How is this happening?
The strong demand for used cars started during the recession, which economists believe began in December 2007 when new car sales plummeted. Many people kept their current cars, but others in need of economical transportation chose something used.
That's why all passenger vehicle sales and leases (both new and used) fell between 2007 and 2009 when the recession supposedly ended, while new car sales dropped by 36 percent, compared to just 14 percent for used cars (final 2010 figures are still being calculated).
An interesting way to look at the 2009 new and used car sales is to note that sales and leases of new vehicles were 10.6 million in 2009 while used car sales leveled off at 35 million. That's a ratio of roughly 3-to-1 and the first time used car sales tripled new car sales since sales reporting statistics of new and used vehicles were first measured more than 20 years ago.
High gas prices helped cause this imbalance between new and used cars, creating a steep rise in demand for small, fuel-efficient cars less than 10 years old. These cars became very hard to get, and dealers are now charging premiums on used vehicles. But we can't blame it all on high gas prices.
Several other factors squeezed supply: the Cash for Clunkers program took some 700,000 used cars and trucks from the marketplace in the single month it was in effect in summer 2009, according to the Transportation Department.
Rental car companies also cut back drastically on their new purchases when the recession hit, raising mileage turn in thresholds. Industry figures compiled by Automotive Fleet magazine show that rental fleets fell from 1.6 million in 2007 to 1.175 million last year – eliminating more than 4 million available late model used cars.
The impact for the repairer is overall good news. The sharp rise in used car prices, in particular small fuel-efficient vehicles, means fewer vehicles with moderate damage ending up as economic total losses. For example, http://Edmunds.com reports that the price of a three-year-old Honda Accord has soared in value by 24 percent since last September, similar to other fuel-efficient late model vehicles.
Increased vehicle values will tightly constrict the pipeline of used parts, with marginal total losses being rebuilt instead of sold to parts harvesters. Remanufactured parts, primarily alloy wheels and bumper covers, may also see a reduction in the availability of usable cores and a rise in prices.
These vehicles are prime aftermarket parts targets, and you can bet that the aftermarket parts producers are watching these developments and adjusting production accordingly to take advantage of the increased demand.
Similarly, insurers will benefit from the rise in these values, as they will be repairing more vehicles rather than totaling them out. When it comes to estimating repairs on these vehicles, estimators will likely find fewer used and remanufactured parts and instead will choose more aftermarket parts as the economic alternative. When looking for used parts, insurers will likely need to increase their search radius to include more vendors who might have the part they are looking for, but may be discouraged as the increased demand will cause the prices to rise.
New vehicle sales will not return to the pre-recession level until 2015 according to most industry experts, with used vehicle values expected to remain robust until then. For collision repairers, there will be more vehicles that will be repairable once they arrive for an estimate.
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