Used car prices rising in US due to Japan effect

Used car prices — already rising — could soar as buyers are driven to seek alternatives due to a predicted shortage of some new vehicles in the wake of the continued disruption of Japanese car production, experts predict.

Price increases at the wholesale level are already being seen for the compact and midsize used cars from Japanese brands and of rival models that would be the closest substitutes for the more popular Japanese new cars.

“If you have a small car and want to get rid of it, now is the time. The prices are just going crazy,” says Jonathan Banks, analyst for US National Automobile Dealers Association Used Car Guides.

Over the past couple of weeks, the NADA pricing service says it has observed an 11% rise in the wholesale prices of 3- to 5-year-old compacts such as the Toyota Corolla and the similar Ford Focus while midsize cars went up 8.5%, the service says.

Part-exchange values for smaller cars were already rising because of higher petrol prices. Banks says they could now rise even further by the end of the month. He says that’s when reduced Japanese car factory output will begin to really show up as a shortage of the more desirable models in car dealer showrooms.

Toyota and Nissan said this week that they don’t expect to get back to full production in Japan until at least April 11th, a month after the earthquake. Many Japanese plants remain closed, and several Japanese makers’ U.S. plants are operating on reduced hours to conserve parts that are sourced from Japan.

Small cars started “to command a premium” on price at auction last month, says Tom Webb, economist for Mannheim, one of the largest wholesale auction houses in the US for car dealers.

Dealers are preparing, thinking that shoppers are likely to turn to recent-vintage used models if they can’t buy what they want new.

At Toyota of Hollywood in Los Angeles, general manager Don Mushin says he is focusing on getting more midsize and compact models for his used car inventory.

He says he mostly can’t find used Toyota Prius hybrids, though, and when he comes across one, it’s priced too high for him to be able to resell at a profit.

Mushin also is avoiding vehicles with big engines for fear they’ll on the forecourt.

“We’re staying away from anything with a V-8 in it,” he says.

Though higher prices are bad for buyers, they’re good for car dealers who have suffered through the recession.

“It will help everybody in the used car business,” says Terry Megee, who runs Floyd A. Megee Motors, a Chrysler-Dodge-Jeep-Ram dealer in Georgetown, Del.

Could we see a similar pattern emerge here in the UK?

Source: USA Today