CLARKONOMICS: Just a few years ago at the height of the recession when Americans were reluctant to buy anything, auto dealers simply couldn’t move their inventory. And cars were a screaming deal.
But now, purchasing is up, manufacturing is up and cars are moving off the lot as fast as they come in. It’s amazing how high car prices have jumped. Various reports put the average price of a new car in the U.S. today somewhere between $28,000-$30,000.
The recession changed the auto industry. It used to be all about market share, but now it’s about marketability, cutting excess and making sure that every vehicle produced gets sold.
This has affected the car rental business too. In recent years when cars were largely going unsold, car makers were dumping huge lots of excess vehicle inventory onto car rental lots. Rental lots were getting them so cheap that they were able to rent them to consumers at discount prices. (Clark remembers getting a car for just $4 a day from a Chicago several years ago– his all-time record low!)
Rental agencies used to sell off their fleet to used car dealers after about 6 months to a year of use, but with increasing costs and scarcity, they’re holding on to them longer. Also, leasing was down during the recession.
So now, with fewer used cars coming to the lots from all fronts, used car prices are up too, with prices climbing even faster than new cars!
There are a few conclusions to draw here: First, this is a great time to keep the vehicle you own as you wait this cycle out.
Second, if you have tired of your old car, or truly need to replace it, you’ll likely get more bang for your buck with a new car over a used car, even with the increase in prices. You should be able to fetch more money for your used vehicle right now–up to 20% more on a trade-in than you would have seen just a couple years ago.
Third, auto loan rates at this moment are about the best they’ve ever been.