Dealers going beyond usual channels to stock used cars due to Japan crisis

Article by Christian Andrei, on April 16, 2011

Dealers are going the extra mile to obtain used cars as preparation for an anticipated shortage in new vehicles. Since the March 11 earthquake in Japan, the prices for used vehicles have been so volatile that the dealers often pay more to acquire these units.

Even before the earthquake, prices for these cars have been high. The recession has caused shortage of used cars, and prices rose as credit eased for individuals opting for these vehicles, increasing the demand.

Now, the market will see a reduced supply in new vehicles, as the March 11 quake forces Japanese automakers such as Honda Motor Co., and Toyota Motor Corp., as well as virtually all car manufacturers, to reduce production.

Such scenario also forces dealers who are short of new vehicles to search out for pre-owned ones to meet the demand, which means that prices can rise even more. In addition, as incentives for new vehicles dry up as generally forecasted, used-vehicle prices will increase along with new-car prices.

Black Book managing editor Ricky Beggs said that he sometimes thinks that prices for used cars can go as high as they can, as a one-year-old or two-year-old vehicle is nearing the new-car transaction price.

This means that if the new-car transaction price is raised a little bit, there is room for the prices of the used ones to go up as well. NADA Used Car Guide forecasts that the average transaction price on the new compact vehicles like Ford Focus, Honda Civic and Toyota Corolla will go up by as high as $850 by the end of June, considering that some automakers are announcing sticker-price increases and incentives are scheduled to expire.

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