Americans are keeping their vehicles longer than they ever did. That, in turn, is causing used car prices to rise. Many later-model used vehicles are now selling for barely less than new models.
Used car prices rising
According to Kelley Blue Book, the keeper of car prices in the U.S., vehicles that are a year old are selling, on average, for only 11.5 percent less than their new versions.
Juan Flores, KBB’s director of vehicle valuation, said that is the narrowest gap seen since 1998.
“It’s just crazy,” he remarked.
For some models, the gap is almost non-existent. According to KBB, a 2011 Chevy Camaro LR went for a median $25,135. That is a savings of only $126 less from a new one. A year-old Toyota 4Runner SR5 sold in 2012 for only $254 less than a brand new one.
Could cost more with loan
Since pre owned car loan rates generally run higher than those for new cars, it could actually end up costing more for a used car than for a comparable new one.
According to the Detroit Free Press, the loan on for a 2011 Honda Odyssey cost a miniscule $7 less per month than the loan on a 2012 Odyssey.
Tight supplies raise resale value
The reason for the increase in used car prices, says KBB, is that the supply of late-model used vehicles has shrunk among the nation’s used car dealers. In the tight economy, consumers are keeping their vehicles longer and trading them in less frequently. The average age of a car on the U.S. highways in now 10.8 years. In 1997, it was only 8.4 years.
Another factor is that some automakers have cut back on production to stay in line with demand. With fewer vehicles being made, the resale value goes up.
Meanwhile, the lease market has all-but dried up.
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However, some analysts do not expect the tend to be a long-lasting one. Tom Kontos, a used-car wholesale auctioneer, told the Detroit Free Press:
“At some point, something has to give.”
Flores believes the smart thing is probably to buy new, and take advantage of the timely situation. He said:
“As long as the consumer has not been hiding under a rock, they should get a good sense that the price of a new and used vehicle are close together and that they should buy new.”
A bargain is a bargain
However, if year-old modern cars are comparable to new ones, as manufacturers suggest, then a bargain is still a bargain.
Jerry Ojeda, sales manager at World Jeep Chrysler Dodge Ram in Shrewsbury, N.J., said that his customers still inquire about used cars more often than new ones. He said:
“They’ll still go with a used car to save $20, $30, $40 a month.”
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