Just a couple years after U.S. auto sales plunged to their lowest levels in decades, dealers are finding an industry-wide shortage of used vehicles. This lack of used inventory has driven up the price of scarce pre-owned vehicles on lots, sending more and more consumers into aggressively priced new vehicles. One economist says as many as 500,000 people who intend on purchasing used will instead take delivery on new vehicles by mid-2012.

This phenomenon wasn't completely unexpected. When production and sales slumped, many realized the steady supply of returned leased and fleet vehicles – which traditionally deliver late-model low-mileage inventory – would slow to a trickle down the road. The used vehicles are often reconditioned by dealers for sale with extended warranties, but special financing and automaker incentive packages usually don't apply. Parked next to new vehicles, with aggressive pricing and low interest rates, consumers are finding only a marginal jump in price (if any) will put the aroma of a freshly minted vehicle in their driveway.

The news is good for automakers such as BMW (new car sales up 13 percent), GM and Ford (both expecting a 10 percent boost). However, most Japanese automakers are still reeling after production losses earlier this year which won't allow them to stock lots and take full advantage of the unique situation. Industry experts, who are able to trend new and used vehicle sales, predict the used car market will remain strong for at least the next year or two.


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  • 46 Comments
      hevace
      • 3 Years Ago
      Used cars are at a premium these days. I just spend $17,500 on a rusty old Ford Granada with wasps living in the trunk.
      Matt Clare
      • 3 Years Ago
      It's Honda buyer's fault. It's all those people who wanted to buy a new Honda only to find out Honda was only selling old Hondas with new model years.
      lne937s
      • 3 Years Ago
      In this market, offering a low priced car like the base Versa makes sense-- it is hard to find a low-mile used car in decent condition for less than $10,000. Especially as the subcompact competition have recently gone up in price.
      RSS007
      • 3 Years Ago
      I should get a job as an analyst; I've. Seen this happening for the last three years. And looked around the country for the same period.
      • 3 Years Ago
      [blocked]
      Sgt Beavis
      • 3 Years Ago
      I wonder if, in some cases, those used car prices are putting downward pressure on new car prices. Lot's of new cars have small profit margins for the dealers but used cars have fairly sizable margins. In many cases a dealer may cut the price and lose money on a new car knowing they can get a much larger profit from selling the trade in.
        photofill
        • 3 Years Ago
        @Sgt Beavis
        yep, that new car costs more if you dont have a trade in that can make them some money!
      Richard S.
      • 3 Years Ago
      I see a myriad of factors coming together for what is happening: -Consumers are holding on to their owned cars for much longer thus rather than trade-in an used car and buying a new one they will keep it longer. We see this resulting in lower annual sales for new cars and a lower amount of used cars entering the market. -As consumers drive their cars for longer they will only replace it when the repair costs of their car comes to a point that is better to buy/lease a new car than keep the car. The flip-side is that repairing the car (say a new transmission on an old $4000 Taurus) is such that the car is only good for salvage value so even less cars come into the used market. -As pointed above, repairing major items on your car is very expensive and the general population is not mechanically-inclined for repairs as previous generations, especially as cars have gotten more complex. Thus we are getting to the point where we are with electronics: for a little more is better to buy new than repair a broken one.
        Dump
        • 3 Years Ago
        @Richard S.
        Agreed. I owned a 2003 FX45. It was great, minimal issues as most was just regular maintenance items. But my extended warranty ended and my out-of-pocket costs immediate increased drastically. It was better to trade-in for something new b/c of the risk of something breaking due to normal wear-n-tear. Items like having to replace all 4 tires and maybe 2 tire monitors would cost nearly $2k depending on what tires where selected. And since the FX was loaded with options I had the DVD power module replaced ($850), the Nav head unit replaced ($1200), some wiring connectors & battery replaced ($250) --- fortunately all under my warranty so it was only $300 out of my pocket. I wasn't ready to take a change that something else was going to give out. I was ready to trade it in --- though missed --- I like the security of the new car warranty, especially during these unstable times.
      cashsixeight
      • 3 Years Ago
      Or people are just using craigslist and avoiding dealers. Why would anybody ever buy new?! It's dumb.
        sulebon
        • 3 Years Ago
        @cashsixeight
        Whats dumb is choosing a used product when you could get a new version for cheaper or for the same cost (with a full warranty no less). With your mentality I'm assuming you purchase all of your goods from Savers/Goodwill/Flee Markets because buying new is dumb?
          cashsixeight
          • 3 Years Ago
          @sulebon
          Aw I hurt someone's feelings. Sorry, it is DUMB to buy new. Drive off the lot and lose 5 grand? COOL. YOU FIRST. I shop at H&M and rethreads (high quality used clothing from quality brands). I buy a lot of stuff used. What is the point? I could chose between a new economy car, or a 300hp AWD wagon, but it's used. Gee, tough choice.
          Papi L-Gee
          • 3 Years Ago
          @sulebon
          cashsixeight, someone has to buy new in order for it to become used. So for those who do buy new cars so you can pick them up used on the cheap? You owe them your gratitude.
        lemonite
        • 3 Years Ago
        @cashsixeight
        You sound like a single-minded dumpster-diving hipster. Some people can afford and want to pay for the peace of mind and sense of security that comes with a brand new vehicle. Some people don't care.
          • 3 Years Ago
          @lemonite
          [blocked]
        digitalwatch
        • 3 Years Ago
        @cashsixeight
        Well apparently in some cases you can buy new now and turnaround and sell it "used" for more than you paid for it. So who's dumb in that deal? If used car prices are going up in means depreciation is going down; really the only reasons to buy used is to avoid that big hit in depreciation, it's not happening anymore. Or you might buy used to get something you can't buy new anymore.
      Hazdaz
      • 3 Years Ago
      This is good news. More new cars will have to be built simply because we will run out of used cars... that will help stimulate the economy by putting folks back to work in making, designing, engineering and selling these cars.
        cooker263
        • 3 Years Ago
        @Hazdaz
        I don't think this is good news. There are two main reasons why this could be happening that I can think of: 1. Channel stuffing - GM, especially, has not cut back production to match demand, which is why their average days in inventory for vehicles has gone way up this year. That's good old GM getting back to what they used to do - it saturates the market and forces prices on new vehicles to be cut beyond the original price. Consumers aren't stupid, they see this and are handed over the leverage since dealers can't afford to hold on to boatloads of inventory. 2. There could still be some effect from cash for clunkers - many used cars were destroyed, which drove up the price of used cars. I'm not sure how much this could affect the market now, but cars generally stay on the road for quite a few years.
          Hazdaz
          • 3 Years Ago
          @cooker263
          Used cars don't run forever. At some point new vehicles have to replace the ones that are out there now. If less and less used cars are available for purchase, that will create more demand for new vehicles. Your mention of GM not cutting back production - while that is definitely bad, I believe they have changed their minds more recently and started cutting back on new supplies. You can say that with a larger inventory of new cars at GM dealers, then that might have driven new car prices down, but that only goes so far. Jalopnik had a story the other day where a used BMW was only ~$30 cheaper a month versus a brand new one. Who the heck isn't willing to spend the nominal extra money for a brand spankin' new vehicle? And I highly doubt that BMW has the same glut of inventory that some GM vehicles are having. This is absolutely a good thing - its basic economics where people have cut back for so long but eventually they have to buy new to replace the older items that might not be worth repairing or keeping around.
        bobmarley
        • 3 Years Ago
        @Hazdaz
        Its not good news for the people that normally buy used cars...maybe for those that buy barely used cars that are 1-3 years old but for people like myself who buy older used cars it really sucks.
          Hazdaz
          • 3 Years Ago
          @bobmarley
          I am talking about good for the economy. And for the vast majority of folks a stronger economy is good for everyone.
      sulebon
      • 3 Years Ago
      I experienced this first hand a few weeks ago. I could get a 1-2 year old lower mileage vehicle for MAYBE $500-$1000 less then a brand new car (and the new cars were better equipped). Plus, you can *generally* get much better financing on new as opposed to used (I got 1.9% for instance...).
        DKano
        • 3 Years Ago
        @sulebon
        The interest is what some people do not realize. Interest will be a lot higher on a used car and could end up raising the price after a couple of years to the point where you end up paying more than if you got a new one, especially for people getting into used cars that cost more than $20K. When a new car costs you $25K and you get a 2% 6 years loan you end up paying $26,551 after 6 years. Compare that to a used car that costs you $22K and you get a 7.99% 6 years loan, you end up paying $27,765 after 6 years on the used car.
          sulebon
          • 3 Years Ago
          @DKano
          Yeah for the used cars I was looking at the best interest rate I was offered was between 6.5% and 8.9% at a couple dealers and even my bank...so there are thousands of dollars of additional savings so it was a no brainer for me.
      Tom
      • 3 Years Ago
      Reminder: that new-car aroma is carcinogenic. Also, economically speaking, new-car purchases are not necessarily better than people maintaining their used cars by utilizing skilled labor. Even when it's the same amount of money, it matters where that money is going, whether it's for materials and energy costs in distant places or for the salaries of local professionals. Environmentally speaking, it's also highly preferable for people to maintain (somewhat) older vehicles than to replace them more often.
        marcosc
        • 3 Years Ago
        @Tom
        Keep your wheels til they fall off. Screw car payments and high interest rates. Soon most Americans will be living out of there cars, if they're not already.
      Justin Knuebel
      • 3 Years Ago
      THINK GOD FOR CASH FOR CLUNKERS!!!!!!
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