BANDON, Ore. -

In the midst of used-car prices moving upward in the past year, there is some question as to whether this trend is like a “bubble” that will suddenly burst or — as CNW Research president Art Spinella put it — “more like a slow leak in an air mattress,” deflating gradually.

To shed some light on which of these scenarios is more plausible, he offered a few statistics about recent trends in the used market, where annual sales are expected to reach their highest level in four years during 2011.

Diving into a historical perspective on used supply and demand, Spinella pointed out that from 2002 through 2005 there was a sharp spike in full-year used inventory.

As such, dealers had to resort to “fire sales” to clear out their stock, he explained.

During 2003 and 2004, in particular, dealers saw their used-profit margins fall under 4 percent. Typically, profit margins had ranged from 7 percent to 9 percent, coming in at 9.53 percent in 2001, for example.

After full-year inventory hit almost 110 million units in 2003, and dealers scaled back, annual inventory levels settled down. Each year from 2005 to 2008, full-year inventories were between about 83 million vehicles to a little more than 89 million.

“As dealers pulled back on inventory to reduce their costs, the supply began to fall in closer alignment with demand, and profits rose to a high in 2008 of more than 8 percent per unit on average,” Spinella shared.

Then, two years ago, demand was hit hard by the recession. Spinella noted that sales of existing inventory started to skyrocket, and profits fell.

“That course seems to have reversed in the last year-and-a-half,” Spinella pointed out. “While demand has fallen to 62 percent of available supply, the key vehicles being sought — one- to five-year-old models — are in virtual parity or demand outstripping supply which, in turn, is driving up the prices at wholesale but bringing higher retail prices.”

What CNW found to be the “net result” of all this is that for channels overall, used profits have hit their strongest level in nine years at 7.53 percent.

“Will the profits keep rolling in? At least for this year,” Spinella noted. “Sales of 39.5 million units will dig deep into what CNW estimates will be the full-year’s total available inventory of 64 million.”

The resulting full-year 2011 sales of inventory ratio would be 61.72 percent, which Spinella contends is the strongest in at least 13 years. It would be up from 57.83 percent in 2010 and 52.8 percent in 2009.

Overall, the 39.5 million used sales projected for 2011 is up from 36.88 million last year and 35.49 million in 2009. Moreover, it would be the strongest used sales total since 2007, according to CNW’s data.