Used SUV and Pickup Selling at a Premium

If you’re considering buying a used vehicle, you can still find some good deals unless the vehicle you have in mind happens to be an SUV or pickup. According to one estimate, these vehicles made up 83 percent of all vehicles traded in through the Cash for Clunkers program. Since the federal government required dealers to destroy trade ins instead of reselling them, the inventory of SUVs and pickups on used car lots is critically low.

If you do happen to find that used SUV or pickup you’ve been looking for, be prepared to pay more for it than you might have just a couple of months ago.

According to Tom Kontos, executive vice president of customer strategies and analytics for ADESA Auctions, retail prices on used autos is still relatively low compared to new car prices despite wholesale price increases.

In July the industry-wide wholesale price for a used vehicle averaged $10,017. That’s a 1.2% decrease from the previous month but a 7.3% increase compared to July of 2008 according to ADESA.

The Manheim Used Vehicle Value Index also reported an increase from 114.1 in June to 115.4 in July which is a 5% increase over July 2008. It was also the seventh consecutive monthly increase in used vehicle valuation. Manheim Consulting is a leading provider of automotive remarketing services and releases its Used Vehicle Value Index of wholesale used vehicle prices on a monthly basis. The Index is calculated “on a mix, mileage and seasonally-adjusted basis” according to the company’s Website.

According to ADESA’s Tom Kontos, the average retail price for used cars and trucks sold on franchised dealer’s lots is approximately half of the average price for a new automobile. He says that, at that ratio, the demand for retail used cars and trucks tends to remain high.

He says, “When the retail price of a used car gets closer to 60 percent of a new-car price, that tends to choke off demand for a used car for people who are considering either a new car or a used car.”

Wholesale prices on used trucks dropped precipitously as gas prices neared the $4 per gallon mark last summer. In July they rose by double-digits over last year’s prices with full-size pickups reaching an average wholesale price of $12,082. That’s a 36.5 percent increase over July 2008 pricing and a 1.1 percent increase from the previous month.

Although wholesale prices on large SUVs dropped in July by 1.4 percent from the previous month, they were up 38.5 percent from their July 2008 levels to an average of $13,542.

Kelly Blue Book director of vehicle valuation, Juan Flores, says that, for the near-term, they expect price increases of between 5 and 8 percent on older autos valued around $4,500; that was the maximum voucher amount offered on trade ins through the Cash for Clunkers program.

Flores says it’s simply the law of supply and demand at work. “If you remove the supply of those older vehicles from the marketplace,” he says, “there’s going to be a little bit of a premium that consumers looking for such a car will have to pay.”

Says Flores: “If you remove the supply of those older vehicles from the marketplace, there’s going to be a little bit of a premium that consumers looking for such a car will have to pay.”

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