Tax Refunds, Easy Credit Boost Used Car Prices
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.
Seattle-based writer, blogger, and photographer for many a publication. Born in Louisville. Raised in Kansas. Where I lay my head is home.
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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.
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".
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.
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.