What is the Reason Used Car Prices Are So High?
If you have looked at the prices of used cars lately, you know they are extremely high. So, why are the prices of used cars so high? There are many reasons, but they all come down to the fact that the demand for used cars is up and the supply of them is down. The demand for used cars is up because a lot people who normally buy new cars are now buying used cars because they are afraid to take on too much debt.
The supply of used cars in the market is very low for many reasons. One of those reasons is the Cash for Clunkers program. This was the government program that ran last year. That program was supposed to stimulate the economy and the sale of new cars. Under Cash for Clunkers, people who traded in running cars that got low gas mileage received a voucher up to $4500 to use towards the purchase of a more fuel efficient new car. Almost 700,000 cars were traded in under the Cash for Clunkers program and subsequently destroyed instead of entering the used car market.
Another reason for the limited number of used cars is that many car owners are choosing to keep their cars rather than trade them in for a another car. Also, rental car agencies and companies that provide fleet cars to their employees are not trading them in as they normally would because of our slow economy.
The price of used cars will continue to be elevated as long as the economy remains unsettled. When consumer confidence finally improves, the price of used cars will too.
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