Economics

Used Car Prices Rise as Administration Declares Victory on Cash for Clunkers

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Nothing like sitting around waiting for the double dip recession at home, watching the Dow plunge, or listening to the doors of European banks slam shut, to make a person feel like a used car might be the way to go, rather than something shiny and new.

Too bad used cars are becoming much more expensive. Demand for used cars is up, and supply is down. People traded in 3 million fewer cars last year than in the pre-recession years. And perhaps you recall those 677,842 functional cars we junked as part of the Cash for Clunkers plan? Yeah, those aren't on the market either.

But rising used car prices and an unimpressive economy didn't stop the government from declaring victory last week on Cash for Clunkers:

Transportation Secretary Ray LaHood responded to reports released today by the DOT Office of Inspector General (OIG) and the General Accounting Office on the DOT's popular 'Cash for Clunkers' program and announced next steps for closing it down. "Cash for Clunkers was wildly successful," said Secretary LaHood. "In a matter of weeks, Americans traded in nearly 700,000 gas-guzzlers for more fuel-efficient cars, improving the environment and providing a lifeline to the auto industry. Our program was a win for everyone, and most importantly it gave the economy a shot in the arm at a time when we desperately needed it."

More Cash for Clunkers fun here.

NEXT: Los Angeles Destroys Functioning Businesses in a Recession

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  1. What’s the over/under on the percentage of used car buyers who will attribute some of the price increase to the administration?

    I say 8%.

    1. Free Healthcare!

    2. I think it would matter to twenty-somethings. I’ve had a few mention to me that they can’t find a car…

      Also, if 8% of the car buyers out there make the connection, wouldn’t that add up to something?

      If it gives Obama a 2% drag nationally, then I think that’s probably an issue the Obama Administration would rather do without.

  2. Well, used car prices were bound to rise once the credit implosion occurred. The domestics in particular spent a decade handing out car loans to anyone with a pulse. This flooded the market with new cars at a rate that was unsustainable once the credit didn’t flow as freely. It didn’t make a whole lot of sense for cars to lose 50% of their value after 3 years, when after 3 years a car has only been on the road about 1/4 to 1/5 (or more if you listen to some maintenance nuts) of its useful lifespan. The “much more expensive increase” is all of 7%, according to the article. So it looks like simply the market realizing that used cars are have been a tremendous bargain for those who were willing to forgo the new car smell and take some small risks regarding the warranty.

  3. The increase of used car prices is a result of capitalists gouging consumers in the free market. We need price controls because in a society as rich as the United States…social justice…jalopies. I’m sure you can fill in the blanks.

  4. Just for record, if you twenty-something Obama groupies haven’t figured out yet who the sucker was at the poker table?

    It was you.

    First he came for the clunkers you’ve traditionally driven to work, and then he based his whole healthcare plan on making twenty-somethings pay for healthcare–specifically because they hardly use it…

    Please, twenty-something America–this man will not stop cheating on you. He crushed your car and sold it for scrap. You cannot change him. Don’t take him back.

    1. Dude, there are pictures of 20-somethings rioting in Greece over pensions. The New 20-Something wants to be a slave as long as he has 100% employment and healthcare.

      1. If I was a 20-something still living with my parents, I’d want them to keep their fat pension too. And while we’re at it, can I get on their healtchare too?

        1. Here in the US, the safest, long term job you can have is with the government, isn’t it?

          It’s heartbreaking when you realize that corporate American values you for your performance. …if you’re a lazy bastard with a shitty attitude.

          …and if the government will pay you by the credential? …with no experience necessary? I can see why the lazy bastards brigade would want to keep plenty of cushy jobs available.

  5. Ray Lahood is the dumbest man in the public sector. And that’s sayin’ something.

    This has been the splash screen for my GPS for several months now.

  6. What’s the over/under on the percentage of used car buyers who will attribute some of the price increase to the administration?

    What percentage is four guys? My calculator only goes to 8008135.

  7. Hmmmm. Used car prices going up. People have money to spend, and they’re spending it, having confidence in the future. Used car dealers are making more money, which they will spend, creating more jobs. Yep, the economy’s growing, the market works. If only you understood that, Katy.

    1. So you think it’s a good thing that we voluntarily destroyed 700,000 cars, most of which were entirely functional? This didn’t affect the market prices for the ones remaining in a negative way?

      This is the market, how?

    2. It’s genius. Have the government destroy 1/3 of everything, and prices will go up! The sellers of the remaining 2/3 of everything will make more money which they will spend, creating more jobs.

      I don’t care what they say about you, Vanneman, you’re a rare kind of genius.

      Let’s go break some windows!

    3. I couldn’t have gotten to work or school if I hadn’t had a crummy car.

      Couldn’t have gone from work to school in time or visa versa via public transportation, that’s for sure.

      And I think that’s the question people who need a crappy car and can’t find one should be asking themselves–why did Obama make that choice for me?

      I think he did it for the UAW. In fact, I’d have a hard time believing that he didn’t do it for the UAW. Why wouldn’t he have done it for the UAW?

    4. No, Alan, used car dealers aren’t making more money. The reason used car prices at retail are rising across the board is that wholesale prices are rising across the board (for all of us) due to unprecedented scarcity. Some segments of the market are up well over 25% from a year ago. I’ve seen vehicles the likes of which I was buying for around $4200 one year ago bringing $6000 recently (I’m talking same model year, one year older than when it was bringing $4200). I know, I know, all anecdotal. Google it yourself, the stats are available. If it were just because we “greedy bastards” in the used car industry were lining our pockets a little deeper, someone else would come along and take away our market share by selling vehicles for less profit per unit and make more on volume due to their preferable pricing model (damned free market protecting consumers!). The fact of the matter is, most dealers have cut their margins as much as they can and many have folded.

      Demand for used cars isn’t up because people just have more cash than they can figure out how to spend. They have to get to work or school, and many don’t like the prospect of undertaking a 5-7 year loan under current economic conditions (well, the more sane of the bunch, at least). Either that, or they failed to use all of that excess cash you seem to believe they have to make payments on the late model car they had, and it was repossessed. Therefore, they are in the market for a modest used car that they can either pay cash for or get financed through a lender of last resort.

      Ironically, while demand (read: need) for these vehicles rises, nearly 700,000 of them sit rusting in salvage yards, their engines intentionally seized, so our dear leaders could help bail out the automakers they had so deftly stolen from bondholders and redistributed to their union allies. Add to this the facts that many lenders ceased leasing several years ago, removing a reliable stream of used vehicles entering the market; and new car sales with their attendant trade-ins are still well below recent historical levels (and will likely remain lower for some time due to the above mentioned market intervention shifting future sales forward to capitalize on the “Free Government Money”). And before you tout the decent new vehicle sales the last couple of months, I wouldn’t bet the farm on that trend continuing, particularly in light of the European debt crisis and it’s impact on those 401k’s many thought were finally out of the woods.

      Sorry this was so long, I was just going to make a snarky remark about breaking windows or burning down buildings to speed up the recovery, but someone beat me to it.

      1. And the thing is that this was touted as a feature at the time…

        We’re gonna make it so people have to buy new cars, and that’s gonna stimulate the auto industry, ’cause there won’t be any old cars to compete with the new ones…

        This was all out in the open. They planned this. This was half the reason why they did the program!

        1. Ha, more like everyone will just keep buying used cars at higher prices, and the people priced out of the market at the bottom will be shit out of luck. Or they will keep their older, shitty vehicles running any way they can afford to, leading to a lot of waste and possible safety problems. Tires? Oil change? I don’t really need that!

          1. Why, that can’t be, Colonel Angus. None of Obama’s policies will have unintended consequences.

  8. Hmmmm. Used car prices going up. People have money to spend, and they’re spending it, having confidence in the future. Used car dealers are making more money, which they will spend, creating more jobs. Yep, the economy’s growing, the market works. If only you understood that, Katy.

    Holy shit, Vanneman, you’re almost as smart as Ray LaHood.

  9. Oh wow, that is so cool. Who would have thunk it.

    Lou
    http://www.anonymous-web-surfing.cz.tc

  10. What’s with the Star Trek: Next Generation font?

  11. Anyone have any regressions or econometric studies on CFC?

  12. And perhaps you recall those 677,842 functional cars we junked as part of the Cash for Clunkers plan?

    I remember watching some evening news piece about this in which a tech at one of the dealerships receiving the magical subsidy in question explained the process of destroying a perfectly good vehicle by pouring a caustic solution into the crankcase and running the engine. What made me cringe uncontrollably wasn’t so much the destruction of the car but rather the thought of untold numbers of economic dunderheads also watching the piece and saying to themselves, “Now that’s progress.”

  13. “Our program was a win for everyone”
    Except for taxpayers and people who need cars, but are too pressed for money to buy new. Oh, but they don’t count.

  14. I can confirm from the front line that prices at the auctions have increased by more then 50%.

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