Used Car Price Index Hits Record High in May
Japanese Earthquake and 'Cash for Clunkers' drive up prices for Used Cars

Used vehicle prices increased to another record high in May. The May Index reading of 127.8 represented a 5.6% increase from the year-ago level. According to Manheim Consulting, wholesale auction supplies remain constrained while the demand for used vehicles in the retail market remains healthy.

The recent earthquake created a significant disruption in Japanese production and has lead to shortages of some popular new Japanese cars, contributing to the dramatic rise in used car prices. The collapse in new car sales in 2008-2009 and the destruction of almost 700,000 used cars in the summer of 2009 during the “Cash for Clunkers” program have contributed to the current shortage and high prices for used vehicles.

New vehicle sales pace dips below 12 million in May. In May, the rate of new car sales slipped below 12 million as the Japanese earthquake has materially affected inventories. Tight inventories have led to lower fleet deliveries, reduced incentives, and higher retail transaction prices. This environment in the new vehicle market is expected to persist for several more months and will continue to keep used car prices high.

Used vehicle sales soften in May. Total used vehicle retail sales in May slipped 1.4% since last year according to CNW Marketing Research. Sales at independent dealerships fell 4.4% as a result of increased competition from franchised dealers and the reduced availability of vehicles in their desired price point at auction.

Auction prices for compact cars soar. Compact car prices are up more than 20% from a year ago. Higher gas prices are making car buyers more cost-conscious, which is likely the reason for this surge in demand for compact used cars.

http://www.manheimconsulting.com/Used_Vehicle_Value_Index/Current_Monthly_Index.html