Used car and van prices to level off over 2010

Used car prices went up all year, but buyers may finally start to get a modest break.

For the past few years the nation’s dealerships, car rental, van rental agencies, and other trades that relied on used automotive vehicles have had operate with 8 million fewer used cars and trucks, resulting in much higher used vehicle prices throughout the 2009 year.

But an expected 15% rise in new vehicle sales this year could result in a flood 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.

“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.”

Before 2008, used cars were profitable every year since 1980. Then in 2008, dealerships lost money on used cars when gasoline prices ballooned. No word yet on profitability of used cars in 2009.