CoPilot CEO & Founder Pat Ryan joins Yahoo Finance Live to discuss used car sales stalling while prices remain high and dealerships begin to be flushed with supply.
– Let’s stay in the transportation space if we will here as sales of used cars they slipped last month as prices gave prospective buyers some sticker shock while new car inventory still lags. Joining us now is Pat Ryan, who is the CoPilot CEO and founder. Pat, great to have you here with us today and thanks for taking the time.
You’ve been studying the data. So are consumers just hitting a point where they’re saying enough is enough, these prices are far too high for used vehicles, and just waiting it out at this point for some new inventory to come along?
PAT RYAN: It’s starting to emerge that way. The first thing is that last year in March is a big comp because we had stimulus checks that dropped. And when those stimulus checks dropped, that was the beginning of prices taking off in a way we’ve never seen before. So it’s a very tough year over year Comp, in any case. But particularly in that one to 3-year-old car range, we’re really starting to see a stand off.
You know, new car buyers have often looked at that one to 3-year-old, kind of newly nearly new market. And supply is back where it was before the pandemic started, but prices are up 40%. And we’re seeing emerging stand off because right now, historically, three out of four used cars that are sold are priced below $25,000. That’s only one third of the inventory that’s available on dealer lots.
So with the prices being up so high people don’t want to buy a 2019 car for what they would have paid for it new, and what they can wait, they’re waiting.
– How has the rising energy costs? And particularly, the prices at the pump that consumers are seeing, how has that perhaps triggered even more searches for energy efficient type of vehicles or at least, fuel efficient vehicles?
PAT RYAN: It’s interesting. Usually when you see interest rates go up, that means more expensive vehicles like pickups and SUVs tend to cost more, the payments go up. And when gas prices go up, both of those usually have a downward pressure on demand for large SUVs and trucks. We’re not really seeing that right now. So the people who wanted to buy those vehicles appear to be going, which is unusual. It just shows you how strong the consumer remains in the economy.
But we are seeing a big increase in demand for electric vehicles. And of course, a lot of the electric vehicles that should be on the market right now are new vehicles that aren’t available. A lot of the new models are just starting to come out. And so we’re seeing big increases. Tesla prices are up dramatically. One to three-year-old electric prices are up 13% in the last five weeks alone. That’s about $8,000.
PAT RYAN: So you’re seeing big interest in electric, but not the softening in the gas guzzlers you would normally see with high interest rates and high fuel prices.
– It’s really fascinating. So when we think about going forward from here in the used car market, because even as we get later on down the line years out from now, and perhaps you see some of that churn show up in the used car segment, where you’ve got perhaps more electric vehicles that are available for resale. That trade in, trade up, and refinancing even on a vehicle that may be getting traded, and even if for a used car. What does that look like for you? What’s the forecast or the outlook even spell out at this point in time?
PAT RYAN: Yeah, it’s a great question. I think the first thing is if you have a car to sell, this is the time to sell it. The truth is it’s for the first two months of the year, prices were dropping everything but the oldest vehicles. So one to 3-year-old cars dropped $1,200 in price in the first two months.
But then when dealers saw those holes in their lot on the new car side, and they saw what happened in the Ukraine and the questions about how supply chain would be affected, they haven’t lowered the used car prices like they would have. In fact, used car prices went up in March for nearly new cars. Those one to 3-year-old cars, they continue to go up for the older cars and they held steady for kind of cars in the middle.
So this is a great seller’s market. If you are a seller, sell your car now. You got a– the car prices were declining and they stopped, and they’ve gone back up, and up a little bit. This is your chance to sell. But the pressure over the years for prices to go down, there is a huge amount of supply that is overpriced relative for consumers are right now, particularly in those 1 to 3-year-old cars, which keep coming off lease.
So you’re going to see those prices eventually start to go down as new car shipments get there. The second half of the year, we’re going to see softening, but Ukraine and the continued hold in dealer lots have slowed that decline. So I’d wait if you’re a buyer, go sell now if you can.
And then the second half of the year will be good because in ’23, we’re going to see less off lease vehicles because three-year-old leased cars would have been sold during the first year of the pandemic when new car sales were down somewhat because of the shutdowns and because leasing declined. So second half of ’22 is going to be the best time you’re going to get to be a buyer. But this quarter is the best time to be a seller.
– Pat, I’ve got to sprint to the finish here, but we’ve been largely talking about the dealership experience. What about in private sellers where people are just looking for anybody, to your point, who’s looking to list their car to the marketplace, and whether that they’re doing that online, weather they’re doing that just in their own kind of personal connections. You know, what have we seen within that sub segment of the used car space?
PAT RYAN: You know, that’s a segment where only half the cars typically sell because a lot of friction. You know, you have to answer questions for everybody who asks you questions. You have to go meet somebody for a test drive, you don’t know, it makes people a little bit more worried about crime, and the like. So there’s a new channel that’s come up which is these large dealers are putting bids on cars online, consumer cars.
So you can go to Carvana, CarMax, Lithia, Drive Go, and you can put your car for sale to dealers and get bids from sitting on your couch. The bids, if you get two or three of them, you’ll get a good price, it’s convenient. That’s a whole new channel that emerged because of the shortage that will be here for good. And it’s a much better way to get the most money for your car with the least hassle.
So we encourage people, get online, get two or three dealers to bid on your car. You’ll get the best price possible. That works well if you’re selling a car. If you’re trying to get in of course, there’s some tax advantages to selling it to the dealer you’re buying from. But if you’ve got a car– if you have a car to sell, get out there, get online, let your fingers do the walking for you here, and you’ll get great prices without having to go meet a stranger at a 7-Eleven that you’re worried about and not the fear of crime.
– Yeah, hard enough to find a new bike here in New York City. I can’t even imagine trying to find a used car. Pat Ryan, who’s the CoPilot CEO and founder, thanks so much for joining us. We appreciate. It.