News Column

Used Car Prices, Demand Soar as Supply Drops

May 20, 2011

Tiffany Ray

Car with

Economic pressures of the last few years have pushed many consumers out of the new-car market in search of a cheaper alternative -- good news for used-car dealers, if only they could find enough cars to sell.

But reduced production of new cars, federal incentive programs, exorbitant gasoline prices, natural disasters and other factors have conspired to reduce the supply of used cars on the market to a trickle and, as a result, drive prices through the roof.

"It's pretty crazy right now," said Tom Hughes, of San Bernardino, Calif., a used-car dealer for 27 years. "I've never seen anything like it."

Hughes said prices and availability have never been this bad -- not by a long way. A car that would have cost $5,000 wholesale six months ago might cost $6,500 today, he said. And if it's a Toyota or a Honda, "it's insane."

Hughes said it's tough to find vehicles he thinks he can sell at prices that make sense. As a result, his inventory has dropped from about 40 cars at a time to 20. "If you don't have the cars, it doesn't matter how much activity you have," he said.

Recent research by Cars.com found used-car prices have increased 10 percent, on average, over the past year. Although prices were up across the board, spikes were higher for some brands. Hyundai prices were up 22 percent, for example, and Ford prices were up 14 percent. In extreme cases, used cars have even appreciated in value as they've aged. A 2007 Hyundai Elantra with 40,000 miles on it listed last year for $9,900, according to Cars.com. That same car today costs $200 more, even with an extra year and a few thousand more miles on it.

Edmunds.com, another autoindustry research site, reported similar findings. Prices for 3-year-old Honda Accords are up 24 percent since September, the website reported. They're up 12 percent for a Nissan Sentra.



Source: (c) 2011 News Sentinel.


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