These days it seems a lot of people want used cars, even though there aren’t that many around. This reduced supply and increased demand leads to higher prices for used cars, or what many are calling a "seller's market." To understand why this is happening, first we have to look back a few years.
The economic downturn of 2008 and 2009 meant that fewer people bought new cars. That translates into fewer used cars available today. As most would agree, we are still not out of the woods economically, and many people who need a car prefer to buy a less expensive used car than a brand new one - but because of the relative scarcity of used cars, their prices are inching up.
It’s The Economy, And...
It’s not that no one tried to help the car market. In 2009, the federal government attempted to stimulate the car market with its Car Allowance Rebate System, or CARS. This program awarded cash bonuses (average $2,000 per person) to those who traded in their old, inefficient cars and bought new ones that were good on fuel economy. Although Congress hoped to both help the environment and stimulate the economy through this program, the payouts ended up outweighing the benefits, as the money Congress had allotted was completely exhausted in a matter of weeks. Some people even filed fraudulent claims and got money from the government without contributing a trade-in or helping the new car market at all (see car expert Kevin Griffin's article at http://usedcars.about.com/b/2011/06/13/prisoners-took-advantage-of-cash-for-clunkers.htm). So unfortunately, CARS didn’t really work.
To add insult to injury, this year’s tsunami in Japan has slowed the production of car components from that country, lowering the supply of new cars. However, the flow of car parts should be back to normal by the end of the summer. If you're in the market for a used car, you may want to wait until the end of the summer - if you can. The car part supply rate from Japan should have recovered by then. More new cars will be available and - fingers crossed the economy continues to improve - more people will buy new cars, freeing up greater numbers of used ones. Also, because consumers are currently noting a plateau in gas prices, they may feel more optimistic about owning a new car.
At the moment, however, used car dealers have reacted to the low supply and high demand for used cars by intensifying their search for inventory with alarming energy. As The New York Times reported on June 9th of this year, some dealers have been calling owners of popular cars with low mileage in the hopes of persuading them to trade in.
Sell Sell Sell!
If you are looking to sell your used car, now is a great time! Ensure you are well aware of your car's value by checking sites such as Kelly Blue Book (kbb.com), Edmunds.com, and Clearbook.com. Visit several dealerships and play them off each other to see who can offer you the best price, or try your luck in the for-sale-by-owner market. BestCarFinder.com is always a great place to start because it caters to individuals selling their car. As we all know, you are more likely to get a good price when you sell your car yourself, since you won't be handing it over to a dealer who has a markup in mind.
Since used cars are so hot right now, if you have one to sell you can start thinking about what you'll do this summer with the extra cash.