Prices of GM used cars unhurt by recall
Low values mean little room to fall
Wholesale prices of General Motors vehicles with faulty ignition switches are unscathed by the highly publicized recall of the vehicles, analysts say.
That's because the recalled 1.6 million 2003-07 small cars are valued at about $2,000 to $5,000 each in the wholesale market so there is little room for the prices to fall, says Larry Dixon, an analyst with NADA Used Car Guide.
But Dixon also cautions against reading too much into a big percentage change in older vehicles' prices. After all, a $100 change on a $2,000 car equates to a 5 percent swing. For a $15,000 used car, a 5 percent change would mean a $750 shift.
"They can't fall to zero," he says of the vehicle prices. "If they do fall as a result of the recall, the degree of the fall will be dictated by the amount of media scrutiny. The greater the press firestorm, the more it will negatively affect the prices of those vehicles."
Dixon says he doubts the recalled vehicles' wholesale prices will impact GM vehicles' general residual values because the recalled units are "light-years" from the vehicles the company builds today in terms of quality and technology.
Since the recall was announced in February, wholesale auction prices of the recalled vehicles have held up better than those of their peers.
Beggs: Big demand at that price level
For example, NADA guide data show that the average price of a 2007 Chevrolet Cobalt, one of the recalled nameplates, rose 14 percent from Feb. 10, the week the recall was announced, until March 10. During the same period, the average price of 2007 compact cars increased 7 percent.
During the week of March 10-17, the average price of 2007 compact cars dropped 2 percent; the average price of the 2007 Cobalt fell 1 percent.
Prices for other recalled nameplates, such as the Chevrolet HHR, Pontiac G5 and Saturn Ion, have followed a similar trend, Dixon says.
The compact car segment includes the Honda Civic, Toyota Corolla and Ford Focus.
Ricky Beggs, editorial director at Black Book, says the vehicles' price and age make them a perfect fit for the buy-here, pay-here market, which does well with consumers who use their tax refunds as down payments at this time of year.
"There is a huge demand for that level price car right now," Beggs says. He agrees that the GM recall "has not had an adverse effect in the marketplace."
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