PARAGOULD, AR (KAIT) – Johnson's Auto Sales in Paragould told Region 8 News Monday that used car prices have increased over the last year for a variety of reasons.
According to Edmunds.com, the average price of a used vehicle increased approximately 10% in the last year. Edmunds.com is a site that considers itself premier for automotive information.
"They were cheaper and they were more accessible," said Doyle Johnson, owner of Johnson's Auto Sales.
Johnson, who has been selling cars and trucks since 1980, said Monday that his business is up 30% over the last year, but his profit margin isn't doing as well. Before the recession hit the United States, used car dealerships were making a profit. Once new car dealerships started keeping used vehicles on their lots, used dealerships discovered problems.
"There were sufficient cars to supply the used car dealers with a reasonable amount of cars and also on the price," said Johnson. "The new car stores now are keeping anything that they think they can sell and the customer is satisfied with it in a reasonable length of time."
Johnson sells vehicles worth anywhere between $2,500 and $7,500 and 125,000-150,000 miles. He said he has to spend more money purchasing good used vehicles to sell on his lot.
"We have to pay more when we get the car and then sales are such that we might be willing to take a customer's offer that would be considerably less than what we would ask for," said Johnson.
Instead of purchasing vehicles from new dealerships, Johnson said he has to compete with other used car dealers at various auto auctions. That competition drives up the price.
"Our inventory was depleted and it's just going to take a while, it all starts with the new cars of course and when they get back into the business of selling cars, then our business will pick up," said Johnson.
Johnson said the government's Cash for Clunkers program also negatively impacted his business. During the months when the government offered rebates for new vehicle purchases, fewer people were looking to buy used cars and trucks from his lot. He also said the more than 700,000 used vehicles destroyed during the program has damaged inventory.
Johnson also said it's difficult finding a customer who has credit to purchase a vehicle.
"If they came, they were probably looking for something I didn't have and our business last year when that took place, it just bottomed out. It was the worst year that we've ever had by a long shot," said Johnson. "The banks are beginning to loosen up and help some and that's making a difference I think."