Special Report: The Used Car Bubble Is Bursting

Written by Jerry Reynolds | Aug 27, 2020 5:00:00 AM

Photo Credit: alexmillos/Shutterstock.com

I've talked on the Car Pro Show for eight weeks about used car prices being sky high. I monitor the Manheim Dallas auction weekly so I can report to my listeners up-to-date information about trade values. I have also warned everyone that this bubble would burst and prices would drop hard and fast.

Just last Saturday I talked about every vehicle, especially trucks and SUVs, bringing way over MMR (Manheim Market Report). MMR is the gauge car dealers use to know the current market values, unlike the old days when dealers used the Black Book or NADA book.

A week ago Wednesday, pickups and popular SUVs were bringing $2000 to $5000 over the MMR guide, some even much more.

This week, things changed dramatically. Sure, some vehicles brought MMR and a few brought slightly more, but the majority of vehicles sold struggled to get to MMR and a huge number of them didn't even get close to MMR.

Here were some vehicles that I took particular note of from two days ago:

Year/Model	Mileage	MMR Amount	Sale Amount
2017 Nissan Titan	21,000 miles	$33,700	$31,000
2017 Hyundai Elantra	24,000 miles	$11,200	$10,000
2019 Toyota Avalon	23,000 miles	$30,400	$27,500
2019 Toyota Tacoma	27,000 miles	$35,200	$34,750
2017 Toyota Tundra	33,000 miles	$37,500	$35,000
2017 Rover Sport	27,000 miles	$53,100	$51,750
2019 Audi Q5	4100 miles	$41,200	$38,000
2018 BMW M3	20,000 miles	$55,600	$51,000
2018 Mercedes GLS450	41,000 miles	$43,300	$39,250
2016 Chevy Tahoe	66,000 miles	$37,600	$35,000

Just a week ago, every Toyota Tacoma and Tundra that had a clean history report and average miles was bringing $5000 over MMR. As you can see from the numbers above, there was a major downward market shift.

SEE FOR YOURSELF:

Check out this 2017 Toyota Tundra with low mileage. The MMR on this one is $37,500, and a week ago it would have gaveled for over $40,000. The auctioneer starts at $35,000 and has no takers. They restart at $33,500 and ultimately sold it for $35,250.

I've also talked recently about the amazing money the new 2020 Corvettes were bringing at auction. A week ago, I saw one with an $88,000 window sticker price bring $109,500. It had an MMR of $108,000.

This week, there was an 1800-mile 2020 2LT very similar to the one I am reviewing this week. MMR on this one was $101,000. Auctioneer started it off at $80,000 but then she struggled to get to $95,000 and it finally sold at $97,500. That is $3,500 UNDER MMR on the hottest car on the market. That is what this week was like.

THE GOOD NEWS:

Although I saw the auction tanking this week, it will take a couple of weeks before that will affect the value of your trade-in vehicle. From auction prices to the real world lags before used values drop at the dealership level.

So, if you have a trade-in, and are contemplating getting a new vehicle, DO IT NOW. Timing is everything when trying to get the best possible overall deal.

Although auction prices were way down this week, it won't affect you immediately, but I will tell you auction prices will fall again next week, once the slide begins it takes weeks for the market to completely adjust back fully.

It is the end of the month, give all this some serious thought.

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