Used car prices are the highest they have been in the last 16 years. Since 2008 alone, prices have gone up close to 30%, and dealers are paying well over $10,000 on average for a used vehicle.
There are several causes for the increase in prices. One of the larger contributors to the change in pricing is that people are keeping their cars for a longer time then before the recession hit. Polk research firm reports that cars are on the road on about a year longer than in 2007. Since people aren’t giving them up the used car inventory has gotten lighter.
Another reason people have been harboring their vehicles is their inability to get another at a reasonable rate, or get one at all. Lenders were asking for outrageous interest rates and credit standards got much higher.
More recently, after Japan experiencing the earthquake and tsunami some cars won’t be as readily available as anticipated. Smaller vehicles are being bought used by dealers to compensate for the the lack of inventory.
Johnathan Banks, executive auto analyst for the National Automobile Dealers Association used car pricing guide says “You’re not going to find a situation like this very often.” It does seem a bit odd that you can get a better deal on a new car than a used one. Lease or finance, a new car will, in many cases, cost about about the same or less monthly.
But the increase is prices is not going to last much longer. David Whiston, an auto analyst for Morningstar advises that prices are at or near a peak. This indicates that it will soon be turning back around. Manheim auction houses’ cheif economist Tom Webb predicts the price increase will only be around for another couple of months before leveling off.
Numbers are also rising for the amount of vehicles being leased. Considering most are three year leases, the returns should put a good amount of used cars back on the market around 2014. Leases may have become more popular again due to more lenient terms from auto companies and lenders.
With the used car shortage and better lending options, the market is certainly in favor of anyone looking to sell a used car and get a new one.
– By: Alexandra Koken