Tuesday, November 10, 2009

Used cars in high demand, command premium prices

Used vehicles prices jumped an average of 16 percent in October compared with a year ago, according to Edmunds.com, an automotive information Web site.

Leading the rise are minivans such as Sharp's, up 27.1 percent. The Web site shows increases for 14 of 15 vehicle categories, with the only decline being a 1.6 percent drop in the price of mid-sized cars.

The dramatic increase stems from basic economic principals, said Joe Spina, analyst for the California-based Edmunds.com. "Used car supply is down, and demand is up," he said.

The supply has diminished for several reasons, Spina said. One is because many vehicle manufacturers cut their leasing programs several years ago, meaning there are fewer vehicles coming off lease and entering the used market.

Another reason is the federal "Cash for Clunkers" program, which gave consumers an incentive of up to $4,500 to trade in older vehicles for new ones. Those older vehicles were destroyed, meaning nearly 700,000 vehicles that could have ended up in the used car market were eliminated.

And finally, new car sales are down — especially after the clunkers program ended in August, so fewer customers are trading in their used cars.

Meanwhile, demand is up because many traditional new car shoppers are now considering used because of the economy, Spina said.

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