John Ombres started selling cars in 1952, but the Ambridge dealer has never before seen used-car prices going up at the rate they are today.
“I actually can’t believe this, because the used-car market has not been good as far as retail sales,” said Ombres, co-owner of Ombres Auto Sales.
The “Cash for Clunkers” program and a slowdown in vehicle sales are said to have caused a strange phenomenon: an increase in the values of some used SUVs, pickups and high-end cars. Cash for Clunkers was a federal rebate program last year that aimed to encourage consumers to trade in their gas-guzzling cars for newer, more fuel-efficient vehicles.
In fact, prices for used vehicles listed for sale on AutoTrader.com, an online listing site, continue to rise as the economy rebounds and car shoppers increasingly become buyers.
In used vehicles, the big average price-gainers were the Ford F-150 pickup and the Jeep Wrangler, both up 10 percent in April 2010 from April last year, according to AutoTrader.com’s Trend Engine Report for May, covering sales in April. Other used models from Chevrolet, Toyota, Volkswagen, Honda, GMC, Dodge and Jeep also experienced double-digit average price increases from last year.
Glenn Young, owner of Young’s Auto Sales in New Sewickley Township, who has been in business for 40 years, said many people are either buying used or repairing old cars, which means there aren’t as many trade-ins coming to the market from new-car sales.
New-car prices were on the rise as well, but moderately, reflecting the slower pace of improvement in the new-car market. And poor new-car sales mean fewer trade-ins and fewer used cars available for retail.
Ombres began to notice the used-car trend last fall, right after the federal program began to take off. But while he believes the program was well-intended, he thinks it also created a vacuum in the used-car inventory, which in turn helped drive up vehicle costs.
“People were parading in cars that were still valuable to be driven on the road,” Ombres said.
Mark Scott, AutoTrader senior manager of public relations, explained that before “Cash for Clunkers,” used-car inventories were already tight because many people were holding onto their vehicles, waiting for a better time to buy.
“Used cars come from people buying new cars and turning in their old cars,” Scott said. “As the economy went into a challenging time, fewer people bought new cars.”
The program took a lot of cars off the road, many of them lower-priced older cars that could have gone to one last buyer before ultimately being scrapped. Instead, those cars are gone. Seventy percent of cars bought nationwide each year are used, and more people are attracted to buying used cars, although there are not a lot of used cars out there, Scott said.
“And now what’s happening is because the economy is recovering, you’re seeing a lot of people get back into the car market. They weren’t sure they would have their job or wanted to save their money. A lot are looking at used cars.”
LOOKING AT NEW
Don Ehrenberg, a salesman at Miller and Sons Chevy in Aliquippa, which sells used and new cars, contends that many buyers are also looking at new cars. There’s the new Chevy Equinox, for example. Ehrenberg said Chevrolet can’t produce them fast enough, and the wait for one can run eight to 10 weeks.
“Right now only three are sitting out there,” Ehrenberg said.
When looking for cars, Scott said, buyers should keep in mind that manufacturers are eager to sell when they begin rolling out newer cars. In a lot of instances, with many offers of 0 percent financing and rebates available, he said, buyers may be able to get a brand-new car close to the same price as a 2- or 3-year-old used car.
Ehrenberg said Miller and Sons was “very involved” in Cash for Clunkers and that it did help spur some buying activity, but he doesn’t believe it affected the used car market one way or the other.
“The used-car market goes through short-term cycles anyway,” Ehrenberg said.
DO THE HOMEWORK
Local used-car dealers say a number of prudent buyers have been perusing the lots, attempting to be a bit more responsible in their purchases, as opposed to buying new. With that, the trouble used-car dealers are finding is that buyers are haggling over higher asking prices.
Young said Kelley Blue Book pricing, a resource for car prices and reviews, isn’t keeping up with current prices, but buyers are relying on the book for vehicle values.
“They look at a used car and look at their little blue book, you might as well throw them away. That’s what the bank is going by, too, but I can’t go to the auction and buy them that cheap. It just doesn’t happen,” Young said.
Ombres suggested that buyers do their homework, shop around and use their own opinion. He said Kelley Blue Book might say a vehicle is worth $5,500 when it’s actually worth $7,000. And, he said, it’s bad enough people typically don’t trust car salesmen.
“My wife doesn’t even trust me,” Ombres said, laughing.