Less inventory, smaller margins, higher prices

You may noticed that there is an unusual trend afoot here and everywhere in North America. The price of used cars has actually risen in the past year. Yes, thats right, the car you bought a year ago is probably worth more today. Seems unusual, but the industry is facing a supply shortage. Right after the economy took a major dip in mid to late 2008, barely anyone bought new cars. Production numbers on certain models went from 400000 in a year to less than 100000. All these vehicles usually come back to the market as lease returns, rental fleets and company cars. This stream of lightly(and sometimes heavily) used vehicles is what is normally used to populate dealer lots. Well the stream is at a low water mark now. The lack of sales and leases in 2008 and 2009 has resulted in a lack of 2-4 year old used cars right now. All of this has effectively driven the prices up on existing inventory. The automotive industry, as with any other consumer driven entity faces cyclic periods. The problem, however, is to determine when the bubble will burst and when the price of used inventory will fall.  When this adjustment happens, used vehicles will depreciate at above normal rates and there will be many deals to be had.