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Cheap used cars are starting to appear in droves at dea... Cheap used cars are starting to appear in droves at dealerships (Scott Olson, Getty Images).

You don’t need a PhD in economics to understand that when times are tough, consumers are on the hunt for less expensive products. That’s especially true with big-ticket purchases like cars and trucks. Even as new car sales remain sluggish, sales of used cars have increased in recent months, mostly because, well, they’re cheaper. The big auto dealer groups reported increases in used car sales of anywhere from 20 to 35 percent for the third quarter.

Much of that growth has been on the lower end of the pricing scale, where car buyers have been finding even cheaper cars on the lots of franchise dealers compared to a year or two ago. How cheap? Some are selling cars at prices under $3,000, the sorts of cars that used to be the stock and trade of low-budget independent operators.

Bargains Galore

But today, even at the big dealership chains, buyers can find a nice selection of bargain used vehicles. These are the sorts of cars that are more than seven years old, off warranty, and don’t qualify for certified pre-owned programs. They are always priced at under $10,000, vehicles that just a few years ago the dealers would have sent to auctions, where they would have been sold at rock-bottom wholesale prices to independent dealers or other wholesalers. Many of the big dealership groups, like Sonic, Lithia, Penske and AutoNation are now hanging on to these vehicles when they come in on trade instead -- and selling them on their own lots, for a profit, as rough economic times have increased the demand for even cheaper cars.

There has always been a need for cheap transportation, notes Jeff Dyke, executive vice president of Sonic. “There are 40 to 45 million used cars sold in the U.S., annually,” he says, compared to the 2010 new-car sales projections of 11.5 units.

Used Car Shopping? Check Out Millions of Listings at AOL Autos!

“Sixty percent of the people who come to out lots are looking for cheaper transportation,” says Dyke. “About four years ago, I’d say we were selling about 40 used cars per store per month. Now, it’s more like 75 or 80. And about 30 percent of our current used-vehicle sales are of vehicles priced under $10,000, compared to maybe five percent three or four years ago.”

John North, Lithia’s controller and vice president of finance, says Lithia’s sales of these cheaper cars is up significantly compared to last year, but could not quantify it, “since this is an area of the business we weren’t really in a year ago.” He says Lithia presently sells about 40 used vehicles per store per month.

He concurs with Dyke that there’s always been a demand for lower-priced vehicles, but “there does seem to be an even greater demand for them in the last year or so.”

Expanding Market

AutoNation, the nation’s largest car retailer, is expanding its no-haggle “Value Vehicle Outlets,” which specialize in low-priced vehicles, according to a recent report by Automotive News -- opening 16 such stores this year, with plans to add six more by March.

Some of Sonic’s dealerships have similar cheap-car “corrals” at its dealerships, says Dyke.

“A few years ago, if we got a 2002 BMW with 120,000 miles on it as a trade-in, that vehicle would have gone to auction, and ended up at a ‘buy-here, pay-here’ lot, where it would have probably been sold to a sub-prime customer” – someone with bad credit.

“But now, if someone wants to buy an older Beemer for their kid in college, that vehicle is available to them.”

Dealers who sell this these cheaper, older cars generally like to take a no-nonsense approach to pricing, like at the aforementioned no-haggle Value Vehicle Outlets run by AutoNation – which is a practice Sonic also endorses, says Dyke.

“We like to price a vehicle right the first time, and not build in much of a negotiation gap,” he says. “We don’t like the final selling price to be within any more than $500 of the asking price. We don’t like to buy something at auction, automatically add $3,000 to that in order to get to its ‘asking retail price,’ and then negotiate to the sale price from there.

Starts, Stops and Steers

But are these cheaper used cars a good buy? Are they in reasonable condition? North says Lithia spends $300 to $400 to recondition these older cars before sale, and offers two-month or 3,000-mile warranty.

With normal late-model used cars, “the reconditioning standard is a ‘like-new’ standard,” says North. “But when we sell an eight-year-old vehicle, our motto when it comes to the re-con standard is that the vehicle will ‘start, stop and steer.’ They may not be cosmetically perfect, but these vehicles do allow us to reach a greater number of consumers who just need a car to get them from place to place.”

Obviously, when a vehicle is seven to 10 years old, parts are going to wear out and need to be replaced. That’s just part of the deal when buying a cheaper, older car.

“Yeah, you might get a car with a rattle, because you’re not buying a brand-new vehicle, says Dyke. “But we do a safety check, and we spend $800 to $1,000 on re-conditioning it before sale.

“We don’t offer a warranty, but if you buy one of those older, cheaper cars from us, and something major comes up, like a blown engine, we would definitely stand behind it. The consumer could return that vehicle and exchange it for another one.” 

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  • 74 Comments
      gr8bsn
      • 3 Months Ago
      So now, the used "budget" cars, the ones you see on Craigslist or Autotrader in the $1500-$3000 range will be sold at dealerships, marked up to sell for twice or three times that amount.
      • 3 Months Ago
      Funny how an article about used vehicles brings out the racist rabble who can't fathom that a black man has been elected president....Get over yourselves people.
      k9sue
      • 3 Months Ago
      Buy used cars, have them inspected and pay cash. If you don't like banks, don't ask them to give you money. Pretty simple. If you don't hve cash, save up until you do. It was good enough for our parents, it can work for us.
      • 3 Months Ago
      jg4556@aol.com Dec. 02 2010 5:10am buying a used car is the way to go these days. The new vehicles are all way over priced and not worth the money. Do your homework on the vehicle ,be aggressive with the seller and you can and will find a vehicle to suit your budget. Just buy American.
      Wayne's World
      • 3 Months Ago
      I always buy NEW and and a POS 4x4 to take trash to the Dump, Yardwork and drive to work in inclimate weather. With a New Vehicle I get the piece of mind of a Warranty and The Lemon Law. However I just bought a Toyota from my Sister. Its an '04 with only 34,000 miles. Its been serviced regularly and garaged. Looks brand new, drives brand new and gets over 30 mpg. I prefer to buy American when possible but I have found that most US Brands are assembled in a Non-US countries. And Toyota and Nissan are assembled in the US. Ahhhhh...go figure??? With a Used Car you're only buying some elses troubles. Like ahhhh, someone's Ex-Wife. Ya Think???
      vlady1000
      • 3 Months Ago
      I usually bought used cars. But when the huge rebates, gov incentives, and other offers (i.e. GM credit card points, etc wre around, I went to buying new as there were times new was the same price as 1-2 year old used. Bought 4 new cars during those 2 years for the family. My wife's 1 year old Saturn (huge rebate, dealer closing down, credit card, etc), the dealers are now asking for more used, than what I paid new. Same with my son's 1.5 year old Vibe (clunker, rebate, Credit Card). Now that those days are over, probably look at used next time. Remember to always save first then pay cash and carry only PL/PD insurance (no collision, theft) as that will save you more over time tahn you can imagine.
      • 3 Months Ago
      BUYING A NEW CAR IS A JOKE. THE CAR DEPRECIATES SEVERAL THOUSAND DOLLARS AS SOON AS YOU DRIVE IT OFF THE LOT.
      • 3 Months Ago
      Do NOT buy used. Buy a NEW dirt cheap car or truck/suv. Get the factory authorized extended warranty, not that third party worthless stuff that NO car manufacturer accepts. Don't automatically accept the Dealer's financing. Always tell them the interest rate is too high. They will keep looking for more creditors. Usually they are compensated by certain creditors. Extend the payments as far out as allowed, usually 60-72 months. Hyundai Accent GL, $10,705 Nissan Versa 1.6, $10,740 Chevrolet Aveo LS Sedan, $12,685 Kia Rio Base Sedan, $12,990 Smart Fortwo Pure, $13,000 (ugly clown car) Toyota Yaris 3-door Liftback, $13,615 Kia Soul Base, $13,995 Ford Fiesta S Sedan, $13,995 Suzuki SX4 Sedan, $14,244 Nissan Cube 1.8, $14,740 Do NOT buy used. Use an online Auto Loan Calculator to figure out payments.
      • 3 Months Ago
      When we turned in our leased 2007 Cadillac Escalade, that was costing us $975.00 a month in payments. Not including the cost of insurance. We went out and purchased 2 fantastic used Cadillac limousines, a 95 Fleetwood and 99 DeVille for a total cost of $6,000 There nicer then the 2007 Escalade. And get much better gas mileage then the Escalade. No more new cars for us. And I'm saving an extra $975.00+a month.
      Bill Stehl
      • 3 Months Ago
      Cash for clunkers!?! The only clunkers are in D.C. I knew Obama was a wrong number when he sent back the bust of Churchill; this was a gift from the people of Great Britain to THE PEOPLE of the U.S. It was not Barack Obama's to give away! The questions still remain, why does Barry Ali bow to Saudi royalty but has the temerity to go in your face and insult Great Britain??? Just who does this________, think he is? I leave it to the reader's imagination to fill in the blank.
      ronb247bin
      • 3 Months Ago
      ill tell all of you guys and girls one thing ILL NEVER EVER BUY A TOYOTA DEATH TRAP VEHICLE AND PUT MY FAMILEY DANGER !!! JUNK ! ! !
      • 3 Months Ago
      Gee nancedeck did you forget that most policies were pushed ( extorted) by the Dems and that they have controlled the Senate and House since 06!
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