Author Topic: Do Recessions Reduce Car Prices?  (Read 872 times)

maizeman

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Do Recessions Reduce Car Prices?
« on: March 08, 2020, 11:43:17 AM »
I've been trying to find some sort of time series data so I could look at what happened back in 2009 but so far without any luck. I drove the same car from 2006-2013 and really wasn't paying attention to the economy/investments/news from 2008-12 -- was in grad school -- so I don't have any person memories to fall back on.

On the one hand, the average person likely has less money and definitely feels less inclined to spend money, which would argue for reduced demand and decreasing prices.

On the other hand, at least for the new car market, supply is pretty elastic. Maybe it'd make more sense for the big car companies to simply build fewer cars during a recession or depression and keep selling them for about the same price?

v8rx7guy

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Re: Do Recessions Reduce Car Prices?
« Reply #1 on: March 08, 2020, 12:28:27 PM »
I was wondering the same thing.  I suspect the first thing that would happen is that interest rates would drop to near zero.  That helps people who dont look at the overall price of the vehicle make more sense of buying a new car.  It benefits the car companies greatly to sell more vehicles even if they arent making money with the financing...  More opportunities for sales , parts and service in the future to make money on
« Last Edit: March 08, 2020, 12:31:17 PM by v8rx7guy »

terran

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Re: Do Recessions Reduce Car Prices?
« Reply #2 on: March 08, 2020, 12:47:23 PM »
I could see used car prices actually going up as people still need to get to work, and more of them might look to the used market instead of buying new.

red_pill

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Re: Do Recessions Reduce Car Prices?
« Reply #3 on: March 08, 2020, 01:08:20 PM »
I remember in the fall of 2008, the prices of 3/4 diesel trucks dropped by around 40% to clear out the 2008s before the 2009s arrived.  It was an insane deal.  We almost bought one but didnít really did the 3/4 ton. Turns out we could have sold it a few years later for the exact same price so maybe it would have been a good deal.

Iím betting it would be a good time to book a cruise though, lol.

Another Reader

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Re: Do Recessions Reduce Car Prices?
« Reply #4 on: March 08, 2020, 01:14:22 PM »
Remember "Cash for Clunkers"?  That program was designed to get people to buy new cars. 

Prices and sales dropped in 2008-2010.  I bought a 2010 Highlander, brand new model, late in 2009 for $4,300 off the approximately $28,000 MSRP. 

lutorm

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Re: Do Recessions Reduce Car Prices?
« Reply #5 on: March 08, 2020, 02:47:16 PM »
I sure hope so, we have a new (!) car ordered but the price is decided when it is delivered... ;-)

v8rx7guy

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Re: Do Recessions Reduce Car Prices?
« Reply #6 on: March 08, 2020, 02:54:07 PM »
I remember in the fall of 2008, the prices of 3/4 diesel trucks dropped by around 40% to clear out the 2008s before the 2009s arrived.  It was an insane deal.  We almost bought one but didnít really did the 3/4 ton. Turns out we could have sold it a few years later for the exact same price so maybe it would have been a good deal.

Iím betting it would be a good time to book a cruise though, lol.

I wonder if that was fuel price related.  I seem to remember that was the year of $4-$5/gal here in WA

nereo

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Re: Do Recessions Reduce Car Prices?
« Reply #7 on: March 08, 2020, 03:37:16 PM »
FWIW car prices in my area of California (hard hit by mortgage crisis) went through the floor in 2008 while the used market remained relatively steady as people kept their cars. I distinctly remember one story in NPR talking about how the cost of new pickups at dealerships were being discounted so heavily that they cost LESS than a comparable model 2-3 years old.
Perfect storm of dealerships having an oversupply of cars, the manufacturers not being able to take them back ( as they normally do after 180 days), few customers, a system-wide credit crunch and high fuel prices. IIRC there were $7500 manufacturers rebates plus $2000 in dealership incentives plus sticker prices a few grand under MSRP

If you could buy with cash or secure credit (hard to do then) you could buy a new car for cheap

Will circumstances be the same next time? ::shrug::  But itís good to know we could pay cash (ie not rely on credit) if/when the opportunity comes again.

Bloop Bloop

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Re: Do Recessions Reduce Car Prices?
« Reply #8 on: March 08, 2020, 06:59:56 PM »
Anything that hurts consumer demand will have an effect on transaction prices, though not necessarily RRP (manufacturers hate decreasing or increasing RRP arbitrarily, but will often adjust discounting and options bundles to meet demand both in good and bad times).

I recently helped a friend buy a new Mercedes and she got over 20% off the sticker price with a bit of haggling. We were initially happy to buy a dealer demo or slightly used but the eventual price gap was trivial. I'm a car nut and I regularly monitor prices on target cars and send dealers enquiries and I've noticed a lot of softness in the market.

Cranky

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Re: Do Recessions Reduce Car Prices?
« Reply #9 on: March 08, 2020, 07:05:41 PM »
IIRC, used car prices went up, because people held onto their cars.

New car production was cut pretty quickly.

I did get a great deal on a refrigerator at the end of 2008. It was a great time to buy stuff if you had cash, but it was tough to borrow money. If interest rates are very low, banks are not very motivated to lend, so people had a hard time getting financing.

hops

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Re: Do Recessions Reduce Car Prices?
« Reply #10 on: March 08, 2020, 08:09:47 PM »
When I bought in 2010 my already cheap Honda Fit was discounted by a few thousand and I was offered 0.9% financing. They weren't moving inventory and the dealership went under within a couple years.

the_fixer

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Re: Do Recessions Reduce Car Prices?
« Reply #11 on: March 08, 2020, 09:19:50 PM »
Purchased an almost new Yaris super cheap back in 2009 dealers were really struggling and we had cash.

Lots of things came together to make 2008 happen so not sure it reflects a normal recession but I would expect some opportunities during a recession.


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Dicey

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Re: Do Recessions Reduce Car Prices?
« Reply #12 on: March 08, 2020, 09:30:49 PM »
Friend of mine got a hell of a deal on a new Lincoln Navigator during the downturn. But then, it was a Lincoln Navigator. Happily, she still has it, and actually has a job where she can semi-legitimately claim a need for it. She paid cash. She also voluntarily cut down to part time, to save reducing the hours of co-workers with families who couldn't afford to lose the income. When things improved, the owner of the business remembered and took good care of her.

2sk22

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Re: Do Recessions Reduce Car Prices?
« Reply #13 on: March 09, 2020, 07:40:34 AM »
I have bought cars for cash over the past twenty years. However, according to various articles I've been reading, being able to pay cash in full for a car is not necessarily an advantage. This video summarizes the arguments about how cash buyers are given a bad deal.

Added: see also this FAQ from reddit
« Last Edit: March 09, 2020, 07:48:48 AM by 2sk22 »