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Used cars in demand
Various cars sit in the lot for sale at a General Motors used car dealership at the Troy Motor Mall in Troy, Mich.
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TEXT OF STORY
Kai Ryssdal: Here is an economic indicator from the classifieds for you. If you happen to be in the market for a used car, move over. There's been a jump in sales and also prices. In fact, brace yourself for some sticker shock. Edmunds.com says the average price for a three-year-old car is up 10 percent over the past year to almost $20,000 -- for something that's used.
Our Washington bureau chief John Dimsdale draws the wider economic lesson.
John Dimsdale: A year ago, used cars made up 75 percent of the overall market. This year, it's 80 percent.
Edmunds.com analyst Jessica Caldwell is seeing pent-up demand for all types of used vehicles.
Jessica Caldwell: A lot of people have waited, hoping the economy will get better to purchase. But they still don't want to pay for a new vehicle.
Prices for used gas guzzlers have especially rebounded. Some SUVs, trucks and luxury sedans are going for 30 percent higher than they did just a year ago. Caldwell says folks who shed their big vehicles when gas prices were high, are having second thoughts.
Caldwell: We're seeing some customers are being a bit remorseful on that and deciding that this really isn't working with my lifestyle I need to get back into a truck or SUV.
Sound of an auctioneer
At a used car auction in Florence, S.C. this afternoon, Kenny Hyman was on the lookout for good prospects. He is used car sales manager at King Cadillac, Buick and Pontiac. He says it's not just lots of demand that's driving prices -- there's also less supply.
Kenny Hyman: They're just not out there to buy. Some auctions would have 1,000 cars, are having 200 and 300 now.
Nine years ago, the average owner held on to a car for 28 months. Now, that's more like 44 months. Polk analyst Lonnie Miller says eventually higher prices for used cars will help new car sales.
Lonnie Miller: Because at some point people are going to say, "Well, if I'm going to pay that much, I'm going to buy a new car."
But not until they're more confident about their own financial outlook.
In Washington, I'm John Dimsdale for Marketplace.
Besides Cash for Clunkers, I think the other big factor in this is that GM and Chrysler recently worked their way through bankrupncy court, which allowed them to shut down factories. Now that the Unions can't force them to make more cars than what will sell there's less supply in the market.
Regarding Cash for Clunkers, one report says an estimated 690,000 cars were destroyed, which not only effects the used car market, but also the spare parts market. (Less supply = higher prices)
Note also the top 10 cars turned in. Anyone know the prices these used vehicles are now commanding compared to this time last year?
For Marketplace to overlook the fact that we, the USA, led by our present administration, decided that it would be a great idea to spend $3000000000 to buy up and simply destroy 700000 used cars is a bit shocking for a show where 'supply and demand' should be axiomatic. I can deal with a bit of a slant to news, but come on folks....
The single biggest cause of this is probably what you didn't mention: Last year, the government paid people to get have their old cars destroyed and buy new ones. And the so-called "clunkers" were overwhelmingly the *cheap* used cars. This had the same effect on average used car prices that minimum wage laws do on average wages.
