(Long Island, NY) Used cars are no longer seen as unreliable methods of transportation or hand-me-downs for senior high school students heading out to college. The used car marketplace in the United States is making headlines in publications such as Time magazine and the Wall Street Journal nearly ever day this year. Economists are taking a close look at the current boom in used car sales, and their research is providing and interesting glimpse as to why pre-owned vehicles are all the rage in 2013.
High Demand for Used Cars
Amidst the ongoing used car boom, the Wall Street Journal compares pre-owned vehicles to gold. Used cars are not traditionally considered investments since they tend to lose their value a lot faster than precious metals or real estate. Under the right market conditions, however, used cars can command high prices. It all goes back to the Car Allowance Rebate System of 2009, more commonly known as “cash for clunkers.” Nearly 700,000 SUVs and other fuel-inefficient used cars were taken off American roads in exchange for incentives to purchase smaller, fuel-efficient vehicles.
With so many clunkers out of circulation, new car dealerships were able to move their inventories at the height of the Great Recession. Unemployment was rampant and vehicle financing was tight; these factors prompted automakers to play it safe by reducing their output. People started driving less and began taking better care of their cars.
Over time, the value of used cars appreciated to the levels experienced today. A particular used vehicle owner profiled by the Wall Street Journal sold his 13-year old Honda Accord to a dealer for about a quarter of the value of a 2013 model. That was a cash transaction that took a few days, and the dealer found the Accord by scouring online listings.
Tight credit and a more attractive fleet of used cars are behind the current boom, and what owners of used vehicles can take away from the Wall Street Journal article is that they have a potential investment in their driveways and garages. The prospects are even better for used car owners who would like a cash transaction that is easy, fast and convenient. Current market conditions are clearly competitive, and used car buyers are courting owners with better cash offers and improved customer service.
Small, fuel-efficient and hybrid vehicles = easy cash
Vehicle owners who traded their clunkers for fuel-efficient vehicles in 2009 stand to gain the most in the current used car boom. Dealerships that specialize in new cars are not seeing the same amount of trade-in vehicles that they had enjoyed since the 20th century. Car owners who realize the cash potential of their used vehicles are opting for generous amounts of cash.
Used car shoppers are looking for fuel-efficiency above all. Oil prices are likely to remain high, and thus shoppers are interested in used compact, economy and hybrid vehicles. Those who own vehicles matching these descriptions can quickly convert their used cars into a quick cash infusion. The rationale behind the sharp value appreciation for these pre-owned vehicles is that they are built to last. According to a recent Time magazine article, buyers are interested in saving between $20 to $80 per month on their financed auto purchases, and thus fuel-efficient used cars manufactured after 2007 are in very high demand.