Cathie Wood, the founder, CEO, and CIO of ARK Invest line of funds shared her views about the trajectory of used car prices on the microblogging site Twitter (TWTR). As per the hedge fund manager, “consumers hoarded cars” during the pandemic to avoid “mass transit.” This led to a rise in used car prices as demand exceeded supply. Consumers thus benefitted from the “inventory profits” and delayed selling their vehicles post the pandemic.
Cathie further quoted, “Now prices are falling, threatening them with inventory losses, so they are likely to sell.” Cathie also noted that she expects new and used car prices to “unwind fairly dramatically.” Cathie’s analysis was essentially a reply to a debate on whether prices of used cars are rising or falling.
Sam Korus, an analyst at ARK Investment Management earlier shared a tweet on how the wholesale used-vehicle prices had “declined 3.6% from July in the first 15 days of August.”
This was followed by a reply which stated that auto dealers were keeping the prices high. The tweet also shared a chart from auto research and shopping website, CarGurus (CARG) and quoted, “There is no drop yet in the car gurus used car price index.”
Meanwhile, Cathie’s tweets received mixed responses from Twitterati. A few agreed with her thesis that the used car prices have started declining, particularly noting that repossession rates of used cars are at a record high. Consumers even benefitted from the stimulus checks received during the pandemic, which many used to make down payments for purchasing autos. Now, however, with record high inflation and interest rates on the rise, consumers are unable to shell out the monthly installments.
On the contrary, some did not agree with Cathie’s views. A few even joked about Cathie’s use of the word “hoarding,” stating that not everyone would buy at high prices and sell at lower prices as her funds do.
Meanwhile, some claimed that the used car prices would not decline until the supply situation improves. A few even voiced their opinions on the need to improve mass transit options for the people.
A notable point that emerged during the discussion was that consumers did actually hold on to their old cars because currently, they cannot afford to buy new autos. Moreover, the waiting list for new cars has gone up to more than a year in many countries owing to supply chain disruptions. This is also compelling consumers to hold on to the old ones.