If you’re looking for a used car, you may want to wait a month or two. That’s because used vehicle prices are increasing, along with demand, as the availability of cars shrinks.
According to the Manheim Used Vehicle Value Index, wholesale automotive prices jumped almost 3 percent month-over-month in September, thanks to tightening inventory levels and rising used car demand. Cox Automotive also reported an increase in used car sales of 8 percent in September, with CarMax reporting an 11 percent jump.
But hold on. If you really are getting ready to buy, you may have read a story or two about how right now is actually the best time buy, thanks to a glut of new car inventory, piles of incentive dollars at dealer lots…and all these semi-used, off-lease cars crowding everyone out. So what changed?
Well, Harvey happened. And then Irma, about 15 days later.
In terms of the automotive market, the impact of the first two hurricanes alone is staggering: up to a million cars wrecked, tossed, flooded and useless, and all in need of replacement. As a result, in the days and weeks since Harvey made landfall, automakers have been earnestly shuttling cars and incentive dollars to Texas and Florida, shifting the balance and availability of cars across the country.
According to the Manheim, the result has fundamentally changed what buyers should expect when they arrive at dealerships. As reported in the index, “though wholesale market values continue to show strength as a result of growing retail demand, most of this price strength can be attributed to the recovery following Hurricane Harvey and Hurricane Irma. Replacement demand combined with a reduction in available supply is causing wholesale inventories to tighten. The impact to the wholesale market is widespread, providing additional support for likely continued wholesale price gains for at least another month or two.”
Thus, just like that, a year-long forecast of declining used car prices, slowing demand and too many cars (new and near-new) became a reality of rising demand and too few cars.
For car buyers, that means higher prices and less selection, except perhaps when it comes to all those nearly-new, low-mileage used vehicles. Shoppers in the market for off-lease 2013 models may want to instead pay close attention to the kinds of new car incentives available as many analysts see a shrinking price difference between new cars with incentives, and lightly used cars with low miles.
That’s little help for the used car shopper looking for a deal on affordable transportation, however. For the person searching for an 8-year-old gem with just 65,000 miles on the odometer, the hurricanes have made a bad market worse, with fewer good older cars to go around.
Even before the storms, it wasn’t a pretty picture: according to the Edmunds 2Q Used Car Market Report, owners of older cars are keeping the keys, creating higher values and, thus, prices.
These buyers will need to search carefully for good deals, and be hyper-aware of flood-damaged cars hitting the market. The National Insurance Crime Bureau (NICB) warns buyers to “be particularly careful in the coming weeks and months as thousands of Harvey-damaged vehicles may reappear for sale in their areas. Vehicles that were not insured may be cleaned up and put up for sale by the owner or an unscrupulous dealer with no disclosure of the flood damage.”
Sure, now is a good time to buy. It’s always a good time to buy a new car. But if you’re shopping for a good deal on a quality used car, you may want to wait just a little bit longer, when the selection improves, prices drop a little and flood cars cycle through the system.