Banks: Price Increases on Models in Demand Are Here to Stay for Short Term

NADA Used Car Guide is seeing the price of smaller, fuel-efficient cars spike as the market reacts to the Japan disaster. And as such, the company said NADA values for April will reflect this increase.

And if Japan cannot restore power soon, NADA Used Car Guide is predicting that these higher prices at auction on the more popular models could stick around for a while.

“The dramatic increase in wholesale vehicle prices indicates that buyers are expecting the supply of small, fuel-efficient cars to dwindle even more because of the crisis in Japan and gas prices that continue to rise,” said Jonathan Banks, executive automotive analyst for the NADA Used Car Guide.
 
“In response to this trend, NADA values for April 2011 reflect large increases in most car segments compared to March 2011,” Banks added. “We’re basing our adjustments on the current market conditions and the expectation that these price increases will continue during the next few months.”

From March 11 through March 28, for example, auction prices for two- to five-year-old compact cars, such as the Honda Civic, Toyota Corolla and Ford Focus have increased by about 11 percent compared to February.
 
Auction prices for intermediate-sized cars, such as the Nissan Altima, Honda Accord and Chevrolet Malibu have increased by about 8.5 percent from March 11 through March 28 compared to February.
 
Looking at the entire used-vehicle market from March 11 through March 28 compared to February, Banks said overall auction prices across all vehicle segments have increased by about 5 percent, which is higher than the expected seasonal improvement of 3 percent.
 
The crisis in Japan and the subsequent damage to the Fukushima nuclear plant have caused several auto assembly and parts plants to suspend operations, interrupting the supply of new vehicles and parts for export to the U.S. market.
 
“The impact of the crisis in Japan will have its most significant effect on the global auto industry during the next three months, unless Japan is able to quickly restore consistent power,” Banks said. “The bottom line is that price increases — for used cars in demand — are here to stay for the short term.”