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Used Vehicle Demand Up, Supply Down; Prices Soar


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Cash for Clunkers Being Blamed - Huh? Go Buy A New Car Folks

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Washington DC August 30, 2010; The AIADA newsletter reported that used car prices are climbing and the pool of available models is drying up one year after the federal Cash for Clunkers program spurred consumers to scrap old cars for new ones. (Ed Note: We don't believe that Cash for Clunkers is an actual reason for the rise...we will update this story when we find the real reason.)

Used cars are selling for the highest average price in at least seven years, according to Edmunds.com, an online auto consumer guide. Last month, the average price of a three-year-old vehicle spiked 10.3 percent, to $19,248, compared to July 2009. (Ed note: What does this have to do with Cash for Clunker junker trade-ins?)

The Detroit News reports that supply is down because Cash for Clunkers required old vehicles to be destroyed, rather than allowing them to be resold (Most Cash For Clunkers were cheap junkers that would not affect the late model market - so see remarks above). In addition, fewer leased vehicles are being turned in and available for sale because automakers all but abandoned leasing during the industry collapse of 2008 and 2009.

Demand, meanwhile, is up as some cautious consumers choose to buy used cars, rather than expensive new ones. Prices have climbed so fast that banks are slow to recognize higher book values for some used vehicles, which complicates the financing process when consumers try to trade in used models and buy new ones, dealers say. That means larger down payments.