In our last update, prices of used vehicles were doing things we’ve never seen before.  Of course, early last year, values hit rock bottom, but as the year progressed, they steadily and significantly began to climb back up.  Value increases are not something that we typically see on a regular basis, but a combination of factors, including a relative shortage of used vehicles, the Cash for Clunkers program, and turmoil in the new car industry, all contributed to one of the most unusual years for used vehicle pricing in history.

Our January 1 update continued to reflect pricing increases, but many of them were less than we had seen during the months prior.  Auctions and dealers were still reflecting more strength than expected, and Red Book prices were adjusted accordingly.

These increased values are contrary to what people typically expect as vehicles get older.  Conventional wisdom says that a car or truck will lose value as it begins to age.  That is sound logic, and applies most of the time.  The difference in this case is that values had dropped so unusually low during the first months of 2009, it has taken awhile for things to get back to normal.

Compare our used vehicle pricing to a huge ocean liner traveling across the sea.  Normally, the ship will follow a nice, linear course, just as prices tend to steadily drop.  But for this trip, the ship was forced to turn around for reasons beyond the captain’s control.  Just as the ship cannot turn on a dime in the ocean, used prices took a few months to change their course.

As we research pricing for February and beyond, we are beginning to travel smoothly on our new route.  Vehicle prices at auction do not tend to reflect the types of increases we saw at the end of last year.  Many prices appear to be completely flat—not increasing, and not decreasing.  Fuel prices have remained relatively steady lately, and dealers seem to be adjusting to the current business landscape.  

Certainly, there are some outliers.  There are not nearly as many obvious increases, but there are a few.  More often than not, we’re seeing values start to decrease a little on certain models.  This gives us the impression that things are starting to get back to normal.

2009 was one of the most tumultuous years for vehicle pricing in history.  One lesson we’ve learned is that anything can happen, even when you least expect it.  Much of this drama was hard on consumers, hard on dealers, and hard on the auto industry as a whole.  Hopefully, current trends continue, and 2010 will be a year of smooth sailing in calm waters.