At a time when there is little good news, I hate to be the bearer of even more bad news, but it kind of goes with the territory. So here it is: Used vehicle prices have bottomed out and are moving higher.
Some of you will read this, shrug your shoulders and say to yourself, "so what?"
Hey, if you are not in the market for buying a vehicle, this is just one more piece of data. For millions of others who do need a "new" car or truck, it's not welcome news. It means they will be paying more for a used ride. At a time when people are feeling squeezed, the rebound in used prices will put a little extra pressure on them.
According to used vehicle wholesaler Adesa, Inc. Used vehicle prices bottomed out in October at $8,628... and has steadily moved higher since then. In January the average price hit $9,239. Keep in mind those are the wholesale prices dealers are paying when they buy a used vehicle at an Adesa auction.
Wholesale prices are still running below where they were in January of last year, but in general they are trending higher month to month since October. This is clearly a reflection of greater demand as people who need or want a new car or truck have decided that they either can't afford or don't want to pay for a truly "new" vehicle. In November when used prices started moving higher there's a good chance the inability to get a new car loan forced some people to move off the new lot and get used ride.
So will used car prices keep rising?
Probably. Right now two things are moving in favor of the used market. First, the automakers are selling cars at a pace of 9.5 million new vehicles this year. The scrap rate or the pace at which cars come off the road is roughly 12.5 million a year. You do the math. The U.S. Is on pace to get rid of 3 million more vehicles than it sells. That will put pressure on used prices.
Another factor is the weak economy. I hear it from neighbors and friends. I'd like to get a new car, but I'm not signing up for a new car auto loan. People are spooked. Eventually, even the scared folks will find the itch for a new ride so great-they will go and look for it in the used car market.
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