Buying an older pre-owned car used to be the refuge of the spendthrift. Not anymore; according to recent reports, if you go looking for almost any kind of pre-owned vehicle, you’ll find that prices have spiked in 2011. A new Wall Street Journal story chronicles the overnight ascent of used car prices that have a lot of buyers worried.
A survey of American dealerships shows huge increases almost across the board for a wide range of pre-owned vehicle models. With many dealers scrambling to fill their lots, the old trade-ins that these businesses take in are going back on the lot, with bigger price tags. For example, new Kelley Blue Book prices reflect the trend: WSJ cites increases of $1800 for a 2008 Ford Fusion within the last four months; prices for some used Prius models have risen almost $4000.
Dealers are confirming that the prices for their old jalopies have shown an amazing upswing, where an aged sedan that brought a couple of thousand dollars last year could now carry a $3000 or $4000 price tag. Even for higher value pre-owned vehicles, evaluation of 2011 prices shows rises of up to 20%. Contrast that with the 2% or so cited for new car sale price increases this year, and you can see how big this used-car frenzy really is. The Manheim Auto Auction, a big American car sale venue, is weighing in with estimates of a 5% wholesale increase.
If you’re looking for a used Toyota or Honda vehicle, you might see even more price hikes. With these companies still claiming limited production, there’s going to be a dramatic shortfall, and those older cars that owners might have carelessly shedded last year are now going to be more valuable assets. For buyers, this can be pretty scary. When even the oldest market vehicles get more valuable, even the most basic car financing can seem like a mountain of money.
So how do you deal with a combination of tight supply and the usual big costs of financing a pre-owned vehicle? Start with cutting down the car financing amount with a bigger down payment. Even if it means selling some existing assets, this can save new car buyers a ton of money. Shopping around to for third party lender options can’t hurt, either: those who go to the lot with third party lender pre-qualifications can avoid a lot of hefty dealership financing charges. Above all, a prudent car search is important: don’t buy more than you need, or more than you can afford. Then there’s the old strategy of waiting for this “new car price bubble” to resolve. Prices won’t stay this high forever, but right now, buyers are still looking anxiously for the high water mark. Look for more from this blog as the year continues to unfold.