Are used cars more expensive now? Seems like an easy question to answer, but it really isn’t. Here is why.
Low Prices at the Recession’s Start
In 2008 most of the world was in the early grips of a deep recession. As the recession deepened, there were plenty of used cars available as more and more vehicles were being repossessed and put back on the market. This used car bounty caused prices to dip considerably, for a short time.
Record High Car Prices from 2008-2012
That all changed shortly after the original rash of repossessions. After a car is repossessed the former owner still needs a ride, so they would turn to a less expensive used vehicle, increasing the number or potential customers for each vehicle available. Then came the twin disasters of an earthquake and tsunami hitting Japan in 2011. The damage stopped the production of cars and parts in Japan. Since many of those parts were being shipped to North American manufacturing centers, the total production of new vehicles dipped well below demand. Again, this caused a heightened market for used cars. As you can expect from a free market economy, high demand turned into high prices. Between 2008 and 2012 used cars prices set multiple price records.
Used Car Market Normalizing in 2013-2014
In mid-2013, automobile manufacturers finally made it back to their desired inventory levels, so new car sales began to flow once again. This began to slowly replenish the used car market, easing prices. While prices are not down to their pre-2008 levels as of yet, they are beginning to relax considerably. According to statistics released by several automotive auction specialists, new car prices have dropped by ten percent since July of 2013 and the trend should continue throughout 2014.