Used cars pricier, scarcer

The manager of the Brown Super Center lot in Sylvania Township says dealers are bidding aggressively at used-car auctions to ensure they have inventory to last until Japan's problems are resolved. THE BLADE/LORI KING Enlarge | Photo Reprints

While car owners cope with rising gas prices, car buyers are being bedeviled by the continued jump in the cost of used cars.

Prices of previously owned vehicles began increasing in March as a reaction to slowed new-car production by Japanese automakers hurt by natural disasters in the island nation. But the rise has been exacerbated by soaring gas prices and a used-vehicle shortage.

"Intermediate compacts jumped 5 to 5.5 percent in April, which was above the historical rate of increase from April to March," said Larry Dixon, senior auto analyst for the National Auto Dealers Association.

"Several segments went up another 1.8 percent relative to the previous week this month," Mr. Dixon added.

Prices are still vaulting, but the trade association anticipates used-car prices will peak by the end of June or mid-July and then come down by the close of summer, the economist added.

Intermediate midsize vehicles jumped 7.6 percent in March and 3.5 percent in April, statistics from the dealers association show. Prices for large sport utility vehicles and pickup trucks were flat both months. For several specific vehicles, the increases have been even more pronounced.

According to AutoTrader.com, an online site advertising thousands of used vehicles nationwide, a used Honda Accord rose 9.9 percent in April after rising 3.6 percent in March. A used Nissan Altima rose 7.2 percent in April after rising 2.5 percent in March, and a used Toyota Camry rose 9 percent in April after jumping 5 percent in March.

Contributing to the boost were Japan's earthquake and tsunami, which curtailed Japanese new-car production, which in turn led some people to buy used cars, experts said.

Ryan McCabe, used-car manager for Brown Automotive Group's Brown Super Center used car lot in Sylvania Township, said Brown's Honda dealership sold 150 Hondas in April and normally gets resupplied by the amount it sells. For June, it is being allocated only 17 new vehicles.

If they cannot get new vehicles, many buyers will consider newer used vehicles, but "dealers are bidding aggressively at auctions [of used cars] to ensure they have the inventory to keep things going while the Japanese … work through their production problems," Mr. Dixon said.

Higher gas prices lead people to consider spending less money on a car, said Scott Ball, assistant manager of Grogan's Towne Used Cars in Sylvania Township.

The demand for used cars is increasing prices "across the board on everything from a $7,000 to $10,000 car all the way up to $30,000 cars," he said.

Dealers, he explained, are being hurt in that they sell a used car and find they cannot replace it at wholesale for less than the retail price. "It's making it impossible to buy cars and resell them for anything close to a profit," Mr. Dixon said.

Paul Devers, co-owner of Vin Devers Autohaus in Sylvania Township, said other factors are contributing to rising used car prices. For example, the federal Cash for Clunkers program in 2009 got rid of thousands of used vehicles.

Used-car prices will level off and then ease later this summer, he said. In the meantime, the rising price of used cars isn't entirely bad, he added. "It's great for the customer because it means their trade-in's worth more," Mr. Devers said.

Contact Jon Chavez at: jchavez@theblade.com or 419-724-6128.