Smart SpendingSmart Spending

Used-car prices on the rise

More people feel they can no longer delay replacing their old vehicles, driving up demand.

By MSN Money Partner Jan 23, 2012 10:06AM

This post comes from Jeff Brown at partner site MainStreet.

 

MainStreet on MSN MoneyIn the market for a used car? Kelley Blue Book urges you to buy sooner rather than later, as prices are rising.

 

Of course, it doesn't pay to be strong-armed into it, especially not if your current vehicle still has some life left in it. And it will make sense to consider your used-car choice carefully, as certain models command a premium.

 

KBB, a leading source of car-value data, says used-car prices are likely to rise by 3% to 5% in the first quarter of 2012, and even more in the second quarter. "Non-luxury cars and crossovers increased between $50 and $100 in the past week alone, and they will likely continue to rise in the weeks and months ahead," KBB reported last week.

 

Between Jan. 6 and Jan. 13, the average trade-in value of a 2009-2011 midsized car increased $107, from $12,096 to $12,203, or 0.9%. Most other types of cars that age gained 0.5% to 0.6% that week. A 5% increase in the coming months would raise the price of a $12,000 car to $12,600 -- and that's serious money for budget-conscious Americans.

 

Credit goes to unusual market conditions. Supply has been tightened by a slowdown in lease returns, a key source of used vehicles, while at the same time the average age of cars on the road is going up as drivers postpone purchases in the weak economy. Now more people feel they can delay no longer, driving up demand. Post continues below.

Careful shopping is especially important now, as redesigns have led certain 2011 models to trade at a premium, KBB says. The 2011 version of the Chevrolet Cruze and Cobalt go for $13,400, a 43% premium compared with the price of the 2010 models with older designs. At $15,700, the 2011 Kia Optima trades for nearly 52% more than the 2010 model.

 

These premiums far exceed the higher price typically expected of a vehicle that is one year younger. The 2011 Toyota Corolla, for instance, goes for $12,225, just 15.6% more than the price of a 2010 model, which is virtually the same except for age.

 

"This type of premium is typical for vehicles that have recently undergone a major redesign, especially when the outgoing generation was an underperformer in its segment," KBB says.

 

While drivers who really need to replace their cars as soon as possible may be wise to get going to beat the expected price increases, others may do better by waiting.

Auto loan rates are fairly low, with many used-car loans charging only 3% to 4%, according to the BankingMyWay rate search tool. Still, at 4%, a $12,000 loan for 36 months would cost $354 a month. If you own your current car free and clear and can delay your purchase by a few months, the savings on payments could easily justify paying a bit more for your next vehicle.

 

More on MainStreet and MSN Money:

24Comments
Jan 23, 2012 3:09PM
avatar
OF COURSE  used car prices are on the rise. Fewer and fewer people have the money or the inclination to buy a new one!
Jan 23, 2012 3:14PM
avatar
It was another of Obama's great ideas that helped to increase the cost of used cars when the cash for clunkers program removed many used cars from the market and thus drove up prices. 
Jan 23, 2012 10:05PM
avatar

When you go to trade your chariot in with printouts in hand, from Kelly Blue Book, Nada and Edmunds, each specifying trade-in or wholesale price, the dealer will try to lowball you anyway.  See, he has another piece of information we consumers can’t easily access.  It’s called Auction prices.  The dealer wants to stay as close to the auction price as he can to minimize his loss if your car goes to auction instead of on his used car lot – or doesn’t sell.  If the dealer keeps and sells your car, of course he is going to ask retail from the next buyer.  Dealers probably make more money on used cards, getting them for lowball prices and selling it for retail prices.  That spread can be up to a couple grand.

 

As all the experts say, do your homework, know before hand what you will take for your used car and walk if the dealer offers a lowball figure.  And keep the used car transaction separate from the new purchase.

Jan 23, 2012 3:56PM
avatar
KBB, sometimes I wonder how this crap works....use KBB to buy a car (Dealer price) and Edmunds (read Blackbook) to sell it to the dealer, what a racket.  If your not catching the drift here, look up your car on Edmunds, put in all the info and mark it as "clean", get an appraisal...then do the same with KBB and look at the differnce.  Just saying.
Feb 1, 2012 3:52PM
avatar

I'm sure this has NOTHING to do with the FACT the NEW cars/trucks cost what a Mercedes/BMW used to cost 10 years ago! 

 

Nor, does this have ANYTHING to do with the "Cash for Clunkers" debacle that DESTROYED perfectly good vehicles just to "spur" new car purchases.  BTW, I haven't seen one news story about the dealerships that went out of business because the government was too SLOW in paying the $$$$ for the "clunkers".  (Alas, I could NOT AFFORD a new car,  and the loss of those "clunkers" that still had thousands of miles left in them has caused the remaining junk to be "worth" much more than they should be.)

 

This is what happens when the government gets involved in the economy.  They have no foresight.  The scarcrow for Wizard of Oz had more of a brain . . .

Feb 1, 2012 2:11PM
avatar
What did people expect after cash for clunkers?  Millions of cheap cars were destroyed, now there are not many to buy.  Another hit to those who are being crushed by this bank created depression.
Jan 23, 2012 3:35PM
avatar
Yep! This is a direct result of the cash for clunkers scam Obama did  to once again help these disgraceful unions. By doing this, it hurt the really poor people that depended on these cars for cheap transportation. I for one will never buy a GM or Chrysler product again. PERIOD!
Jan 30, 2012 1:23PM
avatar
I love the ranting by people like T Lanier..what the heck did they do to you??? I run a used car lot and what they wrote is true! Long gone are the days of dealers polishing up a turd to try and market it as something that it is not. At least here anyway. My cars are inspected, CarFax's run and everything is out in the open. Today the consumer has many more tools that they ever have had before, and it helps keep the business a bit more honest.  Used car values are up, so instead of crying about what evil we are going to try to attempt, come on in and  take advantage of the fact that your present car is worth more than ever before. Leave the cry babies at home in their mothers basement screaming about all the wrong that has been done to them....and come on in and get yourself a deal!!!
Jan 30, 2012 11:55AM
avatar
Sheesh, leave politics out of it. Figure out what you need or want in a used car and reasearch the hell out of it. Then start searching for the make and model you want. A new car dealership will always ask way more than a used lot. Don't go to a fly by night lot, but go to a good, reputable used dealer (we have several in the Portland OR area). I needed a mid sized sedan and found everything I wanted and more in a 08 Saturn Aura XE. It cost thousands less than an import in it's class and with 26,000 on the odometer, it held the remainder of it's factory warranty. I knew that the Aura is a re skinned Chevy Malibu so parts are no problem.DO THE RESEARCH AND SPEND THE TIME! Good deals are still there, but you have to have some insight and don't impulse buy or get brand specific. You will get boned! 
avatar
This article is 3 years to late. Every time I waste my time reading an MSN autos article it's either written by a 3rd grader, old old old news, or a recycled article with a different headline from 6 months ago. Stop wasting our time!!!!!!!!!!!!!!!!!!
Feb 1, 2012 2:57PM
avatar

I love my 1994 Chevy. It's did cost me about $600 in repairs, over the course of a WHOLE YEAR. Some people pay that much EVERY MONTH in payments and insurance. Runs and drives like new, 'cause I take care of my cars. Why in the world would I want to buy a NEW ONE?

 

Feb 1, 2012 3:26PM
avatar

GO AHEAD AND GET THOSE KIAS ETC. THE PARTS YOU WILL NEED SOONER THAN LATER ARE EXPENSIVE AS HECK.

 

ALSO DONT GET HIT IN ONE OF THOSE CAR COFFINS.

Feb 1, 2012 3:45PM
avatar
I agree with Flea Dog. You have to do your homework. I spent six months comparing cars and prices before I bought mine. I got exactly what I wanted at the price I wanted. It takes some effort, but you can still find and get good deals.
Feb 1, 2012 6:44PM
avatar
Regardless of what the mainstream media, and the democrat party preaches, profit is not a four letter word. If no one made a profit, you would not have an income, the internet, cell phones, food medicine, none of the modern conveniences you take for granted every day. You would only have what you could catch, make or kill, and you would probably still be living in a cave.
Mar 2, 2012 10:40AM
avatar
No blame for 'cash for clunkers', eh?  MSN should change it's name to APO;  Always Protect Obama.
Feb 1, 2012 3:26PM
avatar
Dont believe the media hype people. Any vehicle, new or used can be negotiated down to a reasonable price. If the prise rise for the car you want, tell the salesman how much you are willing to pay. The auto buisness are as desperate as most customers. Never pay sticker price for any vehicle. They are all over priced. I plan to buy a 2011 Kia Optima SX next year in 2013 ( 2 year old car) and I refuse to spend over $20k for it.
Jan 30, 2012 12:43PM
avatar

Cash for Clunkers has almost nothing to do with higher prices on less than 7 year old used vehicles. Most of those trade-ins were more than 10 years old, and consisted of full-sized trucks and SUV's. It mostly affected the vehicles in the $3000-8000 retail range. The reduction of trade-ins and lease returns of vehicles less than 5 years old is what forcing the prices higher- and the fact that for about 10 years consumers were turning over their vehicles almost as soon as they finished paying, or almost finished paying off their last auto loan. Leasing died when low to zero percent financing, and losses suffered by banks on lower than expected residual values hammered their portfolio, and changed leasing needs on vehicles with less than a $30k price tag. Also, 2008-09 saw very little new vehicle production, ergo 4 years later, very little used product on the market.

Kelly Blue Book now is owned by Auto Trader, which is trying to get into the used car auction business. Is this a potential conflict of interest? I do know that when a customer tells me what KBB says their trade-in is worth, I ask them if KBB was ready to write a check for it.

Feb 2, 2012 1:05AM
avatar
I have a 2003 Monte Carlo SS which just hit 110,000 mi. ..........still runs great .....everything works....the only thing I ever did to it was brakes twice and new tires once.......I think I'll stick with Chevy....I would never buy a Foreign  junk....
Feb 1, 2012 3:31PM
Jan 30, 2012 1:28PM
avatar
I love what I do and I am proud of it. I don't take advantage of people, I also don't work for free...do you?? I love how people still think that we are all evil and are just out to rip the general public off. Nothing could be further from the truth! I am a professional and I enjoy helping people find a good deal on a vehicle that they will enjoy for years to come. That is why I am still in business after over 25 years. I doubt ANYBODY would do business with me if I was the dastardly con artist that so many people believe we are. Go buy a car of Craigslist you idiots...maybe you won't get robbed!!!
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

ABOUT SMART SPENDING

Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.

VIDEO ON MSN MONEY

TOOLS

More