How Did The Japan Crisis Affect Car Prices

Written by Viraf Baliwalla, Published in the Serious Buyer, Serious Seller Eletter, 2011-06-29

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It's been a while since Japan's woes have been in the news. As a result, the challenges of the Japanese people and companies may not be on our radar screens as much as they were a few months ago. However, the ripple effect can still be felt by car buyers.

From a big picture standpoint, Japanese auto plants were heavily hit resulting in slowdowns in production in some cases and temporary but complete plant shutdowns in others. This has dramatically affected availability of Japanese cars, trucks and SUV's and as a result, dealers in North America have been unsure as to when shipments of new inventory were coming in. Without a constant supply of new vehicles, dealers are holding on much tighter to their existing stock and charging a premium price compared to before the March 11 earthquake.

If we dig deeper though, we see that the problems aren't just with the Japanese automakers like Toyota and Honda. There are many manufacturers that buy parts from Japan, especially electronics. Since parts are often built ahead of time and stocked for just-in-time delivery, parts shortages have had some impact on availability of other makes, but not as dramatic. When dealers don't have enough new car inventory to sell, they rely more heavily on used car inventory to fill the gap. With increased demand for used cars, wholesale prices at the auctions go up and as a result so do the corresponding retail prices.

In the US, average trade-in values for used cars are predicted to be up by 18% since December and a full 30% over June last year.

Japan has been working hard at rebuilding and some experts are predicting that they should be back to a reasonable level of production within the next several months. Nobody knows how long it will be before things are back to 100% normal. For those manufacturers that have plants and suppliers in other areas of the world, at least some production can be shifted there. No doubt that this tragedy has been an expensive one for the Japanese and anyone that depends on Japan for economic trade.

Our dealer contacts for Japanese vehicles tell us that inventory is starting to trickle in however many people have chosen alternate brands if they needed a vehicle sooner than later. Fortunately for us as a broker, we have not been locked in to selling any specific inventory and therefore have been able to assist regardless of which make and model our clients have gone to.

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