Tred CEO Grant Feek joined Yahoo Finance to discuss the boom in used car prices.
ADAM SHAPIRO: Something else that's breaking, at least pocketbooks, is the cost of a used car. Let's bring in somebody who's got a platform that you may want to take advantage of because you can find a car, apparently, for a little bit less if you're buying and a little bit more if you're selling on Tread.
And the founder and CEO Grant Feek joins us now to talk about this. I went to the site today, by the way. And what was interesting to me because I'm a car nut and I love to just look at car prices, nothing older than, essentially, like 1999. What are you seeing on the site as far as people transacting?
GRANT FEEK: Thanks for having me. I would say a couple of trends that are very obvious right now, there's sort of one that we see as possibly sticking around and sort of an accelerant of what was already happening and another one that we see is a little bit more of a short-term shock.
But firstly, I would say, obviously, we've been going through a pandemic over the last year-plus. And it's clearly increasing the velocity at which consumers are interested in basically transacting with their phone or from their couches for used vehicles as well as other types of goods to maybe try to stay away from crowds, whether that's the retail environment, the dealership, the DMV, what have you.
We've seen an enormous growth that we've never seen anything close to over the last year or so. And we do believe, to some degree, this is sort of an acceleration of a trend that was already happening.
And then the second thing I would say would be, obviously, used car prices are rising quickly. And so the Manheim Index, I believe it was something like-- don't quote me on this. But something like mid-single digit percent, like 5% in May at about 50% year over year in terms of increases in car valuations right now.
And one of the things we're seeing, the thing that jumps to mind is, if you own a vehicle on lease, it makes no sense to turn it into a dealership right now because the likelihood that your vehicle residual value is greater than the street value is basically zero. So anyway, that's one trend that jumps to mind if you're selling a vehicle. But there are a lot of things that are a little bit out of whack right now.
SEANA SMITH: Grant, we mentioned the massive spike that we've seen in the price of used cars. I'm curious, just on your platform, how large of a jump have you seen just in terms of the average price of a car that's sold?
GRANT FEEK: So the way our platform works, the seller has full control of the pricing. And our price recommendations are based on the same sources of data that drive Manheim, drive Kelley Blue Book and others. So we're certainly seeing an average of, I would say, 50% in the last year. But of course, there's a lot of standard deviation model to model.
So the OEMs, the manufacturers that you're hearing about, obviously chip shortages with Ford, et cetera, we certainly see more of a spike with those sorts of vehicles because there's just no supply on the new side. And so consumers that traditionally would be purchasing new vehicles are more or less forced to purchase used, which just further increases demand for used.
Demand was already high because you have stimulus checks going to consumers, which oftentimes are spent on vehicles. You have people, now that the pandemic has abated a little bit, wanting to travel. It's just sort of a perfect storm of lots and lots of demand with very little supply.
ADAM SHAPIRO: I saw an Audi A7. I think it was a 2017 or '18. So my taste exceeds my wallet, but beautiful car.
GRANT FEEK: Mine too.
ADAM SHAPIRO: Are you worried that-- I mean, there are the established platforms already that people are already familiar with. Is it going to be hard to catch up to them? Or are you offering something that they don't offer that's going to make it hard for them to keep up with you?
GRANT FEEK: Well, so we don't necessarily consider ourselves direct competitors with anyone because there isn't, in my mind, really anyone that does quite what we do, in the sense that we are allowing consumers to transact with the advantages of the dealership, which is the assurance, the fraud protection, the quality assurance, the payment conveniences, financing and warranties and gap coverage, those sorts of things, with the advantages of the private market transaction, which is this that you're going to get a lot more value on either side of the transaction.
So we actually are increasingly sort of becoming more of an enterprise company. We're partnering with a lot of other pre-existing marketplaces to power sort of their platform, sort of being the PayPal to their eBays, if you will. And the same goes for a number of franchise dealers.
So we don't exactly consider ourselves competitive. But there's certainly no question in my mind that, if you fast forward even three to five years into the future, if you consider that there are about 40 million used cars transacted annually right now in the US, I think you're going to see, in a short order of time, the majority of those transactions.
So today, it's maybe 8 to 10 million units a year are P2P, basically on Craigslist, transacted on Craigslist. We think that that's going to become 20-plus million in a very short period of time, when people realize that, hey, there's an easier way that I can just use my phone and go meet somebody and transact a vehicle, get payment conveniences, don't have to step foot in the dealership, don't have to step foot at the DMV, compliance, fraud, all these things are sort of taken care of.
So we do see it as the future. Whether it's called Tread or not, who knows? We're happy to help others power their efforts. And we just want to be the ones to be part of building it, to be honest.
ADAM SHAPIRO: It's fascinating. And I'm a car nut, so I look forward to watching you succeed. Grant Feek is Tread founder and CEO. Thank you for joining us here on Yahoo Finance.