“Two or three factors are all hitting at the same time,” said Rob Long, a used car manager at Matt Castrucci Auto Mall in Dayton. “Consumers are looking for ways to save money.”
Long said the March 11 earthquake and tsunami in Japan created a shortage of new cars and new car parts, driving the cost of those vehicles up. At the same time, higher gas prices and a slow economy mean buyers are increasingly favoring cheaper and more fuel-efficient vehicles, driving prices on those up as well, he said.
Vehicle analyst website Edmunds.com noted last month Honda and Toyota had to cut production by 50 percent in the wake of the disaster in Japan, and many companies eliminated incentives for new cars. According to Edmunds.com, 3-year-old Honda Civics are going for an average of 10.4 percent more than they did last year. Among other 3-year-old cars, Nissan Sentras are 11.8 percent more expensive and Toyota Camrys are 7.2 percent more expensive, on average.
“Probably in the last year we’ve gone up at least 30 to 40 percent output in the used car department.” Long said.
The National Automobile Dealers Association, which determines the book value of cars through sales and auctions, has pushed its values up by an average of several thousand dollars per car in recent months, meaning dealers are also giving more money for trade-ins, Long said.
“This is probably the best year Matt Castrucci has had in used cars since he’s been in business,” Long said.
Dave Zelik, assistant used car manager at Jeff Schmitt Auto Group in Miamisburg, said the group saw a 25 percent increase last year in used car sales and is projecting another 25 percent to 30 percent increase this year.
“The demand for used cars is absolutely terrific.” Zelik said.
Zelik added banks have also adapted to the spike in sales — raising loan values on used cars to meet the market.
Richard Arca, pricing manager for Edmunds.com, said car dealerships aren’t pocketing the extra money from increased costs — in fact higher prices mean less profit. He noted only the car retail prices are going up, and to compensate dealers have been forced to ask for less above retail value.
“Compact dealers have to pay 35 percent more to acquire vehicles (from the manufacturers), but ... there’s 40 percent less in profit for that compact (for the car dealer),” Arca said.
Arca said the margins per unit have decreased, noting for example the asking price on a 3-year-old compact car may have been $2,800 over retail in May 2010, but in May 2011 dealers often asked for no more than $1,600.
“There’s such a demand for these used cars. People are holding onto their cars a lot longer and there are fewer trade-ins,” Arca said.
He added the lack of used cars on the market meant especially more recent models are hard to come by, pushing some used car prices so high they are often near the price of a new car. More recent used cars are in greatest shortage, so 4- to 6-year-old cars are making up a larger share of the market, he said.
“With the uncertainty in the job market there isn’t the luxury of trading a three-year lease in for a new car. It makes a lot of sense to extend that lease for three to six months.”
With such a difficult job market, Arca said it might actually be advantageous to consider a new car, thanks to reduced annual interest percentage rates, or APR.
“The biggest cost saving (for a new car) is you get a special APR,” Arca said, “You’re saving 20 percent if you’re financing a $20,000 car.”
He noted interest rates on financed cars used to be around 5.9 percent but have since plummeted to near zero, saving $4,000 on that $20,000 purchase.
Still, Arca said the prices won’t increase much further and may begin decreasing in coming weeks as companies ramp up production to pre-disaster levels.
“The prices have to be near peaked, if they haven’t already,” Arca said.
Zelik also said he thinks the numbers aren’t here to stay for the long term.
“I’ve been doing this 37 years, I’ve seen a lot of changes come and go.” Zelik said. “I think it’s just a trend ... (prices) go up and down.”
Contact this reporter at (937) 225-2260 or tnavera@DaytonDailyNews.com.
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