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Source link: http://archive.mises.org/17103/used-car-prices-up-who-would-have-guessed/

Used car prices up: who would have guessed?

May 25, 2011 by

According to The Columbus Dispatch, “The lack of supply stems from the economic downturn. Automakers sold fewer new cars, which means that fewer recent models are out there to be traded in.”

The article fails to mention the Cash for Clunkers program and its desired result of a reduced supply of used cars.

According to the chart (right) in the paper, used car prices rebounded before the program began. But some of the later rise has to be attributed to 650,000 less used cars on the market due to the 2009 program, regardless the paper’s silence on the matter.

{ 11 comments }

Jonathan M. F. Catalán May 26, 2011 at 12:24 am

I don’t know if cash for clunkers would impact the price of the cars cited in the article as much as you’d think. The cars that were traded in during the program were mostly SUVs and older model automobiles. A reduction in used car supply of that degree is surely to have an impact on prices, but I don’t know if the impact would really be that dramatic. Substitutability tends to fall as models get older, and the degree of substitutability between a SUV and a more economical automobile has also fallen since the recession. So, I’m somewhat skeptical at blaming cash for clunkers.

On the other hand, I wonder what kind of impact the recession has had on turnover rates for cars. I don’t know for certain, but the average family probably buys a new car every three years? After the recession the turnover rate must have fallen, as buying new cars became less affordable and unemployment increased. The fact that people are deciding to maintain the same model car for longer must impact the supply dimension of the used car market, especially for the models cited by the article (2008 and older).

J. Murray May 26, 2011 at 5:29 am

I’d agree on the total average. A better question is what the average price on a 8-20 year old vehicle would be and the history on that range. It would likely better determine the impact of Cash for Clunkers.

matskralc May 26, 2011 at 8:41 am

Only one data point, but Blue Book on my 2002 Chevy Cavalier has gone up almost $1000 in the past year.

Fritz May 26, 2011 at 1:20 pm

Let’s not also forget that new cars are getting more expensive and less desirable all around. There are some basic market forces at play. Also, with bad credit, a new car might not work out. Whereas, you might be able to at least get a used car at a higher rate. Hand in hand with more people renting thus rent going up. Lots of things going on.

Tony Fernandez May 26, 2011 at 1:55 pm

But this was the kind of stimulus that Republicans wanted, and they’re the party of the free market!

Glen Smith May 26, 2011 at 5:29 pm

No, the Republicrats are generally no more free market than the Demopubs. Primarily, its just that most of the people who are honest about being anti-free market are Demopubs.

Tony Fernandez May 26, 2011 at 6:29 pm

Sarcasm. It never seems to convey itself well.

Travis May 31, 2011 at 1:18 pm

There’s no way used car prices will stay as high as they are. Three months and things should be back to normal…
http://www.cargurus.com/blog/2011/05/31/why-the-used-car-bubble-will-burst-soon

Maiah October 12, 2011 at 4:45 am

Lots of information! thanks!

Used Cars Australia October 12, 2011 at 6:52 pm

People are hanging on to their cars longer, further constricting supply.

Dan Rathbone November 22, 2011 at 6:25 pm

I’m in the business of collecting used car prices. I just started in April, so I don’t have data over the time period that would capture the effect of Cash-for-clunkers on the market.

Nonetheless, I think you might be interested in the new website that I’ve built, http://carpricegraph.com. It shows graphs of used car prices, which indicate the year-over-year depreciation, similar to that which you analyze in this article.

It is my hope that CarPriceGraph will help both buyers and sellers find accurate prices for their used cars. Additionally, I think the aggregate data may be of interest to economists. Please let me know what you think.

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