Is there a used car market bubble?

May 24, 2011


Just a heads up…

While I’m not willing to make firm predictions about the market, I think there’s at least a chance that we might be at the top of a frothy used car market, perhaps one that might even be characterized as a bubble.

This is because wholesale prices generally begin to level off in March and April, and this year they continued to rise through those months.  May just might be the month that they level off.  Moreover, signs are that gasoline may also be leveling off and the supply interruption from Japan may not be as bad as originally reported.  These combined conditions could very likely cause wholesale prices to moderate, and perhaps even decline in the coming weeks and month. 

This means that vehicles purchased within the last 60 days may be at risk as they could soon be competing with similar vehicles owned for less money.  Should this scenario unfold, you don’t want to be caught long and wrong at the top of the market.  My advice, therefore, is to be very cautious about buying at this moment and very aggressive about selling.