Finally, some good news for people who own a compact car: the value of their vehicle is increasing. That information comes from Kelley Blue Book (KBB) which issued their monthly market report for October earlier this week. KBB is one of the most respected providers of new and used car information for consumers and businesses alike; their monthly reports offer a good picture on how car prices are trending.
Fluctuating Used Car Values
The small car segment has been battered since last summer when gas prices began to drop. As prices at the pump dropped, compact car values fell accordingly. This wreaked havoc for consumers who were looking to turn in their aged subcompact and compact cars and learned that their values had plummeted over a short period of time.
“Several cars that might have been traded in were scrapped in the last few months through the ‘Cash for Clunkers’ program and new-car inventories are just as low, helping to drive used-vehicle values up,” said Alec Gutierrez, senior market analyst, Kelley Blue Book. “The compact market may have actually gotten too low this year due to irrational behavior and the overcorrection of the economy and gas prices.”
Cash For Clunkers
KBB noted that the recently concluded Cash Allowance Rebate System (CARS) or Cash For Clunkers program is still having an impact on car prices. New car sales surged dramatically in August thanks to federal intervention but fell almost as dramatically in September. However, with 700,000 fewer used cars on the market, overall price demand is rising.
“Many manufacturers increased production levels in August as it became clear that the ‘Cash for Clunkers’ program was moving metal and shrinking inventories,” said Gutierrez. “With that increased production call taking place in August, those new inventories should be hitting showrooms in the next 30 days; however, it remains to be seen if demand will be sufficient to support the increased levels of inventory coming into the market.”
Of concern to KBB is the current state of the economy as a high unemployment rate (9.8%) and sour overall conditions are conspiring to suppress consumer prices across the board. KBB believes it could be years, not months before the economy returns to anything like normal, however “normal” is to be defined.
Source: Kelley Blue Book
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