For Sale What will a Hertz bankruptcy do to the used 200 series market??

Year

2018

Vehicle Model

1. 200 Series

Location

United States

Eric Sargeant please weigh in as I am shopping for a used 200 series.

Why Used Car Dealers Fear a Hertz Bankruptcy

Rental company could flood the market with hundreds of thousands of used cars.

www.autoweek.com

 

[prwillard2]

The Hertz car sales website doesn't even list a Land Cruiser as an option for used cars. Nor do they sell any Lexus models.

 

[Nola622]

Right - there is almost zero connection between Hertz filing bankruptcy and the market for 200 series land cruisers. Additionally, a company restructuring its liabilities and ownership / capital structure does not mean it goes out of business and is forced to liquidate its entire fleet.

 

[hickuptruck]

Hertz has Land Cruiser 200s in their fleet.

 

[pcut]

Right - there is almost zero connection between Hertz filing bankruptcy and the market for 200 series land cruisers. Additionally, a company restructuring its liabilities and ownership / capital structure does not mean it goes out of business and is forced to liquidate its entire fleet.

I wasn't just thinking of the 200/570 inventory but the effect if they do file and dump 560,000 used cars on the market or even 20% of them (112,000). I understand how BK works and almost certainly whoever ends up with the company will dump cars to raise cash because even if they get a killer deal on the company they will still have to raise cash for operations. And even if Hertz can find $400M to keep going for a short while, they will need to raise more cash which means they sell used cars. Any of those scenarios would inevitably affect the price of all used cars, so to say there is zero connection is a little simplistic. Probably not something Deutsche Bank will do, but you never know. And you never know what Carl Icahn, who owns something like 39% of the stock will do. Just saying! Food for thought.

I'm going to wait a few weeks and see what the market does but welcome everyone's input.

 

[fro20fow]

I don’t think anyone really knows. Might be able to look to similar bankruptcies and make projections.

Can highlight a basic supply & demand scenario:

Bankruptcy & liquidation of Hertz may cause large supply of low cost fire sale vehicles to hit market driving used prices down.

Land Cruiser demand may be fairy elastic as someone may choose a 4Runner or Tahoe over a Land Cruiser for the right price. Less demand for Land Cruiser may result in lower prices for LC.

There are many unknown variables such as: will future economic impact payments from fed. Increase demand of vehicle purchase? Will supply of Hertz cars simply replenish depleted inventory?

The bigger issue, I believe, is on the business operations of Hertz & its stakeholders. Lots of financing, contracts, debts etc. occur to allow Hertz to do what it does. A wrench in that system might cause some lasting damage. Therefore, I believe Hertz will be get some next round bailout money and will not file bankruptcy - at least in the short term.

 

[Nola622]

so to say there is zero connection is a little simplistic.

Thats why I said "almost zero connection"

There is certainly a connection between used car values declining broadly and pricing of a specific used car model. There is certainly a downward pressure on dealer margins and desired inventory levels because of high unemployment and a global recession. There are also dynamics that shift new car demand into the used market, dynamics that result in people holding onto their vehicles for longer, etc...

Land Cruiser prices aren't going to go up. Thats the only sure thing.

 

[pcut]

Great discussion. Keep it coming!

 

[grampswrx]

All used car prices are going to go down as fewer buyers are in the market and there will be more sellers (like Hertz). However, until the dust settles and we know what kind of true economic impact this situation has caused, prices will be all over the place. In my GX460 search, I have seen prices drop from $20k to $17k in 3 weeks. I certainly won't buy until I know we are nearer the bottom.

 

[katzalex]

There are a few rental car companies that have Land Cruisers in their fleets but the biggest by far is Sixt, which is German. They currently have about 4 2019 and 2020's on the wholesale marketplace. Nobody else has any or has had any for at least 6 months.

The overall market has dropped anywhere from 10-15% in the past 8 weeks. By almost all accounts, it is inching back up, which means we've hit at least a temporary bottom. These are crazy times and cars are depreciating assets so it's impossible to say what will come next. I will say that we didn't buy a car for about 6 weeks (with the exception of pre-sold special orders) and bought 5 for inventory last week and those same cars were all more expensive this week. It's also worth noting that Land Cruisers tend to be so scarce in the wholesale marketplace that we didn't see any significant drop in price in Land Cruisers based on supply and demand. We did see a slight softening in LX570's but not nearly as much as the rest of the market.

 

[Nola622]

Thanks Alex - that's great insight into the current market.

 

[bugsnbikes]

The release of the 300series will be the biggest impact on 200 prices........as everyone drops the gas guzzling 200s for a 35mpg -400hp hybrid 3.5 twin turbo hybrid 300. Not to mention the optionsl Burrito warmer center console.......and cooled seating with Sake bottle slot in seat-chillers.

 

[SPANNERSPINNER]

If Hertz did file, they would likely file Ch 11 and restructure. It is unlikely that their fleet would hit the open market, but it may be that a smaller, less or less-than profitable subset of their fleet is sold off as part of Ch 11. Their impact isn't likely to be huge either on the broad used car market or on the LC-specific market. They're a blip on the giant wave that is the impace from the pandemic.

If, however, they were to file Ch 13 somewhere down the line because they still can't weather the pandemic... then it depends on the specific conditions at that time.

 

[mcgaskins]

TL;DR a Hertz BK won't do a lot to the 200 market

In regards to the future of the auto market and residual values, the reality is absolutely nobody knows. No car dealer, no enthusiast, no OEM, no rental agency, et al., knows what's going to happen or even has a firm grasp on what's going on right now. If they say they do, don't listen to them. Any large liquidation of a rental fleet will certainly lower the value of the cars that are being sold because that's what happens in bankruptcy and distressed asset sales, but keep in mind rental car companies are overweight on OEMs like Nissan which sell ~40% of their inventory or more to fleets. The residuals on models with heavy fleet sales will suffer the most as they flood the secondary market.

I am a craigslist, autotrader, forum, etc. junkie, and before those existed I was a newspaper classifieds junkie and would read nearly every ad every day and take notes of which cars and motorcycles sold. I'd often then call the number after ads disappeared to ask the seller how much they sold it for, and then I would note how close to asking price things were selling for (I started doing this when I was about 10 years old and my parents thought I was crazy). I picked up on a trend or two over the years, and interestingly Toyota 4x4s never really seemed to follow the same depreciation curve that almost everything else did. There are a bunch of factors at play, but the basics are: quality, durability, reliability, and designs that don't change much over a relatively long life.

A factor that has magnified the strong residual of the 200 is incredibly low supply in the US that is difficult to appreciate. Most people think of the Mercedes G Wagon as a very rare, almost exotic car, but the reality is the 200 is MORE RARE than a G Wagon! In the last 7 years, Mercedes has sold 4,481 more G Wagons in the US than Toyota has sold Land Cruisers in the US. Seriously. Of course Lexus sells materially more LXs than Toyota sells LCs, so I've put the data below showing both individually and combined.

If you've read this far, you already know the 200 is more reliable and has better longevity than its competition, and it is a favorite vehicle for wealthy people who don't want to show off. When you combine all of the positive attributes of the 200 with the incredibly scarce availability in the US (not to mention cheap gas prices right now), the 200 is poised to depreciate far less than the average vehicle if/when there is a massive flood of inventory hitting the market. I could see the LX depreciating more than the LC simply due to higher volume of sales combined with more on road focused styling, but I personally don't see the bottom dropping out of the 200 market soon, if ever. I've watched the 200 market like a hawk for many years and have now owned 4 including one I just bought 2 weeks ago, so I'm putting my money where my mouth is.

Now for the data showing just how rare the 200 really is. Keep in mind Toyota sells about 250,000 Tacomas every year.

For those who use a white background:

 

[katzalex]

mcgaskins nailed it

 

[pcut]

More news on the car rental companies.

These Automakers Stand to Lose the Most from a Hertz Bankruptcy

Report: Hertz cancels most new fleet orders as the pandemic hammers business.

www.autoweek.com

 

[JWSportV8]

I am a craigslist, autotrader, forum, etc. junkie, and before those existed I was a newspaper classifieds junkie and would read nearly every ad every day and take notes of which cars and motorcycles sold. I'd often then call the number after ads disappeared to ask the seller how much they sold it for, and then I would note how close to asking price things were selling for (I started doing this when I was about 10 years old and my parents thought I was crazy).

Are you aware of any tools available to the non-dealer for tracking sold vehicle prices?

If you ask over on reddit/askcarsales the way to find out if a vehicle you are looking at is reasonably priced is to look at similar listings on the car listing sites (cargurus, autotrader, cars.com, et cetera). If the asking price is comparable to the listings you find, then the price is reasonable and at market. I would argue this is incorrect as it only confirms that the asking price is within the range of asking prices for that particular vehicle. What is asked and what is actually paid are not the same thing. We do not use asking prices to determine the market value of a house or a reasonable offer - we use sold comparables. Nor can one use the 'Great/Good/Fair...' banners the car listing sites use since they are based (may not be universally true) on KBB or other book value assessment. Again, if you ask why a vehicle is priced above its book value on reddit/askcarsales the response is that the book value does not reflect the market. That may be true, but with only asking prices to go off of that does not confirm the book values are invalid. Assuming the car sales crowd is correct, and you cannot use book values to determine market value (even though your bank does for the loans) and you cannot use asking prices from the car listing sites. What do you use?

I have tried to use eBay Motors sold listings, but the selection is limited and often not comparable to each other or to the greater market I am researching. The 'Most Recent 200 Series Purchase Prices' thread is very valuable for those of us seeking a LC200 and I wish there was such a community for every vehicle I have researched.

Regarding Hertz, I agree it will have little impact on the LC200 market. Perhaps, it could drive prices down to where someone considering an LC200 opts for another model that is now priced very attractively. We have had similar discussions wondering if it is wiser to buy a nearly new 4Runner for the price of a 7-8 year old LC200 w/ 100k miles. I also wonder if it will have any real impact on the used car market as I would expect that if Hertz rentals were to flood the auction market, the auctions would find a way to "meter the flow" of this inventory thru the auction block to avoid a shock drop in values.

This is great discussion.Thanks for your insights.

 

[pcut]

Well we'll know in a week from tomorrow what Hertz will do unless they get an extension on the $400M their asset backed security holders are requiring. And I don't think the next round of bailouts will arrive in time to help them. Are Avis, Enterprise and others far behind? I appreciate Mcgaskins detailed analysis but given the upheaval caused by Covid-19, I am waiting for a couple of more weeks before I take the plunge. Hoping to score an'18 LC, white with terra, <20,000 miles for around $60K. Time will tell!

 

[musthave]

The release of the 300series will be the biggest impact on 200 prices........as everyone drops the gas guzzling 200s for a 35mpg -400hp hybrid 3.5 twin turbo hybrid 300. Not to mention the optionsl Burrito warmer center console.......and cooled seating with Sake bottle slot in seat-chillers.

Yea, but still needs more cupholders

 

[LXstalker]

Glad to see I’m not the only crazy person out there tracking this stuff

I was asking one of the YouTube channels that keeps on talking about “carmogeden” how they are tracking prices, but they are just using CarGuru, to which I made the same point about list vs actual sales price. Long story short, he didn’t have a source that actually tracks retail prices paid.

My perspective, not much impact from hertz, there may be some substitution impact as some consumers may look at a discounted Chevy, Ford product vs Toyota/Lexus, but thinking it will be small.

Using CarGurus as a proxy for the market there seems to be ~ 30 LC per model year (2013-2019) nation wide, with 1.5 to 2.5x the number of LXs. The one exception is 2017 for the LX, with ~200 available which I assume is driven by lease returns, so if your looking for a deal that may be the place to find it.

My guess is the deals will be driven more by the individual dealers financial position. Here’s hoping I am completely wrong and will score a great deal on an LX or LC in the next 6 month

Anyone have insight into if wholesale prices for 200’s have changed?