The Used Car Bubble Is Bursting

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The big question is how quickly will it deflate?

Despite the best effort of banks to keep a flood of repossessed cars from flooding the used market, the bubble appears to be bursting. That’s great news for everyone who’s been holding off on buying a vehicle because prices have shot into the stratosphere, although realistically relief might be a few months away.

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Data from Cox Automotive shows wholesale used car prices dipped on average 4.0 percent in August versus July. This is good news since we’ve seen trends in the opposite direction for well over a year. There’s still room for prices to come down significantly, with Cox noting the Manheim Used Vehicle Value Index is still 8.4 percent higher than a year ago and far more than that versus two years ago.

Drilling down into different market segments, Cox concluded only full-size cars didn’t see a year-over-year increase in overall prices in August. Compact cars saw a 15.9 percent increase, perhaps because people are trying to save on gas prices, increasing demand. Vans were next at 14 percent, then midsize cars at 10.9 percent, SUVs/CUVs at 6.6 percent, pickups at 5.4 percent, and luxury cars at 4.4 percent. This doesn’t mirror trends we saw in the past with full-size SUVs and trucks driving price inflation in the car market, so things are changing.

According to Google search data pulled by FindTheBestCarPrice.com, searches for the term “sell my car” increased over 145 percent for August and 104 percent for “how to sell my car.” Indicating the trend is accelerating, “sell my car” queries were pegged at 177 percent from August 25 to September 1, which was when the Federal Reserve announced more rate increases were coming. On September 4, when the US Labor Department gave more bad news, announcing the unemployment rate increased, searches for “sell my car” went up another 15 percent. In other words, a lot of people are trying to figure out the best way to sell one of their vehicles as the economic crunch hits hard.

If you’re wondering where people are most interested in selling their car, Google data analyzed over the last 12 months show the top 10 states for “sell my car” searches are:

1. Michigan

2. Arizona