A Shortage of Second Hand Cars

Written on 20/01/2009

The credit crunch is having some strange effects on the car market at present.

Anyone who watches the news at the moment will know that the new car market has all but collapsed. Honda is closing its factory in Swindon for 4 months, the hyper-modern Nissan factory in the North-East is on short hours and Jaguar-Land Rover in Halewood is looking somewhat shaky. It seems all those private customers and corporate businesses are saving their money by holding onto their existing cars just a little longer.

This is having some strange effects on the second hand car market too. When a new car is sold there is normally a used car taken in exchange. This used car comes into the second hand market and is then exchanged for an older car. You can imagine that there is a kind of chain where new cars lead to slightly used cars, slightly used cars lead to older cars and older cars lead to the bangers and cars ready for the scrapyard.

But now the chain is starting to break. With fewer new cars being sold, there are fewer used cars coming into the chain. Those used cars are also in more demand because if you must replace your car people are trying to save money by buying used. The car dealers I know are all to quickly getting into the difficult situation of being able to sell second hand quite easily, but not being able to get hold of stock to sell!

Recently the values of larger, less economical cars has fallen sharply. Larger BMW’s, Lexus’ and Mercedes’ have been almost worthless and great bargains can be had…if you can afford to run such a behemoth. It remains to be seen if the value of second hand cars will start to rise as supplies of used motors dries up.

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