• Dec 31, 2010
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
      • 9 Days 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.
      • 9 Days 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 .
      • 9 Days Ago
      This guy says that prices dealers are paying are higher than ever. This DOES NOT TRANSLATE into higher dealer profits. Just the opposite is true... its lower profits because they the dealers are paying more for their inventory. This guy is an Idiot with a capital I.
      • 9 Days Ago
      I've been an auto mechanic for 35 years and yet I can't figure this used car/new car deal. My wife purchased a new Ford Fusion in 07. The car already has 99,000 miles on it due to highway miles back and forth to work but it is still in perfect condition. The car has had Mobil 1 oil in it since it was new, oil changes every 5000 miles and has only required normal maintnence with all parts being from F M C. Since we still owe way to much on the car with 535 a month payments on a loan that can't be paid of early because she got financed with americredit(by the way if any dealer mentions americredit run away fast) we had considered trading it in on a new fusion until they told us our car is worth nothing for trade because of the milage. Gee I wonder why there's no good used cars for sale....then again seems kinda stupid to trade in a perfectly good reliable car except for the fact we owe more on the car than a new one sells for....who's fooling who ? We all know that new car dealerships and car sales men are the most honest people in the world today....yeah right...if you really knew what that used car was purchased for at the auction with a bad wiring harness like all newer cars you'd all know how bad the auto industry is screwing every body. The ford dealership where she purchased the car said ours was worth $8000.00 less than what we owe on it....oh yeah by the way they're out of bussiness now...wonder why ? Cause you can only lie to all the people some of the time. So what do you do???? For now we just have to keep our high milage perfect running car and hope we can get 300,000 miles out of our worthless car(according to the car salesman) since we will have paid $30,000 for it's when it's paid off. Bottom line buyer beware...it's not the mechanic who everyone thinks is trying to screw you(i'm so sick of that crap) It's the car salesman that see you as a sucker when you walk in the door. Lucky for me every body is fixing there old high milage cars...find a mechanic you trust(we're not all out to get ya) fix your old car and let the dealers hold on to there scam of these high priced, high milage junk they insist is the way to go. Buying new isn't really the answer either...even though my wife purchased a very good car it still will never be worth what we paid for it. By the way I own a 94 Towncar, paid $500.00 for it, rebuilt the frt end and as it seems this car will out last the Fusion since I only drive it when it rains and I don't want to get my Harley wet....Good Luck !!!!
      • 9 Days Ago
      I agree with the person that said not to trust what you read on aol car data . As an ex employee of valvoline oil and being the auto repair business . I am shock at some of the advice given on this web page. It can be very harmfull to your readers
      Mac
      • 9 Days Ago
      Used cars are at give-a-way prices around here. Everybodys broke and nobody can buy them. Some body was paid off to write this phony artical. The dealers that were buying them for nothing and thought they were going to make a killing are now stuck with them and running them back through the same auction.
      • 9 Days 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.
      gluetank
      • 9 Days Ago
      What a load of crock Mr Hoffman. Who's paying YOU to scare people out of a good thing? I've seen some of the BEST prices on used cars here lately. People are selling cheap because they are out of work and have bills to pay. Do you know (even slightly) what you are talking about? I currently have a sweet handling 24 year old Monte Carlo I bought 13 years ago and a 24 year old Dodge truck I bought 5 years ago. They're both totally dependable and simple to work on. There's no OBD emissions hook-up crap, no collision insurance needed, no ridiculous taxes and "NO CAR PAYMENTS". I just keep the oil and the plugs changed and put some tires on them when needed. I WOULD NOT HAVE A NEW CAR. They're just over-thought, wind-up gadgets. The last NEW car I bought was in 1973 ............... and it was NOT an over engineered piece of work prone to malfunction or unreliabilty due to some stupid "SENSOR". Even if I was a rich man, given the choice between a NEW Dodge Challenger or maybe a NEW Camaro I would UNDOUBTEDLY take the professionally RESTORED original of either one ANY time. Besides the bonus of the simpler "know how" required to maintain the originals, there really wouldn't be that much difference in the price either. So, if I won or was given a new car, the VERY first thing for me would be to put it up for a quick sale - CHEAP - and then put a new paint job on my Chevy with the vast difference going in my pocket. In summary, I WOULD say "Don't give up your day job", but in this case maybe you should. Should some people actually wind up believing you...... shame on you.
      • 9 Days Ago
      This is largely propaganda. inflation is taking its toll on americans! you can see it every day anymore, people cannot continue to pay 28,000 to38,000, Plus tax for a new car, they are just not worth that kind of money. you can buy a nice little home for that money we need , peoples car like the volkswagon, too many gadgets and gimmics on the new cars , that raise the price.
      • 9 Days Ago
      The previous Government Motors advertisement has been paid for with your tax dollars.
      Michael
      • 9 Days Ago
      The REAL question here is... Are Automoblie companies..esp G(government) M(motors) so desperate that they have to pay AOL to have an article written that trys to persuade Americans to do stupid things like buy new instead of used cars? The moment a new car rolls off of the parking lot of a dealership it is considered USED. I bought my wife a new accord in 2008 for close to $30,000. Absolutely no problems with it...and now it is worth $18,000 retail. With 60K miles on it. You do the math. I should have bought it now and saved 12 thousand dollars. Will...next time. And this is a car that usually has one of the BEST resell values.
      • 9 Days Ago
      Have you lost your mind posting a stupid article like this you brainless idiot???? Lets see how many used cars are in the market place?? 3 million?? lets put some more people out of work!!!
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