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Used car prices to stay firm

 

As we’ve discussed, dealers typically buy fewer cars between Thanksgiving and New Year’s. Then they pull out their checkbooks in January, as consumers start spending in earnest. Those trends look set to continue this winter as well, and the result will be strong used car prices.

Other factors driving this trend include smaller ex-rental car fleets, reduced numbers of lease returns, and tighter inventories of new vehicles. The numbers from Manheim, the world’s largest car auction company, bolster this; prices were up on a wholesale basis through year’s end, with cars roughly 10% higher than a year earlier and full-sized trucks running almost 20% more.

With a decent amount of positive economic news of late and fewer and fewer layoffs being announced, buyers are regaining their conviction that they can get behind the wheel of something new—at least to them. Also, vehicles get old and break no matter what, so when consumers defer buying (as they did in 2008 and 2009) it creates huge pent-up demand that needs to be filled. The confluence of all these trends looks set to keep the prices of used cars, trucks, and SUVs up for at least the next few months.

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