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Bargain-hunters in the used vehicle market are in for a rude awakening: prices are now at historic highs after rising hundreds or even thousands of dollars a unit over the past few years.

Lately, the used-car market has thrived as the new-car market has struggled. The problem for consumers is that used-vehicle demand has outstripped supply, sending prices skyward. It's not unusual for price tags to be up $3,000 in some product segments in the last five years.

And the classic "beater" – a high-mileage, $1,500 used car that can handily take you around town on your errands – is fast becoming a thing of the past, according to some auction houses.

"As new car sales have lagged in the 11-million or 12-million-units-a-year range, used car pricing has just gone up steadily," said Jay Adair, president of Copart Inc., an online vehicle auction company. "So we are at record used-car pricing right now."

Used Car Shopping? Check Out Millions Of Listings At AOL Autos!

Used Vehicles More Popular

Used vehicles are more attractive to consumers than ever, he said. They've realized that two- or three-year-old vehicles are decent substitutes for new ones -- thanks to increases in vehicle quality and durability over time.

"With the economy the way it is, people are saying, 'Do I really need to buy a new product?'"

But the rise in used-vehicle prices is sure to complicate consumers' best-laid plans to spend less money. Consumers who are shopping for a used car through a financing program -- as opposed to buying with cash -- will find that lending rates are higher for used vehicles. With the higher prices for used cars and the higher prices paid for financing used vehicles, in some cases the actual out-of-pocket costs are equal to that of a new car.

The increased demand in used vehicles has been dramatic, according to Manheim Used Vehicle Value Index, compiled by the consulting arm of Manheim Auctions, a major dealer-only auction company. The index stood at 122 in November – the highest level since its inception in 1995. The index is based on data from the 5 million annual vehicle sales at the company's wholesale auctions, adjusted for mileage, model type and season of the year.

The net effect has been higher profits for dealers – especially if they can find the inventory – and heftier price tags for consumers, since dealers haven't had trouble passing on higher prices so far, Manheim Consulting said in its latest report.

The 122 figure represents an increase of nearly 6 percent over last year. And wholesale prices were still rising the first two weeks in December, according to a tweet from Manheim chief economist Tom Webb.

Prices for pickups, up nearly 8 percent in the last year, were muscling their way up the scale faster than most other segments. By contrast, wholesale prices for luxury cars were up just 1 percent.

Average Prices For Used Vehicles Much Higher

Between January 2005 and July 2010, the average price rose from about $15,000 to $18,000 for pickup trucks one- to five-years-old, and about $10,500 to $13,200 for cars in that age bracket, according to the National Automobile Dealers Association Used Car Guide.

Average prices for conventional SUVs rocketed upward from about $13,000 to $22,000 between January 2009 and July 2010.

Used vehicles on the market generally have more miles on them, too. "The average mileage on vehicles sold at auction has risen in every market segment over the past two years," Webb said in his latest report.

As might be expected, the best time for consumers to buy a used car would have been at the
height of the financial crisis in 2008. The Manheim index stood at a mere 98 points (two points below the baseline of 100) in December of that year. But that figure is little more than a footnote in the story since then.

The trend was well underway before the crisis hit, Adair said. After faltering momentarily during the meltdown, it has begun picking up speed. Auto analysts attribute this to a number of factors.

First of all, people aren't unloading many trade-ins onto dealerships since they aren't buying many new vehicles.

Cash For Clunkers Effect

Auction managers also blame the Cash for Clunkers program, which led to the scrapping of hundreds of thousands of used cars last year.

"There are now fewer cars at the low end of the market for dealers to purchase," said Fred Passatta, manager at Motor City Auto Auctions in Fraser, Mich. "Dealers haven't been able to carry as much inventory or do as much advertising as a result.

"Previously, we would have older cars in the $2,500-range, even $1,500, that they were good, drivable cars. Now you are looking at three grand for just a good-running vehicle, basic transportation."

New online market channels have increased used-car demand, Adair said. "There is absolutely no question that the online world has increased visibility, and visibility has increased demand."

But there is a ray of hope in the retail market statistics, according to Alec Gutierrez, chief analyst for vehicle valuation at Kelley Blue Book. "Just in the last month, we saw the (used vehicle transaction values) drop about two-and-a quarter percent," he said in early December.
Still, buying a used car will take greater foresight than in the past. To increase their odds of success, shoppers can try out different retail channels, such as online and real-time auctions, along with private owners and dealerships, the two more traditional options.

But Michael Royce, publisher of beatthecarsalesman.com and an AOL contributor, warns that emotions can come into play in some transactions. In private sales, owners may be attached to their cars and insist on a higher price than they are worth. And at real-time auctions, buyers can get carried away with the bidding.

One other complicating factor: Every used vehicle is different, with its own mileage and maintenance and repair history. So to get their money's worth, buyers need to be prepared when the right one comes along, Royce notes. They won't be able to find one like it at the next Toyota, Ford or Chevrolet dealership down the road.

As a result, he recommends lining up financing and doing research on any preferred models in advance. To speed up the buying process, the shopper can call up product information from a handheld or laptop right at the point of sale. And dealers, private sellers or auction houses may be willing to provide a vehicle history on the spot.

"When you buy a used car, you can't play around as much," Royce said. "You have to be a little faster on the trigger."

Otherwise, you could soon see the object of your desire rolling down the street without you – even if you were ready to pay a higher-than-ever price for it.


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  • 254 Comments
      • 6 Months Ago
      While the sentiment expressed in this article may apply to some segments of the used car market, a car coming off of a three year lease and purchased through a dealer which will include an extended warranty is still a smart way to avoid a new car's rapid market value depreciation during the first several years of its life. I have bought several cars in this way and have been extremely happy with each of them.
      • 6 Months Ago
      ....and a gallon of milk will never be $1.59 again. Yes the price of a used car has increased. but what hasn't? I have had only (1) new car in my life and it was in the shop more times then I care to remember, transmission problems, squeaking window seal, etc never will buy new again. I happen to know how to maintain a vehicle so it's not a huge problem for me and know what to look for when buying a used car. If something is gonna break or go out there isn't much you can do about that, but if you have done a simple and complete check you can rule out most major proplems. Parents teach your boys/girls about car maintenance, they will will gripe when you try to make them listen while they are texting and staring with that blank look on their face into their phone, but they will thank you in the long run. Newer cars may not be as easy to work on as in the past, but at least they will have some knowledge to trouble shoot a problem. It's not that hard. I have a niece that has gone through several cars, because she thinks if she turns the key and it starts all is good. I would be able to afford a 400.00+ car payment but why should I when there are others options. I have seen new car payments be has high as north of 600.00!?! Yea, I'm kinda old, 49, but common sense sure isn't valued much in the US anymore. Most real monied people, not the nuevo riche crowd, drive cars that are good cars but never new and close to 10 years old. My bro-in-law is in finance for a luxury car dealer and there is no shortage of people who will pay tons of money for a car a month by financing, which there is huge profits in, so don't worry about most dealerships going bottom-up because you buy used.
      Master
      • 6 Months Ago
      Pardon me but wasn't there an article here on aol just a couple of months ago about how you could save thousands buying a used car???????
      • 6 Months Ago
      Did you guys read the article? He is saying that used car prices are so high, it might not make sense to buy used. HE IS RIGHT. My friend was looking at a 2007 Mazdaspeed 3, used for 18K@40K miles. Or a 2010 new for 21K. Guess which one he bought. I was looking for a used 2008 Mitsubishi EVO, the CHEAPEST I can find is close to 30K. At a dealership nearby, I can find a 2010 Lancer EVO for 31K, I was looking at a 2006 Lexus GS, 2 years ago for $18K. Guess how much it is in 2010.... 21K? Seriously...... WHAT IS GOING ON?
      • 6 Months Ago
      Funny Aol was telling us yesterday to buy used. Anywho, garbage article. If you know how to look under a hood, do your research, and haggle, it's too, too worth it to buy used in this economy. I just bought a second car I don't need only because I couldn't pass up the deal. I could turn it for profit but I'd like to keep in reserve I case my first baby (also used with 200,000 miles on it still going strong) takes a poo. Just be smart.
      • 6 Months Ago
      Even if this were true, then why are the dealerships still only giving you squat for your trades, you'd think they would give more up front. Of course there is no truth to this article, how could you justify spending $40k on a car you could have for $20k with a few miles on it. I've purchased new cars but only when I can get a killer deal on them, like my GMC pick up I paid $19k for right after 9-11 when the prices were below what the dealerships paid. But now we're looking for a car for my wife and unless the prices come down drastically we will purchase used like her last one that lasted over 10 years with no problems.
      nalarj
      • 6 Months Ago
      A pretty much BS article. When a vehicle depreciates 50% in the first two years it doesn't make much fiscal sense to buy it unless you plan on hanging on to it for an extended period of time. I've bought or leased numerous new cars over the years, but in retrospect that while they provided a nice boost to my ego and probably lowered maintenance costs they all cost me more money overall. About 10 years ago I finally got smart and started buying well maintained and priced used cars. Much more fiscally responsible and much more conducive to maintaining a bigger balance in my checking account. I surely don't knock people for buying new cars because there are some "nice" deals out there. There are valid ************* for buying new, but don't kid youself you are spending noticably more money. The article's writer has more than likely received some type of compensation from either new car dealer(s), manufacturers, and or trade group.
      miranarts
      • 6 Months Ago
      Its not so much an article as a sales pitch. I buy several used vehicles each year for friends who imagine that I have x-ray eyes and can see if the engine is in good shape. The prices on the newer vehicles are indeed higher but the older vehicles are stilla great bargain. Buying a used car that's 10 years old will cost you less than the interst you will be paying during the first year in the loan you take out. Then you wll have to something on pay in the principle and upkeep. Insurance on new cars is much higher also. I have driven more than 4 decades now and I enjoyed the one new car I bought till one day a man asked the bank clerk how much interest he was paying on his loan. When I found out that the interest payment I was making was 60% of each monthly payment I paid off the car the next day and have never spent big bucks on a new car since then. That was more than 20 years ago and I have never regretted it for one moment. ($196.00 per month payment consisted of $120 per month in interest and $76 against principle after more than 18 months of payments. That was $4 per day in interest and only about $2 per day in vehicular cost.)
      • 6 Months Ago
      What a load of rubbish! I ALWAYS buy a used car, I ALWAYS pay cash! I don't pay depreciation or interest, and my insurance is low. I always get a good deal and have had no more trouble with my cars than friends who buy new. I don't buy luxury cars, at the moment I am driving a Volkswagon and I am very happy with it. I started with a relatively inexpensive car, I think it was about $3,000 (it got me where I needed to go) saved in the meantime and just upgraded to a more reliable vehicle, but have never gone into debt for a car. One thing I always do though, is to have the car checked by a mechanic, it is worth paying someone a few dollars to check the car over to make sure everything is okay. People are in so much debt due to buying cars that they cannot afford, much the same way people did with houses. If you can afford a luxury car and all of the expenses that come with it, then by all means buy one. If you have to struggle to pay for it, it is not worth the worry. If you think you have to have a luxury vehicle to look good, work on your self esteem, you are not your car!
      • 6 Months Ago
      And how much the car companies paid for this BS advertisement?
      • 6 Months Ago
      Type your own comment here Plain and simple people have to cut back because no jobs no money its all about getting by somehow someway .
      • 6 Months Ago
      I tow an 8000 pound travel trailer with my 88 Ford F 150. Every time that I look at the new truck prices, I put a few more dollars into my old truck. I get about 9mpg towing. I can afford this. Why? I do not have a $600.00 payment for the next seven years!
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