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Surplus of Used Cars Driving Down Prices

December 19, 2003

Take four years of record new-car sales, add more than a year of discount financing on new vehicles, mix with an economic slowdown, and

poof: sweet deals on used wheels, according to the Centre Daily Times of State College, Pa.

Strong new-car sales mean more trade-ins, boosting the supply of used vehicles. Discount financing lowers monthly payments for new cars, which means the price of used cars also has to decline to offer the price difference that buyers expect, the Daily Times noted.

And the sluggish economy has pushed car rental companies to trim inventories, putting yet more late-model vehicles on the used-car market, the Daily Times said.

According to ADESA Analytical Services, the average wholesale price for cars in December was 5 percent less than a year earlier. For light trucks, which include pickups and sport utility vehicles, the average was down 2.6 percent.

In turn, used-car dealers have had to become increasingly selective in the vehicles they buy. Art Spinella, president of CNN Marketing/Research in Bandon, Ore., said car dealers in late 2001 rejected trade-ins at roughly twice the rate they did in 2000, and the market has only gotten tougher.

Paul Taylor, chief economist for the National

Automobile Dealers Association (NADA), said there's been a steady rise in the number of vehicles per household. The strong economy of the 1990s led more people to own specialty vehicles, including classic cars, especially in suburban areas where there's room to store the extra

vehicle.

In the past 10 years, the average number of vehicles per household rose from 1.6 to 1.85, Taylor said. He said the increase is probably understated because of the growing number of single-person households, according to the Daily Times.

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