Record High Car Prices, But Slow Sales

"Ah, Goosey Loosey, the sky is falling!"

The used-car market is still going crazy. According to a recent report by Manheim, average May used-car prices jumped over 20 percent from last year. And the trend will likely continue.

It’s not hard to understand why this is happening. The quake in Japan cut new-car production drastically and diminished parts supplies. Rising gas prices have scared people into seeking out more fuel-efficient cars, used and new. Cash for Clunkers still has a residual effect, as it took a lot of cars out of the market.

And a big reason: Carmakers’ incentives are going away, so new car prices are hitting record levels. Ford, Honda and Nissan are leading the price-hike parade. Ford cars are 5.2 percent higher than last year, and the industry average is up 2.1 percent.

In part that’s because, while folks are buying smaller Focus-type cars, they are getting them loaded with options, which raises the final transaction price (and contributes nicely to Ford’s profits).

Toyota, with the lowest incentives of all the majors, is spending 54 percent less on them this year, though there is talk that it may have to increase them since sales are flagging so badly. Honda sales are off 22.5 percent.

Rising gas prices have impacted new-car sales. GM is down 1 percent for May, and Ford is off 3 percent. The trucks and the big SUVs aren’t selling—no surprise—but these are the profit-makers, and GM’s May numbers are way off: 14 percent down for the big GM pickups; 15 percent off for Ford’s F-Series. Suburbans, Tahoes, etc. were down 16 percent or more.

Jeep WranglerThe story isn’t all gloom and doom. Chrysler’s May sales are up over 10 percent, with Jeep going gangbusters at 55 percent over last May. And Volkswagen is up 27.9 percent, the company’s best month since August 2003. One big reason is the Jetta, which most of us auto writers panned but the public likes. (We called it a step down from exceptional to simply good.) VW sold 58.6 percent more of them this year than last.

With all this turmoil, it may not be easy to buy late-model fuel-efficient used cars at a reasonable price. Our DealFinder can be a big help. And keep hunting for those incentives (some still exist) and offers that can make a new car a better deal than a used one.

Anybody out there bought a new Jeep or a Jetta recently? What kind of deal did you get?

—jgoods

Find Used Cars in Your Area at CarGurus

Used Ford Focus
Used Chevrolet Suburban
Used Chevrolet Tahoe
Used Jeep
Used Volkswagen Jetta

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