The sudden Tesla price drops have had the seemingly intended impact on Tesla’s inventory, with cheaper cars and government incentives colliding to move a lot of the cars. If that’s not your vibe, I also have the dullest story in the history of dull stories because David is quite excited about it. That, and some other stuff.
The Great Tesla Sell-Off Continues
First, there was the great sell-off in Tesla stock, with the company losing 64 percent of its value in the last year (based on the current stock price, which I Googled about two minutes ago.) Then came the Inflation Reduction Act, with a quirk that meant new Teslas suddenly could qualify for the full $7,500 tax credit until the end of March.
The problem? New Teslas were mostly too expensive. Then came Tesla’s big price drop last week, putting the Model 3 and Y into contention for the tax break in certain trims.
Did it work? The TeslaData website tracks Tesla inventory and, going back to October, you can see a big spike in the inventory above followed by a big drop. It doesn’t require a lot of shrewd analysis to see that lowering prices helps to move inventory.
But what of used cars? Used cars also qualify for incentives but they’ve got to be below $25k and sold by a dealer, so that rules out most used Teslas for sale right now. Here’s an interesting tweet:
UPDATE: Carmax sold 57% of its ENTIRE Tesla inventory in the past 24 hours ???? https://t.co/msjHMjJADi
— CarDealershipGuy (@GuyDealership) January 15, 2023
As I believe I’ve expressed before, I have some skepticism about @CarDealershipGuy, and not just because he pays for a blue checkmark and tweets bullshit memes. His analysis is mostly just tweeting out whatever bits of data he sees and reacting in these big pronouncements to get social engagement, but he hasn’t Milkshake Duck’d yet and he does find some interesting stuff so let’s roll with it.
So, above he pointed out that CarMax had 696 Teslas in stock on January 13th. Two days later, that inventory dropped to 301 Teslas. As of this morning, when I checked, there were about 210 (you can check for yourself here). That’s a drop of a little over 69% in a few days.
What’s happening? For one, CarMax is heavily discounting Teslas. In searching around it seems a little uneven, but here’s a good example:
It’s not easy to tell on CarMax’s website when they discount a car, but Edmunds tracks it for you. and they show this Tesla Model Y in Lafayette dropping from $55,998 on January 13th (pre price-drop) to $44,998 in a day. $11,000! Overnight! That’s a big drop considering the car was only discounted $2,000 over the course of the prior month. If you look around you’ll see a lot of similar price drops.
It seems like CarMax has decided it’s better to drop inventory as fast as possible rather than let the cars sit there overpriced. The presumption is that these cars have been sold, but I don’t have any proof of that. It’s also possible that CarMax is pulling these cars from inventory and is wholesaling them. Either way, they aren’t listed for sale anymore.
Carvana is also dropping prices (here’s a Model Y with a $9,000 price drop), but their inventory stands at least 700 cars as of this morning. It might be harder for Carvana to part with cars given that they were driving up prices dramatically. Given all the problems Carvana has had lately, it’ll be interesting to watch how much they can afford to write-down cars compared to CarMax.
According to Cars.com, more than 7,500 used Tesla Model 3s are listed for sale (primarily by dealers) in the United States, with more than half of them listed above $40,000. That means you can get a new Tesla for cheaper than a used Tesla. Even adjusted for trims, there are 368 base model Tesla Model 3s listed above that number. This Model 3 might be the most overpriced Tesla in America.
If you’re aiming to buy a Tesla, it seems like times are good. If you’re selling them, they are, uh, less good. The impact this has on residual values is gonna be fun to watch.
Palate Cleanser: Automotive Heat Exchanger Market Worth $34.3 Billion By 2027
Did you know that David was a powertrain engineer focused specifically on vehicle cooling? He was! So he sent me report from MarketsandMarkets that has the headline: “Automotive Heat Exchanger Market Worth $34.3 Billion By 2027.” You can download the PDF here. Do not actually download it, unless you are a powertrain engineer or related to that industry in some way.
Anyway, here’s the important graf for you if you care about tube fins:
Tube Fin segment is expected to hold the largest share in the Automotive Heat Exchanger Market during the forecast period
The tube fin heat exchanger typically has tubes with fins attached to the outside. In this type of heat exchanger, the heat transfer rate is greater due to the liquid flowing through the inside of the tubes for heat transfer and the additional heat transfer surface area due to the finned tube. Tube fins are the most widely used heat exchangers in the automotive domain. This type of heat exchanger is used in car radiators and condensers and evaporator coils of HVAC systems. The increasing adoption of HVAC systems in developing countries is driving the market for tube fin heat exchangers. In November 2020, Dana Incorporated announced that the new 2021 Land Rover Defender featured Danas latest Spicer AdvanTEK axles, typically designed to deliver improved performance and superior power density. The Defender also features several Dana technologies for engine and thermal management, including gaskets, thermal acoustical protective shielding, and engine oil coolers to support optimum engine performance.
I am not excited about this, but David is. Good for David.
The 84-Month Car Loan Is Becoming More Popular
Palette cleansed, back to car sales. According to credit bureau Experian, 19% of new vehicle debt and 11% of used car loans were freakin’ 84-month auto loans in Q3 of last year. If you’re bad at math, that’s seven years!
Here’s the scoop from an Automotive News report on Experian’s findings:
In the third quarter of 2018, only 11 percent of new-vehicle borrowers and 4.1 percent of used-vehicle borrowers were on the hook for 84 months, according to Experian. By the third quarter of 2022, 19 percent of new-vehicle debt and 11 percent of used-vehicle loans ran seven years.
People can find themselves in situations where they have bad credit or little savings and need a car, which leads them to do whatever they can to find the lowest monthly payment possible even if it means spending a lot of money in interest. But, compound this with car values that were insanely high over the last few years, and you’ll end up with people unable to sell or trade in a car that’s worth way, way less than what they’d expected and owe (putting them underwater). The article touches on this:
I’m curious if someone in the last year took out an 84-month loan on a Tesla Model Y…
Palate Cleaners Two: Here’s A One-Off Ferrari Roma For China
Unless it was wild I’m not sure we’d write up a bespoke, “Tailor Made” (i.e. official Ferrari personalized) Ferrari Roma as its own story. That is not what we do around here, usually. Still, this tie-up between Chinese designer Jiang Qiong’er and Ferrari produced a car that doesn’t look half-bad even if it’s extremely subtle.
From the press release (which you can read at NetCarShow):
Jiang Qiong’er, who has developed an international reputation, is much sought after for her work with its roots in the subtlety, beauty and heritage of Chinese culture. Her design vision and distinctive insights, together with her deep understanding of traditional Chinese culture, mirror the aspiration of Ferrari to craft a special Roma for commemorating the special occasion. Together, Ferrari and Qiong’er took inspiration from classic Chinese aesthetics and fused concepts and expertise to achieve a synthesis of Italian design philosophy and Chinoiserie Chic.
Neat!
The Flush
What’s the longest loan you’ve ever taken out on a car?
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Even CarMax’s CEO Thinks Used Car Prices Are Too High
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The Political Reason Why Gas Prices May Rise This Summer
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The Mazda CX-30 Plug-In Rotary Hybrid Is Coming And The Logo Is Amazing
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Mercedes To Challenge Tesla’s Supercharger Network
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Here’s What You Need To Know About Tom Zhu, Tesla’s New ‘Number 2’
Got a hot tip? Send it to us here. Or check out the stories on our homepage.
Photos: Carmax, Edmunds, Hydro, Ferrari, Mazda
I’ve only ever had one car loan (cash-bought beaters for the remainder) – 84 month loan at 0% on my Mazda2. I was driving for work and needed something newer and reliable, and I stuck with the car through the entire loan period, so I don’t regret any of it.
I got into a 72 month loan a couple years back. Zero interest, zero down and got the exact configuration of car I was looking for that just happened to be aging in the dealer’s inventory (manual transmission, LOL, they just can’t move those). Took the cash I would have paid and invested it. Haven’t gotten rich off the investment, but I’m still a few percentage points ahead and have the car I needed anyway. As long as nothing causes a write off, I expect to be driving it many years after it’s paid off.
I don’t foresee that kind of luck coming along in my lifetime again.
I lost a friend over the whole 84 month thing. She’d gotten divorced and decided to move to a new state. So no job, no apartment, no car. She had a little savings and “sometime soon” she would start receiving “some” alimony. She asked me to go car shopping with her. I said that I would start checking Craigslist et al for some decent cheap cars. She got mad at me. She said she was too old to drive junky cars. I said, “You don’t have a job and you’re going to need to put down deposits for an apartment. The LAST thing you need is a car payment. Get the cheapest thing that will last a year. After that you’ll know want you can afford. She told me she could easily get a loan she could afford- the salesman told her she could. I asked if she was that dumb. She was insulted, and never spoke to me again (which was okay by me as I was friends with her Ex). Anyhow she ended up with an 84 month loan on a new Fiat 500.
I mean, on one hand that sucks, but on the other hand…welp. You gave solid financial advice and she wasn’t interested. You can only help people who actually want it. My opinion (keyword, opinion) that operating with financial literacy is equal parts knowledge/awareness, discipline, and maturity.
Tesla Fire Sale, the headline writes itself
*Generated by Auto ChatGPT
I really don’t see any issues with the 84 month loan – as long as the rate is fairly low and you actually have some equity. If you’re paying 10% on a car that you’re already underwater on, or worse – you’ve rolled negative equity from your trade-in into that 84 month loan, then you’re gonna have a bad time.
I bought my 4Runner about a year ago, before interest rates got super crazy, and I financed it for 72 months. I also put down 25%, and had about 12k positive equity on my trade, so the amount financed isn’t that much. I could have paid cash, but interest rates were low enough that I was making more money on my savings than what I’m paying in interest on the car, so I don’t feel too bad about it. I was more interested in keeping my fixed expenses low.
Now, I’m looking at buying a GR86 in the next year or two, and if interest rates are still crazy, I’ll probably just pay cash for the thing.
That’s pretty cool news about tube fins. (Sorry, I couldn’t resist).
::golfclap::
Many in the HVAC industry reject the heated debate of fins vs plates. Hoping cooler heads prevail
5 years is the longest I’ve ever financed a car. I try to never have a loan that’s longer than the powertrain warranty. I did take a 5 year loan out on a used, 3-year old Volt once, but that’s because it had an 8 year “Voltec” warranty (battery and all EV components). Due to crazy pricing last year, I sold that car for about $4,000 less than I had purchased it for after 5 years of use. For my current truck, the interest rate was the same for a 6 year loan, but I still did 5. Now I wish I had done 6 years, since that rate was a super low 1.74%. Those days are gone for a while.
“Tube Fin segment is expected to hold the largest share in the Automotive Heat Exchanger Market during the forecast period”
This isn’t just something that effects automotive. If you want to understand what ‘tube and fin’ is as easy as possible? Radiators. Radiators are tube and fin. Car radiators and computer radiators. So it’s not particularly surprising; it’s simply the application is changing.
And cars can’t switch heat exchanger types. I switched over to stacked plate because I can say ‘chilled water supply required.’ Cars can’t just tack on a 5HP pump and and a 120,000BTU/hr chiller. The primary is open air exchange, whereas if I really need I can design for full closed circuit. (And David’s going “no, that’s not possible!” It is – datacenter application. I have one that went geotherm including rejection; circuit’s something like a couple hundred thousand gallons.)
So what does that leave? Tube and fin. Cars don’t have any other realistic options for rejection. Ask David about the JL cooling system. It has tube and fin (i.e. transmission cooler) as well as stacked plate (i.e oil cooler.) One rejects, the other exchanges between systems.
“What’s the longest loan you’ve ever taken out on a car?”
Never done anything over a 60. Cars are almost exclusively depreciating assets with rare exceptions. And on average, 5 years puts you at a best case of 50% of the original value. Plus all the interest costs. I might consider a 72 at sub-1% interest for something I plan to keep 10 years, but ain’t nobody getting those rates now, and there isn’t a single new car you are going to be able to keep going for 10 years. (“Welcome to the new 2027 Android Auto experience. Which the completely non-replaceable infotainment in your 2024 can’t support especially as the manufacturer never provided a single update.”)
As long as there are no penalties for paying a car loan off early, and the interest rate delta is not massively different, a 5 versus 8 year loan is probably not that much of a benefit. you make a 5 year loan payment each month and if you have a rough month and need to pay the 8 year amount one or two months then their is no penalty. the biggest issue is the GAP. Value versus loan amount. after a few years most are over/under because of Depreciation. worse so lately because some brands/models have seemingly started up with a tighter planned obsolescence time frame. GM V8 DFM issues, Ford Ecoboost turbo 4 cylinder issues, Nissan CVT anything. all of thee thing s kill value as nobody will buy them. so you get in an accident or try to trade it in before it is paid off, and you get hosed.
This is exactly what I did for my last car loan. 7 year loan, paid the 5 year amount each month, paid it off after 3-ish years. Yes, I could afford the 5 year payment no problem, but I had also been laid off very unexpectedly a couple of years prior, so having the flexibility to make lower payments for a while if I had to was worth the extra $12.36 in interest I paid for the .25% higher interest rate.
5.5 years is the longest I’ve signed, but the interest rate was lower than my mortgage, so I sunk the extra the longish term left me into the mortgage, got PMI off, then got the truck paid off early to clear monthly breathing room.
Still have the truck 15 years later, so wouldn’t have hurt me to just keep paying extra on the mortgage throughout, but flexibility is worth a little extra in overall interest accumulation.
At this point custom Ferraris are so common it’s nice to just see some “plain Jane” model with good taste.
If I’ve said it once, I’ll say it again (which is probably obvious to most of you):
Cheap money has artificially sustained and propped up the pricing in the new car industry. Manufacturers and dealers tacked on overpriced, unnecessary features, 90% high-falutin’ configurations, and other ways to jack the MSRP into the stratosphere. Now that interest rates are stabilizing to something more sane (even if we may not like it), there will be a reckoning. I truly believe that there will a return to some more reasonable trims and prices, at least as an alternative, to those who cannot or will not burden themselves with 120 month loan terms. I’ve got my popcorn ready.
Not sure what the longest term was on an auto loan I actually signed. I’ve never taken more than 5 years to pay one off, and usually try to pay them off in 3.
Ok, I’ll be that guy (all definitions unofficial):
Palate: 1) the roof or upper part of the mouth OR 2) taste or sense of taste
Palette: 1) a selection of colors or styles OR 2) a wooden board used by painters to hold and mix paints
Pallet: a low platform commonly made of wood used for the storage and transportation of items
What you were looking for was “palate cleanser”. In restaurants these are dishes or courses intended to refresh one’s sense of taste after powerfully flavored foods. If you already knew this and were executing some sort of subtle pun instead, apologies.
The pedantic portion of today’s commentary is now complete and I return all of you to the usual hijinks.
That Ferrari Roma is a nice looking car. All too often the bespoke vehicles I see are not to my liking.
Longest loan? Five years, but only because it was interest free. Every other car I’ve bought cash or had paid off within three years.
Damn, got me.
My standard length loan has been 72 months, and most of my vehicles have been this length. Generally I’ve found this to be the best balance. I’ve never once regretted taking a 6 year loan, and I’ve never paid above 4 percent to do so.
I’ve done a 72-month loan, but only because I knew I had some money coming and was going to turn around and refinance it as a much smaller 60-month loan a few months in. I guess I could have asked for an 84-month loan and paid even less for those first few months, but even though it might technically have been a slightly better move, I just couldn’t bring myself to do it.
I did an 84 month term (zero down) on an f-150 at 0.9%, still got x-plan, got the same incentives as if I had taken a shorter term or paid cash, and sold it after 3.5 years for $14k more than I owed on it about a year ago. I realize those were heady days in the used car market, but can you really tell me it was a poor decision to take Ford Credit’s money pretty much for free?
I mean, in hindsight I’d have pre-ordered a bunch of Mavericks and Broncos and Audi RS6 Avants with the lowest payments possibly pre-pandemic, held on to them, and then sold them to Carvana for big windfall profits.
In hindsight you could’ve just shorted Tesla and be richer than Elon.
As long as it wasn’t G-Wagens you bought around the end of 2021. Then you’d be shacked up with Tracy.
My dad has gone to the huge government auction in NM for many years and bought a Ford truck with heavy duty bits, uses them two or three years and often sells them for as much as be paid or more, then goes and gets another.
What’s special about that Roma? I can see that it has a red-on-red-on-red leather interior, and that the paint job is silver with a red stripe and accents… which, OK, I get that that probably required a special order. How is that “wild,” though? It honestly seems pretty tame, by the standards of semi-custom supercars. I am 100% just not seeing what it is about this car that merits special attention.
The car they started with doesn’t even look all that special. It’s fine, but ‘meh’. Could be a Jag/AM/Supra/etc…
I don’t particularly think Ferraris need to look wild, but they should at least be pretty and be identifiable/distinctive for that kind of money.
I have always taken 60-month car loans to but have never taken more than 3 years to pay those loans off.
84 months. That’s like when you ask a mom how old their kid is. “Oh about 84 months” they say. If they say it in years it sounds a lot less cute for both ages and car loans.
It’s also a good way to downplay how long the potty training is taking.
Currently half way through a 6 year car loan. Not my best decision, but also not my worst. It allowed me to get out of a bad automotive situation and into a very efficient & reliable (but still fun!) daily driver. The previously mentioned “bad automotive situation” was my worst decision ever, bar none.
As long as the interest rate is very low, longer the term the better. I keep my cars 12-15 years. If delta between the financing rate and “normal” returns on investments is high enough, you’re actually losing money buying cash.
Disclaimer, I’m in Canada, where car financing rates are usually quite a bit lower than the US.
Interest rates are crazy high right now though, which is what makes this such a bad deal. Plus, most of the folks looking at 84-month loans don’t have very good credit, let alone the kind of investments that would negate the interest they were paying on the car. Besides, there’s the fact that someone taking a loan that long is very likely to be underwater on the car for quite a while, due to depreciation—better buy Gap insurance.
Yeah, although high interest rates are a pretty recent phenomenon. The majority of the 84 month loans out there were probably taken out before rates went up. The problem will be if they keep going even with higher rates.
“Tell me you’re under 30 without telling me you’re under 30.”
Son, literally the first time interest rates went so ridiculously low was 2008. Go look at the fed historical rates. From 1971 to 2007, those rates never went below 6%. Ever. Mostly they were much higher.
The 0% interest rates were literally a desperation move to stave off collapse, that the 1% demanded they keep going because the fed cash window was literally a money printer. Literally. I had direct experience; banks spent millions turning up automated systems so they could go to the money window, borrow for nothing, and reap every penny of interest for themselves. And convince people that were living paycheck to paycheck that they weren’t and could totally afford that new bed or that new car or that new home.
Well hey guess what happens when interest rates go back to the normal of the past 70+ years after that? Yup. Nothing fucking good. The interest rates for the past decade have been an extremely dangerous anomaly. They were never normal.
How do you prevent the car from rusting out before those 12 years hit?
Buy an aluminum vehicle. F-150s, many Ford Super Dutys, Audi A8 (and I’m pretty sure, Audi A7s), modern Jaguars and Teslas Model S or X. I’m sure there are others, but these come to mind immediately.
Or buy a Volkswagen group product. Most if not all of their body-in-whites are fully hot dipped in industrial wax, and several models are likewise galvanized. They carry an unlimited miles 12 year corrosion warranty but in reality should last far longer.
Undercoating companies still exist, and are usually a good value if you keep your cars for the long haul. Or buy a gallon of the stuff and DIY. Waxoyl and Woolwax are brands with a good reputation in the little British convertible markets, for good reason.
The other option is to live on the West Coast or in the desert South or any other area where it’s simply not a problem.
Krown rust proofing. Never had rust or needed a torch on any of my cars.
“Tube Fin segment is expected to hold the largest share in the Automotive Heat Exchanger Market during the forecast period”
Although it looks like the market is heating up, they’ll need to keep their cool, just in case there’s a big Celsius-off.
5 years new car
1.5 years buy here/pay here , but it was cherry!
I don’t know how people even think in terms of 84 month car loans. My strategy, since I was a kid, was buying ratty fixer-uppers until I could put at least 25% down on a new car. That let me get out of the buy-on-credit hole. Now I have a designated savings account just for when I want to buy another car. I think most people can do this, if they prioritize it. If you start thinking in terms greater than five years, at that point, isn’t it just better to lease?
The length of the loan is not a problem except for the fact you are more likely to be in negative equity for longer with a longer loan. Most car depreciation happens in the first 5 years of its life (and even that is front loaded towards the first 2-3 years). With a long loan you are not paying off that much capital in that time so more likely to be in situation where the car is worth less than what is still owed.
The difference now is that even the cheapest, most humble new car can be expected to have significant service life left after 7 years. The 3-5 year “standard” loan term is a relic from when that wasn’t the case.
Responsibly used, there’s nothing more or less objectionable about a longer loan term, depending on rates vs what you plan to do with the monthly savings.
Exactly. We financed a new CX-5 for my wife for six years, but we’ve now had it for eight years, and plan to keep it for at least another ten years.
Regardless of longevity, the longer loan terms indicate that a car purchase represents a much larger percentage of a working person’s income than it used to. Wages have not kept up with car prices (or the prices of most other things).
I have financed exactly one car and it was 5 years. After the 5 years, I began automatically putting the payment amount into a savings account. When it came time for the next used car, I paid cash (private sale). It’s a damn good feeling to know I could buy a new car any time. Of course, I’m cheap and will always but a jalopy before a nice car.
Just before the pandemic really hit we bought a Hyundai Ionic Hybrid (2019 version). All the horns and whistles. 7 year loan at 0% interest with no effing downpayment. Gas at that exact moment was a little over $1.00 per gallon. This is my wife’s computer to work car and it averages 40+ MPG. I am paying Hyundai finance back with dollars that are way less valuable than they were 3 years ago. So yes: 7 year loan. LOL
Dude, where are you at that you had gas at $1.00 a gallon?
I mean, if it’s zero-percent interest then it’s kind of a no-brainer to stretch the loan out for as long as you feel like.
“Tube Fin segment is expected to hold the largest share in the Automotive Heat Exchanger Market during the forecast period…”
“The Tube Fin Segments” is an absolutely outstanding name for a band made up of automotive engineers and market analysts.
They play Garage Rock.
I suggested “Bleed Nipples” to a band in NYC. They snagged it.