Used cars command premium prices

Orlando Sentinel

ORLANDO, Fla. — Dale Sharp’s 6-year-old Honda minivan had been reliable but not needed, so Sharp advertised it for sale for $8,000.

“The first caller bought it for the asking price,” said Sharp, of Orlando. “No negotiation.”

The ease of the transaction wasn’t surprising. Used-vehicles prices jumped an average of 16 percent in October compared with a year ago, according to Edmunds.com, an automotive information Web site.

Leading the rise are minivans such as Sharp’s, up 27.1 percent. The Web site shows increases for 14 of 15 vehicle categories, with the only decline being a 1.6 percent drop in the price of midsize cars.

The dramatic increase stems from basic economic principals, said Joe Spina, analyst for the California-based Edmunds.com. “Used-car supply is down, and demand is up,” he said.

The supply has diminished for several reasons, Spina said. One is because many vehicle manufacturers cut their leasing programs several years ago, meaning there are fewer vehicles coming off lease and entering the used market.

Another reason is the federal “Cash for Clunkers” program, which gave consumers an incentive of up to $4,500 to trade in older vehicles for new ones. Those older vehicles were destroyed, meaning nearly 700,000 vehicles that could have ended up in the used-car market were eliminated.

Finally, new-car sales are down — especially after the Clunkers program ended in August, so fewer customers are trading in their used cars.

Meanwhile, demand is up because many traditional new-car shoppers are considering used cars because of the economy, Spina said.

All the price volatility “is making the used-car business very difficult, very complicated,” said Ron Thurston, one of the owners of Thurston’s Used Cars in Clermont, Fla. “Five years ago, we could pretty much predict what the market would do — what would sell and for how much. It’s impossible now.”

Shawn Allen, general sales manager at Greenway Dodge in Orlando, said that another reason the used market is hot is because the credit market remains tight.

“We’re seeing a lot of people who want to come in and pay cash for a vehicle, versus financing a new one. A lot of our traffic is looking for a $6,000 to $8,000 car, rather than financing a new $20,000 automobile. People are saving up their money and putting cash down.”

Consequently, with demand up, finding good used cars at the auctions is tough. “They’re there,” Allen said, “but you have to pay all the money for them.”

That said, there is some evidence that used prices might have peaked.

“We’ve seen a drop recently in price,” said Joe Oberman, a sales manager for Mullinax Ford in Apopka, Fla. And the supply is increasing slightly, he said.