USA Today

Clunkers program could drive used car prices up
USA Today

Hundreds of thousands of « clunkers » headed for scrappers may cause already rising prices for used cars to head even higher, dealers and market analysts warn.

The popular cash-for-clunkers program, extended by Congress last week with $2 billion more in federal incentives, requires that all the old fuel guzzlers traded in are scrapped — not resold. That means up to 750,000 vehicles will never find their way into the hands of another owner. Many are at the end of their useful lives, but others, with years of life left in them, normally would be resold.

« Those are the cars that lower-income families need, » says Geoff Smartt, owner of Smartt Cars in Caldwell, Idaho.

The clunker program could cause prices to rise 5% to 10% more, especially for vehicles worth $4,500 or less, says Alec Gutierrez, senior market analyst for Kelley Blue Book. « It’s going to drive prices up of some of the most affordable vehicles we have on the road. »

Sen. Tom Coburn, R-Okla., called that provision « nuts » during debate in the Senate last week. He said that in his state, one trade-in had less than 10,000 miles on the odometer. « We’re going to destroy the opportunity for somebody less fortunate to have that automobile, » he said.

Used car dealers agree. They say fewer older cars are at auction.