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Obama's Cash for Clunkers deal removed a large amount of viable used vehicles from the roads. When these vehicles were traded in for the deal, the dealer/salvage yard had specific instructions on how to completely destroy the engine regardless of running condition. Salvage yards lost money from this. Used car lots lost out on selling perfectly good running vehicles to those for whom this was the best they could afford. The lingering effect was to drive up the price of used cars.
This is interesting. I completely forgot all about that program! I remember reading how it was expected to create other problems....looks like it did!
When comparing used to new, are people comparing the same package? I just bought a new Durango and the low end has nothing that mine has. I have a Citadel and I don't even think you can get a used one unless it's from this year. When I was buying a new vehicle, it was a bit of a challenge comparing the Durango to the Grand Cherokee because they had some different features.
Multiple factors that have been mentioned have combined to screw up the used car market for an extended period.
Cash for clunkers did drive up prices on remaining vehicles on the market. When the least expensive cars become more valuable, the same effect works uphill to the more expensive (newer) vehicles. Anyone that says it did not have an effect is ill-informed.
The slow sales for several years also reduced the number of available used cars, driving up prices. With an economy in the tank, people deferred buying in many cases when they would have made replacement decisions if the economy were good. This is also likely affected by the realization that cars can last longer today than a generation ago and also by the reduced travel that was also a result of the economy being in the tank.
The combination is higher prices on used cars almost across the board. Many industry "experts" thought this would have passed already but it seems to be lingering. My guess is that we will see the inflated pricing till two things happen; real economic recovery hits the blue collar masses and (as already mentioned) the increased sales of the last ~18 months drives the used vehicle inventory up.
In the past when I've bought used, I NEVER went to a used car dealer. That is a big mistake people make in the first place. You will never come out winning. NEVER. Instead, when buying used, buy from a private party. There's plenty of deals out there so long as you dont mind looking for them.
I'll give you an example. Many years ago I purchased a 2003 Honda Prelude SH. It had 72k miles on it and I found a private seller willing to let it go for $7500. Car was in immaculate condition. Weeks after I bought it I was driving down this main blvd where there were many car dealerships. I see the same make/model as mine with similar mileage. Asking price?..... $14,500.
Another time I purchased a Lexus IS300 sportcross for $8500. That car too was also immaculate with only 64k miles at the time. Saw the same make/model/year with similar mileage at a used car lot for $13,000.
Last edited by louie0406; 11-03-2014 at 07:19 AM..
Cash for clunkers did drive up prices on remaining vehicles on the market. When the least expensive cars become more valuable, the same effect works uphill to the more expensive (newer) vehicles. Anyone that says it did not have an effect is ill-informed.
15 million new cars enter the market every year. C4C effect on the used car market, even if it ever existed, has long dissipated.
I've noticed the cost of some are still high, but in other cases I've noticed prices have come way down since the Cash for Clunkers debacle a few years ago.
During the height of that program I needed a new car (the old one died) and didn't really have much of a credit history or any money saved up. I was a college kid. I ended up paying $6000 for a 10 year old Malibu. That same type of car (common car, ten years old) I'm seeing is running about $3500-4000 in my area nowadays. That's a significant difference.
But yeah, cars from say 2007 onward are running $10,000+ with 100-150,000 miles on them. It's nuts. I saw a 2006 Grand Prix (or was it an Am? I always get those mixed up) selling for $14,000.
15 million new cars enter the market every year. C4C effect on the used car market, even if it ever existed, has long dissipated.
From 2008 - 2013 there were significantly less than that sold annually. Only since September of 2012 did the number of vehicles sold finally go back over 15 million annual rate. Almost every economic analyst on the planet has agreed that the CFC program negatively affected sales of used cars over the long term. It may have been a minor help to the new car market, but it was a catalyst in the rising prices and lagging sales of used cars, the primary profit center of most dealerships and the industry as a whole.
There is this "Silent Majority Wisdom" that buying a used car is "A better deal". Car sellers aren't dumb, they trap people this way.
A late model used car might be cheaper, but often it is proportionately more expensive than a new one.
That and people forget to factor in that new car rates are typically at least one percent less with interest making the cost and warranty of a new car the better deal.
If everybody decided not to buy those overpriced used cars you'd think they wouldn't remain overpriced. Who are those those idiots who buy them then?
I really don't know. I think a lot of people still believe in the "Always Buy Used" rule without actually analyzing the price difference (or lack of.) Example:
15 million new cars enter the market every year. C4C effect on the used car market, even if it ever existed, has long dissipated.
I wouldn't say that.
C4C, however, really only had an impact at the very bottom of the barrel. If you're looking at 20-year-old cars, sure, I'd say it reduced the supply and still has some impact. If you're looking at "a few years old," it never had much affect at all and by now certainly has dissipated.
From 2008 - 2013 there were significantly less than that sold annually. Only since September of 2012 did the number of vehicles sold finally go back over 15 million annual rate. Almost every economic analyst on the planet has agreed that the CFC program negatively affected sales of used cars over the long term. It may have been a minor help to the new car market, but it was a catalyst in the rising prices and lagging sales of used cars, the primary profit center of most dealerships and the industry as a whole.
Not really. If people don't buy new cars, they don't trade in their used cars for the dealers to sell. The cars that got clunked weren't the types dealers were making any real money on anyway. They just auction the low end stuff off. C4C had an impact on the bottom for the market, not so much on the "a few years old" market.
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