By on March 10, 2014

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A combination of income tax refunds issued in January and February with accessible financing have boosted used-car prices overall in the first two months of 2014.

Automotive News reports prices rose 1.1 percent year to date, and 0.8 percent over the past month, according to the Manheim Used Vehicle Value Index. Meanwhile, the IRS processed 40.4 million returns in the first two months of the year, refunding $125.8 billion to taxpayers at an average of $3,112, which helped in propping up wholesale used vehicle prices.

Easy credit with attractive terms also aided used-vehicle pricing, making the market “more profitable than the underlying unit sale numbers would suggest” according to Manheim.

Overall sales fell 1 percent from the previous year, and 12 percent from January to 2.05 million units, with used compact cars falling the hardest at 3 percent from last year due to heavy supply and competition from newer vehicles. Used truck sales rose 8 percent in the same period due to high demand and low inventories.

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43 Comments on “Tax Refunds, Easy Credit Boost Used Car Prices...”


  • avatar
    CoreyDL

    Ha, $4k for a Contour. Must be an older photo.

  • avatar

    Hmm, loans to people who have no savings and thus need to wait for their tax refund check to put down a down payment.

    What could possibly go wrong?

  • avatar
    67dodgeman

    A guy I once knew worked those type of lots. He’d pick up some POS at auction for $1000, then put about a week’s time into cleaning and detailing. He’d then list it for $3999, with $1000 down and real easy payments. The down payment would actually cover his entire dollar investment, and any payments would cover his 1 week of actual labor. And if anyone missed a payment, he’d pick the car up and resale it again. According to him, he’s resold the same car 4 or 5 times, with all the subsequent times being pure profit for him.

    So yeah, cruise the slums and you’ll see $1000 cars going for 3, 4 times what they’re worth.

    • 0 avatar
      Sky_Render

      I can’t decide if I find that brilliant or reprehensible.

      • 0 avatar
        CoreyDL

        Both! Just like these people who don’t really work hard enough or have enough sense (or both) to know what they can or can’t afford. But they won’t settle on an econobox which they could potentially live with – they want a 30 year old 6L Cadillac, because it’s big and shiny.

        Stupid people buying from seedy (but smart), slick and reprehensible salesmen.

        Tis the fate of all old Navigators as well, and some Expeditions.

    • 0 avatar
      geeber

      A friend who is a real GM enthusiast spied a clean late 1980s Oldsmobile Custom Cruiser at a Philadelphia “Buy Here, Pay Here” lot. He stopped and offered to buy it for cash. The proprietor refused to sell it to him, unless he agreed to “finance” it.

  • avatar
    raresleeper

    You’re kidding?

    Subprime debtors are flocking to “buy here, pay here” stealerships after getting their tax refunds?

    When did this start happening??

    Let’s hope the Starter Interruption System will still allow their baisch ’03 Intrepid to get them to work after they are “ONLY a couple of days late”.

    • 0 avatar
      28-Cars-Later

      Been like this for a long time friend. I’d also wager most if not all of the Intrepids are gone too, being powered by The Engine Who Shall Not Be Named.

  • avatar
    jetcal1

    Considering income distribution and the cost of living, I am surprised by some of the comments here. Consider the fact that the 50th percentile household makes about $85k a year, just swinging modest mortgage and car payments leaves them a $240K house a 17K car. In alot of places you ain’t gonna find that house. Keep in mind I Am not talking about the 75th percentile at $52K either. And BTW, the numbers I gave would run about 40% of the budget to do. I for one am thankful to be more fortunate.

    • 0 avatar
      CoreyDL

      Why do they need a $240k house on an $85k income – what area are we talking about here? Portland? Sounds like they should rent.

      • 0 avatar
        jetcal1

        Corey,
        Average rent 3 bedroom Portland is about $1400 a month. (From what I found online. About a wash between rent and buy at that price point.)
        And I do agree about rent vs. buy. It’s a shame that upwards of 50% of the population has been priced out of a house.

        • 0 avatar
          CoreyDL

          People live beyond their means! OR, live in a city beyond their means. If you had 85K here in Ohio per year, you can have a nice big house and a nice car as well.

          $240k is a pretty big house in a nice area – you can have new or old construction, take your pick!

          • 0 avatar
            jetcal1

            Bear in mind that 50% of the population lives below the income i mentioned. And given other costs little would be left for retirement or emergency savings. That said, I do not completely disagree with you. I pulled stakes for economic reasons. Not everyone is so fortunate to be able to do so.

      • 0 avatar
        DevilsRotary86

        1400 sq ft house, $115k. I love Dallas :)

  • avatar
    jim brewer

    Of course the $3,000-$4,000 cars will offer the worst value. A big part of the price is effectively a fee to accept the buyer’s poor credit. The real interest rate is astronomical. Has it ever been different?

    Used cars in general are still way expensive. Supposedly my plain Jane American car is worth $4,000 less than what I paid for it a little over two years ago. I guess that at least is rational in that it represents pretty closely the extent to which my car was “used up” but most people with the means would be better off going new.

    • 0 avatar
      danio3834

      You’re right, the shift in prices in the last 4-5 years has been signitifcant. I have a 2007 Grand Prix for sale at the moment that demonstrates this well. I bought the car for someone else at a repo auction in 2008 when it had 30k miles for $9,000 (retail book value was $14k at the time). Yes that was a really good deal, but it’s now 5 years later, the car has 88k miles and look what the BHPH lots are advertising similar cars at, ~$8,995 to $9,995.

      • 0 avatar
        CoreyDL

        Good lord you’d have to be high as a kite – or have really bad credit to go for that kind of deal on a car.

        And thus we see reiterated the importance of having good credit!

        • 0 avatar
          danio3834

          Most people aren’t very good at math, probably why many have bad credit. Those kinds of customers main concern is that the payment is x and that they make more than x a month, or in some cases bi-weekly or weekly.

          • 0 avatar
            CoreyDL

            Sigh. The inability of people to create a budget is baffling to me. I’m not super-awesome at math, but I can do the basics – and Excel is great at the rest.

        • 0 avatar
          28-Cars-Later

          I agree with Danio as poor eduction is part of it but also the avg person has no idea what cars are worth. I was talking to a girl last night who worked out an “even trade” of her 09 Fusion SEL for an 07 Grand Cherokee 89K (she wasn’t even sure if the GC was a V6 or V8). I told her unless her Fusion had near 100K she was getting hosed on the deal as GCs with those miles trade in the 7-10 range and I figure her Fusion was avg miles and in the 12s.

        • 0 avatar
          jetcal1

          Corey,
          As an NCO, one of the first things I did with my kids was counsel on credit and work with them to establish credit. After that it was pretty much up to them. I am also old enough to remember the old credit worthiness matrix. I rated only 3 points because I was enlisted. Nothing like paying more because of your job instead of actual credit history.

      • 0 avatar
        28-Cars-Later

        I paid $11,200 for an ’08 in ’10, in hindsight I overpaid by at least a grand as base GPs were in the 9s and loaded ones only did a grand better. If I had to guess yours is worth 5s and mine 6s, but one of the rules in BHPH used to be double the price at retail to allow room for junky trades.

        • 0 avatar
          danio3834

          It’s tax time man! I expect to get 7k for it. It does have the bonus of a set of meaty winter tires on steelies as well as a set of chromes for the summer, in addition to being clean and well maintained. Otherwise it’s a grey base bodel.

          • 0 avatar
            28-Cars-Later

            Funny you posted back, I just had a conversation with my boss not five minutes ago about how ridiculous things have become. He’s telling me to replace my Saturn, and how he bought his son a Mazda 6/18K in 2010 for 15K. I said good luck boss you have no idea whats been going on since 2010. Everything wholesale is probably 30% higher than its really worth, let alone retail. Although I did spy something yesterday I did not realize, MY11 Regal trades 13-14 in lower miles and the BPG dealer had what I believe was an ‘as-is’ one for $15/35K otc. Since MSRP at the time I think was 28 and now is in the low 30s, this is a nice curve to ride. However I thought I read they have been very problematic, and mileage is rated at 19/28 or 29. So an base I4 puts out the same mileage as my 3800, nice. Also the 18in tires are on avg $200/apiece which is facepalm. So you buy at 15 x 7% = $16050 on say a 3% note and then get to spend up to $800 more on new tires in the next 10K miles. Yikes. This car should be trading in tens to low teens and retail low teens.

            EDIT: Loaded models low 11s, base high 9s. This is not a beloved car. Verano on the other hand trades much higher due to I assume demand for it.

    • 0 avatar
      frozenman

      I Am Canadian:) and flee south to the great US of A in the winter. Your used car prices are indeed shockingly high, in Canada a vehicle with 200,000 km on it(120,000 miles) is perceived to be nearly “all used up”and the price reflects that. Add in CDN dollar values slipping against USD and the value is even greater.


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