itself will cause some pain, but you only know for sure how much damage the skin sustained when the flame is removed. If any. We need that situation to resolve itself, and the cost of Porsches is by far the least important reason why. Then let the manufacturing industry catch up with demand in a few areas and we'll see.
Corporate profitability isn't anywhere near as bad as it was in 2008 or even in 1992, and where it is weak it's mainly sector-specific. Last year tax revenues to State & Local Government were much higher than expected by result, so they are spending. Other hand, there's been massive money creation in the last 2 years to float us out of the pandemic and the cost of that probably hasn't been fully realized.
Nothing we know about the past describes this situation. At best it's a combination of previous situations that did not occur together before now. We're in for a slowdown, but whether it's mild or severe is yet to be seen and anyone who says they know for sure is probably selling something.
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06-21-2022, 12:48 PM
#207
Here is my experience in the last 1-2 weeks. I decided to sell my .2 C2 MT slick top. I initially thought I would not get many hits due to the fact that a manual 911 needs a specific enthusiast. And even more so since it was not an S or GTS. For me, my fun car is usually more on the minimalistic side with lightweight high on my list. And its hard to get that fun car with modern cars. But I got many hits from day one. To the point where I didn't even list my car here, on this forum. My car was around 30K miles, and I posted it for 97K. I got asking and highest offer I got from a dealer was 85.2K. Unsure if my experience is an outlier or not.
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jbendaou (06-30-2022)
