Used car prices skyrocket a year after Cash for Clunkers

posted at 1:35 pm on August 25, 2010 by Ed Morrissey

With home prices falling, fewer people employed, and every economic indicator on the dashboard flashing red, deflation has started to become a big enough worry that the Fed has adjusted its monetary policy to account for it.  There are no such worries in the used-car industry, however.  Prices have jumped 10% overall and in some cases as much as a third for used cars, thanks not to demand as much as a restricted supply after the government destroyed billions of dollars in assets as part of its Cash for Clunkers program last year (via Instapundit):

Car buyers on average paid $1,800 more for a used vehicle in July than they paid a year ago at this time, according to data. That’s a 10.3 percent increase, bringing the average cost of a 3-year-old vehicle to $19,248. The price of a Cadillac Escalade spiked nearly 36 percent. “A lack of confidence in the economy is driving more people to used cars, putting upward pricing pressure on a limited supply of vehicles,” said Joe Spina, a senior analyst for Edmunds. …

Spina said that at this time last year, a troubled economy had consumers buying less- expensive fuel-efficient vehicles and trading in “gas guzzlers” through Cash for Clunkers (more formally known as the Car Allowance Rebate System). “Now, those who need trucks and large SUVs are buying them and in many cases are turning to used vehicles as a way to save money,” he said. “Prices are high because this demand comes at a time when inventory is low as a result of the current shortage of lease returns and trade-ins for vehicles of this type.” And, he said, while prices are indeed very high now, last year’s prices were low, making the gains even more dramatic.

In other words, there was real and rational demand for the cars that the Obama administration sent to the grinders.  That demand hasn’t stopped, even if tainted with political incorrectness.  The top four vehicles for price increases in Edmunds’ used-car tracking are all high-end, larger cars or SUV:

  • Cadillac Escalade – 35.6% increase
  • Chevy Suburban – +34.2%
  • Dodge Grand Caravan – +34%
  • BMW X5 – +33%

As predicted last year, the people most hurt by the price increases are those who can least afford them.  The used-car market usually attracts people who need transportation on a budget, who cannot afford to buy new.   By destroying a quarter’s worth of trade-ins in three weeks and permanently taking them off the market, the Obama administration has forced an artificial inflation by supply restriction.  Moreover, they did so by subsidizing new-car sales that would have occurred anyway, eating up three billion dollars in taxpayer money.

In other words, the White House spent $3 billion to make used cars more expensive for working-class families.  Nice work.

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I’ve been looking for several months and I’m pretty put out about used car prices. As someone else said on this thread, most of what you see have way too many miles on them for the $.

I just this weekend decided to bag it and fix a number of problems on my SUV that has 175,000 miles, rather than pay too muich for a used car.

Definitely not in the market for a new car…

AJ on August 25, 2010 at 7:38 PM

The One will just ignore this or ride the rationalization bus.

BTW, where are the GM bashers? They thought all Caddies were junk. Made and loved by black UAW members.

And X5 drivers have mental problems. Dang Ford had a commercial with their crossover smoking one by all of 2/10 of a second. No matter what I am driving, they race me. And I lose races before I risk lives so some of them feel good. A few do not, to be sure.

I also noticed all the 30 somethings would pick on me when I drove a girlfriend’s S class. They all have their crap Acura TL or Nissan 35 (actually good value cars and I bless them) and would cut me off like crazy. Between them and her company, it was a miserable experience.

And to AP and others (on ‘stupid” Hummers) I have been told that a Hummer would handle a private road in No Va which a Range Rover couldn’t navigate near Middleburg. Jeep had to go change their off road because of Hummer.

Hummers will rise again. Just will not be made again.

IlikedAUH2O on August 25, 2010 at 10:47 PM

Government cannot create wealth: It can only steal it from the future and spend it inefficiently in the present.

BadgerHawk on August 26, 2010 at 3:15 AM

Also, C4C is the perfect example of the law of unintended consequences.

As a result of the Dems attempting to manipulate the economy for short term political gain, they ended up hurting the working class people they claim to stand for.

Now more people will need more government handouts, and the country will go a little bit deeper in debt trying to fix a problem that the government created in the first place.

BadgerHawk on August 26, 2010 at 3:29 AM

Well, I believe we have successfully demonstrated that breaking every window in a city does not, in fact, provide a net economic gain.

Voyager on August 26, 2010 at 3:31 AM

Ocean/fishing nationalization

conservative pilgrim on August 25, 2010 at 2:44 PM

Forgot about this. We need more info on it.

Badger40 on August 26, 2010 at 2:16 PM

I love it, it is a cool car to go to certain events in, but with the way things are now, and the fact I have a huge house I can’t sell in a house-rich ATL suburb, I have an embarassment of riches, and no buyers. I want to sell everything and move back to Alabama, and I just can’t afford to.

di butler on August 25, 2010 at 4:32 PM

Ouch. My condolences. The only thing worse than having nothing to sell is having no buyers. With the latter you have all the problems of storage, maintenance and security and no hope of profit, AKA the “White Elephant Syndrome”.

Dark-Star on August 26, 2010 at 2:17 PM

Credit is hard to get , our ELECTED leaders are trying to manipulate the natural cleansing of the bad debt in the economy . Car sales spiked with clunkers, Home sales trended upward with tax credits (both programs were riddled with fraud )
We had a ” tax free weekend here for back to school and people crossed state lines to purchase , biggest weekend since Christmas , now the ” incentive is gone and stores are empty .
Meanwhile investors were cheated as Obama bankrupted GM , now GM is going to do an IPO and those investors jsut plain got took
Welcome to HOPE N CHANGE ( HOPE they change this insanity while you still have pocket CHANGE )

ELMO Q on August 26, 2010 at 3:16 PM

Isn’t this stimulus for used car salesmen?

nazo311 on August 26, 2010 at 4:32 PM

As someone who was in the market for a used pick-up truck, it was depressing to see perfectly good used pick-ups destroyed and taken off the market. Now the ones that are left are being sold at higher prices due to increased demand. Also, sales of NEW pick-up trucks are increasing.

Guess what a lot of small businesses use for transportation and utility: pick-up trucks. People drive trucks because they serve a purpose, regardless of their efficiency.

This is the dumbest government EVER.

stevezilla on August 26, 2010 at 5:39 PM

Sounds like the two guys in the “OnDemand” video store, who sit around thinking up crazy stuff, are running the Obama admin.

For conspiracy theorists: Was the intent of Cash for Clunkers to get old inefficient cars off the road? To get “Working Class” (hey I work for a living too) families to get rid of a old beat up unreliable vehicle for a newer one?[ To artificially push up used car prices to keep even more “dirty gas guzzlers” off the road?

Was anyone even thinking long term about Cash for Clunkers, or just long enough to get “praise” for “doing something” to “help the less fortunate” in the media?

Neo on August 26, 2010 at 8:21 PM

Here’s a surprise. A government program with unintended consequences. Ask anyone who has tried to buy a cheap car for their teenager how well cash for clunkers has worked.

pgrossjr on August 26, 2010 at 9:45 PM

I still cringe when I think about how they murdered all those perfectly good used cars with the sodium silicate and water treatment.

Ward Cleaver on August 27, 2010 at 11:18 AM