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(Transportation-News.com, September 23, 2012 ) San Francisco, CA- With a recession, there are usual consequences in prices for cars particularly as people change their spending habits. In a healthy economy, a new car loses its value the moment it is driven away from the seller’s lot, sometimes it loses up to 30% of its value within a year’s time. As a response to the recession, more people are turning to used cars instead of new ones and, as a result, used cars have reached new highs that have not been seen before.
There are some instances where new cars are even cheaper than used ones at this point. Some say that within the upcoming days, used cars will go back to being cheaper than new cars. There are some numbers that support this prediction. For instance, the average used car is now selling for 2.4% less than in May. Analysts are expecting for this decrease to continue not only for the upcoming months, but also for years to come.
The most recent ALG report further supports these predictions as it reveals that, “The percentage of dealership transactions attributable to used car sales has been steadily declining since January.” It also supports the hypothesis of new cars being overshadowed by used ones, “Since their peak of nearly 65% in 2010, dealer used car transactions have been eclipsed by new car transactions as a percentage of total vehicle sales”
There are many guesses and hypotheses as to why the decline in used-car prices is not happening fast enough. Some blame government programs like Cash for Clunkers. Some think it is because buyers are holding on to cars for longer periods. However, most agree that this decline is due to a low number of used cars in general.
Vice president of residual value solutions at ALG, Eric Lyman explains to Automotive News, “The supply right now is so low, that is controlling everything in the used-market values,” He expands on this statement, “There just aren’t enough vehicles out there relative to used-car demand.”
Regardless of the decline in prices for used cars taking a longer time, still, new cars are getting more expensive as they include more up-to-date technology that is often pricey and better fuel economy. According to Cars.com’s Kicking Tires blog, the average new car sold last month for $2,338 more than a year ago.
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Source: EmailWire.com
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