Cash for Clunkers' Effect on the Used-Car Market

The focus on new car sales during the previous week due to the Cash for Clunkers program did not prevent consumers and dealers from buying good used cars. That is according to the Aug. 24 Beggs on the Used Car Market report from Ricky Beggs, Black Book’s vice president and managing editor.

Beggs said in the report that demand for quality late-model used inventory continues because of the lack of new car inventory and because of “the continued fact that used cars are smart retail purchases.”

In what Beggs described as “an almost unreal market,” the Cash for Clunkers program resulted in some long hours for sales professionals and finance and insurance managers, who were completing deals and paperwork. The weekend before the program came to an end on Aug. 24, the rush to take advantage of the potential $3,500 to $4,500 incentive continued.

The 10 car segments that Black Book tracks showed the largest week-over-week difference since the last week in March, with a strong change in the premium sporty car segment. The truck market showed more stable market changes. Five of the 14 truck segments showed no trend difference. Three dropped, including the luxury SUVs, compact crossovers, and full-size crossovers. The total segment average was still a stable $3 increase from the previous week for the total 14 segments.

The direction of daily vehicle adjustments was mostly on the positive side, with a solid 332 daily changes. Seventy-two percent of clean condition adjustments increased at an average amount of just over $193. Those that were adjusted downward dropped $182. But due to the volumes, the overall average came in a very positive $88.

Beggs concluded by saying the lack of supply of used inventory continues to be the driver of the strength in values and auction activity and sales conversion rates at the auctions. He said that while attending the International Automotive Remarketers Alliance Summer Roundtable, he asked one remarketer if he wished he had more units to sell with the prices being so strong. The remarketer’s response: “No, if I had more, everyone else would have more, the supply would be greater and then the prices wouldn’t be as strong.”

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