sack5000

Just had a chance to read through this interesting thread, again. There are so many prices quoted from auto trader, you can see how much depreciation has taken place in just four months as some of the cars are still for sale; for many thousands less. The stealers certainly take a bath for having the dead weight sitting around. That is probably why the nice cars are higher than a cat's behind.

CWW

Wow this is an old thread...

I read back through some of it, and I was right, not that I'm happy about it. The economy has only gotten worse since last year, and I've seen '07 E63's going for high $40k's recently.

He shoulda gone with the P-car.

sack5000

Anyone in the market for a '07 E63 should obviously wait. By summer, a certified '07 may be available for less than $50. Right now a very low mileage 08 E63 can be had for slightly less than $60.

Wonder what the trade-in would be now on that P-car, $43 vs $53?

CWW

Oh yeah, he would be way ahead if he'd jumped to the P-car. At least $10k, maybe more.

MB_Forever

Prices are tanking and will continue to tank for both cars until the economy starts improving. I was only suggesting he tries to sell it privately for a month because he stated that he wasn't in a hurry, and for some reason I thought he had the rare P30 package, but he didn't after all....

Improviz

The economy is taking a toll on depreciation right now, no doubt about it; normally the end of calender year is when prices drop the most rapidly, and with the post-Lehman credit crash hitting just before Q4 it was far worse than usual.

Basically there was a whole industry built up around banks/credit institutions issuing loans for homes, cars, credit cards, commercial loans etc., then selling them to investment banks, who in turn packaged them up into bond-like entities & sold them to large investors.

This worked fine, until the investors started to realize that the AAA ratings that these entities had been granted weren't worth the paper they were printed on, and lost (deservedly) faith in the whole enterprise, and stopped buying the entities.

So the whole credit system basically collapsed, which is the same thing that happened the last time consumer debt levels were equal to GDP; hopefully it won't be as bad this time around:



And from there, it was all downhill, but insofar as vehicle sales go, there are two main factors which have killed them: 1) the collapse of the system led to the "old system", wherein banks/credit institutions actually keep the loans they issue, becoming the predominant system for issuing credit, which a) lowered the number of available loans, and b) has resulted in tighter lending standards, since many of these banks/institutions were heavily invested in the aforementioned now-worthless entities, which caused them to take large losses, which forced them to hoard money to meet their capitalization requirements; 2) the tidal wave of bad news has scared consumers, making many of them fearful of making big-ticket purchases (and many are cutting back on small-ticket purchases as well).

But 1) is a killer: I was talking with a friend who's in the industry a week or so ago, and he was saying that if the people who wanted credit could actually get it, their sales would increase dramatically. Of course, this begs the question of whether or not said people are credit-worthy by rational lending standards (as opposed to the system-wide irrationality that's gripped finance for the last decade or two once their training wheels were removed), which I didn't think to ask at the time...

So until all of this gets ironed out, or until production cuts and/or product obsolescence restore a balance, there will be a huge supply/demand imbalance in the system for most items, particularly the big-ticket items. And even then, things are not going to be as they were; this is a readjustment. People will have to start living within their means again, which means that demand, and pricing, for luxury items will surely be taking a beating for the forseeable future.

sack5000

All great points, thanks for posting. See also the attached article from the NY Times from 1999. Apparently this was the start of "easing the credit requirements".

Improviz

Fannie and Freddie were definitely a part of the sub prime market, but in terms of magnitude they were dwarfed by several other entities (Countrywide, Indymac, several other now-bankrupt institutions). Also, pressure for lenders to ease credit terms continued in, in fact accelerated in, Bush administration:

http://www.whitehouse.gov/news/relea.../20020615.html

http://www.whitehouse.gov/news/relea.../20020617.html
"The President also believes that government alone can't close America's
homeownership gap. It is critical that our government challenge the
private sector to take concrete steps to tear down the barriers to
homeownership that face minority families. The President is issuing
"America's Homeownership Challenge" to the real estate and mortgage
finance industries to join in his effort to increase the number of
minority homeowners by 5.5 million families by the end of the decade. Many
organizations have already responded to the President's challenge by
committing to:

Substantially increase by at least $440 billion, the financial commitment
made by the government sponsored enterprises involved in the secondary
mortgage market, specifically targeted toward the minority market;

Launching twenty-five different local initiatives across the nation,
geared toward eliminating the specific homeownership barriers faced by
minority families in those communities;

Raising $750 million in below-market-rate investments by 2007, which will
work in collaboration with local homeownership initiatives and be targeted
to heavily minority program areas;

Pursuing strategic partnerships in 20 top housing markets between
homebuilders, lenders, local officials, and community leaders to develop
approaches that address the local challenges to building homes for
minority families living in urban centers;

Establishing faith-based housing partnerships between the participants and
at least 100 churches, mosques, synagogues, and other faith-based
institutions;

Aggressively developing new mortgage products so that conventional market
alternatives are available to combat the predatory loan products that are
disproportionately targeted to minorities;

Creating new mortgage products to meet the unique needs of recent immigrants;

Dramatically expanding financial education efforts for minorities,
providing financial counseling to at least 380,000 minority families, and
taking measures at the local level to reduce predatory lending; and

Establishing multilingual, consumer-oriented internet Web sites designed
to help minorities overcome barriers to homeownership, including creation
of a central data bank of affordable housing programs made available to
real estate agents when working with clients. "

http://www.whitehouse.gov/news/relea...0020617-2.html
"That's why I've challenged the industry leaders all across the country to
get after it for this goal, to stay focused, to make sure that we achieve
a more secure America, by achieving the goal of 5.5 million new minority
home owners. I call it America's home ownership challenge.

And let me talk about some of the progress which we have made to date, as
an example for others to follow. First of all, government sponsored
corporations that help create our mortgage system -- I introduced two of
the leaders here today -- they call those people Fannie May and Freddie
Mac, as well as the federal home loan banks, will increase their
commitment to minority markets by more than $440 billion. (Applause.) I
want to thank Leland and Franklin for that commitment. It's a commitment
that conforms to their charters, as well, and also conforms to their
hearts.

This means they will purchase more loans made by banks after Americans,
Hispanics and other minorities, which will encourage homeownership.
Freddie Mac will launch 25 initiatives to eliminate homeownership
barriers. Under one of these, consumers with poor credit will be able to
get a mortgage with an interest rate that automatically goes down after a
period of consistent payments. (Applause.) "


http://www.whitehouse.gov/news/relea...0020618-1.html
"And so, therefore, I've called -- yesterday, I called upon the private
sector to help us and help the home buyers. We need more capital in the
private markets for first-time, low-income buyers. And I'm proud to report
that Fannie Mae has heard the call and, as I understand, it's about $440
billion over a period of time. They've used their influence to create that
much capital available for the type of home buyer we're talking about
here. It's in their charter; it now needs to be implemented. Freddie Mac
is interested in helping. I appreciate both of those agencies providing
the underpinnings of good capital. "


http://www.whitehouse.gov/news/relea...0040326-5.html
"President Bush proposed the Zero-Downpayment Initiative for Federal
Housing Administration (FHA)-insured single-family mortgages for
first-time homebuyers in his FY 2005 budget. FHA projections indicate that
this new mortgage product would generate about 150,000 new homeowners in
the first year alone.

Through America's Homeownership Challenge, more than 2 dozen companies
have made commitments to increase minority homeownership, including
pledges to provide more than $1.1 trillion in mortgage purchases for
minority homebuyers this decade.

Supporting rural homeownership through the Department of Agriculture with
$2.7 billion in home loan guarantees for low- to moderate-income rural
residents and $1.1 billion in direct loans for very low to low-income
borrowers who are unable to secure a mortgage through a conventional
lender. These loans are expected to provide 42,800 homeownership
opportunities to rural families across America. "


http://www.whitehouse.gov/news/relea...0040902-5.html
"Zero-Downpayment Initiative. In his FY 2005 budget, the President
proposed the Zero-Downpayment Initiative. Preliminary projections indicate
this Initiative would help about 150,000 homebuyers in the first year
alone. This proposal would eliminate the statutory requirement of a
minimum three percent down payment for FHA-insured single-family mortgages
for first-time homebuyers.

America's Homeownership Challenge. In June 2002, President Bush issued
America's Homeownership Challenge to the real estate and mortgage finance
industries - to encourage them to join the effort to close the gap that
exists between the homeownership rates of minorities and non-minorities.
Due to the President's leadership, more than 2 dozen companies have made
commitments to increase minority homeownership, including pledges to
finance more than $1.1 trillion in mortgage purchases for minority
homebuyers this decade. "

http://www.whitehouse.gov/news/relea...030415-11.html

So, how did it work? Well, in 2006 the White House was crowing about its
achievements:
"The Accomplishments

Increasing Homeownership

The US homeownership rate reached a record 69.2 percent in the second
quarter of 2004. The number of homeowners in the United States reached
73.4 million, the most ever. And for the first time, the majority of
minority Americans own their own homes.

The President set a goal to increase the number of minority homeowners by
5.5 million families by the end of the decade. Through his homeownership
challenge, the President called on the private sector to help in this
effort. More than two dozen companies and organizations have made
commitments to increase minority homeownership - including pledges to
provide more than $1.1 trillion in mortgage purchases for minority
homebuyers this decade.

President Bush signed the $200 million-per-year American Dream Downpayment Act which will help approximately 40,000 families each year with their downpayment and closing costs.

The Administration proposed the Zero-Downpayment Initiative to allow the
Federal Housing Administration to insure mortgages for first-time
homebuyers without a downpayment. Projections indicate this could generate
over 150,000 new homeowners in the first year alone.

President Bush proposed a new Single Family Affordable Housing Tax Credit
to increase the supply of affordable homes.

The President has proposed to more than double funding for the Self-Help
Homeownership Opportunity Program (SHOP), where government and non-profit organizations work closely together to increase homeownership
opportunities.

The President proposed $2.7 billion in USDA home loan guarantees to
support rural homeownership and $1.1 billion in direct loans for
low-income borrowers unable to secure a mortgage through a conventional
lender. These loans are expected to provide 42,800 homeownership
opportunities to rural families across America. "

Of course, extending lending to low income and/or minority borrowers isn't a bad thing in any way, shape, or form,
provided that a) the banks/lenders, realtors, mortgage brokers, appraisors, investment banks, and ratings firms
involved do their do dilligence and ensure that the loans are actually being made to people who have the ability to
pay the loans back; and b) the government exercises some oversight of the banks/lenders, realtors, mortgage
brokers, appraisors, investment banks, and ratings firms to ensure that they are practicing due dilligence
and ensuring that the loans are actually being made to people who have the ability to pay them back

Unfortunately, neither a) nor b) happened. At every link in the chain from the realtor to the ultimate packaging
of these toxic loans into ultimately worthless assets, people simply ignored the risk, thinking it was someone else's
problem, and the government, under the delusion that markets police themselves (akin, imo, to arguing that if you
simply removed policemen from the streets, there would be no crime), sat on the sidelines and did nothing.

And so here we are.

Plenty of blame to go around here, basically all parties involved, be they political, financial, or consumer,
acted like a bunch of drunken sailors at a party. And it's just sickening, because it could have been
prevented, but wasn't.

tscales

Take my approach. I kept my E55 and bought a 996 Turbo Cab. Best of both worlds.

sack5000

That approach is certainly understandable and almost necessary if you want a new ride and will not agree to a whacking on the existing vehicle.