Friday, April 23, 2010

Used car prices continue to rise

Used car prices have risen over 20% since the end of 2008. Not surprisingly, auto sales are up 14% over the same period. I take this as one more indication that deflation is dead. Here's how the folks at Manheim explain it:

Pricing strength in the wholesale used vehicle market became more broad-based in the first quarter of 2010 as record tax refunds and improved retail credit availability reinvigorated the market for lower-priced vehicles. Meanwhile, prices for late-model, higher-priced, units stayed strong despite the increase in new vehicle incentive activity in March.
Incentives helped new vehicle sales, but didn't hurt used vehicle values. March brought forth a significant increase in incentives (mostly in the form of no-down, low-rate, financing or lease deals) from a variety of manufacturers, some of whom - such as Honda - have generally stayed away from such promotions in the past.

On a year-over-year basis, all market classes of vehicles are up significantly in pricing and, in recent months, the differences between individual market classes have moderated. Likewise, the relative difference in price performance between the various price tiers has also evened out.

In short, demand is strong and there is no shortage of money.