Used cars expected to get more expensive

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Used Cars

Used cars are getting more expensive, thanks to reduced inventory and better demand. Image: Flickr / kb35 / CC-BY

A new National Automobile Dealers Association guide on used cars estimates that the price of used cars will be going up. For most consumers, this means used cars will be more expensive and less available.

Expected price jump

The NADA research expects two distinct levels of price jumps in used vehicles this year. The average compact or midsized used car is expected to go up in price by 2.7 percent or more in 2012. Vehicles that use more fuel, such as SUVs, are expected to go up in price only 1.4 percent this year. This means that the average used midsize sedan that is five years old or newer will sell for an average of $11,850.

Lower production, fewer trade-ins

Part of the reason used vehicles are getting more expensive is simply supply. Vehicle manufacturers have been making fewer cars because of reduced demand for new cars. More and more consumers are also holding on to their cars for longer, waiting to trade them in until the economy is in better shape or they feel more comfortable with the expense. This means there have been fewer new cars entering the system and fewer trade-ins building inventory at used car dealerships.

Effects of a drop in inventory

This drop of inventory of used vehicles is expected, in part, to contribute to an improved average gas mileage of cars on the road. In the United States, the average age of cars on the road is 11 years. Eleven years ago, average gas prices were around $1.70 per gallon, about half of current prices.

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The drop in available inventory means the vehicles that were popular when gas prices were lower are the vehicles available as used inventory at the moment. That means any new fuel efficiency standards will take at least 10 years to be fully effective.

Saving money on a used car

Though the price of used cars is expected to go up in the next year, it is still possible to save money on a used car purchase. There are plenty of used vehicles available that get more than 30 miles per gallon, and many of them were built in the 1980s and 1990s. Low mileage means that the car is likely in better shape, but high mileage cars can be a good deal. Have a mechanic check out whatever car you are considering purchasing.

Sources

MSNBC
SmartPlanet
NADA guides

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