Sunday, August 29, 2021

Crazy and Getting Crazier

There has been nothing that has exemplified the crazy world we live in today better than the increases in the value of used cars.

Prices have fallen slightly recently but are still up 40% compared to two years ago.

 Manheim Used Vehicle Value Index, Mid-August, 2021

It is almost as if we are living in Cuba where a 1957 Chevrolet still commands top dollar and not because it is a vintage collectible.


You just don't have a lot of other options in Cuba if you don't want to walk or ride a bicycle.

The Cuban Communist government did not allow any imports of American cars or parts from 1959 to 2016.

That ban has been relaxed but it is still prohibitively expensive to buy a new car in Cuba as this story on Cuba's "classic cars" explains.

New car imports are still highly regulated, and the pricing makes purchasing a car unrealistic for most Cuban locals. The state still has a monopoly on Cuban car sales, which means prices are high. A Peugeot 508 which typically retails at $29,000, costs a whopping $262,000 in Cuba. With the average Cuban citizen earning around $20 a month, it is unlikely that new imported cars are going to be part of a buying boom.

 $262,000 for a Peugeot?

Bernie Sanders and AOC say they want to make the United States more like Cuba?

This firsthand account estimated that 50% of the vehicles on the road in Cuba in 2014 were American cars from the 1940's and 1950's.

We haven’t seen any official estimates, but our back of the envelope guess would be that about 50% of the automobiles on the road in Cuba in 2014 were American cars from the late 40s to 1959. The rest of automobiles we saw were Russian Ladas, French Peugeots or Citroens, Fiats, or cheap models of Japanese and Korean cars.

Prices of used cars has gotten so bad that the price of a year old car is approaching the price of a new car. That is, if you can find a new vehicle.


In June, the median price for a used one-year old car was selling at 94.7% of the price for a new car at dealers.

In 2019, a one-year vehicle was typically selling for 77% of the price of the new car.

Based on reports I have seen, it is not unusual for someone with a two-year old car to be able to get the same price for their used car today as they paid for it new. 

What is causing this?

It appears to be a classic case of supply and demand.

The supply of new cars has been depressed by manufacturing cutbacks as well microchip shortages coming from China and the Far East.

Dealers only have about 1/3 the number of new cars in inventory as they did two years ago.

At the same time, the car rental companies who traditionally supplied a lot of vehicles to the used car market, drastically cut their inventories during the lockdown months of the pandemic. This has now led to high auto rental prices as well as fewer cars going to the used car market.

It is estimated that Ford has fully manufactured 50,000-60,000 Ford 150 pickup that are lacking the necessary microchips that are necessary to send them to dealerships.

A number of these are parked in Kentucky near where they were manufactured in Louisville.

Originally, Ford expected it would be short about 200,000 to 400,000 trucks in 2021. Now, it looks like that figure will explode to 1.1 million vehicles. 

This problem is not limited to the United States.

In the United Kingdom, car production in July was the lowest it has been since 1956!

That might explain this recent ad in London for a "slightly used" 2 year old Range Rover.


At the same time that the supply of vehicles is lacking in the United States, reports are that there are plenty of pickups, trucks and humvees not to mention Blackhawk helicopters, night vision equipment and assault rifles that just became available.

Source: The Sunday Times

I saw one report that it adds up to $85 billion.

Let's out the number in context---it is ten times the annual defense budget of Pakistan.

The Taliban now also have more Blackhawk helicopters than 85% of the countries in the world.

I thought 2020 was crazy.

2021 is starting to make last year look like a walk in the park.

Let's hope we all won't be walking soon from the combination of car prices, gas prices and $85 billion of our military hardware in the hands of a bunch of crazy terrorists.

No comments:

Post a Comment