Used car and van prices to finally decline

The markets for used cars and vans suffered last year due to the schemes to remove older vehicles off the roads, putting a strain on business that relied on the markets, such as second hand auto dealerships, car hire and van hire agencies, impounds, etc. The prices for used products continued to rise excessively all year, but buyers may finally start to get a modest break.

Various dealerships and agencies across the country have had around 8 million fewer used cars and trucks over the past two years to operate under, resulting in a spike of increased vehicle prices every month in 2009.

However, there is an expected 15% increase in new vehicle sales this year, which could mean a new wave of trade-ins, increasing the supply of used cars and helping to ease prices.

“We’ll start to see an ease to the used car shortage, but it will be several years before the supply returns to the average of the 1998-2007 period of strong new car sales,” says Paul Taylor, the association’s chief economist whose analysis is based on wholesale transaction prices.

Taylor says that not only were there fewer trade-ins last year, but fewer vehicles coming off lease and out of rental-car fleets. All are the traditional sources of late-model used cars. Don’t blamed the government’s cash-for-clunkers program:

It was not a reason for the increase in used car prices month-over-month from January through November, he said. “The cash-for-clunkers program removed only 690,000 used vehicles from the marketplace, and these clunker vehicles were largely undesirable anyway. Even if these vehicles hadn’t been recycled under the program, their worth as trade-ins was modest.”