By Dan Strumpf, AP Auto Writer
NEW YORK (AP) — Used vehicle prices shot to an all-time high last month, spurred by falling inventories, according to a closely watched barometer of the second-hand car business.
For those in the market for a used car, that's not necessarily bad news, said Tom Webb, chief economist at Manheim Consulting, which produces the index of the used car market. That's because the value of trade-in vehicles are fetching record prices, he said.
But those buying their first car or who aren't looking to trade in a vehicle will find themselves stuck paying the higher price, Webb said.
The Manheim Used Vehicle Value Index rose 6.9% in September to a record high of 118.5. The index is adjusted for vehicle mix and seasonality. A value of 100 represents used vehicle prices in January 1995.
The index reflects the wholesale, or trade-in, value of vehicles. But Webb said retail prices move "pretty much in lockstep" with wholesale values.
The main driver behind higher used car prices is falling wholesale vehicle supply, Webb said. This summer's wildly popular Cash for Clunkers program sent new vehicle sales soaring, taking dealers by surprise and clearing out inventories.Even though new car sales dropped off in September, auto factories struggled to catch up and inventories remained low.
In addition, he blamed falling vehicle turnover from rental car companies, many of whom have taken a beating in the economic recession.
"There's a lack of wholesale supply" in the market, Webb said in an interview.
The trend is unlikely to continue for much longer, he said. Toward the end of the month, second-hand car prices began to level off due to falling demand, he said. Used car sales fell 14% in September, he said, citing a study by CNW Research.
"If I had to guess, I think we were pretty much near peak," he said.