used carEven as overall costs for consumer goods rose 0.1% in September, prices for used cars fell 0.7% during the month, according to data released Friday by the Labor Department.

It was the first used car price drop recorded since just before the federal government's "cash for clunkers" rebate program began in July 2009, according to the Center for Economic and Policy Research.

The program, which offered consumers up to $4,500 if they traded in older, gas guzzling vehicles for new, more fuel efficient ones, was wildly popular with consumers. But because the program required that traded-in cars be scrapped, it had the effect of driving up used-car prices, since it reduced the number of vehicles available for resale -- by about 700,000.

Driven by short supplies, used car prices shot up nearly 20% during the past 17 months, CEPR noted. Despite the rise, however, the cost of previously owned vehicles remains 9.5% below its 2001 peak, it said. (The rapid rise and slower pace of gains in prices resulting from "cash for clunkers" is shown in the graphic below, which does not include September's data.)

So far the decline in used-car prices is limited to just one month of data. But September's drop may signal the end of the tight supply of used cars, and that can be a boon for those who need to replace an aging vehicle but can't afford to purchase a brand-new one.



Monthly Change in Used Vehicle Prices, January 2009 to July 2010 (courtesy Center for Economic and Policy Research):


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witteyjb

I'm glad used car prices are falling some where in the USA! In Taxatoodobs (Ma) the price of used cars is almost the same as new cars. These article writers, for AOL, seem to live in another world! I guess it'a all electioneering & they don't want us to know the OBAMA sky is falling on OUR heads!

October 15 2010 at 9:14 PM Report abuse -1 rate up rate down Reply
renaldo1949

the writer of these article doesn't know much about the car business. to infer that about 700,000 vehicles taken out of a market of close to 40 million will cause price increases is ludicrous. more important reasons for used car price increases are, increased demand. new car sales are down about 30% from 3 years ago. for many car buyers, who at one time would have bought new, buy used. price being the biggest factor. even with used car financing costs higher that new, shorter loan periods and lower payments sway many buyers who still fear in losing their job; or the job they still have, hours may have been cut

October 15 2010 at 6:21 PM Report abuse +1 rate up rate down Reply
chase5300

EVERYTHING the Fed and Gov't does to prop up or manipulate prices and markets will inevitably fail. It is just temporary, and creates more BUBBLES of the type that cause this malaise to begin with. STOP INTERVENING IN FREE MARKETS! Write your congress people or VOTE THEM OUT!

October 15 2010 at 6:20 PM Report abuse +1 rate up rate down Reply
chase5300

EVERYTHING the Fed and Gov't does to prop up or manipulate prices and markets will inevitably fail. It is just temporary, and creates more BUBBLES of the type that cause this malaise to begin with. STOP INTERVENING IN FREE MARKETS! Write your congress people or VOTE THEM OUT!

October 15 2010 at 6:20 PM Report abuse +1 rate up rate down Reply