Used car prices reached a record high in October according to Manheim Consulting's Used Vehicle Index (see chart above) and also Edmunds.com, which reported the average used car price reached a record high of $18,570 last month. From a CNN article:
"According to Karl Brauer, an analyst for automotive website Edmunds.com, those preferring used cars over new fall into two categories: buyers who are forced to economize and others who can afford new but decide to hold off because "there's a bit of a stigma to spending." Or, as Tom Webb, chief economist for Manheim Auto Auctions, put it: "It's cool to be frugal."
Here are some of the factors reported by CNN that have pushed used car prices to record levels:
1.Improvements in design, materials and manufacturing mean that today's vehicles can be operated safely longer than ever, which helps used vehicles retain their value longer.
2. Manufacturers have squeezed new-vehicle discounts, giving consumers incentives to shift to used cars for better deals.
In its monthly release on vehicle sales, Manheim Consulting reports that in addition to a healthy used car market, "new vehicle sales suggest a solidifying recovery."
It's also important to recognize that U.S. automakers like Ford have been significantly more profitable in 2009 ($2.7 billion profit) and 2010 ($6.4 billion profit in the first three quarters of 2010), even with significantly fewer units sales than in 2008 when it lost almost $15 billion and 2007 when it lost $2.7 billion. The focus on cost reductions over the last several years (e.g. getting hourly labor costs down from $78 to about $52) are now translating into strong profits for Ford and GM and have helped the U.S. automakers experience a strong, and ongoing rebound.
Update: According to CNBC, GM made a profit of $3,000 per vehicle in the third quarter of 2010.
