McLEAN, Va. — Wholesale values were pushed up every month last year, thanks largely to the fact that the number of used vehicles being pumped into the U.S. market in the last two years has shown a decrease in the neighborhood of 8 million units, according to AuctionNet data.
Despite this plunge in used inventory, the expected 15-percent upswing in new-vehicle sales for 2010 is likely to result in 1.1 million additional used-vehicle trade-ins this year compared to 2009, said Paul Taylor, chief economist for the National Automobile Dealers Association.
"We'll start to see an ease to the used-car shortage, but it will be several years before the supply returns to the average of the 1998-2007 period of strong new-car sales," Taylor explained.
"As 2010 gets underway, the short supply of used vehicles means a narrow spread between new- and used-car prices, so expect new-car sales to be a greater share of the sales mix, and certified and other used cars to be a relatively smaller share compared to the last decade," he continued.
So how did used-vehicle inventory get so small in the first place? Taylor pointed to a number of reasons, including softer new-car sales, among other factors.
"There were several reasons for the decline in used-vehicle inventory: dramatically lower new-car sales in 2008, as well as fewer trade-ins, off-lease vehicles, and rental-fleet vehicles in 2009," Taylor shared.
However, he emphasized that the CARS program was not a factor in the run-up in month-over-month used-car pricing from January through November.
"The Cash for Clunkers program removed only 690,000 used vehicles from the marketplace, and these clunker vehicles were largely undesirable anyway," Taylor stressed. "Even if these vehicles hadn't been recycled under the program, their worth as trade-ins was modest."
Officials went on to note that prior to 2008, used vehicles had been profitable for 28 consecutive years, a streak that snapped in light of volatile gas prices that heavily influenced the market.
As most remember, gas prices climbed to a national average $4.11 per gallon in 2008 before plummeting down to below $2 in the same year. During that year, dealers averaged a net loss of $5 per used unit.
"Because of whipsaw gasoline prices, used-car and new-car inventory were mismatched to consumer demand in 2008," Taylor pointed out. "Gas prices will be flat or inch up modestly as the economy recovers in 2010, suggesting a more stable mix of used-car and new-car demand."