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Used-Car Prices Climb

February 6, 2012
3 min to read


LAS VEGAS—Used-car shoppers may want to consider making a purchase sooner rather than later because prices aren't expected to come down any time soon. In fact, they are going up.


The average price tag on previously owned vehicles is on track to rise 1.8 percent in 2012, with much of that increase expected in the second half of the year, according to the National Automobile Dealers Association.

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It would mark the third-consecutive year that used-car prices—already running at or near record highs—will have risen. Prices jumped 3 percent in 2011 from the prior year, reported The Wall Street Journal.


"I have been looking at used-car ads for two weeks and can't get over the prices," said John Timmons of Canton, Mich. "Looks like I am just going to have to take the plunge and buy."


A midsize used car under five years old is projected to sell at an average price of $11,850 this year, according to the group. Two years ago, the same car would have sold for $10,325. The average price for a large, used pickup truck one to five years old is expected to be $19,050, compared with $17,050 two years ago.


"The prices you see out there now is the new normal for the market," said Jonathan Banks, executive automotive analyst at the National Automobile Dealers Association. "We don't see prices having a huge falloff, which is good when it comes to depreciation, but for consumers, it means they will really have to shop around."


For years, the used-car market was a haven for thrifty shoppers looking to buy a car at an affordable price. Sticker prices often fluctuated thanks to auto makers who would routinely flood dealer lots with more cars than the market could handle. Big incentives to spark sales added another level of pricing pressure as consumers who rushed to nab a deal also would trade in their vehicles, further saturating the market.

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Then came the financial crisis in 2008. Consumers began holding on to their cars longer. Auto makers cut production, pinching new-vehicle shipments to rental-car companies, which in turn slowed the flow of vehicles into the used-car lots. Even repossessions, another source of used cars, have declined. The number of repossessed cars in 2011 was 1.3 million, down 32 percent from 2009, according to Manheim Consulting, which also tracks the used-car market.


Despite the shrinking supply, demand for previously owned vehicles increased as those consumers who were shopping during the recession bought used cars.


Not much has changed. The used-car supply remains strained as auto makers keep production and incentives in check.


"What we had in the past was abnormal," said Manheim Consulting chief economist Tom Webb, who publishes the Manheim Used Car Value Index. "There has been a permanent shift here, and unless you return to high incentives and overcapacity, we aren't going back."


Ford Motor Co. company executives, who addressed thousands of their own dealers Sunday, said they plan to enhance the certified-preowned program through such moves as extending some warranties.

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"There will be a cadence of support at marketing, rate support for dealers and merchandising to the consumer to keep those certified-preowned customers in the Ford family," Ken Czubay, vice president of U.S. marketing and sales, said following the Ford dealer meeting. "It's good for the dealer and every department in the dealership. Programs like this continue to support the upward loop of residual value."

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