Driving a hard bargain: Used-car shortage sends prices revving

While collectively peering into the abyss formerly known as the U.S. economy, might we summon an iota of sympathy for a rather large problem this downturn is creating for Utah's used-car dealers?

OK, can we at least pretend?

On a stack of Blue Books, Wasatch Front used-car dealers swear that recessionary pressures are creating a dearth of quality used vehicles at the wholesale level. And it's sending used-car prices revving into a higher gear — especially desirable late-model, low-mileage units.

If this sounds like yet another car dealer sales ploy, it's not. While the recession has slowed used-car demand, it's done an even bigger number on the available supply of used vehicles.

Nick Markosian, co-owner of West Valley Auto Plaza, has been keenly watching used-car price spikes of late.

Typically, end-of-year sales are softer and prices lower, Markosian said, but what's happened since — especially the past four or five weeks — has been outside the normal business cycle. He cites a 2007 Chevrolet Impala with 25,000 miles selling in December for about $8,000 wholesale. Now it's bringing between $10,500 and $11,000 at auction.

"Cars that we sold in December and January that I bought super-cheap, the people who bought those got smokin' deals," Markosian said. "That was the market then. Now to go out and replace those cars, I'll have to pay $3,000 to $4,000 more for each one. It's all supply and demand."

"Too many dealers chasing after too few cars," sums up another dealer, who asked that his name not be used. "If I can't buy it cheaper, I can't sell it to you cheaper," the dealer said.

Perhaps car dealers bidding against one another driving up their costs might seem like poetic justice for previous crimes against humanity, but it's the car-buying public that ultimately will pay as dealers pass along higher prices.

Nick Boris, general manager for auto auctioneer Manheim Utah, says currently there is limited demand for new cars, while some demand for used cars remains. But there's not nearly the supply (of used cars) coming back to the auctions. "A year ago we might have sold half of what the dealers brought to auction. Now it's up to 60 to 70 percent," he said.

"Any dealer looking for that quality car is going to have to travel more and look more and visit more auctions," Boris said, adding that he doesn't see current trends easing anytime soon.