Used Car Deflation

The Internet makes car shopping a lot more interesting than it used to be. I like skimming the boards at though it’s hard to know how statistically valid the impressions one gets there might be.

So, I was curious about the used car market and with a little poking around was able to find articles from the last few years discussing trends in used car
prices. A lot of people think that used car prices have fallen due to the aggressive price reductions that new car makers have been using to maintain
volume. Some people think that cars comming off lease are creating an
excess supply. But most interesting was that the Consumer Price Index data
contains a category for used cars.

The July data shows that over the prior 12 months used cars fell by 9.3 percent. Over the last decade used car prices rose during the bubble and then fell back again.

One of the articles, from back in 1997 says that dealers (I suspect that’s new car dealers) make around $1,900 profit per car on used car sales. But then, in that usual good news bad news style of journalism the article goes on to say that was expected to decline over the coming years.

The CPI data is fun. One of the components is “Whiskey consumed at home.” Prices? Up 3.4% over the previous 12 months ending in July 2003. Increased demand in the face of limited supply? Where is higher productivity when you need it?

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