Should U.S. Government Impose a Ceiling on Used Car Prices?
In 1944, the United States was in the midst of fighting a world war. Many manufacturing and production resources were devoted to the war effort, leaving other manufacturing to shut down completely. Even new car production was put on hold, with existing stock of autos sold only to those approved by the government.
That put a higher demand on used vehicles and, as you might expect, prices soared. In some cases prices doubled or even tripled from their pre-war levels.
Jumping to modern times, the 2011 state of auto sales is in a much different position. The industry still faces its problems, though, and the past few years have been especially troublesome for new-car inventory. Our country has been at war, our economy is taking punches to the chin and auto manufacturers have dealt with everything from high national unemployment to natural disasters that crippled production and sales.
New car sales are down, used car sales (and prices) are up.
In 1944, the U.S. government’s Office of Price Administration solved the problem of soaring used car prices by imposing a ceiling on them. That’s a nearly unthinkable proposition today, but what if it happened?
First, a little more on the 1944 ceiling and how it worked.
The government’s price ceiling was determined by make, model and location of a car. For example, the price of a 1942 Ford V8 Deluxe sedan was capped at $1,065 if it was located in Oregon or Washington State. (Prices were slightly lower on the East Coast.) If it was sold with a warranty, the cap was $1,331. No private party or dealer could sell the vehicle at a higher price, regardless of demand.
Naturally, the NADA took issue with this practice, arguing that it would create a black market and destroy a dealer’s only remaining way to make money.
Consumers, on the other hand, appreciated the effort to make sure they were charged a fair price. Plenty of lawsuits ensued when sales prices exceeded the set ceilings.
The practice of capping the prices of used vehicles hasn’t been back since the OPA dissolved in 1946. I, however, wouldn’t mind seeing it return. Wouldn’t it be easy to shop for cars if you knew a 2008 Camry would cost no more than $17,000, regardless of the dealer you were shopping at?
Barbara Shunt, a 29-year-old woman living in Spokane, Wash., thinks so. “I would love to know that I was getting a fair price without the need to negotiate. It just makes sense.”
Former car salesman Scott Sherman doesn’t feel the same way. “The government shouldn’t determine how much a dealer makes on a car sale. Consumers are well educated these days and can use online tools to determine a fair price on a car. Dealers know this and aren’t out to overcharge customers. A price ceiling isn’t needed.”
Online tools such as CarGurus’ DealFinder, Kelley Blue Book and NADA Guides do remove much of the question of what a car is worth, but that doesn’t stop some dealers from charging significantly more, especially for in-demand models with limited new production.
And they will keep doing so as long as there are people willing to pay.
Should the U.S. government impose a ceiling on the prices of used cars?