http://online.wsj.com/article/SB10001424052748703859304576307132781060592.htmlShrinking Supplies Mean Bye-Bye Used-Car Bargain
By JEFF BENNETT And MIKE RAMSEY
Count on digging deeper to buy a used car for junior. Prices for used cars hit a record high in April and are poised to go even higher as production cutbacks during the recession and the more recent Japanese earthquake has made used vehicles a hot commodity as dealers dive into the depleted pool for cars to fill their lots. The one-two punch has added between $1,500 to $3,000 to the price of some used cars just in the last six months, meaning more money for trade-ins and a tougher time for shoppers looking for a deal.
"The price of used cars is just crazy right now," said Adam Lee, chairman of Maine dealer Lee Auto Malls. His dealership is paying hefty sums for cars it normally might not purchase to have a full inventory. "It can be a piece of junk—cars we used to pay $2,000 or $2,500 for, we are now paying $5,200 to $5,500," Mr. Lee said. Dealers say the prices of used vehicles will continue to soar as inventories of lower-priced and economy cars shrink. Japanese auto makers Toyota Motor Corp. and Honda Motor Co. have warned their production could be limited through year-end. U.S. dealers say they expect to exhaust existing inventories and face severe shortages of new Japanese cars by July.
The topsy-turvy market has dealers that once quickly dumped trade-ins to wholesalers now holding onto those vehicles to fill out their shrinking inventories. The move is raising the value of trade-ins, helping dealers convince customers to buy brand new cars. Stephanie Samuels went shopping for a used car but found prices for a late model car nearly as much as for new—and financing for the new car easier to obtain. "I was looking at buying a 2009 Ford Focus which was going to cost me about $16,000," Ms. Samuels said. "But for a couple grand more I could get a new Focus and a better interest rate. So now I am shopping new."
On Friday, wholesale auto auction house Manheim, a unit of Atlanta-based Cox Enterprises Inc., said its index hit 126.6 in April and adjusted wholesale prices of used vehicles rose 5% from a year ago. It's the highest level the index has reached since it started tracking prices in January 1995. The index sets its baseline of 100 at January 1995. The biggest increases are for fuel-efficient cars and small SUVs, where prices are up as much as 20% since January, according to Kelly Blue Book Co., which tracks trade-in values. For example, it says average trade-in of a mid-size car, such as the 2008 Ford Fusion, rose $1,800 to $11,375 between January and May. Average value of a hybrid car such as a four-door Toyota Prius hatchback jumped $3,775 to $17,040 in those four months...
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