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September 30th, 2009

Used-Car Demand, Prices on the Rise

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Why? The answer is as simple as supply and demand.

What presents itself as great news for sellers, comes as unwelcome news to consumers looking to buy. You don’t have to be an economist to know that during an economic downturn most of the car-buying demand will be shifted to the used-auto market.

Granted, a majority of the pent up demand from July and August of this year was focused on the new-car market, but that was only because the Cash for Clunkers (C4C) program was up and running. Part of the criticism surrounding C4C was that it would dually result in a false sense of demand and cause the used-vehicle market to suffer. Critics don’t have to worry about used-car dealers anymore; demand for used vehicles is rising substantially enough that prices have risen right along with it:

One widely followed measure of used-car prices, the 14-year-old Manheim Used Vehicle Value Index, will likely hit a record when data for September are released in early October, says Thomas Webb, chief economist for Manheim Consulting, a subsidiary of Cox Enterprises Inc.

Back to C4C for a moment…besides increasing sales volume, C4C was designed to promote fuel-efficient vehicles. What makes the increase of used-vehicle demand particularly interesting is that the demand for large vehicles, SUVs in particular, are rising:

Demand seems particularly strong for used SUVs, analysts say, reflecting lower gas prices.

What kinds of used vehicles are selling? All kinds, but particularly “gas guzzlers,” says Katharine Kenny , vice president of investor relations for CarMax Inc….

Back in June we wrote an article titled “Do Americans Still Want Large Vehicles?“. From the responses we got from our readers in conjunction with this latest data, the answer seems to continue to be “yes.”

When gas prices soared and demand plummeted in 2008, production of large vehicles dropped dramatically. Come to 2010, 2011, if you’re in the market for a two-to-three-year-old used truck or SUV, it may be an expensive and difficult item to come across.

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One Response to “Used-Car Demand, Prices on the Rise”

  1. How to Buy a Used Car | Auto Blog Says: October 5th, 2009 at 11:21 am

    [...] Used-Car Demand, Prices on the Rise | HSH Financial News Blog [...]

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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