Comment by treis | Hacker News Reader

Comment by treis | Hacker News Reader

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I don't think there's any real relation. The single sector that saw the largest increase in prices were new cars followed closely by used cars. The market for new cars has a dozen or so major global companies and the used car market is about as pure of a market as you can get.

Ultimately it's gigantic corporation vs gigantic corporation. Walmart, Target, Best Buy, Amazon, et. al. aren't being pushed around by suppliers. If there were great margins to be made in manufacturing these companies would (and do) step in with their own branded products.

Anecdotally, I think Covid was like a conductor giving the orchestra a cue to start playing. Everyone ran into supply issues at the same time and naturally raised prices to the new point on the demand curve. Those that didn't see supply issues saw everyone else raising prices and figured why not take some easy money. Even if they wanted more market share they wouldn't have been able to expand production.

IMHO, it also revealed that demand was more inelastic in the short term than expected. Like my kid's frozen waffles went up like 2 bucks for an 8 box over Covid. I pay more than I want to but my demand's pretty inelastic. Not gonna fight my kid on his food choices over 25 cents a day. Eventually that will break and I don't think I'm gonna start the next kiddo on the same habit.

> Everyone ran into supply issues at the same time and naturally raised prices to the new point on the demand curve.

Some fancy pants buying a car with cash at $35,000 over MSRP last year during the new car shortage could be called a "new point on the demand curve." But actually financing a car for that last year? Unless there was an enormous increase last year in down payments, it points to bank shenanigans. Loans typically last longer than a year, and banks look at trends past the year in which they write the loan. Granted $35,000 over MSRP is the worst case I've heard. But the more common case of vehicles financed for 5 - 15k over MSRP for rapidly a depreciating asset is still a problem.

And now, a year later, it seems we're already seeing the other end of those shenanigans-- increasing delinquency levels and banks holding off on repos. Because after repo, the difference between the loan and the actual value of the vehicle is stark for all to see.

I have no idea where this market is going. But greedy dealers and finance depts have added so much energy to "natural" market dynamics that it could push many of the cash-strapped used car dealers out of business. Hell, even Carvana may not have the billions needed to survive this volatility. None of this is good, and it's all based on short term greed with little to no basic oversight last year to stave off the obvious risk.

If that behavior is in the set of "natural market forces" then the term is so broad as to be meaningless-- might as well say "inflation is what it is" at that point.

Did the used car market ever recover from 'Cash for clunkers' taking a large portion of supply artificially off of the market?

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