Is there a used car bubble?
More on the spike in used-car prices, from AP:
People are holding on to cars and trucks for about a year longer than they did before the recession, which has created a tight supply of used vehicles. So few are on the market that prices have risen to their highest in at least 16 years.Dealers are paying an average of $11,660 for a used car or truck, up almost 30 percent since December 2008.
“You’re not going to find a situation like this very often,” said Jonathan Banks, executive auto analyst for the National Automobile Dealers Association used car pricing guide.
Comments
There is no used car bubble. Dean Baker has a good chart and analysis of the issue here:
http://bit.ly/jAQO39
"Sticker prices" on used cars may be somewhat higher, but the cars are better, so the value is greater. (Remember, this comment is from a guy who drives a 1998 Volvo wagon with over 160,000 miles on the odometer. I know the difference between "sticker price" and "actual price.")
Posted by: Stuart Levine | May 19, 2011 11:28 AM
You don't think cash for clunkers had anything to do with this? They took a lot of used cars out of the supply. Now the demand is up.
Posted by: Neil B | May 19, 2011 11:56 AM
I was going to weigh in on this issue, but I don't drive an old Volvo so I guess I'm not qualified...
But seriously, it wouldn't surprise me in the slightest if people were holding off on new car purchases these days. The economy is still down, credit is a little tight, and many people rushed into purchases not long ago thanks to "Cash for Clunkers."
Posted by: John J. Walters | May 19, 2011 12:03 PM
The financing is probably the larger issue.
Even with the C4C program removing the deadwood... at the low end (up to $3000?) most used car buyers will pay cash or float their Visa card for a while if need be and make that purchase privately via craigslist and such.
But at almost any price point above that price level buyers will want/need to finance more and more of the purchase price... certainly the $9000 and above that most new car dealers consider the floor for their used car inventory.
Posted by: MrRational | May 19, 2011 12:42 PM
I have a 10-year old Taurus that has been paid of for 4 years now (I bought it used in 2004).
As long as the non-maintenance repairs (anything other than stuff like brakes, tires, shocks, oil changes, etc.) stay below an average of $300 per month, I'll keep driving it.
Why? Cheaper than a car loan.
Every month I don't pay a car loan is a month I save money.
Posted by: Gunpowder Chronicle | May 20, 2011 2:07 PM
As a dealer, I can say that things have been getting weirder and weirder on the wholesale market. Every auction I go to seems to surprise me even more.
I know a lot of dealers (especially smaller, non-franchise) are being cautious about what they buy and at what price, just in case the "bubble" bursts.
Production in Japan, all the storms/hail damaged cars (especially in the midwest), and the finance dealers willing to pay any amount seem to be the main three things that I have noticed that is hurting.
Though, I'm sure Cash For Clunkers has had a significant impact, too.
Thanks for the article!
Posted by: KC | July 21, 2011 11:39 AM