Quote:
quote:Originally posted by quicksilverdon
Check out some of the deals you can get on a new car, and you'll understand why used prices are low. It isn't just the PT.
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This is the best short answer to general depreciation.
When the annual inflation percentage is higher than what the bank is paying you to keep money on deposit, a phenomenon known as "deflation" occurs.
The Fed cuts rates to jumpstart the economy.
Unfortunately 9/11/2001 took over 4 trillion dollars of "projected wealth" out of the economy via the stock market. Even worse, much of that "projected wealth" had already been spent into the economy.
This caused a severe shock wave in the economy. The Fed responded by continuing to cut rates until the fed rate was below the annual inflation rate.
Now (and for a while to come) we are playing "Catch-Up" on the money supply.
Money has to be loaned into existence.
The fed can print it up 24/7, but, by the book, a loan has to be created before the money is "spent" into the economy.
Whenever the fed pumps money (liquidity) into the economy, interest bearing bonds are sold to back the money, and the national debt increases by the amount of bonds sold/money spent into the economy.
Our children, and their children's children's children will be forever paying the compound interest on said debt.
The relaxing of credit, low interest rates, 0% financing, and other smoke and mirror tactics have all been employed to try to return motion to a money supply/economic condition that has already had the wheels driven off of it's chassis. I not sure if we can stay out of the way of the snowball, and am sure that we will never be able to push the snowball back uphill.
Meanwhile, back at the ranch, car sales since 9/11/2001 have been stronger than ever, due to the relaxed credit and low interest rates. This, in turn, has flooded the market with trade-ins; used cars that were often traded in to take advantage of the cheaper financing. In many cases, money was actually saved by trading into a lower interest rate.
With new cars requiring zero or extremely low interest on the loans, the used car market became a venue for those who could afford to pay cash, or couldn't get credit. This severely limited the customer base for uised cars. Due to the excess supply, used cars are now valued at what they will bring at the auction. In most cases, this is under the wholesale value, and well below trade-in value. Retail value of used cars is a paradoxial phrase.
With this in mind, cars purchased after the drop of interest rates, as long as rates remain low and money is plentiful, are almost disposable.
With the second 7 year cycle of flooding the market with unsecured debt by the fed (anti-counterfeiting measures that require paper money change it's appearance every 7 years), It will be some time to come before the money supply is allowed to contract enough for the dollar to have enough buying power to raise interest rates and lower inflation.
Short answer, cars are overpriced, dollar value is low, and credit is loose - Spend all you want; we'll print more.