Already high used-vehicle prices are surging at auctions as dealers anticipate gaps in new-car inventories and snatch up used vehicles to fill their lots.
Fears of impending new-vehicle shortages as a result of the March 11 earthquake have pushed up used-vehicle prices. In recent weeks those fears have created a buying frenzy, especially for late-model, fuel-efficient vehicles.
But Damon Schoen, wholesale director at Hamilton Nissan in Hagerstown, Md., and others say retail demand for those vehicles has yet to catch up with the wholesale demand. They warn that used-vehicle auction prices could drop sharply.
Last week Schoen saw 2010 Hyundai Accents with 30,000 miles selling at auction for around $10,500 -- about $2,000 more than he would have paid at the end of February, he says.
His customers aren't clamoring for small used cars, he says, because they would pay almost as much for a used one as a new one. And he acknowledges that he might have to rejoin the bidding if he runs low.
"I participated in the bubble process," he says. "I have enough of these little things gathered up. When we start selling a couple, I'll be forced to go back to the well to replace them."
Michelle Primm, managing partner at Cascade Auto Group, which sells Audi, Mazda, Porsche and Subaru vehicles in Cuyahoga Falls, Ohio, typically buys the used vehicles she needs through auctions run by the manufacturers of her brands. But even those prices have "overheated," she says.
In an effort to find used vehicles with lower prices she has expanded her search to include local classified ads for private sellers and vehicles that have been repossessed.
Primm says consumer demand doesn't line up with the auction bidding because the general population does not understand the inventory problem facing the industry over the next few months. Dealers must plan ahead so they are ready, she says. "Dealers plan 60, 90 or 100 days out. It's what we're good at."
Even so, some dealers and analysts warn that auction buyers could get stuck with vehicles for which they overpaid. Falling new-car prices or lower gasoline prices could prompt a drop in used-vehicle prices, they say.
Since the Japan quake, rising new-vehicle transaction prices have, in turn, lifted used-vehicle prices. But that could change.
Last week, after announcing that its North American factories would be cranking up production sooner than expected, Toyota Motor Sales U.S.A. announced regional cash, interest-rate and lease incentives on most vehicles. Nissan Motor Co. followed suit.