A lot of Louisville KY consumers are surprised at the rising cost of quality used cars, which is understandable. To us in the industry there is no surprise, like always it’s simple cause and effect in action.
Any time the economy is down, it’s immediately reflected in the car business. After all America is a mobile society and has been since our boys came home from WW2. The automotive industry is and has always been a good indicator of the overall health of our economy. But we’ve had recessions before, so what makes it different this time?
Mainly there are 2 reasons.
Reason #1
The recent and still on going great recession. Any time the economy goes into recession, Americans tighten their belts and do without a lot of things that they would otherwise still afford. Simply put, a lot of Americans are keeping their cars instead of trading them in. It’s not untypical for a person that normally makes a new car purchase every year to five years to end up keeping their old car a couple of extra years during bad times. Without people trading their old cars in on new car purchases there are less used cars being sold at auction. Naturally the price of the cars being sold at auction rises exponentially. And like always that rising cost is passed onto the consumer in the form of higher sticker prices at used car dealerships. For an in depth explanation check out this article from the Wall Street Journal.
Reason #2
CASH FOR CLUNKERS! That’s it.. When you remove a vast number of used cars from the market for any reason, those cars are simply not longer there to provide 2nd or 3rd tier buyers a reliable option when it comes to making a future used car purchase. When the supply for one reason or another shortens, cost goes up. It’s just that simple! Cash for Clunkers took 700,000 used vehicles off the road, so it’s no surprise that this has added to used car prices.
