Used car dealers are ‘slower to drop’ prices on EV brands like Tesla: Expert

So with Tesla cutting the price of its brand new Model S and Model X vehicles, the value of some used Teslas are taking a hit. We want to bring in Pat Ryan. He's the founder and CEO of Co-Pilot. That's an app that helps potential car buyers find the best deals. So let's talk about what you are seeing in the used car market right now. How are these price cuts trickling down to the used car market and that action? What is that signal just in terms of how much more of a hit these vehicles could potentially So with Tesla cutting the price of its brand new Model S and Model X vehicles, the value of some used Teslas are taking a hit. We want to bring in Pat Ryan.

He's the founder and CEO of Co-Pilot. That's an app that helps potential car buyers find the best deals. So let's talk about what you are seeing in the used car market right now. How are these price cuts trickling down to the used car market and that action? What is that signal just in terms of how much more of a hit these vehicles could potentially get this time around? Well it's really hot car market right now. The new market is up 6.5 percent week over week last week. The used car market is up 7.

So these price cuts are coming into a high demand market particularly for EVs. On the used side there aren't that many EVs available. A lot of the EVs that we are looking at are coming in the future so they are 23, 24. So that's what dominates this market. get this time around? Well it's really hot car market right now. The new market is up 6.5 percent week over week last week.

The used car market is up 7. So these price cuts are coming into a high demand market particularly for EVs. On the used side there aren't that many EVs available. A lot of the EVs that we are looking at are coming in the future so they are 23, 24. So that's what dominates this market. They have 65 percent of the used market for EVs and 86 percent of the luxury market. So when these prices come down it's great for consumers.

The new prices coming down are going to put more and more pressure. The one cautionary note we are telling our members to remember is this. Elon Musk cuts the prices overnight. They immediately drop. You get the benefit of that on the new side. But on the used side you have car dealers. People who took this car in on trade bought them a wholesale auction.

They have 65 percent of the used market for EVs and 86 percent of the luxury market. So when these prices come down it's great for consumers. The new prices coming down are going to put more and more pressure. The one cautionary note we are telling our members to remember is this. Elon Musk cuts the prices overnight. They immediately drop. You get the benefit of that on the new side.

But on the used side you have car dealers. People who took this car in on trade bought them a wholesale auction. They're slower to drop those cars because they paid a certain price for them. So we've seen there have been a real lag between when the new car market moves and the used car market moves that is almost entirely because of dealers reticence to lower the price and take the hit themselves. Which means if you're going to buy a used Tesla it's good to wait. That is interesting advice. All right.

So Tesla the first time they made their price cuts we saw others follow. Not all of them uniformly. They're slower to drop those cars because they paid a certain price for them. So we've seen there have been a real lag between when the new car market moves and the used car market moves that is almost entirely because of dealers reticence to lower the price and take the hit themselves. Which means if you're going to buy a used Tesla it's good to wait. That is interesting advice. All right.

So Tesla the first time they made their price cuts we saw others follow. Not all of them uniformly. You expect that to happen here. And who is closest to the bumper of Tesla when it comes to used EVs? There's nobody that close to Tesla. I mean it's amazing how far ahead they are. They have so much inventory out there. So much brand loyalty.

There really is nobody close. But I would say on the new side you heard Rubio and Bullstar Bull say they're not going to cut prices. Lucid said they'll cut prices but just for March if you buy in March. So people are afraid to follow. You expect that to happen here. And who is closest to the bumper of Tesla when it comes to used EVs? There's nobody that close to Tesla. I mean it's amazing how far ahead they are.

They have so much inventory out there. So much brand loyalty. There really is nobody close. But I would say on the new side you heard Rubio and Bullstar Bull say they're not going to cut prices. Lucid said they'll cut prices but just for March if you buy in March. So people are afraid to follow. And the reporter was just describing I think exactly right.

Which is the fact that Tesla basically went through the growing pains of learning how to build EVs efficiently earlier and got through that gives them a margin advantage. They make $9,500 per new Tesla today. They can afford to cut their prices and still be profitable or their competitors. Ford's already losing money on every EV they sell and the others will end up with the same situation. And the reporter was just describing I think exactly right. Which is the fact that Tesla basically went through the growing pains of learning how to build EVs efficiently earlier and got through that gives them a margin advantage. They make $9,500 per new Tesla today.

They can afford to cut their prices and still be profitable or their competitors. Ford's already losing money on every EV they sell and the others will end up with the same situation. Nobody can really do what Tesla's doing. Elon Musk built this competitive advantage. Now he's making the most of it at a time where the competitors are struggling to get new inventory out. In the EV world, they're still playing catch up on that. And now he's giving them another headwind that'll give a tailwind to Tesla sales.

The challenge for I would say for used buyers is that this has been an incredible 13 months almost still a little over 12 months for Tesla prices. Nobody can really do what Tesla's doing. Elon Musk built this competitive advantage. Now he's making the most of it at a time where the competitors are struggling to get new inventory out. In the EV world, they're still playing catch up on that. And now he's giving them another headwind that'll give a tailwind to Tesla sales. The challenge for I would say for used buyers is that this has been an incredible 13 months almost still a little over 12 months for Tesla prices.

If you look at Tesla stock price, the vehicle prices have been not that different. When the war started in Ukraine last year, gas prices went up and electric prices, especially Tesla prices took off and went through the roof peaking in the summer. And they've been going down pretty much ever since. But what you're really seeing is that there is a delay now between when the new car price If you look at Tesla stock price, the vehicle prices have been not that different. When the war started in Ukraine last year, gas prices went up and electric prices, especially Tesla prices took off and went through the roof peaking in the summer. And they've been going down pretty much ever since. But what you're really seeing is that there is a delay now between when the new car price drops hit and the used car prices hit the market because of that lag that dealers hoping to sell you cars for what they paid for it, which is why the savvy consumer waits, watches the market, either buys new now because it is attractive pricing or waits for the used market to get their car.

Vana liquidated a lot of them so that was cementary there. Not clear how much they have left. And the rest of the dealer world is hoping to get out of those cars about too big a drops hit and the used car prices hit the market because of that lag that dealers hoping to sell you cars for what they paid for it, which is why the savvy consumer waits, watches the market, either buys new now because it is attractive pricing or waits for the used market to get their car. Vana liquidated a lot of them so that was cementary there. Not clear how much they have left. And the rest of the dealer world is hoping to get out of those cars about too big a loss, which means that buying now could actually cost you a lot of money. Or if you wait 30, 60, 90 days, this price will change really clear through the market.

You'll get the benefit then on the use side like you're on the new side today. All right, Pat. So Tesla aside, let's talk about what else is going on in the used car market because we certainly had seen prices trending down in the direction that was favorable here to buyer some talk, though, that that momentum is starting to shift. And we might see might be seeing an uptick here for the month of February. loss, which means that buying now could actually cost you a lot of money. Or if you wait 30, 60, 90 days, this price will change really clear through the market. You'll get the benefit then on the use side like you're on the new side today.

All right, Pat. So Tesla aside, let's talk about what else is going on in the used car market because we certainly had seen prices trending down in the direction that was favorable here to buyer some talk, though, that that momentum is starting to shift. And we might see might be seeing an uptick here for the month of February. Is that consistent with what you're seeing and what do you, I guess, expect here for the used car market looking out over the next couple of months, given the fact that the spring is a very popular time in terms of car buying season? Well, we're in tax buying season right now. The refund checks peak to, I think, a week or two ago. But there's no question that we've seen the wholesale prices go up. You've seen that some of the manhunt data.

Of course, during the pandemic and even after we saw a wholesale prices go up, I think, Is that consistent with what you're seeing and what do you, I guess, expect here for the used car market looking out over the next couple of months, given the fact that the spring is a very popular time in terms of car buying season? Well, we're in tax buying season right now. The refund checks peak to, I think, a week or two ago. But there's no question that we've seen the wholesale prices go up. You've seen that some of the manhunt data. Of course, during the pandemic and even after we saw a wholesale prices go up, I think, nine times where retail price only followed twice. This will be the third time the retail prices have followed. We're seeing both big increases in sales, like I said, almost 7%.

We go over a week increase in new sales last week. And we're seeing prices go up. Prices went down from pretty much Labor Day all the way through the beginning of February. They ret, retail prices treaded water on used cars during the month of February. nine times where retail price only followed twice. This will be the third time the retail prices have followed. We're seeing both big increases in sales, like I said, almost 7%.

We go over a week increase in new sales last week. And we're seeing prices go up. Prices went down from pretty much Labor Day all the way through the beginning of February. They ret, retail prices treaded water on used cars during the month of February. But the last two weeks, we finally are seeing prices pop back up a little bit. I think the Fed's going to start getting very nervous. It appears that the rate increases they've put in place just haven't had the slowing effect on the used car market the way they expect or the new car market, which is up 6.

5% week over week. So I think we're in a position now where it's really a time to pause because with the demand that's out there, there's no chance that the Fed isn't watching this. But the last two weeks, we finally are seeing prices pop back up a little bit. I think the Fed's going to start getting very nervous. It appears that the rate increases they've put in place just haven't had the slowing effect on the used car market the way they expect or the new car market, which is up 6.5% week over week. So I think we're in a position now where it's really a time to pause because with the demand that's out there, there's no chance that the Fed isn't watching this.

They've watched the used car market and the new car market very carefully. And those markets are heating up again. We're seeing really a strong increase in volume, strong increase in pricing, strong consumer like you see in the job market following through and the way it isn't in some other markets. And they have to cool this down. And when they do cool it down, I think you'll see prices start to soften again. But we're not going to see it in the month of March, it doesn't look like. Yeah, JP Morgan, I study, I'm saying they believe 10% they will fall in terms of They've watched the used car market and the new car market very carefully.

And those markets are heating up again. We're seeing really a strong increase in volume, strong increase in pricing, strong consumer like you see in the job market following through and the way it isn't in some other markets. And they have to cool this down. And when they do cool it down, I think you'll see prices start to soften again. But we're not going to see it in the month of March, it doesn't look like. Yeah, JP Morgan, I study, I'm saying they believe 10% they will fall in terms of the used car prices this year. Clearly not seeing that yet.

Pat Ryan, good to see you my friend. Thanks so much. See you. the used car prices this year. Clearly not seeing that yet. Pat Ryan, good to see you my friend. Thanks so much.

See you.

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