“Consumers are generally paying considerably more for used cars this year compared to 2009,” stated Joe Spina, a senior analyst for Edmunds.com. “A lack of confidence in the economy is driving more people to used cars, putting upward pricing pressure on a limited supply of vehicles.”Certainly part of the issue is the government’s “Cash for Clunkers” program where car buyers were offered incentives to dump their inefficient old cars for more fuel-efficient new ones last summer. The ability to buy a new car at a significant savings last summer certainly depressed the market for used cars. The program, technically known as Cars Allowance Rebate System (CARS), gave car buyers up to $4,500 to trade in a used car for a more fuel-efficient one.
But the dramatic price increase for some large SUVs in particular was shocking. For example the average price of a used Cadillac Escalade went from went from an average for all model years of $25,600 in July 2009 to $34,715 in July 2010, a 35.6% increase. The value of a used BMW X5 jumped from $30,711 to $40,843, a rise of 33%.
As has happened in the past, buyers appear to have quickly erased their memories of gasoline prices shooting well past $4 per gallon during the summer of 2008 when many big SUV drivers abandoned the gas-guzzling vehicles for smaller, more fuel efficient vehicles. With gasoline holding steady at less than $3 per gallon in many parts of the country, even during the busy summer driving months, buyers appear willing to return to bigger vehicles.