How does the recession tie in with second hand car buying?

[Tonyzee]

Well my current car's got a busted rad, got a burnt out rear light, bad breaks, shot suspension, have to keep foot on gas for the first 5 min of start up or it will stall (its an automatic!), horrible on gas, etc. I am planning to get a new used car.

Im a student so my budget isn't very high which is why im buying a used car. This is first time buying a car so I do not know how pricing works. I am pretty sure the owner research up their cars and find reasonable price to list. Does that price factors in the current recession? Should I try to talk them some sense and sell me for far cheaper?

This is an open ended question. You can try to answer the topic title question or answer the ones I just asked a paragraph above. Thanks.

[TheCheez]

You can try whatever you want when buying. The recession doesn't just get 'factored in' like a new car buying incentive would. Used is entirely based on supply and demand and it will take awhile to motivate sellers into low prices if demand is drying up.

Maybe a used car expert here can comment if a recession infact has any impact on used car sales. I would think there are a significant number trading down or looking used instead of new for their next vehicle. This would keep demand higher for used in a downturn than the effect on new sales.

Where you will find deals is on domestics. The bankruptcy(ies) will lower domestic resale more than anything.

[notanexpert]

During a recession, in the short run (i.e. now) prices for both new and used cars drop, because the demand for both drops off, while supply takes a while longer to reduce. Right now, manufacturers have drastically reduced production, so once the overhang of supply runs out, we will see a rise in prices for new cars due to a reduction in incentives needed to reduce inventories. There may even be price increases because the manufacturers have to plan for turning a profit on much lower volumes.

Used cars also drop in price, which is what we have seen over the past year, due to reduced demand. However, because new car sales fell sharply, we will see fewer used cars come on the market over the next few years, both because of more people holding on to their older cars, and also because of fewer new cars sold that will turn into used cars. There will also be an uptick in demand for used as people use them as a substitute for buying new cars, so used car prices will also rise as this recession progresses.

In the recession of the early 90's we saw both new and used car prices rise quite dramatically from the low levels at the very beginning of the recession.

[i_spotdeals]

During a recession, in the short run (i.e. now) prices for both new and used cars drop, because the demand for both drops off, while supply takes a while longer to reduce. Right now, manufacturers have drastically reduced production, so once the overhang of supply runs out, we will see a rise in prices for new cars due to a reduction in incentives needed to reduce inventories. There may even be price increases because the manufacturers have to plan for turning a profit on much lower volumes.

Used cars also drop in price, which is what we have seen over the past year, due to reduced demand. However, because new car sales fell sharply, we will see fewer used cars come on the market over the next few years, both because of more people holding on to their older cars, and also because of fewer new cars sold that will turn into used cars. There will also be an uptick in demand for used as people use them as a substitute for buying new cars, so used car prices will also rise as this recession progresses.

In the recession of the early 90's we saw both new and used car prices rise quite dramatically from the low levels at the very beginning of the recession.

Well put sir..

[gherikill]

In Ontario I have heard that the used market is actually a little tougher than it was before the recession.

Reason being more people are trying to buy used so the used car dealers can charge more.

[Rehan]

In Ontario I have heard that the used market is actually a little tougher than it was before the recession.

Reason being more people are trying to buy used so the used car dealers can charge more. That's also what I've heard from someone that flips cars on the side (as a dealer).

[m4gician]

On a grand scale this becomes an economic problem where assuming because used cars are cheaper than new cars, used cars will be sold more often (lol not with the crazy incentives to buy new).

Essentially theory tells us that there are two types of used car, good quality and bad quality. Since lack of information by consumers and dishonesty from sellers hides quality, most cars are looked upon as medium quality. Sellers of high quality used cars will be less willing to accept the price of a medium quality car and will not sell their car on the market. Thus leaving the used car market full of lower quality cars and a higher price than would receive otherwise...


Oh wait, you wanted to buy a car didn't you?! Haha, seriously if you can find financing, then buy a new car.

[weedb0y]

That's also what I've heard from someone that flips cars on the side (as a dealer).

I was in the used car buying market till last week and I've noticed the same as well, in fact the same cars that were cheaper before are more expensive right now.

Could also be summer season, when prices do rise due to higher market demand. However, from my experience, recession has had no major impact on reducing car prices on the used market.

[morglum82]

On a grand scale this becomes an economic problem where assuming because used cars are cheaper than new cars, used cars will be sold more often (lol not with the crazy incentives to buy new).

Essentially theory tells us that there are two types of used car, good quality and bad quality. Since lack of information by consumers and dishonesty from sellers hides quality, most cars are looked upon as medium quality. Sellers of high quality used cars will be less willing to accept the price of a medium quality car and will not sell their car on the market. Thus leaving the used car market full of lower quality cars and a higher price than would receive otherwise...


Oh wait, you wanted to buy a car didn't you?! Haha, seriously if you can find financing, then buy a new car.

Haha! I didnt want to go into that territory , but you forced my hand, because that explanation, while very close, isnt 100% correct. This market failure (asymetry of information) will lead to all cars being priced as lemons (not as 'medium cars') by potential buyers.

No one would *sell* a good car for anything below the 'high' price, so buyers know that anything below the 'high' price is a lemon, meaning they won't want to pay a 'medium' price, but a 'low' price.

No one would *buy* a car for the 'high' price, because there is no way to tell a good car from a bad car.

What happens? Only lemons get sold, and only at the low price.
What must be done? Find a way for the sellers of the 'good' cars to prove to the buyers that they are indeed a good car and that they should pay the 'high' price.
How? Warranties. Good cars won't be expensive to repair under a warranty, but bad cars will.

Again, this is just theory and hard to apply to reality as I have yet to see anyone giving you a warranty on his car :)
I guess the "second best" option is to have a mechanic inspect the car and tell you which kind of car it is :O)

Anyway, we digress :)

[scotchtape]

I have found used car shopping to be a PITA.
It would really help to be able to evaluate a car mechanically.

One key thing is maintenance. If there are good records for maintenance then hopefully the car is running well. You're still taking a chance but it is better than the "I have no idea when the timing belt was last replaced" sellers who never do oil changes.

It helps to actually look over the records/receipts as well :)

People are always asking way too much for their cars, please don't get suckered in! A 1993 Honda Civic is not worth more than 1,100 bones in my opinion, actually probably less except it's called Honda. But people still pay good money for them, why I have no idea...

Trade in value for a 1999 Acura EL is guess what? $1.5K - $3K... Why would you pay $8K?!

If you need to save money you need to spend the time researching and looking. It is much more convenient to buy a new car with the warranty and less maintenance needed, however with some leg work you can get an older well maintained car for a fair price... But it is a heck of a lot more work!

Just understand that a car is a liability and you will be paying $$$ no matter what for maintenance, it just depends on how much. Find something that is relatively reliable and taken care of and you should be fine. Avoid anything that needs major repairs unless you know someone that can do it for cheap (timing belt, head gasket... annoying to have to replace cv joints etc).

[Tonyzee]

Interesting... are you all economics major by any chance? haha.

To sum everything up:

More and more car owners are holding off their plans to sell their cars for when the recession ends. Therefore, less used cars on the market.

The price for new cars drop while the price for used cars climb because of high demands for used cars.

The price of new cars are about to rise.

if financing is available, buy em new. If it's not, research hard to get the well maintained used ones.

Is all that correct? Agree/disagree?

[CdTriX]

i recently bought a used car, a 2005 acura TL.

i saw all the acura tl's from 2004-2005 and most of them were in rough shape with 130+kms and lots of stone chips and bad leather.

everyone was pretty solid on their asking price.... i went to 7 dealerships and saw about 20 cars.... and no one would give up a dollar....

all their prices were rather high too from the other, and i even tried to price match with another dealership but they don't care, gave me the price and walked away. this happend at all 6 dealerships. gave me a price.. walked away... didn't even try to sell me the car...

i went to one dealership.... the car was mint... price was a little high... we looked at it some more, and he gave us a decent price... we were pretty shocked he even lowered it for us... it was 300 bucks more than the other 05 i was looking at but this car was 100 times better taken care of.

we ended up buying it +300 more than the other 05s but i was happy with the purchase... i even got the side mirrors replaced, calipers painted, new tires (some linglong summer tires.. Z rated) and got the wheels touched up..

private sellers are pricing way to high and dealers aren't budging at all....

[gman]

In recession, there are 2 good business.

1. garage: because people keep their existing car as long as possible.
2. used car: since people wants to keep their existing car, less used car on the market and more demand.

Yes, the new car may be a better deal but if you don't have money, you will have to stay on used car. No matter how much trouble your existing car has (unless it is totally dead), 2 or 3 monthly payments of a new car will cover the bill fixing the existing car. So, it is 3 monthly payments vs 12 monthly payments.