Cash for Clunkers Impacts Pre-Owned Market

Over the past year pre-owned car prices have shot up at an alarming rate. A vehicle that could be purchased for $5,000 a year ago now cost around $8,000. Thats a 60% increase in just a year! Not only are the prices increasing but the availability of quality pre owned vehicles is on the decline and many dealers are pointing to Cash for Clunkers as the culprit.

Cash for Clunkers took about 700,000 trade-ins from the market. These potential trade-ins could have led to more pre owned sales for the industry. Many of the trade ins that I saw first hand were vehicles in very good condition. The lack of trade ins are also linked to the slow down in new car sales as well.

The only places currently benefitting from the purchasing slow down are repair shops. With consumers saving money by not purchasing new cars thy're spending more money to repair their old ones. Owners can easily put a thousand dollars into fixing their old car and get by for a year or two with the repaired vehicle.

The lack of trade ins has virtually eliminated the $4000 to $7000 pre owned vehicle range. They've become increasingly hard to find, and even harder to find ones in good condition. Paul Taylor, an NADA economist, said, "There are aproximately eight million cars that didn't come into the marketplace in 2008 and 2009." Obviously the 2009 number was hurt in large part from the Cash for Clunkers program.

So once again we're forced to re-evaluate the true benefits of the Cash for Clunkers program. It did help many people get into new vehicles as well as increase business for auto dealers at the time the program was running, but was that couple month increase worth the slow down in sales that has now been seen? Since the program ended, and I would have to look into all the going ons in the industry to be sure, I would bet that there has been many dealership closings, manufacturing facility closings, and employee lay-offs. The negatives on the economy would probably out weigh the positives once the numbers were crunched.

Many experts are predicting an increase in new vehicle sales for 2010 so pre-owned stocks should start to be replenished with fresh good condition vehicles.