Used Car Sales Are Revved Up
Friday, March 06, 2009SUSIE GHARIB: With the problems facing the nation's auto makers these days, there is one bright spot -- demand for used cars is picking up. More than two million used cars were sold at dealerships over the past few months. Now that's about 25 percent higher than in normal economic times. As Diane Eastabrook reports, the demand for used cars could spur new car sales down the road.
DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Tom and Julie Godar are on a quest for a car. The Godars want to replace their 10- year-old minivan with a sedan. In the past, the couple only bought new, but this time, they're thinking used.
JULIE GODAR, CAR SHOPPER: We have always bought new and driven it until it was almost dead.
TOM GODAR, CAR SHOPPER: But now it's looking at - I mean any new car any more, you're talking, by the time taxes is $20,000 I think on the low end and $30,000 is more the average. It's a lot of money.
EASTABROOK: Dealers say, while new vehicle sales have all but stalled, used vehicle sales remain robust. Over the past several months, edmunds.com found sales of pre-owned vehicles at franchise dealers outpaced those of new. With credit tight and the economy tanking, pre-owned cars and trucks are a less expensive option and many late models still carry factory warranties. Analysts say traditionally, new car buyers and used car buyers tend to be two separate and distinct markets who rarely deviate from their buying habits. But in recent months, the distinction between those two groups have started to blur. Carmax General Manager Rebecca Sckrabulis is seeing a lot of traditional new vehicles buyers crossing over to used luxury products like this BMW.
REBECCA SCKRABULIS, GENERAL MGR., CARMAX: You can see it's got the heated seats. It's got the memory seats, power locks. We offer it at the no-haggle price is at $23,999.
EASTABROOK: If you were to buy this new, how much would you pay for it?
SCKRABULIS: Somewhere, probably, I'm thinking almost double.
EASTABROOK: Chevrolet dealer Bill Kay says, since he is selling fewer new cars, he's getting fewer trade-ins so he's buying more used vehicles at auction and that is getting expensive.
BILL KAY, CHEVROLET DEALER: The auction prices are escalating, so it's harder and harder to buy the right types of cars that people are looking for.
EASTABROOK: Morningstar analyst David Whiston says if demand and prices for used vehicles keep rising, new vehicles sales could ultimately benefit.
DAVID WHISTON, AUTO ANALYST, MORNINGSTAR: Eventually, that gap between used and new is just going to get smaller and smaller and eventually, consumers will say, you know what, it's cheaper for me to just go ahead and buy the new car and not worry about the maintenance issues with the used car.
EASTABROOK: That is something the Godars are realizing.
J. GODAR: The prices still seem high.
T. GODAR: It seems really high.
J. GODAR: It seems high compared to a new car.
EASTABROOK: Diane Eastabrook, NIGHTLY BUSINESS REPORT, Lisle, Illinois.
