Used cars will be in short supply for the next few years, pushing up auction values and mitigating lenders’ loss levels.
Used-car supply is on track to shrink through 2015, according to ALG. For 2010 through 2013, supply will likely decline about 4% per year. It’s on pace to drop 2% in 2014 and 9% in 2015. By 2016, supply should reverse course, shooting up 10%, according to ALG.
The dip stems from the steady contraction of the new-vehicle market, where volume has plunged 35% in the past three years. Vehicle registration data offers a glimpse at supply trends. In the fourth quarter of 2009, the drop in used-vehicle registrations exceeded the drop in new-vehicle registrations for the first time in two years, according to data provider Experian Automotive.
Sport-utility vehicles will be in particularly short supply, as consumers opt for smaller vehicles like compact cars and crossover-utility vehicles. In fact, in the next three years, SUV volume will fall off about 40%, according to ALG statistics.
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How can this be government interference? If a private bank makes a business loan to a business it has every right to set the debt covenants to what ever it wants. From the banks perspective they are more concerned with getting paid back than having the business be more profitable, which is understandable. Why is it that when the government bails GMAC out the debt covenants that it mandates are “government interference” rather than just business?