Now May Be a Good Time to Buy a Used Car

Used car prices are down slightly, despite rising gas prices

Earlier this year a gasoline price spike sent consumers to used car lots looking for more fuel efficient vehicles. As a result, used car prices rose.

After weeks of stability, gas prices started rising again in July but don't appear to have had the same effect on the used car market. Jonathon senior analyst with the NADA Used Car Guide, says prices have remained stable in August as consumers are choosing to stay the course with their current vehicles.

"This time around, rising gas prices have done little to shift consumer demand for late-model used vehicles," Banks said. "Buyers have become more accustomed to dramatic swings in gas prices. As long as fluctuations are similar to what's been seen in the past, consumers will stick with vehicles that best fit their lifestyles, rather than make unnecessary sacrifices for improved fuel economy."

Over the past two years gasoline prices have been up and down. In 2011 used-car prices increased significantly and light-truck prices decreased when gas prices grew from $3.07 a gallon in early January to a peak of $3.96 in May, according to the Energy Information Administration.

Breaking the pattern

Fast forward to spring 2012, gas prices followed a similar course toward a peak of $3.94 a gallon in April, but used-vehicle prices took a different path with car price appreciation much less than the prior year. Light-truck prices also remained relatively stable and actually increased moderately in some cases.

From April to July, compact and midsized cars have actually depreciated in value by three percent. Prices for mainstream light-truck segments have averaged a decline of 1.6 percent, according to the NADA Used Car Guide.

In dollar terms, the average price of a three-year-old compact car fell by $1,350 over this period. Hybrid car prices have taken an even more extreme hit since the spring.

Hybrids not bringing premium prices

For example, prices for three-year-old compact hybrids, such as the Toyota Prius, fell by nearly 18 percent from April to July, or $2,718. By comparison, prices for large pickup trucks, such as the Ford F150, declined by only $525.

In August, the trend of cars depreciating faster than trucks continues. Compact and mid-size car prices fell by 2.2 percent and 2.0 percent, respectively, while prices for utility vehicles of all sizes and large pickup trucks barely slipped at an average of 0.5 percent compared to July.

Prices for luxury cars and luxury utility vehicles prices fell by 1.8 percent and 1.5 percent, respectively, in August compared with July.

"The most recent jump in gas prices is largely responsible for slowing down the rate of depreciation for cars compared to the prior three months, but by historical standards the improvement has been mild," Banks said. "Even more notable is the continued price strength of light trucks in August. So far, higher gas prices have not had a noticeable impact on the demand for light-truck segments."

Another factor may also be at play, especially this month. New car sales are up sharply as dealers offer incentives to reduce their inventories to make room for 2013 models. With more people buying new cars, demand for used cars has fallen, giving buyers a bit more leverage.

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