Is that used-car you just bought really a lemon? Epoch analyst Stephen Salzone joins the show to shine a light on the various players in the used-car market, the economics behind each car sold, and how data is impacting this fragmented industry. (October 17, 2019)
Is that used-car you just bought really a lemon? Epoch analyst Stephen Salzone joins the show to shine a light on the various players in the used-car market, the economics behind each car sold, and how data is impacting this fragmented industry. (October 17, 2019)
Hello and welcome to Actively Speaking. I'm your host, Steve b Weiberg. Join us each episode as we discuss current issues concerning capital markets and portfolio management from the perspective of an active manager. Hello everyone. Welcome to another episode of Actively Speaking. Uh, my guest today is Steve Salk, uh, who is an analyst here at Epic. Welcome, Steve.
Speaker 2:Thank you very much. Thanks for having me.
Speaker 1:So, what, what do you cover here? What industries?
Speaker 2:So I cover mostly small and mid-cap in terms of a, uh, cap size and I cover industrials, consumer business services, and some of those related industries.
Speaker 1:Well, today we're gonna talk about cars, uh, new and used, but, uh, particularly interested in used cars. There's, I'm just gonna set a little background here cuz it's kind of interesting. There's one of the most cited papers in economics is a paper from 1970. If you've been to business school, you've probably had to read this paper. It's called The Market for a Lemons. And it was written by, uh, George Akerlof. He later won a Nobel Prize for this paper, basically in 2001. He's also married to Janet Yellen, the paper, uh, which really is very interesting. It's called The Market for Lemons. And keep in mind, it was written obviously in the late sixties, published in 1970 at a time when there was no such thing as Carfax or the internet. And when people were buying and selling used cars, uh, there wasn't a lot of easy access to information. And in the paper he talks about the difference between, uh, a used car that's in good condition, which he refers to as a peach versus one that's in bad condition, which is a lemon<laugh>. And the problem is, so suppose that, uh, you know, on average 20% of the used cars out there in the world, whether for sale or not, are quota lemons, meaning they've got some major flaw with them and 80% are peaches. And suppose further just to try to use numbers maybe that were more common to that era. Suppose a peach is worth a thousand dollars and a lemon is only worth$500 and you are interested in buying a used car and you go to somebody who's offering a car for sale, you have no idea whether this is a peach or a lemon. Theoretically, you could take it to a mechanic and go through, but that's gonna cost you money too. And anyway, just keeping it simple, if if you thought, well, there's an 80% chance it's a peach worth a thousand dollars and 20% chance it's a lemon worth$500, you would offer a price of$900 because that's the probability weighted result. If you take a thousand times 80% and 500 times 20%, you'd say, well, on average, a random car, used car that I, if I don't know whether it's a petro lemon, should be worth, uh, should I would expect it to be worth$900. So you offer$900 to the person who's selling this car. Well, the seller knows whether it's a peach or 11, and if it's a peach, they're gonna say to themselves, well, wait a minute. This car's worth a thousand dollars and this buyer is only offering me 900. I'm not gonna sell. And in fact, I may withdraw my car from the market. And that's the point really of the, the interesting point of the papers, there's a feedback loop that goes on where the people who have good cars are not gonna want to sell at that, you know, probability weighted price. And they withdraw their cars from the market, which means that the actual percentage of lemons in the cars offered for sale is higher than 20%. It will, it will just keep rising as the sellers of good cars withdraw from the market. It's kind of an illustration of the, the Gresham's law from several hundred years ago about, uh, you know, good money drives out bad, same kind of thing. Uh, I'm sorry,<laugh>, I'm sorry, I got that backwards. Bad money drives out. Good. My apologies to Gresham. So it was a fascinating paper. What's really interesting to me, I think what makes it worth talking about is that this is a case where the real world, uh, the the advance of technology has enabled us to conquer this problem because now we do have easier access to information that the whole point of the paper was about markets where there's asymmetric information between buyers and sellers don't really have a, a way of reaching equilibrium. And a lot's happened since 1970. And we do have things now ways to get information about cars. There are things like Carfax, there are things like certified pre-owned cars at dealers where, you know, it's been through, uh, you know, rehabilitation to make sure everything's in good shape, et cetera. So we're gonna talk, uh, today about cars and, uh, what, what's happened to new and used cars. So Steve, why don't you start by giving us a sense of the scale of these markets and then we can talk about the difference between them, between new the markets for new and used cars.
Speaker 2:Sure. Well just to kind of set, set the stage with, um, the, the size of the number of vehicles that are in operation, and this is really for the, for the United States, but there's about 270 million plus or minus, uh, cars in operation. And, uh, each year there's about 17 million or so cars that are sold, um, new cars that are sold. And of the used cars that are circulating, it's about 45 million used cars that are, that are bought and sold every year. Um, and, and you know, obviously that's much bigger than, than the new car market. Um, and then just, just, you know, to touch on Scrappage, there's about 13 million cars that are sort of removed from the, the car park each year just because they're, they're no longer, uh, have any value and they're, and they're, and they're crushed for scrap steel essentially. And that, that gives you an age and average age of about 11 point year, uh, eight years for the, the cars that are on the road currently
Speaker 1:Today. And how has that changed over the, that's gone up, hasn't it?
Speaker 2:That that's gone up a little bit? Yeah, back in 2014 it was about 11.4 years old, and now it's 11.8, so it's continued to go up a little bit and there's some different viewpoints on why that might be. Um, some people view it as the, the average car is slightly better quality today and you can hold onto it for a little bit longer. Um, but yeah, that has gone up quite
Speaker 1:A bit. So now obviously the used car market, they, it's a much more heterogeneous market than, than new cars. I mean, all new cars are new, but you know, in the used car market you've got things that are, you know, three years old maybe we're on a lease lease, you've got things that are 15 years old. So it's a very, and, and is the market sort of segmented in terms of where do, where do you go to buy a three-year-old car versus where you go to buy a 15 year old car?
Speaker 2:Yeah, so that's a very good point that you, me, that you mentioned in terms of the new car is essentially homogeneous. So if you buy the exact same make and model and it's a new car, depending on where you buy it, it doesn't really matter because it's really the exact same car. Um, it has, you know, just a handful of miles on it. Um, and, and it's all the same now, a used car, even if it's just a couple years old, one might be a smoker's car, it might have a smell to it, it might have some door dings, it might have a scratch here and there. So one, once a car drives off the lot and spends a little bit of time on the road, it becomes a different product. Um, and you don't really get that much information from just the mileage. Um, that'll tell you, uh, a little bit, but it doesn't tell you all of it. And that really makes it an interesting market. And for anyone who's bought a a used car, there's a lot that goes into it and, and sometimes you don't feel like you're ever getting up the fair price. So I appreciate the, the reference of that paper because it is, it is true, and it is hard to understand what is the right price for a used car.
Speaker 1:I I've had experience buying used cars and I did find it fascinating that it did seem to be hard sometimes to figure out why a particular car was being priced the way it was. When you looked at different cars with different model years and different mileage, you'd think there'd be some, some discernible structure there to the way the, those characteristics affect the price. And it wasn't always the case, uh, when I was doing this, I was going to a, a dealer, you know, who also sells new cars. Talk a little bit about how cars are priced from the dealer's perspective and how do they make money? Like what drives their pricing decision at, at a dealer?
Speaker 2:Right. So at a dealer, it's, it's kind of interesting when they're, when they're transacting, there's a few different ways that they can make money on that transaction. And generally speaking, there's, there's sort of four key ways that they can make money. So the dealership, obviously the, the price of the car, so whatever they sell that car for is one way that they can make money and they can earn a margin on whatever they acquire that car for. The other thing, uh, is a trade-in. So usually when you're going to buy a car, you often already have a car, you drive to the dealership in your current car hoping to leave in a, in a, in a newer or better one. Um, so they can offer you a different amount for that trade-in. So that's the second way that they can actually make some margin on the transaction. And then the other two ways, um, one is financing and insurance. So they may offer financing through, uh, the dealership or arrange that financing and for that arrangement they will get a little bit of a fee. Um, and there's different types of insurance, whether it's extended warranties or or or things like that. Um, and then obviously accessories and, and, and other side sorts of things that you can buy floor mats or, or something like that. So those are the really the four key ways that dealerships can make money. And just sort of a public service announcement. What, what's tricky is you may go to a dealership and be looking to buy a car and you have a price in mind and you look at it and, and you know, you really push for that price and then you get the price that you really wanted and you feel like you haggled and you did a great job. And then you haven't even really moved on to the other three ways that the dealership is going to make money. And they may with a very, you know, nice smile on their face, say, oh, you know, you really got this for a good price. All right, let's find out how much your trade-in is worth. And then they may make up all of the margin that they wanted on that trade-in. So it's a little, it's a little bit tricky and, and a little bit opaque. And there's a, uh, a very well-known phrase, the used car salesman, and that's not something, um, that anyone really wants to be called. And, uh, and that's for reasons that, you know, that we just kind of touched on is because, you know, there's always a way that they can make their money, otherwise they're, they're really not gonna do the deal.
Speaker 1:Yeah, actually I would recommend there's a, an episode of, uh, this American Life, uh, I think it's one of the most popular episodes of all time where they spent the entire hour of the show. They spent like a week at a car dealership on Long Island, which had, which sold both new and used cars, and they brought all their reporters there to shadow the various salesman around for a week. It was fascinating and in particular the segment about the used cars and how, as you say, um, depending on what they paid for the car in, in accepting it as a trade-in, that is a big factor in determining what they're gonna try to sell it for. You know, you can get a car that's, um, younger than another one that's being offered and has fewer miles, which you'd think would mean it would have a higher price, but if they got it at a really good trade-in value for reasons like you suggested, maybe they got bargains down so hard on the price by that person who was trading that car in that now, uh, that they made up for it by giving a low trade-in value, they're perfectly happy to sell it at a lower price than the one that's older and has more miles. You know, just, they're just trying to make a certain margin on that car. Uh, so yeah, definitely look up that episode of this American Life. Obviously there's been a huge disruption coming to the used car market with these firms, like CarMax is, I think the most well known example where you go and it's not, you're not trading in necessarily, it's, it's, it's a one-off transaction, right? I mean, you can be selling them a car and buying one at the same time, but they're gonna treat those as, they treat those as separate transactions. Is that not the way that works?
Speaker 2:Yeah, that, that, that's right. So, so CarMax has been around for, you know, 20 plus years, but their, their whole thing that they want the con the customers to be aware of is that they're a sort of a no haggle and they're not going with those four different, um, ways to make money off of you. They're just really offering, uh, whatever you want and however you want to transact. So you can go there and just say, Hey, I wanna buy a car, and it's not gonna change the price that you'll pay for that, uh, whether you have a trade-in or not, it's just going to, that's the price of the car and you're just, you'll pay it and it'll be a easier transaction because there's no haggling involved. Uh, you might think it's a good deal, you might think it's a bad deal, but either you pay that amount or you're, or you're not gonna get the car. So it makes it a little bit more transparent. And then, um, also because they're not trying to make money off of those four distinct ways, if you decide later on that you come back, you know, two days later and you say, Hey, I would like to trade in my car, um, they'll do that, they'll do that transaction, uh, even the standalone transaction, you can, you can sell your car to them, but really what they're going after is they're going after that used car salesmen type mentality and sort of flipping it over and saying, Hey, we're different. You know, we're not like that traditional dealership where you're buying a certified pre-owned or some other late model used car. We're gonna operate differently and we're gonna do so in, in such in a way that you'll actually want to come back to us, you know, five years later when you, when you want to transact again. And, and really trying to have, um, the best customer experience, um, transparency, fairness, and uh, they, they really try to do a good job with that.
Speaker 1:So they, I mean, they have a relatively low market share, and yet they deal, you know, compared to, say dealers as a, as a group have a bigger, much bigger market share than, than a firm like CarMax. But any one dealer, uh, only deals in a relatively limited number used cars. Whereas CarMax, while having a low market share of the total market does deal in a large number of cars compared to any individual car dealer. Uh, what sort of data advantage does that give them? Do they, are they able to make use of big data because they see so many cars coming and going?
Speaker 2:Yeah, that's a, that's a really good point. So just to kind of set the stage in terms of the size of the used car market, so we talked about about 45 million cars are bought and sold each year. So about, and these are, you know, ballpark numbers, but about 37% or so, um, of, of the dealerships and, and, and the market share of the used car business is with franchise dealerships. So these are dealerships that also sell new cars and they have franchise permission from the OEMs to, to sell those cars.
Speaker 1:And sorry, and just within that, yeah. Uh, like what's the breakdown between quote certified pre-owned versus do they also do dealers sell used cars that are not certified pre-owned?
Speaker 2:W Yeah, dealers will will sell both. And that depends on the dealership and also depends on how much of the cars they're sort of, um, taking in on trade that they wholesale or, or want to sell internally. But they, basically, the way that works is they, they look at that car and they run the math to decide if it's worth the time and labor to certify it. Um, so typically the things that are gonna be CPOs are most commonly going to be coming back from a three year lease. Um, so depends really on what that dealership, um, is, is doing. So the market share, so about 37% franchise dealers, and then about a little bit less than that, maybe 34, 30 5% are non-franchise dealerships. And these are sort of the ones that are on the side of the road. They tend to be older used cars, um, not as new as the franchise dealerships, what, what they'd be selling. And then you have actually about a quarter of the market is private customer to customer transaction. So this is, you know, you know, you're selling it on Autotrader or a website like that by yourself or you, you put an ad on the paper, um, or at least you used to put an ad on the paper now it would probably be on Craigslist or something like that, right. Um, or, you know, it's to a cousin or a friend or a family member things, things like that. And again, those would be a little bit, generally speaking, older type cars. And then you have CarMax, which is only about, you know, a little less than 3% of the total market share for, for used. So it's, it's actually very, very small, but it's actually about three times the size of the next largest, which happens to be one of the publicly traded, um, franchise dealerships. So even though it's only two to 3% of market share, it's actually by far the single largest and they'll probably sell somewhere close to 750,000 cars at retail. Mm-hmm.<affirmative>. Um, so that's a lot of data that they have on selling cars at retail, but as we know, when you buy a car, you often trade one in, so they're gonna probably wholesale close to 400,000 used cars. Now these are cars that are older that they don't want to sell to another customer, so they sell these in the wholesale auctions. And in fact, CarMax is the third largest, um, auction house for wholesale used vehicles. And the number three behind two sort of more pure play, one's called Odessa and one's called Manheim. So when you talk about data, it's, it's hard to find a car retailer, at least a used car retailer that has the amount of data from 700 plus thousand cars being sold at retail a year and over 400,000 cars being sold at wholesale. So, um, yeah, so the data drives everything that they do, and they, um, spend a lot of time looking at that data, analyzing it, and they probably know the better than anyone else, what is the right price for that car. You know, they take into things into consideration such as the color, the region, um, the trim and the model things, things like that. Um, they have a lot of data on that and it, it's very important to CarMax and I think it's probably been a source of their success and their leading profitability when it comes to gross profit per unit, uh, which is really the best in the industry. And I think a lot of that comes down to the fact that they've been doing this for so long and they have the most data. Mm-hmm.
Speaker 1:<affirmative>. Okay. Let's, um, talk about another aspect of this. You mentioned that there are, you know, 45 million used cars sold on average in a year versus Sure, you know, 17 million for, for new cars and many of these cars used cars, you know, could work their way back to dealers, but then the dealer would have, you know, be mostly a used car dealer. But you know, what, how do, um, how do the car manufacturing companies influence the deal their own, the dealers that sell their brand to not just turn into used car lots?
Speaker 2:Right. So that's a, that's a really good point and, and since we, we were touching on CarMax, I I would say this is another, um, aspect that makes CarMax fairly unique and, and, and really any dealership that's focused only unused, it makes them somewhat unique versus a franchise dealer. So yeah, you're exactly right. So if, if Ford, uh, has a relationship with one of their franchise dealers, they definitely wanna make sure that that Ford dealership is selling new Fords<laugh>, they, they make, uh, usually no or, or if any very little money on any used car that's being sold. So they, they need to make sure that their dealerships are selling used cars. So, so what happens is, um, they have to help balance that out. And the OEMs meaning, uh, companies like Ford or Toyota can put pressure and, and also drive different incentives to make sure that dealership is moving enough of the, of the new cars. And some of the most, most, uh, typical ways would be different incentives where a dealership that sells a certain number of cars, as that number of cars they sell, number of new cars goes up, they get better pricing on those cars that improves their, their margin. And then some dealerships and some OEMs will also, um, depending on the relationship, will also maybe even limit the number of cars that they can retain to, to sell as used cars, whether it's number of CPOs or how things that are coming in off lease, if there's a lot of lease cars coming back to the market, they may say, no, you need to auction these off, or, or we may buy these from you and auction them off. Um, so there's a, there's a delicate balance that needs to occur there. And it's a little bit of a conflict if you think about it, because a oem, um, you know, Ford or Toyota is really, their goal is really to move the most amount of new cars, right? Um, they would be very happy if everyone just always bought a new car every time. Um, now the dealership actually doesn't make that much gross profit dollars on a new car. They, they tend to make more money off of the, uh, the service of that car over time. They make money off of the financing and insurance and they actually make a little bit more money on a used car. So what's, what's the incentive of the dealership? They want to probably shift a little bit more towards the, the used side if, if they could mm-hmm.<affirmative>. Um, so there's a, there's a delicate balance there and there's a little bit of a conflict of interest in terms of what's best for the dealership and their profitability versus what's best for the OEM and, um, what they're trying to accomplish.
Speaker 1:Right in, in that episode of this American Life that I was talking about before, there's a really good illustration of that where that the point about incentives and, and the bonuses that, that the dealers can get, uh, for selling a certain number of, of new cars where this dealership had a certain target it was supposed to reach in order to get this large bonus from their, uh, manufacturer, which would make the difference between the dealership being profitable or not for the month mm-hmm.<affirmative>, and which is a really interesting lesson for a prospective buyer to know that if you go in towards the end of the month when they're trying to reach that quota, they may be more motivated to bargain with you on the price or, or these other aspects as you say, the insurance, uh, you know, um, because it could be the difference between them getting this bonus and not, they may lose a little bit on the car they sell to you, but it, they would, it would enable them to get this huge bonus that makes the dealership profitable for the month. Uh, that was, that was interesting to, to learn.
Speaker 2:Yeah, just to, and just to maybe just to throw out a couple numbers on there and, and, you know, start to throw out so many numbers, but, um, you know, the average dealership, and again, these are very ballpark, but the average dealership, you know, maybe 50 to 60% of their, of their revenue would come from new cars, but that only makes up about 15, maybe 25% of their gross profit where, uh, used cars that'll only make up maybe a quarter, maybe 30% of their revenue, but that's gonna be 10 to 20% of their gross profits. So punching above its weight versus, um, the new cars. And then, you know, again, the, the parts in the service are making up a really large portion of that gross profit. So maybe only 10 to 15% of sales, but 35 to 45% of gross profits. And then, uh, and then again, the finance and in, and insurance is another important piece where that, that's very, very small in terms of revenue, but it's almost pure profit, uh, origination fees and things like that. Uh, and you extended extended warranties that that's less than 10% of sales generally speaking, but that could be a quarter of their gross profit
Speaker 1:<laugh>. Sounds like the car itself is the loss leader.
Speaker 2:Yeah, exactly. I mean, and some of, some of this is a little bit of, uh, you know, razor and a razor blade. I mean, you have to get that, that new sale to occur to get that stream of revenue and profits from the other things that I mentioned. But, you know, still most of the sales that are, that are occurring at our dealership are new, 50 to 60% on average, but that's not where the gross profits are. Right.
Speaker 1:Okay. I've been, I've, I've had this segue lined up in my head for a while now. Let's shift gears for a moment.<laugh>,
Speaker 2:Excellent.
Speaker 1:Uhhuh. Um, let's talk about e-commerce. How has e-commerce infiltrated the car market and for both new unused cars?
Speaker 2:Yeah, that's, that's an interesting thing. I mean, there's so much that's changed with e-commerce, you know, over the, over the past number of years. And, and just to back up for a second, and then think more broadly if you exclude things like, you know, gasoline and restaurants and historically they had excluded actually cars too. E-commerce is now almost about 15% of the US retail market. And obviously that that was zero at one point, or, or very small and it was made up of mail order, uh, type things, catalogs, but that's gone up a lot. That was less than 12% just in 2016. And now it's, it's pushing 15% for this year. And cars have not really been a part of e-commerce, but that's, that's actually starting to change. And as, uh, cus as consumers, they're just sort of so used to using their mobile phone and their computer to, to transact, um, they wanna do that with their new cars and, and their used cars. And, uh, that's starting to, you're seeing, so a couple new companies, very innovative companies. Um, Carvana is probably, uh, one of the more popular names in terms of how much, um, you know, notoriety they have. They have these giant vending machines where you can actually buy the car on your phone or at, at home on your computer, and then you can go to this giant vending machine where literally you put in a, a big coin and a car<laugh> comes down. It's a little bit more of a, of a novelty and a marketing aspect, um, to it, but it's, but it's pretty cool. And they're selling, you know, quality, uh, late model used cars and doing that transaction completely online. And either, again, you can pick it up at that vending machine or they'll just deliver it right to your, to your house. Um, and since we're talking about CarMax, I'll, I'll mention as well that, you know, they're sort of doing a similar thing while they don't have the vending machines, they're offering omnichannel and allowing you to mix and match, uh, what aspect you want to do online and what aspect you want to do in the store so you can complete everything online and then go there just to make sure it smells okay and, uh, complete that transaction in less than 15 minutes. Um, or you could do the entire thing online, which is now being rolled out in most of their markets. Um, or you can still obviously go to the d go to a CarMax dealership and do the entire thing in person if, if you're more comfortable with that as
Speaker 1:Well. Yeah. Problem. Those vending machines that'll always get stuck and you have to bang on the side of the machine,<laugh>, get the car to come out.<laugh>. I mean, do you think that's gonna continue to grow? I mean, or is this something, you know, do you think there's sort of a natural upper limit on that, that most people do wanna see the car before they buy it? Like how do they handle that? Can you return cars easily if you buy them that way? Well,
Speaker 2:Look, I, I think, I think some of this is a little bit, um, generational. So, um, a lot of people thought you wouldn't be able to buy furniture online because, you know, you have to see it in your home and you need to sit on that couch to make sure it's comfortable. And then, you know, Wayfair came along and, and, and has, you know, had enormous sales growth. So I think, you know, younger people tend to be more willing to transact online even for bigger ticket items. Um, and I think people are just becoming more comfortable in general at any age with, with transacting online as it becomes more normalized. And of course, as you mentioned, you know, uh, can you test drive it? Can you, what if, what if you don't like it? Most of these companies are offering either a free test drive when they bring it to your house, you can take it for a spin and if you don't like it, it's, you know, no harm, no foul. I know Carvana has a seven day return policy. Um, so there are ways to sort of get around that. And, you know, the benefit is you, you save on some, some physical, you know, capax building dealership buildings and things like that. Mm-hmm.<affirmative>, I guess the one distinction I would make is that, um, you can fit a lot of t-shirts in a pretty small area, but, uh, cars still take up a lot of space<laugh>. So even if you're doing things online, you do need physical property to hold the inventory. Right. Uh, and, and also cars are a little bit more expensive, uh, to, to move. It's not just something you can throw on the UPS truck
Speaker 1:<laugh>. Right. Uh, okay. One last topic. Let's talk about, um, autonomous cars. We had a whole podcast devoted to this a couple months ago, I think, in, uh, and one of the things we mentioned on that podcast is that we tend to, uh, when we we talk about autonomous cars, we sort of conflate that the issue of autonomous driving with, uh, ride sharing and there's, and, and there's a third issue of, you know, electric versus combustion engines that people seem to, without thinking about it, assume that autonomous cars are going to be used only in, uh, for ride sharing and that they'll be electric. But, you know, you could have a world where people own autonomous cars, uh, you know, the car drives itself, but it's still something you buy as opposed to just, uh, you know, summiting on your phone when you need to go somewhere. But how is this gonna impact the used car market? How, how do you think autonomous cars will, uh, what impact will they have?
Speaker 2:Yeah, so I think, um, a lot depends on what you laid out. Where, what's the interplay between autonomous and things like ride sharing and or, or, or ownership that that's hard to know. And I'm sure in, in, in 10 or 15 years, we'll, we'll know a lot more, but the one benefit on the used car side is this is a much larger market and it, whatever happens is, is gonna happen first in the new market. Uh, and it'll take time for those new cars to become, you know, four and five and eight year old used cars so that it'll, it'll impact the, the used market, um, at a much slower pace for those reasons. Yeah, I mean, I think the other interesting thing that you mentioned is, is, is sort of the concept of whether it's ride sharing or, or ownership. And it reminds me of this, of doing research on the boating industry and there was a, there was a period of time coming outta the recession where, uh, boats were starting to be sold again, and people were getting very excited and there was a bear case saying, you know, no people, people don't want to own boats anymore because there's this new concept of these boat sharing groups and you could join a club and you could basically get access to boats for a certain amount of money. Then they realize, well, everyone kind of wants to have that boat on the 4th of July, and then they want to have the boat on Saturday. And nobody wanted to take the boats out, you know, midday during the week. So the, the model serves a purpose, but I think the actual addressable market was much, much smaller than what people thought. And it turned out as people had more money in their pocket and they were boaters, they went out and they bought a boat. So I think, you know, we have to consider that, uh, as it applies to the car market as well. So most people, uh, you know, the average car may only be getting utilized, you know, five to 10% of the day, but everyone u utilizes it around the same time they drive to school or work<laugh>, it sits in the parking lot at work, and then they drive home from, from work and it sits at home. So, uh, maybe they drive around a little bit on the weekends. So, um, I think no matter how it plays out with autonomous or uh, or ride sharing, I, I would say that it, there is a little bit of an issue in terms of the peak usage and when everyone wants to use to use those vehicles, and it may not lend itself so well to this concept of, of ride sharing, uh, replacing ownership.
Speaker 1:Right. Okay. So there, there could well be a, a deep market in used autonomous cars at some point.
Speaker 2:Yeah, that would seem, in fact, that's already starting to happen to an extent. I mean, when we, when you talk about autonomous, there's different levels, right, of autonomy and, and we won't go into that and I'm, I'm sure they go into that in great detail in the other podcast, but I think a lot of customers are being trained that there is some level of call driver safety that we are seeing, and those are working their way down into the used car market, and that's becoming something that people are looking for in a used car. They might, maybe they can't afford that brand new car, but they can afford a car that's three or four years old. And those are some of the key features that people are actually looking for. You know, does it have lane centering type technology or accident avoidance and things like that. So, um, I think it's, I I think used cars and autonomous cars, um, aren't necessarily arch enemies.
Speaker 1:Right. And how about electric? Are we seeing yet much of a market for used electric cars?
Speaker 2:That's also, you know, moving very, very slowly just because of the, just just because of the size of it. Um, but there is some demand for that. And, um, you are seeing some of those, um, work their way into the inventories from some of these, um, retailers that we mentioned. Hmm. But still very small.
Speaker 1:Okay. Well, I think, we'll, we'll wrap it up there, Steve, thanks very much for joining
Speaker 2:Us. Thank you so much,
Speaker 1:Uh, and hope you enjoy it out there and we'll talk to you again soon.
Speaker 2:Thank you.
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Speaker 4:Stop audio.