Used-Car Boom

Skyrocketing prices, a shrunken supply and the furious wartime demand for used cars has OPA looking down the barrel of another gun. Used cars are a vital reserve in the nation's wire-taut transportation system. That reserve is dissolving swiftly, under the attack of a demand that has already forced prices up an estimated 160 to 180% (based on prewar depreciation figures).

Nationwide gas rationing last November slowed the used car business. Many dealers got out. Others sickened, but doggedly held on. In the Middle and Far West, gas rationing was not a death blow to car travel. P:cards were plentiful; jeans were jingling with cash. Then spring, abetted by a new OPA policy of plentiful recaps, brought a new rush of customers.

Circus Ring. The dealers now scour the nation for cars, literally hunting in packs. From the gas-short East, cars are being sucked to farm and war centers in the Middle and Far West. A business that often smacked of the medicine show has skidded into the circus ring. In New York, the backlog of cars, stored by owners who now ride subways, is still great. There, cars are bought on sight, over the phone, by mail. In big splashy ads, out-of-town dealers scream of amazing prices. One dealer even tooted his horn in Chinese.

Getting the cars is only the first step. Selling them at a profit in the gyrating market is another. One New York dealer bought $50,000 worth of cars for shipment west one month, lost $8,000. Another month he made up his loss, and made money. Visions of quick turnover profits brought in many fly-by-night dealers who can go in & out of business in 15 minutes. Instead of shipping west by train or by truck, as do legitimate dealers, they reportedly hire civilians to drive cars west on black-market gas coupons. Unofficial estimates are that 20% of the cars registered in the New York area have been shunted out by such methods.

Too Much Success. Just how many cars can be lured from private hands into the depleted car pool is not known. Some dealers estimate that 2,000,000 stored cars sooner or later can be baited out into the used-car market. But reputable dealers do know that present stocks are too low.

In Detroit, once the grab bag for dealers from all over the nation, stocks of good used cars are the lowest in 20 years.

Correspondingly, sales volume is down, in April was 34% under a year ago. But it has tripled in the last four months. Result: within 90 days, stocks are expected to be virtually exhausted.

In Chicago, 500 dealers reflect the same gloom. From the January high, when dealers had a 143-day supply on hand, less than a 60-day supply remains, 40% down from a year ago. On the West Coast, dealers have scraped through the bottom of the barrel. Throughout the country, ancient jalopies, hardly worth a junk price of $10 a few months ago, move quickly at $50 and up. Also setting established dealers to biting their nails are the number of "clean deals" (without trade-ins). The clean deal rate, normally 10 to 15% of sales, has soared to 38% in some sections; and every clean deal subtracts a used car from the local market.

Go West for Prices. Cars that get lots of mileage to the gallon--Fords, Chevrolets, Plymouths, Oldsmobiles, Pontiacs--are most popular, bring top prices. A 1941 two-door used Chevrolet (new: $754 F.O.B.) can be purchased from a dealer for $750 to $825 in New York, approximately the same in Philadelphia. In Chicago, the same car costs $900 to $925, in Los Angeles up to $1,125, and in San Francisco it brings the nation's top of $1,200, a fat $400 over its price when new.

OPA has encouraged moving cars to war centers. Until March 19 it granted gas coupons for trips West, still grants coupons for trips up to 200 miles. But as the boom hits its second wind, OPA is considering slapping price ceilings on, as in the equally profitable business in used trucks (TIME, April 12).

The problem is that ceilings too low would keep private owners from selling stored cars. But failure to take some action might result in reckless and inflationary disposal of the transportation reserve.

Dealers feel that price ceilings are coming, are already trying to draft workable ones. The Automobile Merchants Association of New York feels that a fair retail ceiling price would be based on the present F.O.B. list price in the dealers' official price guide plus 15%, a rise corresponding to permitted cost-of-living wage increases. To see what other dealers think, Harvey Huegy, onetime auto finance man now heading OPA's new and used-car division, is meeting this week with New York and St. Louis dealers. Best guess: instead of specific ceilings, OPA might set one ceiling price high enough to permit everyone to work under it comfortably, still low enough to prevent a complete collapse in the used-car market.

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