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Strong used car sales, a sign of an improving economy and good news for CarMax

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September 18, 2009 – Comments (7) | RELATED TICKERS: KMX

As someone who works in the industry and follows it closely, I've never been a big fan of any auto stocks, neither manufacturers nor retailers.  I'm still not, but the following news item that I came across today is good news for auto groups that have large used vehicle operations, like CarMax (KMX) the country's largest used vehicle retailer.

NADA Used Car Guide Making Unprecedented Value Adjustments in View of Long-Term Market

After months and months of consecutive year-over-year declines, used sales have finally begun to improve. In July, the latest month that statistics are available for (used vehicle sales figures are much less accurate and timely than new vehicle sales numbers which are reported monthly by automakers), used vehicle retail unit sales posted their third consecutive year-over-year increase.

Used vehicle prices are improving as well.  According to NADA Used Car Guide, during the first week of September used vehicle auction prices were stronger than in August. Specifically, the auction prices of cars, SUVs, and vans rose by around 1.5% month-over-month.  Pickup prices rose a little over 1% month over month.

As a result, the widely followed NADA used vehicle guide is "making unprecedented adjustments in select vehicle segments in response to what we believe to be a long-term repositioning of wholesale and retail market prices."

The drop in the price of gas since the spike last summer has caused the value of used SUVs and pickup trucks to soar by 30% year-over-year.

Interesting stuff.

Deej

7 Comments – Post Your Own

#1) On September 18, 2009 at 11:28 AM, davejh23 (< 20) wrote:

I've read several reports on increased prices for used car sales, and all have pointed to difficulty getting financing for new cars...not an improving economy...actually the opposite.  All have mentioned that this is bad news for new car sales, and based on recent comments from industry CEO's, it looks like those explanations make more sense.

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#2) On September 18, 2009 at 11:47 AM, TMFDeej (99.24) wrote:

New vehicle sales were stronger during Cash for Clunkers than they have been all year so assuming that the strong used vehicle trend that was displayed from May through July continues the theory that it is because people cannot get financing for new vehicles does not make much sense.  It's actually frequently more difficult to get financing on a used vehicle than it is to get it on a new vehicle through a manufacturer's captive finance company.  Unless consumers are paying cash for or picking up really, really cheap used cars the whole used vehicle strength is bad news for the economy doesn't hold much water to me.

While there likely will be somewhat of a drop-off in September as a result of sales that were pulled ahead, I expect new vehicle sales to be relatively strong during Q4...particularly towards the end.  Manufacturers are increasing production and cranking up their incentives.

To me after what we've been through over the past year, people buying anything...especially something that costs thousands of dollars is good economic news.

Deej

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#3) On September 19, 2009 at 2:26 PM, RonChapmanJr (33.19) wrote:

-1 rec

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#4) On September 20, 2009 at 2:48 AM, QualityPicks (22.57) wrote:

This is good news. People are buying used cars instead of new ones they can't afford.

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#5) On September 20, 2009 at 10:11 AM, TMFDeej (99.24) wrote:

Why on Earth do you always just pop your head in and say -1, -1, -1, blah, blah, blah without actually stating any argument or position, Ron?

Deej

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#6) On November 05, 2009 at 1:42 AM, BrandonPaulChevy (< 20) wrote:

This is mainly because of the cash for clunkers program. I bought an old geo tracker and just modified some of the geo tracker parts to make it look good again. And It really came out to be a masterpiece.

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#7) On January 27, 2010 at 9:30 PM, BrandonPaulChevy (< 20) wrote:

Well, used cars are still in demand because some buyers customize the cars. The only thing that others don't appreciate buying used cars is that they still buy parts. I myself bought a used car and the floor panel was damaged so I was the one who replaced it.

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