Before you buy or use a car from the United States, you should understand a bit about how the car dealer arrives at the price listed on the sticker. For a dealer, a used car parked on their lot with a price tag represents cash to raise. You can bet you’d like to see that cash sooner rather than later because, in most cases, the money you used to buy a car is a bank loan that you pay interest on every month.
Used car prices began to rise during the recession.
The price increase was associated with the latest used car US models entering the market and increased demand for them. Now that the recession is ending and new vehicles are selling again, used prices should start to decrease. That is not what is happening. These prices go higher. The question is, why? The simple answer is that more good used cars need to be on the market to keep up with the growing demand.
During the recession, automakers produced six million fewer new cars. As a result, six million lower-quality used cars could enter the market. The program was designed to encourage new car sales but destroyed nearly 700,000 used SUVs. These cars would have ended up in used parking lots if they hadn’t been destroyed.
Used cars dealers get their cars from four locations. One of the largest suppliers of late-model used cars fresno were car rental agencies and companies with a fleet of vehicles. Before the recession in these places, cars were changed every two years. Now they change them every four or five years. Many companies have completely abandoned the fleet.
Another source of late-model cars for dealers is expiring rental vehicles. The banking crisis that started the recession forced automakers and lenders to stop leasing cars because of the risk. Now leasing is back, but these cars will come on the market for at least two or three years.
Another source of cars for used car dealers is the swap. Now people keep their cars longer, eleven years on average. Therefore, the quality of trade has dropped significantly. Car dealers are not interested in old vehicles because they are hard to sell.
The fourth source of used cars is impounding. Lenders have been much tougher on lending during the recession. As a result, fewer risky auto loans were issued. For this reason, the number of seized cars has decreased significantly.
Many of these lenders have now relaxed the requirements so that more people can qualify for a car loan. The more people buy used cars of the latest models, the higher the prices will be. Rising gasoline prices drive demand for smaller, more energy-efficient used cars. The demand is driving up the cost of four-cylinder cars and hybrids.
Except for the used car trade, used car dealers get their inventory from auctions. Prices for late-model, economy cars, trucks, and SUVs have risen sharply in the past year. The dealer has no but to pass these costs on to the customer.