Used cars are more popular – and more expensive – than ever. According to new data from the National Automobile Dealers Association (NADA) and Manheim Auctions, consumers are increasingly turning to used cars instead of new ones, squeezing the market, driving up prices, and turning the used car bargain into a thing of the past.
One indicator of increased used car demand is the Manheim Used Vehicle Value Index, which rates overall values of vehicles sold by Manheim Auctions, a dealer-only auction group responsible for wholesaling around 5 million vehicles annually. The Index hit 122 in November – a six percent increase over last year’s figure and a record high for the scale since its creation in 1995.
“As new car sales have lagged in the 11 million or 12 million units a year range, used car pricing has gone up steadily,” said Jay Adair, president of online auction company Copart, to AOL Autos correspondent Gary Hoffman. “So we are at record used car pricing right now.”
Figures released by the NADA show the trend even more dramatically. Between January 2005 and July 2010, average used car values for one- to five-year-old cars rose from $10,500 to $13,200 – an increase of about 26 percent. For SUVs, the jump was even more dramatic, rising a surprising 69 percent from around $13,000 to about $22,000.
Several factors are contributing to the jump in used car values. For one, consumer confidence about the economy remains low, causing car shoppers to be wary of spending money on any big-ticket items – especially new cars. Those who are spending are concluding that with increasing reliability of today’s cars, buying new isn’t necessary to get a durable, high-quality vehicle.
Another factor driving up used car prices is the government’s Car Allowance Rebate System – known to most as Cash for Clunkers – which oversaw the destruction of nearly 700,000 cars in 2009. While the program generated massive new-car sales by providing consumers with above-book trade-in values for used cars, it also removed many inexpensive used cars from the roads.