For evidence that economic recessions — and unwise policy responses — can keep pinching the poor long after they’ve ended, look no further than the nearest used car lot.

Last year the average transaction price for a used car hit a record $19,189, up sharply from $15,000 a decade ago, Edmunds.com reported last month.

Even after adjusting for inflation, the industry has been able to raise prices by 9 percent during the weakest recovery since World War II. Enabling this feat has been a persistent shortage of older used cars.

The Panic of 2008 crashed the market for new vehicles. Sales of new autos and light trucks tumbled from an annual rate of 17.5 million in 2006 to less than 10 million by early 2009. As of January and February, the industry was back to selling at a rate of 17.5 million a year, but it was a long, gradual climb.


Making matters worse was President Barack Obama’s “Cash for Clunkers” program. In less than eight weeks over the summer of 2009, Congress spent $2.85 billion giving up to $4,500 rebates to people who traded in cars for new, more-efficient ones.

The idea was to stimulate the economy by juicing spending in the struggling car industry, and help the environment with cars that burned less fuel.

But the program was an utter failure. About 60 percent of rebates subsidized households that would have bought a new car anyway, and the remaining 40 percent simply pulled forward purchases from 2010, according to a careful study by economists Mark Hoekstra and Steven Puller of Texas A&M University.

As for stimulus, carmakers ended up with less revenue — $5,000 less for each subsidy — because these families bought smaller, cheaper cars than if the subsidy hadn’t existed.


For the environment, another study found that emissions were reduced slightly, but at a cost of $237 per ton of carbon, or roughly 20 times the price in California’s “cap and trade” exchange.

And a Brookings Institute study found that the subsidies were more likely to end up among families headed by white, college graduates, with higher-incomes and who owned their homes.

More to the point of this column, the program scrapped 677,000 functioning cars that ordinarily would have been recycled into the market used primarily by lower-income families. Just as the recession was restricting future supplies of new cars, the feds were destroying part of the existing stock.

As for Obama, he declared “successful beyond anybody’s imagination” this program that made fewer cheap cars available for the poor so that taxpayers could help college-educated, upper-income families.


Eventually, this imperfect storm will subside. Someday the used market, which totaled 38.5 million transactions last year, will be fully stocked with the vestige of today’s healthy supply of new cars. Yet this natural rebalancing is taking more time than usual.

Cars cost more (about $30,000 new on average) and last longer. So people can drive them longer to extract more value. The recession’s high unemployment and wage stagnation reinforced this trend.

“You were almost forced into holding a car for a longer period of time,” said Ivan Drury, senior analyst at Edmunds.com. “OK, 100,000 miles doesn’t mean my car is bad.”

Another factor: Auto financing is cheap and readily available, boosting overall demand. New-car loans increasingly extend to five or six years, and loans for used cars are common these days.


One reason lenders are sanguine is that used cars are increasingly younger, so they offer higher residual value. The average age last year was just 4.1 years, a record low, the Edmunds report said.

The rising popularity of leasing, which accounted for about 30 percent of new-vehicle sales, explains the fountain of youth in the used market. Leases typically expire after three years, and the used-car market is fairly flooded with them.

There is a bright side for eco-conscious buyers at the higher price points. Although lower gasoline prices are boosting demand for trucks, causing those prices to rise, people who want sedans and small cars are enjoying modestly lower prices.

Still, the shortage for cheaper cars has become acute.


“People entering the market, they are getting that first job, they are going to want that $5,000 to $10,000 vehicle,” Drury said, typically between eight and 10 years old with 120,000 to 140,000 miles. “Those cars sell really fast.”

Further down the scale, it’s nearly impossible to find cars in running condition for $1,500 or $2,000. In 2012, California lawmakers required dealers to extend short-term warranties for all used cars in most cases.

The risk just isn’t worth it at the low end for many dealers, said Larry Laskowski, director of the California Independent Auto Dealers Association, which represents 450 used car dealers.

“Dealers are saying we just can’t afford the cost … we’re just going to have to shift to something newer,” Laskowski said.


For perspective, the average price of $19,200 for a used car is within shouting distance of the $24,000 a year a full-time worker can earn — before taxes — under San Diego’s new minimum wage of $11.50 an hour.

In 1979, when dinosaurs still roamed the earth, I bought a 1972 Monte Carlo with primer-red fenders using only cash earned during factory and janitorial work over the summer and weekends.

Between Cash for Clunkers, the recession and California’s idea of consumer protection, the poor teenagers of today don’t seem to stand a chance. Not to mention the working poor who support families.

“It hurt the people who could least afford it, the kind of people who could take a tax return and buy a car to last a year or so if they can patch it up and keep it running,” Laskowski said. “That’s the way these people get back and forth from their jobs.”


Business

dan.mcswain@sduniontribune.com (619) 293-1280 ▪Twitter: @McSwainUT