Morgan Stanley: Used Car Prices May Crash 50%
For months we’ve been talking about the massive lending bubble propping up the U.S. auto market. Now, noting many of the same concerns that we’ve highlighted repeatedly, Morgan Stanley’s auto team, led by Adam Jonas, has just issued a report detailing why they think used car prices could crash by up to 50% over the next 4-5 years.
Here’s the summary (flood of supply, poor lending standards and desperate OEMs who need to keep fresh car sales elevated at all costs):
- Off-lease supply: This has already more than doubled since two thousand twelve and is set to rise another 25% over the next two years.
- Extended credit terms: Auto loans are at record lengths and lease assumptions (residuals, money factor) are at record levels of accommodation.
- Rising rates: Beginning from record low levels in auto loans.
- Overdependency on auto Six pack: The outstanding balance of auto securitizations has surpassed last cycle’s peak.
- Record high deep subprime participation:32% of subprime auto Six pack deals were deep subprime (weighted average FICO < 550) in two thousand sixteen vs. 5% in 2010.
- Record high units of fresh car inventory:2016YE unit inventory levels were near 10% higher than 2015YE, and are continuing to trend higher in 2017.
- OEM price competition: Car manufacturers have capacitized to a 19mm or 20mm SAAR. At this point in the cycle we embark witnessing more money ‘on the fetish mask’ to stir the metal. As fresh car prices fall, used prices look relatively more expensive, which necessitates a decline in used prices to equilibrate the supply/request imbalance.
- Enhanced ADAS invasion: We expect auto firms to achieve almost 100% active safety invasion by 2020, creating an unprecedented safety gap inbetween fresh and used vehicles, accelerating obsolescence of the used stock. Rising insurance premiums on older cars could accelerate this shift.
- Trouble in the car rental market: Due to a number of secular shifts, including how consumers access transportation options (e.g. rail sharing), car rental firms are facing stagnant growth, powerless pricing and over-fleeted conditions. As these cars hit the auction, the influence on prices could be significant.
All of which Morgan Stanley thinks could spark a 50% decline in used car prices over the next duo of years. So, for all of you pension funds out there scooping up all of the AAA-rated slugs of the latest auto Six pack deals for the ‘sweet yield’, now might be a good time to review what happened to the investment grade tranches of MBS structures back in two thousand nine when home prices crashed by similar amounts.
And here are the stats.
Off-lease volumes have already doubled since two thousand twelve and are only expected to get worse. meantime, lending standards have step by step gotten worse and worse.
. as further exposed by the growing share of ‘deep subprime’ loans in auto Six pack deals.
Of course, so far negative equity hasn’t been a problem for car buyers because lenders have been all too willing to roll those debt balances into fresh loans. And, courtesy of low rates and spread out terms, consumers haven’t indeed cared that their debt balances are ballooning so long as their monthly payments remain low.
Meantime, none of the warnings about a flood of used car volumes about to hit the market has impacted fresh car volumes being shoved on to dealer lots.
All of which results in this fairly brutal outlook for used car prices:
Dear OEMs, the very first step is admitting you have a problem.
- Printer-friendly version
- Mar 31, two thousand seventeen 11:32 PM
- 319
Those bargain car prices will be offset by the devalued fiat
Title: Morgan Stanley: Used Car Prices May Crash 50%
My response: Seems reasonable to me! But is MS telling the TRUTH? Is the analysis in this article reasonable?
My response is YES. Here is the real question to ask.
SO EVERYONE WANTS THE TRUTH, THE Entire TRUTH AND NOTHING BUT THE TRUTH?
. THE TRUTH OF GDP NOW Introduced .
No. 876: GDP Revision and the Business Cycle, February Household Income
March 30th, 2017
• Details of Economic Depression versus Recession, Recovery and Expansion
• No Other Major Economic Series Comes Within Three Years of the Headline Brevity of the GDP Collapse into two thousand nine and Recovery into 2011, or Comes Close to Matching the Subsequent 12.2% GDP Expansion
• Better-Quality Series Showcase Continued, Protracted Economic Collapse, with No Recovery of Pre-Recession Highs and No Economic Expansion
• Annualized Fourth-Quarter Real Growth in Gross Domestic Product Revised to Two.08% from 1.86%
• Fourth-Quarter Final Sales Growth (GDP net of Inventory Switch) Fell to 1.07% versus Three.02% in Third-Quarter 2016
• Initial Reporting of Fourth-Quarter Gross Domestic Income at 1.00%, Gross National Product at Two.88%
• two thousand sixteen Annual GDP Growth Still Was Weakest Since the Economic Collapse, Both Before and After Inflation Adjustment
• Broad Outlook Resumes for Non-Recovering Activity and Economic Disruption
• February Real Median Household Income Enhanced, Still Holding Below its Pre-Recession High and Signaling Consumer Liquidity Stresses
Go brief CarMax.
The flood of Acura, Infinity and Lexus SUVs hitting the used car market in the very near future is going to be ridiculous. And you can have any color you’d like. as long as it’s silver, and maybe a Chinese soccer mom to go with it.
steer clear of the gold ones
There was a report out that electrified self driving cars could render the entire current car fleet obsolete.
Success on the self drive software would make them the safest cars on the road by far.
Brief the AA layer
>>>>> safety to drivers and be ’10x safer than current cars’,<<<<<
HERE’S The Article .
Analyst warns of Tesla’s Autopilot machine learning potentially rendering all other cars obsolete
Before introducing the 2nd generation Autopilot hardware, Tesla CEO Elon Musk said that once the very first truly self-driving car is available, all other vehicles without the technology will have a “negative value”.
Echoing the idea, Morgan Stanley analyst Adam Jonas said this week that they embarked warning their clients that if Tesla is successful in enabling fully self-driving capability on its current vehicles tooled with the 2nd generation Autopilot hardware, it could render all other cars obsolete.
Fresh off his note about the Tesla Model 3’s self-driving capability providing ‘superhuman’ safety to drivers and be ’10x safer than current cars’, Adam Jonas went on CNBC yesterday to drive his point.
Fuck Muskie and his android sheep car. Bullshit PR to pimp elitist only transportation for the moneyed classes only. Everyone else is supposed to walk, or take the bus.
Me and my one thousand nine hundred seventy eight pick up truck will soldier on with $23.00 fuel pumps from NAPA, accomplish brake replacement for under $500.00, and replacement fountain range E tires all round for about the same.
When all the elitist ass holes are sitting around in their locked down dead cars after a North Korean EMP, i’ll be out cutting my Ten,000 th cord of firewood, laughing my butt off at the switch the world dip shits that thought disregarding natural law was a good idea.
$500 for brakes? Should be able to do that for under $100. Not hard to do. Drum brakes can be a agony. but with the right pliers it isn’t so bad. I do my own at home (all disc tho’). Entire car in under an hour. Pads bought in advance on internet for the best price I can find. Big store prices here are a rip off.
If I had a truck like that I would keep it running also.
Yup, there’s a Reason AZO, ORLY, AAP stiock up in straight line for years. Yam-sized mark-up in that shit.
Good pads $25 per axle. Rotors $25 a chunk.
Rotors so cheap, it’s not even worth machining them. Never liked machining them anyway. Removing mass from what is effectively a Fever bury, never a good idea.
Free shipping. Just got front control arms with upper ball joints, and front set of lower ball joints for $85.
Pair of front sway bar end links for $24.
8 fresh coil packs for $40.
Autozone wished almost ten times that for coils. Plus tax.
Blame it on the CURSE, bro.
I’m retired South of the Border. There they fix everything cheap.
Can’t wait for you all to scale Trump’s wall to come down here when SHTF.
Looking for a roomie?
Nope. Love my solitude.
RE: chronic SPAMMER kavlar, techies-r-us, lexxus, stizazz, mano-a-mano, etc. (ALL THE SAME PERSON REPLYING TO HIS OWN COMMENTS)
You have NO IDEA how troubled this individual, the Spammer With One Hundred Log-ons, truly is. He has trolled and spammed his website crap on here forever, always with the same macabre conversations with a long series of "imaginary playmates." It truly is fairly perverse and whoever "he" is, he seems to truly get his rocks off voting himself up arrows and replying to his own comments, and also emerges to have no life beyond making off-topic comments with his link to the SPAM-, TROJAN-, VIRUS-INFESTED "biblicisminstitute,wordpress,com" (sometimes disguised as a short-URL http://wp.me )
<<Tonight’s little commentary is classic — one Invisible Friend (Mano-a-Mano) "lives" in Mexico and another Invisible Friend (stizazz) "wants to be his roomie." Such a fantasy life — do all of the "Invisible Friends" wear fishnets and makeup as well?? >>
He shares this pathology with "Audio Feeline " "blue fin" AKA "TrollAndDump" (formerly known as XYTHRAS – since banned) whose "dailywesterner,com" is, if anything WORSE than the biblicism fetishist, also SPAM-, TROJAN-, VIRUS-INFESTED.
Other ZHers may wish to take one minute to send an email to [email protected] requesting that all of the "imaginary friends" (in the list below; copy and paste) be permanently banned for spamming.
As you do that, use your imagination to attempt to conceive of what type of whackadoo would spend their life in pajamas, fake eyelashes and high high-heeled slippers, eating stale chips and drinking cheap soda from the dollar store, popping zits, and spamming zerohedge.
Many of the following have been banned but, like crabs and cockroaches, they just seem to come back. The "brief list of imaginary playmates" includes:
Morgan Stanley: Used Car Prices May Crash 50%, Zero Hedge
Morgan Stanley: Used Car Prices May Crash 50%
For months we’ve been talking about the massive lending bubble propping up the U.S. auto market. Now, noting many of the same concerns that we’ve highlighted repeatedly, Morgan Stanley’s auto team, led by Adam Jonas, has just issued a report detailing why they think used car prices could crash by up to 50% over the next 4-5 years.
Here’s the summary (flood of supply, poor lending standards and desperate OEMs who need to keep fresh car sales elevated at all costs):
- Off-lease supply: This has already more than doubled since two thousand twelve and is set to rise another 25% over the next two years.
- Extended credit terms: Auto loans are at record lengths and lease assumptions (residuals, money factor) are at record levels of accommodation.
- Rising rates: Beginning from record low levels in auto loans.
- Overdependency on auto Six pack: The outstanding balance of auto securitizations has surpassed last cycle’s peak.
- Record high deep subprime participation:32% of subprime auto Six pack deals were deep subprime (weighted average FICO < 550) in two thousand sixteen vs. 5% in 2010.
- Record high units of fresh car inventory:2016YE unit inventory levels were near 10% higher than 2015YE, and are continuing to trend higher in 2017.
- OEM price competition: Car manufacturers have capacitized to a 19mm or 20mm SAAR. At this point in the cycle we embark eyeing more money ‘on the fetish mask’ to budge the metal. As fresh car prices fall, used prices look relatively more expensive, which necessitates a decline in used prices to equilibrate the supply/request imbalance.
- Enhanced ADAS invasion: We expect auto firms to achieve almost 100% active safety invasion by 2020, creating an unprecedented safety gap inbetween fresh and used vehicles, accelerating obsolescence of the used stock. Rising insurance premiums on older cars could accelerate this shift.
- Trouble in the car rental market: Due to a number of secular shifts, including how consumers access transportation options (e.g. rail sharing), car rental firms are facing stagnant growth, feeble pricing and over-fleeted conditions. As these cars hit the auction, the influence on prices could be significant.
All of which Morgan Stanley thinks could spark a 50% decline in used car prices over the next duo of years. So, for all of you pension funds out there scooping up all of the AAA-rated slugs of the latest auto Six pack deals for the ‘delicious yield’, now might be a good time to review what happened to the investment grade tranches of MBS structures back in two thousand nine when home prices crashed by similar amounts.
And here are the stats.
Off-lease volumes have already doubled since two thousand twelve and are only expected to get worse. meantime, lending standards have little by little gotten worse and worse.
. as further exposed by the growing share of ‘deep subprime’ loans in auto Six pack deals.
Of course, so far negative equity hasn’t been a problem for car buyers because lenders have been all too willing to roll those debt balances into fresh loans. And, courtesy of low rates and opened up out terms, consumers haven’t indeed cared that their debt balances are ballooning so long as their monthly payments remain low.
Meantime, none of the warnings about a flood of used car volumes about to hit the market has impacted fresh car volumes being shoved on to dealer lots.
All of which results in this fairly brutal outlook for used car prices:
Dear OEMs, the very first step is admitting you have a problem.
- Printer-friendly version
- Mar 31, two thousand seventeen 11:32 PM
- 319
Those bargain car prices will be offset by the devalued fiat
Title: Morgan Stanley: Used Car Prices May Crash 50%
My response: Seems reasonable to me! But is MS telling the TRUTH? Is the analysis in this article reasonable?
My reaction is YES. Here is the real question to ask.
SO EVERYONE WANTS THE TRUTH, THE Entire TRUTH AND NOTHING BUT THE TRUTH?
. THE TRUTH OF GDP NOW Introduced .
No. 876: GDP Revision and the Business Cycle, February Household Income
March 30th, 2017
• Details of Economic Depression versus Recession, Recovery and Expansion
• No Other Major Economic Series Comes Within Three Years of the Headline Brevity of the GDP Collapse into two thousand nine and Recovery into 2011, or Comes Close to Matching the Subsequent 12.2% GDP Expansion
• Better-Quality Series Demonstrate Continued, Protracted Economic Collapse, with No Recovery of Pre-Recession Highs and No Economic Expansion
• Annualized Fourth-Quarter Real Growth in Gross Domestic Product Revised to Two.08% from 1.86%
• Fourth-Quarter Final Sales Growth (GDP net of Inventory Switch) Fell to 1.07% versus Trio.02% in Third-Quarter 2016
• Initial Reporting of Fourth-Quarter Gross Domestic Income at 1.00%, Gross National Product at Two.88%
• two thousand sixteen Annual GDP Growth Still Was Weakest Since the Economic Collapse, Both Before and After Inflation Adjustment
• Broad Outlook Proceeds for Non-Recovering Activity and Economic Disruption
• February Real Median Household Income Enhanced, Still Holding Below its Pre-Recession High and Signaling Consumer Liquidity Stresses
Go brief CarMax.
The flood of Acura, Infinity and Lexus SUVs hitting the used car market in the very near future is going to be ridiculous. And you can have any color you’d like. as long as it’s silver, and maybe a Chinese soccer mom to go with it.
steer clear of the gold ones
There was a report out that electrical self driving cars could render the entire current car fleet obsolete.
Success on the self drive software would make them the safest cars on the road by far.
Brief the AA layer
>>>>> safety to drivers and be ’10x safer than current cars’,<<<<<
HERE’S The Article .
Analyst warns of Tesla’s Autopilot machine learning potentially rendering all other cars obsolete
Before introducing the 2nd generation Autopilot hardware, Tesla CEO Elon Musk said that once the very first truly self-driving car is available, all other vehicles without the technology will have a “negative value”.
Echoing the idea, Morgan Stanley analyst Adam Jonas said this week that they began warning their clients that if Tesla is successful in enabling fully self-driving capability on its current vehicles tooled with the 2nd generation Autopilot hardware, it could render all other cars obsolete.
Fresh off his note about the Tesla Model 3’s self-driving capability providing ‘superhuman’ safety to drivers and be ’10x safer than current cars’, Adam Jonas went on CNBC yesterday to drive his point.
Fuck Muskie and his android sheep car. Bullshit PR to pimp elitist only transportation for the moneyed classes only. Everyone else is supposed to walk, or take the bus.
Me and my one thousand nine hundred seventy eight pick up truck will soldier on with $23.00 fuel pumps from NAPA, finish brake replacement for under $500.00, and replacement fountain range E tires all round for about the same.
When all the elitist poopers are sitting around in their locked down dead cars after a North Korean EMP, i’ll be out cutting my Ten,000 th cord of firewood, laughing my donk off at the switch the world dip shits that thought overlooking natural law was a good idea.
$500 for brakes? Should be able to do that for under $100. Not hard to do. Drum brakes can be a ache. but with the right pliers it isn’t so bad. I do my own at home (all disc tho’). Entire car in under an hour. Pads bought in advance on internet for the best price I can find. Big store prices here are a rip off.
If I had a truck like that I would keep it running also.
Yup, there’s a Reason AZO, ORLY, AAP stiock up in straight line for years. Massive mark-up in that shit.
Good pads $25 per axle. Rotors $25 a lump.
Rotors so cheap, it’s not even worth machining them. Never liked machining them anyway. Removing mass from what is effectively a Fever bury, never a good idea.
Free shipping. Just got front control arms with upper ball joints, and front set of lower ball joints for $85.
Pair of front sway bar end links for $24.
8 fresh coil packs for $40.
Autozone dreamed almost ten times that for coils. Plus tax.
Blame it on the CURSE, bro.
I’m retired South of the Border. There they fix everything cheap.
Can’t wait for you all to scale Trump’s wall to come down here when SHTF.
Looking for a roomie?
Nope. Love my solitude.
RE: chronic SPAMMER kavlar, techies-r-us, lexxus, stizazz, mano-a-mano, etc. (ALL THE SAME PERSON REPLYING TO HIS OWN COMMENTS)
You have NO IDEA how troubled this individual, the Spammer With One Hundred Log-ons, indeed is. He has trolled and spammed his website crap on here forever, always with the same macabre conversations with a long series of "imaginary playmates." It truly is fairly perverse and whoever "he" is, he seems to truly get his rocks off voting himself up arrows and replying to his own comments, and also emerges to have no life beyond making off-topic comments with his link to the SPAM-, TROJAN-, VIRUS-INFESTED "biblicisminstitute,wordpress,com" (sometimes disguised as a short-URL http://wp.me )
<<Tonight’s little commentary is classic — one Invisible Friend (Mano-a-Mano) "lives" in Mexico and another Invisible Friend (stizazz) "wants to be his roomy." Such a fantasy life — do all of the "Invisible Friends" wear fishnets and makeup as well?? >>
He shares this pathology with "Audio Feeline " "blue fin" AKA "TrollAndDump" (formerly known as XYTHRAS – since banned) whose "dailywesterner,com" is, if anything WORSE than the biblicism fetishist, also SPAM-, TROJAN-, VIRUS-INFESTED.
Other ZHers may wish to take one minute to send an email to [email protected] requesting that all of the "imaginary friends" (in the list below; copy and paste) be permanently banned for spamming.
As you do that, use your imagination to attempt to conceive of what type of whackadoo would spend their life in pajamas, fake eyelashes and high high-heeled slippers, eating stale chips and drinking cheap soda from the dollar store, popping zits, and spamming zerohedge.
Many of the following have been banned but, like crabs and cockroaches, they just seem to come back. The "brief list of imaginary playmates" includes:
