Thoughts on the Car Market in 2021
The used car market in recent months exploded, if you weren’t aware, which has been both the result of certain pains in that industry and also a contributor to others. Though it is finally slowing down, that means now is a critical time for both buyers and sellers. This primarily concerns buyers of traditional commuter vehicles, like passenger cars and trucks of no particularly exciting variety, but it hasn’t left the enthusiast market unscathed. This week, as we stand right now at the peak before the fall, we thought it was a good opportunity to explore what’s happened in the overall market, where experts see it going soon, and why this matters to BMW enthusiasts like ourselves. Welcome to an unusually journalistic edition of Turner Motorsport Weekly, everyone. | | | With the events of 2020 still managing to put a squeeze on nearly every global industry, it’s no surprise that the car market is one of the most heavily affected, particularly here in America. Put plainly, people will always need transportation and a pandemic doesn’t stop that. It actually increased that need as the commuting workforce opted for personal vehicles over public transportation to avoid unnecessary human contact. During the pandemic, we saw a variety of manufacturer and dealership incentive programs as they exhausted every effort to keep their doors open and move sheet metal onto the road in anticipation of a steep decline in business. Oddly enough, the pandemic didn’t quite have the same effect on the car industry that it did on many other avenues of business. | | | Dealerships, as providers of transportation to the good people of the world, were considered essential businesses and allowed to remain open even during the heart of the largest period of uncertainty our nation has likely experienced in over 100 years. Keeping their doors open and offering those incentives created a boom in car sales that was boosted by the stimulus money and lower monthly spending that average households used to their advantage, which is where this whole problem of car shortages we’re currently witnessing began, in a sense. | | | While the dealerships were moving units, many OEM component suppliers and vehicle manufacturers had closed their doors. Particularly in Italy, Germany, China, and Japan. That supply of vehicles had to run out and, of course, eventually, it did around this time last year. This was the beginning of the used car rush as dealers were taking many relatively new vehicles in on trade for brand new units that offered heavy incentives and paid above-average trade for those vehicles swapped out by customers. With fewer and fewer new cars available due to the pandemic restrictions overseas, used cars began to rise in value as a result of that lack of new car availability. | | | Around the same time, component manufacturers, particularly, microchip manufacturers, had shifted gears to maintain their production output by supplying other industries while the vehicle manufacturers halted their production. Now that everything is opened back up globally, to one extent or another, all those vehicles that need those parts are stuck waiting for the supply chain to catch up. This leaves dealership lots barren of new vehicles ready for sale and has caused a massive spike in used car prices. | | | But how does this affect the enthusiast market, like us BMW owners? Likely, you fall into one of three camps. Either you aren’t looking for a new vehicle and/or aren’t considering selling any of yours, you are looking for a new BMW to replace something aging in your stable, or you’re looking at buying/selling an older BMW (from just a few years old to classic). Regardless, you all are faced with some choices to make as we sit here on the brink of a massive dive in car prices. | | | Now that all the price climbing seems to have stagnated and experts indicate we’re quickly approaching that rapid decline, we have some advice that can help both buyers and sellers right now take advantage of a nearly once-in-a-lifetime opportunity to maximize your dollar. | | | We’ll begin with those of you who are in the market for a new BMW, used BMW, or a classic BMW. There are a few key differences between all three options, but the advice is relatively similar. Unless you have to make a purchase right now, you should probably hold off for several weeks to a few months to avoid overpaying for whatever you’re interested in as your next BMW. Even if yours has a few things it needs, you’re going to be much better off, in the long run, keeping that car on the road with parts that it needs rather than trying to replace it at this moment, as new cars are scarce, leaving you with a limited number of options in terms of specific models and equipment. That, and used cars have never been priced so highly, in many cases, exceeding their original Manufacturer Suggested Retail Price (MSRP). So, unless you want to pay a premium on an outgoing model or something that’s a few years old, standard used cars aren’t a great purchase idea right now. | | | Somewhat unrelated, classic BMWs have become something of a commodity lately, as well. We’ve all seen a sharp rise in E30, E36, and E46 prices lately, even during the height of the pandemic. An E36 M3 you could drive home for under ten grand shortly before the pandemic has doubled, if not more, in price. E30s, even examples that are not what we’d call ‘collector spec,’ have easily tripled in price. I was able to sell my E30 vert for more than I ever expected I’d receive and did it almost overnight. The buyer called less than a day after I had posted the car for sale and flew out the following morning from across the country to come and grab it, knowing that if he didn’t jump on it that he would miss his chance. People are almost treating them like stocks, trying to buy them as quickly as possible, knowing they will never be worth less than they are now. What does this mean, you ask? | | | While the regular commuter car market shows signs of backing off, the classic market, especially classic BMWs, doesn’t show signs of slowing down anytime soon. Frankly, they aren’t making these cars anymore, and the older they become, the more valuable they get. To a point. Eventually, we’ll see all but the rarest, most pristine, most desirable examples experience a plateau, but we aren’t there yet. The prices are still climbing, so if you’re in the market for something like an E30, E36 M3, or E46 M3, you’re going to have to either choose to pay a premium now or risk paying more in the not too distant future. Fortunately, whatever you choose likely won’t lose value, you will just have to prepare to pay more than you’d like for the car you want. We have some helpful buyer’s guides for the E30, E36, and E46 that you should use to make sure what you’re buying for a premium is worth the price and not just inflated by association. | | | For car sellers, though, right now is going to be your best time to move it, especially if you don’t need to replace it in the immediate future. Whether that means trading your current car in for a newer/new BMW, or selling your used/classic BMW on the private market, right now is your best chance to ask that absurd price and likely get it, or at least, close to it. That E30 you paid a few grand for in 2010? Right now, you’ll find similar examples in fair condition hitting the marketplace for close to, if not over, ten grand. The E46 330i you’ve had as your daily for years? No one is taking one home for under 7,500 in decent shape with under 200k on the clock, so, unless it’s sentimental and going with you to the grave, you should highly consider moving it. | | | That said, you’ll have to accept that whatever you decide to replace that vehicle will likely be equally marked up if you buy anytime soon. So, here’s where our advice comes into play. If you don’t need that classic BMW and think you may be ready to move on, selling it right now and waiting for the market to calm down is your best bet to make your money go farthest. If you’re like me, you can take one or two cars that you may not have too much invested in and turn them into a dream car. I sold my 2015 WRX for more than it was worth two years ago with nearly 25k more miles on it and my E30 to fund both a manual transmission X3 AND a Porsche 996 C4. Cash. If someone had told me that I’d be able to trade my 35-year-old BMW and junky Subaru for the Porsche I’ve wanted since I was ten as well as snag a BMW SUV with the proper transmission, I’d have called them crazy. With the market, the way it is, an eye for fun cars that aren’t quite on everyone’s radar but otherwise generally unaffordable are now within reach. | | | Let’s create a hypothetical thought exercise. Say you have always wanted an E31 850ci. These are still desirable cars, but they haven’t seen that same crazy inflation as the more popular classic BMW models, barring showroom-condition collector examples. Let’s assume you have an E30, or even, just a used commuter car in good condition that doesn’t see the road as often as you intended it to. Selling your car right now could award you a premium that makes the cost of that E31, or similarly obscure car, within your grasp. What we’re saying is, now is the time for oddball cars. This is true for both buyers and sellers, as, if you’re a seller, you’re likely going to be a buyer soon after your sale is complete. If you’re a buyer, the only cars you should consider right now are projects or oddballs that maybe don’t have that cult following. | | | Why is this good, you ask? Well, if you are at all interested in projects, builds, or leaving your mark on the car community, the best way to have that impact is with something many people either forgot existed or never considered. These off-the-radar cars, like the E38, E31, E32, and other ‘non-performance’ BMW variants haven’t experienced that price hike and can be incredible when well executed with proper wheels, suspension, and a mechanical refresh. Not only that, but if collectors aren’t interested in them, and the average consumer would steer clear of a vintage oddball BMW, you’re not going to find a lot of competition in the market to buy them. So here’s our tip; if you’ve ever wanted something a bit different, now’s the time to sell that desirable BMW for the most money you’ll ever get for it and justify spending money on wheels, suspension, upgrades, and start a project that you’d otherwise never have the opportunity to consider. | | | With any luck, we’ll see the scene explode with non-traditional BMW builds thanks to this price hike. That will likely build the community around these cars and change the perspective about them to the average enthusiast which will hopefully bring more variety to a scene that has been stagnant for too long. Yes, we all agree that a laid-out E36 M3 on three-piece wheels with some aggressive aero is a glorious thing to behold, but how many of them were built to impress rather than to put a smile on the builder’s face? This change in the market could be the shakeup our community needs to bring similar execution to models that don’t receive attention to that degree. So, go out and find that dream car or oddball with potential and make it something that changes the hearts and minds of enthusiasts. Do it all right now with the excess money you can expect to receive for your used BMW or desirable classic that maybe hasn’t given you that ‘fizz’ that it did a few years ago. | | Regardless, the final rundown is this: if you are in the market for a desirable or more traditional new or used car right now, we highly suggest holding off for the time being until the market cools down. Keep your current BMWs and maybe make a few upgrades that allow you to see it in a new light, at least for a while. If you’ve considered selling your BMW, right now is the time to do it. Collectors, enthusiasts, and even traditional car buyers are hurting for something to drive and willing to pay more than you’ll likely ever see for your car, so let this be the final push from off of that fence that encourages you to sell and explore the possibilities of new projects. Finally, for those of you looking for the next big thing, we predict that in the coming years, those BMWs often passed over for the E30, E36, E46, and M-cars are going to see a mild bloom in popularity as people snag them instead of the more desirable models. Whatever position you’re in, we certainly hope this advice has served at least as a springboard for you to postulate on your current options. As always, we want to hear from you: what do you think about our current car market climate? Are you going to hang on to your classic BMW, or is the additional value too much to justify the risk that it might fall? Where do you see the oddball BMW market and BMW scene heading in the next few years as a result of all this shakeup? Let us know at [email protected] and you might find yourself in a future edition of Turner Motorsport Weekly.
Graphs: Bloomberg - Used-Car Prices Are Poised to Peak in U.S. After Covid Surge | | | | |
