Edmunds Daily is reporting 10-40% increases in used car prices over last year. H/T J Jacoby.
Source link: http://blog.mises.org/13781/used-car-prices-yikes/
Used Car Prices, Yikes
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I imagine this isn’t just as a result of cash-for clunkers, but mainly as a result of uncertainty and the general weakness of the credit markets. Just as credit dried up for homes, credit has also dried up for purchases of new cars. People who are tightening their belts in a market that’s just moved away from an easy-credit period are looking to purchase these used cars.
True Joe, the recession increased the demand for used cars.
But Cash For Clunkers decreased the supply, by destroying them.
True Joe.
Even Tony Robbins “Mr Positive Thinking” is warning of an imminent collapse.
He’s not working from sound economy theory however. Fast forward to 07:30 to skip all his rambling and you come to this:
One of the major suppliers of used cars is the Car Rental Companies. The Rental Car business has been way down, due mainly to a drop in airline travel and business travel. This in turn has led to a decline in the purchase of new fleet vehicles and subsequently the sale of used fleet vehicles.
Won’t this change when many people default on their car loans?
Here where I live, the car prices fell.
This will prove to be a short-term spike, as used cars and new cars are forever linked (can’t have one without the other). I studied this in great detail when it occurred in the late 90s; eventually, either new car prices will adjust downward (via incentives and discounting), pushing used prices lower, or buyers will recognize that they are paying too much for the used vehicle relative to the new, and will opt for a new vehicle instead.
Typically, manufacturers will force the adjustment by throwing incentives to spike new vehicle sales, due to the huge fixed asset costs involved in running a factory, paying union wages, etc. In any case, it’s not a good sign for the long-term health of the auto industry – new volumes are likely to be depressed for a long time, as buyers do not have the disposable income, or the excessive credit (courtesy of the bubble) they once had.
This should shift employment from overseas manufacturing to increased car repairs in the U.S.
Might be a good thing.
It makes sense. I lot of “clunkers” were crushed last year.
Cash for Clunkers is one piece of it. Tightening credit is likely another. Perhaps people are starting to figure out that paying a 20-30% premium for the dubious privilege of driving a new car off the lot for the first time is not a wise use of constrained resources, driving increased demand for used cars.
along w/ the ideas mentioned above, note AZO
http://finance.yahoo.com/q?s=AZO&
AutoZone has been doing well, ‘weak’ Economy, lack of available Credit, has led many to Repair cars that they, otherwise, would have ‘traded-in’..
last year lot of clunkers were crushed….
I fail to see why this is so surprising. In an economic squeeze, citizens will attempt to save money everywhere. The price of a new car as compared to a used car is a substantial sum of money to those in need. Drive a brand new car 2 blocks away from the dealer, change your mind and try to return it – there’s >$15K gone just there. Makes sense to me.
Anyway, just wanted to say that I’m really enjoying the blog. I’m going to have to bookmark it and check back later…
My cars are older. I very rarely purchase any brand new. My daily driver was first registered 18 years ago and was manufactured 19 years ago. I purchased it from a specialist repairer three years ago. New it was retailed at $47,000. Used it was $2,000. Same car.
Most (not all) new cars are not worth the trouble. They tend to be waaaaayyy overweight, along with shortcomings like poor steering, poor ride and inferior handling. The packaging tends to be under-resolved. They have way too much low utility electronic gadgetry. As for the styling…. usually ugly. Not worth the money or the bother of putting up with compulsory service visits to main dealerships.
As regulations tighten around what form new cars are allowed to take, the older versions (which don’t contain as many sealed for life components and interminable electronic frippery and spying, ooopps, monitoring) become more attractive to a growing market. Prices have stabilised for the old stuff. They don’t depreciate to zero in this market as once they rapidly did. You guys in North America can expect to start seeing similar market developments.
It is unnecessary to trade out of your cars once every two or three years. The damn things easily live thirty or longer. Find gooduns. Look after ‘em. Keep ‘em.
Sione
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