Friday, March 4, 2011

Used Car Blues

Today we spent an entire day (unsuccessfully) searching for a used car to replace my beloved Jeep Grand Cherokee, which finally gave up after 230K+ miles.  As we drove through Akron,  we were shocked to discover that many of the small, family-owned used car lots that had previously dotted the city have gone out of business and many more had no more than a handful of cars.  We also noticed that the prices were a LOT higher than the last time we looked for a used car!  

At one of the lots, the owner told us that the prices were higher because the supply was so low.  He said that the U.S. has decreased (by millions) its production of new cars in the past several years, so fewer used cars are available now.  Add that to the millions of cars destroyed by the ill-conceived Cash-for-Clunkers program and we see how this must be taking a toll on lower and middle income families.  Many families (like ours!) can't afford a new vehicle and now, even the price of a decent used vehicle is out of reach for many.  Not to mention the people who are out of work as a result of all these lots closing up shop.  

"Lately, the used car market has thrived as the new car market has struggled. The problem for consumers is that used vehicle demand has outstripped supply, sending prices skyward. It's not unusual for price tags to be up $3,000 in some product segments in the last five years.And the classic "beater" – a high-mileage, $1,500 used car that can handily take you around town on your errands – is fast becoming a thing of the past, according to some auction houses.
"Car buyers on average paid $1,800 more for a used vehicle in July than they paid a year ago at this time, according to data. That’s a 10.3 percent increase, bringing the average cost of a 3-year-old vehicle to $19,248. The price of a Cadillac Escalade spiked nearly 36 percent. “A lack of confidence in the economy is driving more people to used cars, putting upward pricing pressure on a limited supply of vehicles,” said Joe Spina, a senior analyst for Edmunds"
Morrissey concludes: 
"By destroying a quarter’s worth of trade-ins in three weeks and permanently taking them off the market, the Obama administration has forced an artificial inflation by supply restriction.  Moreover, they did so by subsidizing new-car sales that would have occurred anyway, eating up three billion dollars in taxpayer money. In other words, the White House spent $3 billion to make used cars more expensive for working-class families.  Nice work."

I'm still holding out hope that we can find that "$1500 beater," but I'm not going to hold my breath.

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