The government’s cash for clunkers program boosted July’s annualized new car sales by 1 million units, but the CARS program is also having a positive impact on used car sales. Dealers are reporting that buyers not eligible for the cash for clunkers program are opting to buy late model pre-owned vehicles.
With the cash for clunkers program requiring a trade-in vehicle to average 18mpg or less, many shoppers are not qualifying for the program. However, many buyers are not leaving the showroom empty handed, often bringing home a late model used vehicle instead.
“Two out of three people don’t qualify for the program,” Bill Wallace, owner of Wallace Automotive Group, told Automotive News. “You might as well show them what they can get for their money.”
As a result of the increased demand, used vehicle prices have been on the rise. July’s Used Vehicle Value Index checked in at 115.4, representing a 5.5 point increase from July 2008. As a result of the higher prices, dealers are pocketing a greater profit on pre-owned sales. The average margin on a used car sale during the second quarter was 10.8 percent, up from 10 percent in Q2 2008.
Although the cash for clunkers program is fueling used car sales, the pre-owned market is expected to cool down once the program expires.
