There has been a sudden drop in the prices of used cars across America in the month of June. This has been a sharp drop after 3 years of unsustainable price rise in the segment.
The drop seems to be in direct proportion to the drop in new vehicle sales. A supply shortage of used vehicles due to drops in repossessed and off lease vehicles. It was also noted that some consumers found it real difficult to qualify for the new vehicle financing. There has also been a rising trend among consumers to shift from gas guzzling trucks to more fuel-efficient cars. This has resulted in an uneven demand across all segments.
Some experts also attribute the drop in used-vehicle prices on the pullback of gasoline prices. Japanese automakers have resumed normal production after the devastating earthquake, which may also be one of the major contributing factors.
According to Kelley Blue Book's June "Blue Book Market Report", the average used-vehicle price fell by $100 in May. Price of subcompact fell by as much as $25 and used compact and hybrid car prices fell by as much as $50 in the first week of June.
According to Black Book, which keeps a track on the price trends in the vehicle auction market has reported a sharp overall decline in the prices in the past four months in the second week of June. Ricky Beggs, Managing director of Black Book had commented that entry-level car sales price fell an average of $44, prices of SUV's fell an average of $122 and prices of full-sized crossover fell by $147.
Most of the used car dealers seem to be seeking used vehicles more aggressively but many of them admit that they have slowed their acquisitions after the Japanese earthquake from a frenzied level. There is also a note of caution among the dealers. Most of them don't want to get caught in this buying bubble and end up loosing money when the bubble bursts. Some also complained that wholesale prices are as high as retail transaction price
Almost half the vehicles offered in auction lanes in late May were being bought. In the wake of the earthquake in Japan 80 percent of vehicles offered were purchased due to shortage of new-vehicles, which typically is about 60 percent.
Most dealers have pulled back from acquiring vehicles fearing a bubble in auction prices. Most of them are finding it difficult to acquire vehicles at reasonable rates. Also they don't see the retail prices falling anytime soon. Very few dealers think that prices may fall in coming weeks.
Many feel that the prices of small car retail will stay at the current levels. This they attribute to the flow of cars expected from Japan. Some feel the prices will rise where as a small percentage of dealers feel there is a genuine chance for the prices to fall in the next four weeks.
The US is seeing a alarming drop in Used car prices all over the country. Many experts believe its just a bubble ready to burst.
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