The Unintended Consequence They Pretended Not To Expect But Everyone Predicted

Cash for clunkers has raised used car prices, particularly for the poor looking for cars under $5000

In her search for a cheap, used minivan for her and her husband, Krissy Dieroff has visited seven dealerships across Berks and Schuylkill counties in the last week, but to no avail.

"There's not much to pick from, and the ones we do find are overpriced," said Dieroff of Auburn, Schuylkill County, while browsing the lot of a city dealership on Monday.

Dieroff blames the shortage of inexpensive used cars on the federal cash-for-clunkers program, in which almost 700,000 used vehicles were traded in for newer, more fuel-efficient vehicles, and then scrapped.

Some local used car dealers specializing in vehicles priced $5,000 and under agreed that there are fewer inexpensive vehicles available.

The trend is occurring nationally as well.

The Manheim Used Vehicle Value Index reported that prices reached record highs in September. The consulting firm that publishes the index blamed low inventories.

That's bad news in Berks, where many shoppers seek inexpensive, used vehicles, especially during difficult economic times, said George Tabakelis, general manager of Perry Auto Service & Sales on Route 61 in Perry Township.

"Customers used to be able to find a good car for their son or daughter to take to college for $2,000 or $3,000, but now that same car may cost $5,000," Tabakelis said. "It's sad."

Via Maggies Farm

  • http://politicalcalculations.blogspot.com/ Ironman

    Don't think the auto dealers haven't noticed. Here's the text of a letter I received from an auto dealer, on 12 October 2009. I've stripped out the dealer specifics:

    As a valued CAR DEALER customer and CAR MODEL owner, you deserve our lasting appreciation. The best way I know to show you our appreciation is to provide you more great offers like this one:

    I'm willing to PAY YOU TOP DOLLAR today for any vehicle in your driveway!

    Here's why: My pre-owned inventory is really low now, yet there's a high customer demand for quality used cars. I can't satisfy used-car buyers until I get more trade-ins, so I really need your help.

    If there's another car in your driveway to trade, it may be worth more than you realize.

    CAR DEALER and our other ASSOCIATED RETAILERS are paying Kelley Blue Book Fair ValueTM* or better for most trade-ins. And getting more trades is so important we've asked our on-site appraisers to provide immediate inspections. We'll even buy your vehicle if you don't buy from us!

    But now is a great time to buy! With all the exceptional factory incentives, cash back and low APR financing offers available, you could drive a brand-new model for the same monthly payment, or less.

    Visit CAR DEALER for this Buy Back opportunity, or call DEALER PHONE NUMBER.

    As part of the AFFILIATED RETAILERS, CAR DEALER has more to offer than typical car dealers. See the AFFILIATED RETAILERS on the reverse side. And please bring in this letter to accept my offer before it expires on November 30, 2009.

  • DrTorch

    Nice. In the industrial NE, right before winter. For the 54.7% who voted for this clown...enjoy!

  • DOuglas2

    Isn't this what normally happens to used car prices in a recession? People substitute lower-cost items. Didn't we read that dealer sales of luxury "pre-owned" cars were up over 4% in the 1st half of the year?
    Ironman: That's standard trolling for customers, recession or not. It gets you into the showroom with the thought in your mind of trading in your car. For some reason the dealership finds it easier to sell cars to people who are there than to people who are not.

  • http://politicalcalculations.blogspot.com/ Ironman

    DOuglas2: I don't disagree that it the dealer is trolling to get people on their lot. The thing that's different from other efforts I've seen is the part about "We'll even buy your vehicle if you don't buy from us!"

    That's something I've never encountered with an established new car dealer. Sure, they've almost always taken trade-ins (the only limit there was when gas prices were high in mid-2008 - they stopped taking SUVs in trade), but their apparent willingness to offer the one-sided transaction to buy a used vehicle not as part of a trade-in package is very different from any other solicitation they've put forth.

  • smurfy

    "There’s not much to pick from, and the ones we do find are overpriced,"

    All those jokes about used car salesmen and you're just now figuring this out.

  • Eddie

    Well, with a rudimentary understanding of economics, even I can grasp the fact that if you take any product that is commonly used and then resold, then offer x dollars to destroy that product, you're going to be hard pressed to find any of that product for under x dollars for a good long time.

    Not only will any cars valued under the clunker bounty have been turned in, but those cars anywhere near it that are still around will rise in value due to their newfound rarity.

    Everything coming out of Washington this year is either incredibly short-sighted, (as if the laws of economics and common sense are supposed to yield to how super-smart the administration is or something), or intentionally destructive especially in ways that hurt the lowest incomes while shifting the blame off the government, directly. Are they ignorant, trying to create hyper-dependency, or actually trying to foment open unrest? I can't decide.

  • Dogulas2

    their apparent willingness to offer the one-sided transaction to buy a used vehicle not as part of a trade-in package is very different from any other solicitation they’ve put forth.

    True, I should have spotted that. There have been times before my moves abroad that I would have loved the opportunity to have an easy one-sided sale of my late-model car to a dealer.

    From http://www.bts.gov/publications/national_transportation_statistics/html/table_01_17.html
    I made some charts and drew my own trend line which shows about 40,000,000 used cars sold each year. So by scrapping those 700000 "clunker" cars the year's supply of used cars was reduced by 1.75%

  • Douglas2

    I've spotted my error -- looks like about 1.8 cars sell privately for each "traded" car sold by dealers. so the loss to the dealer stream is more like 5% of the year's 14 million available used cars.

  • http://www.cars4charities.org/ Cars4Charities

    Not only did cash for clunkers raise the price of used cars, it also cost car repair shops and charities that rely on the sale of car donation a lot of money.