As clunker impact ebbs, used-car prices will fall
In the summer of 2009, the federal cash-for-clunkers program removed about 750,000 used vehicles from the market, putting the supply and demand equation out of whack to this day.
But that imbalance is finally being rectified, says Ricky Beggs, managing editor of Black Book, the market and residual-tracking service.
That means much softer used-vehicle prices ahead.
As the impact of cash-for-clunkers cascaded across all vehicle-age categories, used vehicles that had sold for about $2,000 at wholesale suddenly commanded $4,000 to $5,000, Beggs says.
U.S. sales of new cars and trucks fell to 13.2 million units in 2008 and 10.4 million in 2009, from 16.2 million in 2007. That meant a lot fewer 3- and 4-year-old vehicles in 2011-12, which pushed prices higher.
That already has begun to reverse. In 2012, new-vehicle sales will be close to 14.3 million, up roughly 1.5 million from 2011.
The rule of thumb is that 60 percent of those additional sales will involve a trade-in and 35 to 40 percent of those trade-ins will be 2- to 3-year-old vehicles. So 315,000 to 360,000 additional 2- to 3-year-old vehicles will be available in the wholesale used-vehicle market. That's equivalent to almost half of the used units taken out of circulation by cash for clunkers.
Beggs estimates that those additional units, plus more off-lease vehicles in 2013, will help to push the price of vehicles now wholesaling for $4,000 to $5,000 down to around $3,000 to $4,000.