Used vehicle prices for the Cadillac Escalade rose more than 35% between July of 2009 and July of 2010.
“Consumers are generally paying considerably more for used cars this year compared to 2009,” stated Joe Spina, a senior analyst for Edmunds.com. “A lack of confidence in the economy is driving more people to used cars, putting upward pricing pressure on a limited supply of vehicles.”
Certainly part of the issue is the government’s “Cash for Clunkers” program where car buyers were offered incentives to dump their inefficient old cars for more fuel-efficient new ones last summer. The ability to buy a new car at a significant savings last summer certainly depressed the market for used cars. The program, technically known as Cars Allowance Rebate System (CARS), gave car buyers up to $4,500 to trade in a used car for a more fuel-efficient one.
But the dramatic price increase for some large SUVs in particular was shocking. For example the average price of a used Cadillac Escalade went from went from an average for all model years of $25,600 in July 2009 to $34,715 in July 2010, a 35.6% increase. The value of a used BMW X5 jumped from $30,711 to $40,843, a rise of 33%.
As has happened in the past, buyers appear to have quickly erased their memories of gasoline prices shooting well past $4 per gallon during the summer of 2008 when many big SUV drivers abandoned the gas-guzzling vehicles for smaller, more fuel efficient vehicles. With gasoline holding steady at less than $3 per gallon in many parts of the country, even during the busy summer driving months, buyers appear willing to return to bigger vehicles.
Mark Scott, a spokesman for AutoTrader.com, said SUV prices rise and fall with the price of gasoline.
“As in the past, we expect this trend to reverse almost immediately if gas prices go back up,” Scott said. “Our experience is that generally, when gas prices are low, more people start looking at trucks and SUVs again, then turn to smaller and more fuel efficient cars when gas prices go back up.”
While sales of large SUVs began to languish during the last several years, automakers decided to cut back on production of them. Chrysler canceled its Dodge Durango and Chrysler Aspen full-size SUVs altogether and Ford decided to remake its Explorer – once the dominate player in the midsize SUV market and the top Cash for Clunkers vehicle turn-in – into a fuel-efficient unibody crossover that will be powered by 6- and 4-cylinder engines rather than the 6- and 8-piston engines powering the old versions.
Spina said automakers’ reduction of large and mid-size SUV production has matched consumer demand.
“Those who do not need or strongly desire one of these vehicles have pulled out of the segment and moved to unibody SUVs,” Spina said. “Decreased production has better matched supply to demand.”
The changing plans for automakers illustrates the difficulty of deciding which vehicles to build as many as 5-6 years before a vehicle actually goes into production.
Overall, the mid-size SUV category saw used vehicle prices rise 13% and large SUVs up 25%. Luxury SUVs were also up 13%, Edmunds said.
One vehicle of interest was the Dodge Grand Caravan, where used vehicle prices shot up 34% to $15,629.