Low dealer inventories and what they mean for buyers

Last winter and spring, the car manufacturers responded to the recession by shuttering factories faster and more aggressively than ever before. The result as we came into the summer was very short supplies of new vehicles on dealers’ lots. About the only exception were some undesirables at GM and Chrysler stores—and even there, the cars, trucks, and SUVs people liked were generally hard to come by.

Then along came Cash for Clunkers. By the time it was done last month, inventories were at the lowest level in three decades; roughly a 14-day supply for hot product, and a 30-day supply overall as of September 1st. A 30-day supply is considered optimal; when levels rise above 60 days, the manufacturers have to resort to big incentives and rebates to move the metal. They had been at 64 days in June, before the factory closures took effect.

The car companies are (on average) much smarter than they used to be; they intend to try to stay at or near 30-day supplies. This will mean fewer $5000 rebates for car buyers.

But that’s not necessarily a bad thing: The loss of these screaming deals means more stable—and higher—used car values, which makes it easier to know your recent purchase wont plummet in value as soon as you drive it off the lot.