By on January 29, 2012

New car sales in the U.S. had crashed from more than 17 million a year to below 10 million. It did not faze you. You buy used anyway. Let someone else eat the depreciation. Now the slump is catching up with you, and you will pay through your nose.  

Reports the Milwaukee Wisconsin Journal Sentinel:

Prices of late-model used cars have soared as the impact of auto production dropping by millions of vehicles has made its way into the pre-owned vehicle market.

Late model 2009 and later used cars are in short supply, because fewer were sold and fewer are traded in. If you said “what recession?” and recklessly bought new while the sky was falling, then you are now rewarded with a lot of money. Jesse Toprak of TrueCar.com explains:

“If you are actually trying to trade in a vehicle and get a new vehicle or simply get rid of what you have, you’re going to get some of the highest resale values we have seen in the last several years. Now, if you’re simply in need of a new vehicle that’s used, then you’re probably going to pay more than you would have just a few years ago.”

Joe Spina, senior analyst at Edmunds.com says that the average retail price for a three-year old car as of December 2008 was $13,849. By December 2011, that average retail price had jumped to $19,500.

This will probably go on for a while. Toprak predicts:

“It’s not really going to get any better for the next two to three years.

So what should you do? Toprak of Truecar tells you to buy new:

“If you look at the purchase from a cost of ownership perspective and not just the purchase price, and if you add in the cost of financing the vehicle, sometimes new cars can actually be even cheaper propositions than a newer used car.

Bruce Belzowski, assistant research scientist at the University of Michigan Transportation Research Institute in Ann Arbor recommends to buy older:

“If you are willing to go back to ’07 or ’08, there should be a lot of those.”

Even then, the prices will probably be up.

 

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132 Comments on “Have You Priced A Used Car Lately?...”


  • avatar
    FJ60LandCruiser

    Why we bought a new car.

    While shopping around a year ago, we found USED Honda Fits, Civics, Mazda3s tickling the prices of NEW cars…

    True, we were looking for cars with warranties, and not scouring the auctions for 10 year old pieces of crap. And at the auctions, the bidding was so fierce, small time buyers could not get a decent newer used car because the dealers were killing each other in bidding wars (or at least in the Orlando and Tampa areas).

  • avatar
    foojoo

    I recently purchased a new car because of the inflated prices of used cars. Two and three year old used compact cars are selling for 1 – 2k less than the price of new cars. I have purchased nothing but used cars for my entire life, but the tiny price difference between new and used cars made buying a new car an easy decision.

    Spend 2k more and get a 5 year warranty and a new car or save 2k and get no or less warranty time and a car that may have been beat on.

    • 0 avatar
      mzr

      I’m not so sure about the value of a warranty. I bought a new 2009 vehicle and of the times I’ve been to the dealer it is usually multiple times before something gets fixed. That is the closest dealer, which is an hour away. There are more, but they’re even farther. For people that can fix their own, it ends up being a lot less time and frustration.

      • 0 avatar
        redav

        In my experience, those who fix their own cars spend far more of their personal time on it than they would by going to a dealership. It’s a question of which is worth more to them: time or cash.

  • avatar

    Craigslist seems to be the only place one can find a half-way decent used car where SOMETIMES a seller is not power-of-a-Dyson-smoking the gold-plated crack cocaine before setting the price. There is no real shortage of used cars unless you’re looking for a truly rare vehicle or one of the aforementioned low-selling model years.

    I understand that the overproduction of dollar bills by the Fed has devalued the dollar a bit and now everything costs more, but this is getting as ridiculous as it would be if those shady gas stations in Atlanta had never lowered their price-gouging signs and the rest of the country decided to join in on the party since then to keep the price of gasoline artificially high.

    Are new and used car lots sitting half-empty because they literally cannot get previously loved cars at ANY price? No. Now some sellers may have been driven out of the market because of the SPECULATION on prices in the used car market. Seriously, this irrational price-fixing is bad as the housing bubble, or worse even. It’s like everyone in the industry is delusional and silently colluding to squeeze the absolute maximum sticker (and or financing) price out of the American consumer just because you need a car to survive in most areas of this country.

    This is not a rational market. The bubble must burst. The housing market was similarly inflated for a long time with people assigning outrageously high valuation to assets that really weren’t worth as much as they believed, now look at it.

    • 0 avatar
      boltar

      Inflation has been excruciatingly low for the last several years. “Overproduction of dollar bills” has nothing to do with it, much though everyone is looking for someone else to blame. Turns out people have to have cars to get around even when the economy is in the toilet. New car sales plummet, everyone tries to economize and anyone who absolutely needs a first or replacement car is on the used market.

      It’s simple supply and demand. Sometimes the simple explanation is the most accurate — no need to worry about the college macroeconomics you never really paid attention to.

      Funny how everyone swears absolute love for the free market, but when they find themselves on the losing side they scream about greedy sellers charging “what the market will bear” as if that’s not just market pricing.

      • 0 avatar
        hreardon

        @ boltar –

        I agree with everything you said above, with the exception of people complaining when they’re on the losing side of the trade. In this case, I don’t think that people are complaining so much as they’re just surprised that used car prices are touching new car territory these days.

        As you said, eventually the supply of buyers will shrink as they get wise to the pricing and then the tide will turn against the sellers and toward the buyers. Just takes time to clear the system – and from what I can see, we’ve got a good 2 years to go before some normalcy returns to the used/new car market.

      • 0 avatar
        geeber

        Inflation has been “excrutiatingly low” for the past few years? Apparently, you haven’t been in a grocery store since about 2009.

        Otherwise, you wouldn’t be able to type that line with a straight face.

      • 0 avatar
        jmo

        Apparently, you haven’t been in a grocery store since about 2009.

        And apparently you haven’t tried to buy a house.

      • 0 avatar
        stuki

        There is nothing particularly excruciating about cars getting cheaper, or more expensive slower, when you’re looking to buy one.

        Printing boatloads of dollars have, amongst other disasters, SEVERELY limited the supply of late model Ferraris being repoed and resold from the NY/CT area. And in case you don’t realize, that’s a bad thing for non-banksters looking to buy one.

      • 0 avatar
        stuki

        jmo,

        check house prices in the Hamptons and on Manhattan, which are where the printing has the most direct impact. Find any deals?

        Even sadder, look at the ownership roster of many/most of the finest properties in the Rockies. Think many of those guys haven’t been able to hold on, simply on account of the excessive printing? Could make militia movement sympathizers out of the most timid of us, or at least it ought to.

      • 0 avatar
        jmo

        check house prices in the Hamptons

        http://www.bloomberg.com/news/2012-01-26/home-prices-in-new-york-s-hamptons-fall-13-as-buyers-seek-cheaper-deals.html

        I don’t mean to get in between you and your ignorant conspiracy theories or anything…but come on – WTF?

      • 0 avatar
        stuki

        jmo,

        from your link:

        “The slump in prices came as homes priced below $1 million accounted for the majority of sales, according to Gregory Heym, chief economist for brokerage Brown Harris Stevens, which also released a report on the Hamptons today.”

        The maid shacks weren’t really what I intended to refer to, but hey! Also, fewer homes are on the market than a year ago. Maybe I was not quite specific enough. What I intended to get across with the Hamptons illustration, is that prices have held up remarkably well, possibly even gone up, for houses whose primary market are people who are getting paid royally by companies that would literally no longer exist were it not for the printing.

        It has nothing to do with conspiracy anything. It is simply how any society where two basic conditions (government can take from some, give to others, and there is a positive correlation between wealth and political influence) are met, inevitably end up.

      • 0 avatar
        geeber

        jmo: And apparently you haven’t tried to buy a house.

        In the real world, people do not buy houses once a week.

        Perhaps you are a special individual who only has to buy food every 20-30 years.

        For vast majority of people, inflating food prices hit them directly in the pocketbook, as they must buy food regularly, while decreasing or increasing house prices don’t affect their weekly budget.

    • 0 avatar
      skor

      @stuki,

      I agree with most of what you wrote. Here’s some more ammo to back up your claims. I live in Bergen County, New Jersey…..Bergen County is located next to NYC for those of who don’t know. The Northern part of the county is inhabited by quite of few of those Wall St types. While real estate values are dropping like a stone in the Southern(99 Percenter) part of the county, real estate values in the Northern part are GOING UP.

      So much for “shared sacrifice”.

      • 0 avatar
        Patrickj

        @skor
        Same thing happening in the suburbs of DC. Most expensive areas are still increasing in price, while less expensive areas are falling quite far. Our own house has dropped 10% in the past year.

        @jmo
        Prices for oceanfront and near-ocean houses are still climbing according to the article. The sort of houses owned by retirees from close-in Long Island and Queens, with a major highway between them and the water, fell 21% in a year.

        Sadly, $700K is a perfectly ordinary price for a detached house within 50 miles of NYC.

      • 0 avatar
        jmo

        Sadly, $700K is a perfectly ordinary price for a detached house within 50 miles of NYC.

        The Hamptons are 100 miles from NYC.

      • 0 avatar
        golden2husky

        patrickj: Especially if you are looking for an area with a great school system, prices in the wealthy areas of Long Island have held up remarkably well. Those areas with middling or worse schools took a pounding. The neighborhood that I grew up in has a top rated school district (SD #2) and entry level homes hover around one million today…

      • 0 avatar
        bd2

        Yep – a family member was in a bidding war for a house in the SF Bay area.

    • 0 avatar
      Mark MacInnis

      Depends on where you live, I suppose. I drive by the new and used lots in the Elkhart and South Bend, Indiana, area daily and all I see are cars, cars, lots of cars….The local Ford dealer is swimming in F150’s, Foci, and Fusions. The Chrysler dealer is awash in 200’s, 300’s and T&C’s. The GM Dealers are crammo-jammo full of Sierra/Silverado’s and Malibu’s. Used car lots are PACKED with late model Chargers, Fusions, Focuses, Cobalts, etc.

  • avatar
    Steven Lang

    It hasn’t changed much since this summer.

    But having said that, there are a lot more reasons for the high prices than supply.

    Here’s a brief list…

    1) New car dealers entering into the buy-here pay-here fray.

    2) The severe decline of credit scores over the last three years. This means that most consumers who want a newer car (and can afford one) have to rely on secondary financial sources.

    3) Stronger pre-certified programs.

    4) Better management of off-lease inventory by the manufacturers.

    5) Rental companies are keeping their vehicles for a far longer period of time than before.

    6) The reduction of brands that took place in 2009. This means fewer fertile sources for strong depreciation.

    7) Fewer vehicles at the auctions since the manufacturers and finance companies are now arranging for their own online platforms.
    I can go on.

    8) Stronger retail efforts by the rental car companies.

    I can go on… but I have to go out now. Good topic!

    • 0 avatar

      I wasn’t attacking your character, Mr. Lang, with my comment above. I just really feel that things have gotten so far out of whack with the used car market and pricing that sometime, a shoe is going to drop, and with it, prices. The stock market is a collective hallucination that just changes faster than things in the real world.

      We’re already seeing the backlash against the astronomical prices for non-clapped-out used cars, people are keeping their vehicles much, much longer. Book price was almost always overly optimistic unless you had a VERY desirable model in perfect showroom condition. You can really only get what consumers are willing to pay for a product, and I feel there is a real gap in the current pricing model and these vehicles’ actual value.

      • 0 avatar
        Steven Lang

        I know you weren’t. I did not even have a remote thought about it.

        The gap you talk about is access to capital. So long as there are too many folks reliant on sub-prime sources for funding, the price for late model vehicles will remain high.

    • 0 avatar

      The only time I bought a pre-owned car was back in 1997, when I arrived in America with $200 in my pocket, passport, and a change of clothes. So I am out of tune with the market in question. However, it was a former rental Galant with 20,000 miles. I can attest that Mr. Lang’s #5 is quite true. This past Christmas I was given the oldest rental car yet – a beater Malibu which was literally falling apart. It only had 33,000 miles, but had a bunch of mechanical issues, and most importantly the right main bearing was on the verge of grenading. I do not envy people buying rental fleets these days. No more lightly used Galants which then last 140,000 miles.

    • 0 avatar
      racer-esq.

      I’m not sure about 2 – people can still get sub-prime credit on a new car, probably easier than on a used car of the same price.

      I think the late model used car prices are just an idiot tax. If the dealer sees someone that the dealer gauges as smart, they get steered to the $16,000 new Fit, if the dealer sees someone that the dealer gauges as an idiot, they get steered to the $16,000 used Fit.

    • 0 avatar
      newcarscostalot

      What I would like to know is where you found that picture of my ex…

  • avatar
    chug

    9) Pressure from the bottom of the market after Cash for Clunkers.

    • 0 avatar

      *Sigh* you do know that One minus One plus One equals ONE, right?

      Every car taken off the road by C4C was replaced by a new, more fuel efficient vehicle. Now some people could not really afford these cars and they were eventually reposessed, but there was absolutely no net decrease in number of cars on America’s roads.

      Plus, all it did was pull forward a bunch of sales that had to happen eventually anyway. Taking a large number of moneyed buyers out of the market should’ve caused a glut of used cars, regardless of the number “destroyed.”

      9) Logical fallacy.

      • 0 avatar
        boltar

        You’ll get their crazy conspiracy theories and defective economics arguments away from them only when you pry them out of their cold, dead, closed minds.

        On the upside there’s generally cubic buttloads of money to be made when so many people are this confused about basic economics.

      • 0 avatar
        Pch101

        You’ll get their crazy conspiracy theories and defective economics arguments away from them only when you pry them out of their cold, dead, closed minds.

        +1. The loonies are really out in force this weekend.

        Anyone who can work a calculator and who learned long division in school should be able to figure out that Cash for Clunkers was too small of a program to have any dramatic effect on the market for or price of cars. The number of cars involved was a fraction of the total market for cars.

        There wasn’t nearly enough volume to move the market. It helped to stimulate a bit of GDP while stabilizing production for the automakers, putting a bit of extra money into the pockets of the dealers, and generating tax revenue for the states and localities, but that’s about it.

      • 0 avatar
        George B

        Partial disagreement. C4C targeted light trucks and offered the biggest incentive to replace them with fuel efficient cars. Beat up pickup trucks retain so much of their utility that people will swap engines and transmissions to keep them running even when they have big dents and faded paint. They last for decades outside of the salt belt. C4C even went so far as to specifically destroy engines from SUVs and pickup trucks to make them unavailable for engine swaps. The owner of a tree trimming or a lawn mowing business can’t substitute a small car for a pickup truck.

      • 0 avatar
        stuki

        “It helped to stimulate a bit of GDP”
        just like digging ditches and filling them ion taxpayers dime does.

        “while stabilizing production for the automakers”
        Of models that poeple didn;t want at the prices they were offered for.

        “putting a bit of extra money into the pockets of the dealers”
        Great political donors, those guys.

        “generating tax revenue for the states and localities”
        Since they’re not getting their hands on enough of people’s money as it is.

        “but that’s about it.”
        Nope, you left out the most important part: Turning people without a car loan into people with a car loan, while replacing cars too cheap to ever require a loan, with cars that will likely require it for quite some time. It’s a banksters world we live in, after all; and we really, really need a healthy, Ferrari driving financial sector to help enable all that ditch digging and filling that primes that all important GDP. Or at least that’s what the lobbyist driving Obama’s teleprompter says, and he’s like, an expert and stuff.

        And truth to be told, it did probably make the air somewhat cleaner, which is nice for those of us wealthy enough to worry about such luxuries. While saving the occasional, once debt free destitute from dying due to lack of ABS brakes; letting him enjoy his newfound life as a debt slave all that longer.

      • 0 avatar
        dvdlgh

        SexCpotatoes, it still equals one less used vehicle in the used vehicle market!

      • 0 avatar
        bills79jeep

        “Every car taken off the road by C4C was replaced by a new, more fuel efficient vehicle. Now some people could not really afford these cars and they were eventually reposessed, but there was absolutely no net decrease in number of cars on America’s roads.” That, it a logical fallacy.

        A normal new car buy does not take a used car off the market. If I bought a new Accord Crosstour, and traded in my Cherokee, my Cherokee would not get taken off the market. Crosstour + Cherokee = 2 cars on the road. Cash for Clunkers did take cars off the road, and while the number was not huge, it was certainly significant, especially since it came in such a short time span, and during an economic downturn when more buyers are interested in used cars.

        You seem fixiated on the idea that there is a bubble in the used car market. There likely is a small bubble, as people in hard economic times think that used is always a better deal, when in fact it may not actually be so. However, basic supply and demand is driving used car prices without a doubt. Less used cars and more used car buyers makes for higher prices. It’s that simple.

    • 0 avatar
      chug

      Every car taken off the road by C4C was replaced by a new, more fuel efficient vehicle.

      Note I wrote it as a factor (9), not the factor, and re: bottom of the market. What you say may well be true for the middle class, but C4C did put pressure on older used car prices, i.e., beaters.

      You know, the kind poor people tend to buy.

      And thank you both for your snark. Much appreciated. Wow, I just feel so … educamated by my betters now.

      • 0 avatar

        Okay, sorry if I was being a bit dickish, but it doesn’t make much sense with the whole bottom of the market thing. Cars get neglected, cars RUST more every day. So, given time, that ‘bottom of the market’ is completely replentished with slightly newer and even some slightly older beaters. The circle of automotive life, if you will.

      • 0 avatar
        vww12

        chug is 100% correct of course « C4C did put pressure on older used car prices, i.e., beaters., the kind poor people buy», whereas

        sexcpotatoes must be one of those who think if you break a window, you just made everyone richer because now the glass factory will produce, the glazer will work, etc. Ignorance of economics at its best !!!

      • 0 avatar

        There’s no question that wealth was destroyed by C4C. It always happens if you take a thing of a value and destroy it. Now the question is how much, and where the corresponding price hike has to manifest (not necessarily in the price of equivalent goods). The burden could be evenly spread across the market, even across all taxpayers. But it’s silly to argue that C4C was economically beneficial. It would be detremental even if executed without the fraud and ridiculous inefficiency that transpired in the case.

      • 0 avatar

        vww12, if you’d like, I’ll sell you my ’99 Grand Marquis with 241k miles for $10,000 since it’s an APPRECIATING ASSET in your eyes.

    • 0 avatar
      Crosley

      Cash for Clunkers IS to partially blame, when you destroy billions of dollars in working used cars and there’s greater demand for those same cars because of a poor economy, that’s going to exacerbate the problem.

      I didn’t know supply and demand was a controversial economic theory.

      Even Obama’s top economic advisor said it was a stupid idea that was a disaster (of course you didn’t hear him say a peep when the idea was being rolled out since it was a payoff to the UAW)

      http://www.politico.com/news/stories/1011/66447.html

      • 0 avatar
        Pch101

        when you destroy millions of working used cars

        Er, Cash for Clunkers involved 690,114 vehicles. http://www.dot.gov/affairs/2009/dot13309.htm

        There were almost 35.5 million used cars sold in the US during 2009. http://www.bts.gov/publications/national_transportation_statistics/html/table_01_17.html

        If you look at other data from BTS, you will see that there were about 194 million light-duty vehicles on the road during 2009.

        Now do the math. The number of cars that Cash for Clunkers removed from the roads amounts to less than 2% of 2009’s used car sales, and less than 4/10th’s of one percent of the total fleet. Your “millions” comment is completely bogus. Spend less time watching Fox News, and more time gathering and understanding data.

  • avatar
    tallnikita

    yup yup. but that’s nothing. when it comes to smoking crack, check used bicycle prices, especially those stylish single speeds with now brakes. hahahaha

  • avatar
    Trend-Shifter

    I would first separate cars into two catagories when discussing depreciation. Cars for the masses and higher end cars.

    Used cars for the masses are massively over priced in my book. Especially vehicles with higher mileage.
    I attribute this phenomena more to the credit market influencing the demand of used vehicles rather than the actual supply of used vehicles on the market. What I mean by that is less people can qualify for a new vehicle loan and go the route of a used car with lower credit requirements.

    I see credit loosening on new vehicles and this trend of high valuation for used vehicles should drop.
    Myself I would now buy a new car over a used car unless you are interested in cars that are over 20 years old!

    I drive cars over 25 years old to save money and as a hobby. The wife humors our 1984 Audi Avant as the family car, but she does NOT appreciate the firm connected steering feel that I love. She wants a car that she can park with her pinky and not worry that people will dent it. I think it’s replacement will be new car to make her happy.

    For higher end cars, only the rich can TRULY afford them. That is true for used high end cars also. If you can afford that kind of money you will want new. So I think they will still see a huge depreciation hit.

    • 0 avatar
      steeringwithmyknees

      wait, isnt it easier to get financed by the manufacturers for new cars than by banks for used cars? I know manufacturer financing is available for CPO, but it’s not for older cars, is it? When I got out of college and needed to find a ride, i had horrible credit and banks wouldn’t lend to me (can’t really blame them for that) but i did get financed on a new car – that was easily twice the price of the used ones and at a lower interest rate.

      I thought credit from car makers was a bit easier to obtain because car makers need to constantly push new sales and need some way to provide a buyer with incentives to take a huge depreciation hit (especially true for the last model year of a car before a major revision – i.e. Ford Escape).

      Is that wrong?

      • 0 avatar
        kvndoom

        The win/win is negotiating a good purchase price on a new car, with low interest, and keeping the damn car for a long time. The dealer network hopes that you love the brand, but want that new car smell in a few years, so that you trade in upside down for another new car from the same dealership. The manufacturer is making money since they made the car too, so it can offset the lower interest rate.

        The banks will jack you for higher interest rates, but they didn’t build the car. Their profit is wholly off the interest.

      • 0 avatar
        steeringwithmyknees

        yes, that’s what I mean – it seems like for a lot of people, it’s a lot harder to get a $10,000 car than a $20,000 car.

        and no kidding about the upside down thing. I keep getting postcards about what my current car is worth that make me laugh. I did “trade up” with my last car before I had it paid off in May, but the used car market is so crazy I got way more for it than I thought I could and didnt lose money. On the other side of the deal, I got a ridiculously good deal on a not-so gas efficient larger car that was listed online for several months. In the end, I am fairly happy with the deal, but I sure see how people can get really screwed and not even realize it.

  • avatar
    joeveto3

    I recently bought my first new car in 17 years. Previously, I bought a different used car every 12 months or so (boredom). When my 2008, 4 cyl Camry’s transmission felt like it was going to die and the steering rack felt as if it were going to drop out the bottom, I said “screw this, I’ve had enough with other people’s cast off’s.”

    Despite the car’s “looseness” which I don’t know if the dealer felt or cared about, I was given just $1500 less than what I paid for it 8 months and 35,000 miles prior.  Not bad. 

  • avatar
    mdensch

    Two people I know, myself and a friend, received unsolicited letters from a large new car dealer in our area urging us to bring our cars in for an appraisal as we would surprised how much they would be worth.

    Both cars are 2008-09 vintage and both are probably fairly desirable on the used car market. His is a Mustang GT 500 convertible and mine, which I no longer even own, was my late wife’s ’08 Ford Escape Hybrid. My letter indicated that the dealer had 5 possible sales they could make to customers looking for a car like mine if only they had some in stock.

    I know this was mostly just a come on, but this is the first time I’ve ever seen something like it.

    • 0 avatar
      mzr

      I’ve always viewed these as just a way to get you in the door of the dealership. I’m sure that at some times (like now) it is somewhat honest, but still its just creepy.

      • 0 avatar
        mdensch

        Slightly creepy, I guess, given that this was not the dealer from which I had bought the car so they had to put the mailing list together from DMV records. Also, the Escape Hybrid pictured in the letter was the same color as mine, though it was the very common metallic green.

    • 0 avatar

      I received those letters too. But the values offered were not that great.

      • 0 avatar
        Educator(of teachers)Dan

        The closest I’ve come to a letter like that was from the local Buick/GMC dealer. I bought my (used) truck there in 2006 and when the economy started to tank I received a letter from them saying; “We know you’ve been enjoying your truck for 3 years now, isn’t it time to come down and look at our great deals?”

      • 0 avatar

        Dan, those I did not count. I receive such ads all the time. But I referred to a specific type of ad that asks for a trade-in, which mdensch described. I would not say that I’m showered in them, but they did not exist previously. Interestingly enough they all want my RAV4, which I alrady traded in for the jeep. Apparently the obsolete records are used to target the ads.

    • 0 avatar
      NTI 987

      As a former sales manager, I can tell you that those are total and complete nonsense. The customer management software prints them out automatically from sales and service customer databases. It is a complete come on, and they’re not going to give you any more than anyone else would.

    • 0 avatar
      gslippy

      This explains – in part – why the dealer I bought my used 09 Sedona from, now wants to buy it back. But I’m not selling it.

      I received similar letters for my 05 xB when it was a few years old, but I plan to keep it for a long time.

    • 0 avatar
      highdesertcat

      mdensch, it’s not a come on. I had been receiving those letters too and not just from one dealer but from dealers in several nearby cities around me.

      The letters started shortly after C4C ended and addressed my 2006 F150 XLT specifically, at that time, which had been bought near Albuquerque, nowhere near these dealers who sent out the letters.

      Now I get letters offering to buy my wife’s 2008 Highlander outright, which was bought in El Paso, TX. I think that dealerships query the MVD because I started getting these letters shortly after we bought my wife a 2012 Jeep Grand Cherokee.

      It is evident to me that someone, somewhere, is keeping a close eye on new-car registrations because our new JGC was bought in AZ, not NM, and I had to personally to go the local MVD to replace my AZ plates with NM plates within 30 days of buying the vehicle.

      I do believe that there is a shortage of decent used cars.

      • 0 avatar
        vbofw

        @highdesertcat the versions I get in the mail are absolutely “come-ons”. It’s also very clear they aren’t from the dealer, they’re from clever outside marketing firms that try to appear like the letter comes from the dealer.

  • avatar
    Astigmatism

    The good news is that, with used inventory so low and residuals so high, you can make out like a bandit if you feel like leasing. In today’s Boston Globe, there are ads for a 2012 Accord LX for $0 and $159/month for 36 months with 12k miles/year, a base-model Passat for licensing and title fees down and $209/month with 10k/year, etc. Dealers are also discounting new cars and throwing cash on the hood of late-model trade-ins – one’s offering a 2012 Focus for $14.5k _plus_ a $2000 sweetener on top of the value of any 2006 or later trade-in. If I hadn’t bought a (used) car last January I’d be all over this.

    • 0 avatar
      jimmyy

      I am seeing left over 2011 Ford Edges being sold in the 23K range. Brand new.

      At the same time, people are bidding 28K on 2012 Pilots LX. Buying them off the trucks.

  • avatar
    Educator(of teachers)Dan

    Yeah the price differences are getting pretty miniscule. I won’t be buying till fall but it has made me rethink my hard core used car buying ideals.

    • 0 avatar
      Zackman

      Always buy new if you can – unless you know the owner of a vehicle you desire. Of course I didn’t always think that way and bought my share of lemons due to repeated temporary insanity…

      • 0 avatar
        redav

        I’ve never believed the ‘used cars are a better deal’ argument.

        A fundamental law in my experience is you never get more than you pay for. Used cars cost less because you are getting less. If somehow you were getting more, sellers would be able to get more, and they’d raise the price (the market is fairly efficient).

        Of course, you may not need what the used car lacks, just like how I don’t need a talking touch screen gps with satellite-controlled self-parking that’s controlable from my phone. In such cases, the used car is a better deal not because it’s used, but because you aren’t buying what you don’t need.

  • avatar
    sean362880

    I’ve kept track of my own car’s market value since I’ve owned it (2005 Mazda3 hatch, bought new for $19k+tax). I’ve used KBB private party value as a metric, although that’s probably on the high end of actual transaction prices. Here’s two data points:

    Nov 30, 2009, 47,500 miles: $10,310
    Jan 29, 2012, 59,800 miles: $9,715

    2 years and 12,000 miles later, and it’s worth pretty much the same. There were several periods (summer 2008, summer 2011) where the car actually gained value. I’m wondering how much longer I can afford not to sell this car?

  • avatar
    geozinger

    One of the other posters further up remarked about the “sell your car to us now” postcards, I got one too. Which is fine if you’re in the position to buy another car, but the prices on those have gone up, too.

    Ever since my former company was merged with another, I’ve been very glad to drive old beaters to work; the new company’s location is not a good part of town. The only upside is the local hoodlums find my cars of no interest. However, ancient cars in everyday service will eventually encounter a repair that is not economically sensible. With that in mind, I keep an eye on used car prices.

    I don’t want anything too flashy, especially where I’m going to park it. But even the 6-10 year old cars you could comfortably buy for $3K to $6K four years ago, are now 12-15 year old beaters that you should just drive to the boneyard.

    I’ve considered leasing, and having done it in the past it makes sense in some situations. I don’t believe it would in mine. Although I drive less than 10K miles/year, the huge added monthly payment, the additional insurance and the worry that even a cheapo Aveo would get broken into for pocket change (it’s happened), makes it a bad idea for me.

    I’m hoping my current beater can tough it out one more year. But if I get involved in an accident, all bets are off…

  • avatar

    It is an interesting comment about leasing. I have always favored the CPOs of european cars. The depreciation is low enough to keep the leases interesting and with the provided maintenance, you actually end up with some very well cared for cars. The downside is you can’t get the options you want, especially if you want a manual.

    But with used cars prices being kept high, leasing actually gets cheaper, as you are effectively buying depreciation. Throw in all the provided maintenance and you have avery attractive deal on a very nice car.

    Maybe now I can finally get a 6 speed 3 series.

  • avatar
    jimmyy

    Part of the reason new car sales are running so much lower is because of Toyota and Honda. The people that buy Toyotas and Hondas need a new car 1/2 as often as people that buy Detroit. So, less new cars are sold every year.

    Also, the average use car value is higher because these long lasting Toyota and Honda products command a higher resale value.

    Did I forget to mention the resale value bump for Toyota and Honda because of their ability to crush Detroit in the Consumer Reports reliability reports? How many places did Ford crash in the survey?

    • 0 avatar
      Dynasty

      So people only started buying Toyota and Honda a few years ago? And the recent used car market phenomenon is the way it is is because of Honda and Toyota buyers?

      Get real troll.

  • avatar
    FromaBuick6

    It’s been a few months since I looked very hard, but I was pretty disgusted with the pricing last fall. 2-3 year old cars for only a few grand less than new. $12-13k for 5-6+ year old compacts with 80k miles. What a joke.

    I swore I wouldn’t buy new again, but the savings just isn’t there. Especially if you buy used from a dealer (I hate the thought of paying sales tax on a used product).

    If I didn’t drive so much, it’d probably be a good time to lease – I can’t believe I just said that.

  • avatar
    JREwing

    I certainly experienced this issue a year and a half ago when buying my current car (’06 Cobalt, 5-sp, 25,000 miles).

    I probably spent a month hunting down something in my price range ($7500 incl. tax & registration) that wasn’t:
    A) > 75,000 miles
    B) > 10 years old
    C) in a serious accident

    Ultimately, no dealer would even come close to a suitable figure; I ended up finding the two good candidates on Craigslist.

    Even more annoying, the sellers of both cars couldn’t immediately produce the title despite me informing them I was ready to buy now and wouldn’t haggle down the price they asked for them. When was the last time you’ve come across sellers who were so unprepared?

    • 0 avatar

      Funny you should mention it but I started searching for my title when I was about to send my ad to Craigslist (composed the thing, with pictures). As it turned out, my Credit Union still had it – 3 years after the car was paid off. They forgot to reassign it. Had to call them and have it all strightened out. Delayed the posting by a few days, but I had the title in hand by the time buyers started calling. I can imagine some members of society not bothering though.

  • avatar
    jmo

    Conventional wisdom changes very slowly. How many people still believe that new cars lose 30% of their value when you drive them off the lot? That certainly isn’t true (I don’t think it was actually ever true) – but it doesn’t stop people from believing it. So, you have ignorant buyers insisting on used when it has long since ceased to make sense financially.

  • avatar
    stroker49

    Gas is now 7,96 usd/gallon here! I am really starting to get fed up with all the costs associated with having a car, and most of all the costs are taxes. With all the cost for a car it costs me +1000usd per month just to go forth and back to work. I am considering finding a job I can take the bicycle to and sell the car, I can rent one in the weeknend if I need to.

    • 0 avatar
      TonyJZX

      $8 a gallon? where the hell do you live?

      we pay ~$6 a gallon and that’s considered medium to high for the western world…

      i think new cars are fine if you need that 5yr warranty and that appliance feel to get from A to B without any guesswork

      if you keep the car for 5-7-10yrs or until it goes bang then who cares about resale?

      • 0 avatar
        stroker49

        Sweden. But prices are similar in most of Europe.

      • 0 avatar
        Pch101

        According to this, gas in Norway is about US$9.17 per gallon, based upon the current kroner-dollar exchange rate:

        http://www.aaireland.ie/AA/Motoring-advice/Petrol-Prices.aspx

        (It’s not directly comparable to the US, because European regular is equivalent to what is midgrade in most of the US. But it still ain’t cheap.)

      • 0 avatar
        steeringwithmyknees

        I care about resale because I see it as part of a measure of a car’s reliability/hassle of owning it. I usually keep cars till a repair comes that costs more than the car is worth.

    • 0 avatar
      George B

      Is an alternate fuel available with lower taxes? If gasoline taxes where that high here, I’d convert a car to run on propane or some other heating fuel. To deal with high local taxes and insurance, some people in the US have some weekend property out in the country that they use as the address for car registration and insurance. Sometimes there is some loophole for farm vehicles that can be used to keep costs down.

      • 0 avatar
        stroker49

        Propane would probably be more expensive. This is Europe, it’s taxes on everything. They even put vat (sales tax) on the taxes. By the way, the sales tax in Sweden is 25%! Biogas would be better but my car doesn’t run on biogas. They use the environment as an excuse to increase the taxes on fuel (diesel is more than 8 usd/gallon!). But there are few alternatives, I got to get to work and live the normal life.

  • avatar
    eggsalad

    I’m in the camp of “Why sell?” My ’05 xB just cracked 50,000 miles. Yes, I’ve only lost a couple grand in the 2.5 years I’ve owned it, but where’s the value in getting a new, or even “newer” car? There’s no reason I can’t keep driving the Scion for the next 5 to 10 years.

    • 0 avatar
      mikey

      @eggsalad…..I’m firmly in the same camp. In the last 40 years I’ve bought new and used. Replacing either my wifes, or my vehicle every 3 years or so.

      No more.

    • 0 avatar
      Monty

      eggsalad – not everyone thinks logically when considering a car purchase, though.

      We bought our car through a dealer-friend as a one year old short term lease return. Depreciation was over 30% ($14K for a loaded Focus ZX5 SES original MSRP of over $23K) and in the 5 1/2 years we’ve owned it the depreciation has been less than $750 per year, based on Autotrader pricing in our area.

      Why sell a perfectly good car? We’ve got not quite 60K miles on it, it’s warranteed to 100K miles or another year and a half, and it’s cost us basic maintenance and one $200 deductable payment since we bought it.

      Already the car doesn’t owe us anything, and I intend to keep it for at least 4 more years.

  • avatar
    mikey

    Here in Southern Ontario, gas is around 4.80 U.S, a U.S gallon. The dealers are asking 13 to 14k for a clean, low KLM 3yr old Cobalt. The dealers arn’t too flexible. 3 yrs ago you could have picked that Cobalt up, new for 18k, out the door.

    A three year, old, loaded, low KLM Tahoe, today….33 to 37K. The dealers are a whole lot more flexible. Three years ago, you were looking at the high fifties to sixty K to take that Tahoe home.

    In my way of thinking,the Cobalt is overpriced,and the Tahoe is a bargain.

    I’m keeping what I got,and I know, I’m not alone in my thinking. That has to be impacting the market.

  • avatar
    Dynamic88

    2011 Impala LT, CPO, 36K miles. $14995 asking.

    2011 Impala LTZ, CPO, 26K miles $17980 asking.

    2012 Impala LT, New, $26,470 msrp. (cheapest one I could find in the dealers listing)

    Looks like quite a bit of depreciation to me, and a one year old car with lots of life in it for $15K doesn’t seem like a bad deal, if one is in the market (which I’m not) (Or go with the loaded up LTZ)

    There is no point go on and on with examples. I have not been in the market, new or used, for many years. I don’t know if prices are up or not. I do know from 5 minutes of research that it’s not too hard to find a late model used car at a substantial savings over a new one.

    Of course, I looked at Chevy’s which may not hold value as well as say a Honda.

    Also I have good credit, so I don’t have to get taken to get financed.

    • 0 avatar
      mikey

      I got a 2009 LTZ, leather,loaded 20,000 miles. The dealers here are asking 17-18K. If I traded, I’d be lucky to get 14K.

      Oh yeah….I’m a keeper.

      • 0 avatar
        Educator(of teachers)Dan

        Check TrueCar. I’m guessing that the price will be quite a bit lower than that. Right about $23,000 for an optionless LT in my area. (Not bad for 300hp.)

      • 0 avatar
        Dan

        Nice powertrain for 23K but that’s the only bright spot.

        Dealer right down the street has a Charger SE 8 speed with the bluetooth package for $23,1xx before taxes.

        If you’re going to get a $23,000 rental car, get the good $23,000 rental car.

      • 0 avatar
        Educator(of teachers)Dan

        @Dan, in your area sure, in my area they aren’t budging on Charger MSRP.

    • 0 avatar
      jmo

      2012 Impala LT, New, $26,470 msrp.

      Why? Please explain why you insist on comparing MSRP? No one has paid MSRP on an Impala since the 1960’s!

      • 0 avatar
        Dynamic88

        Well we won’t know avg transaction prices on 2012 Impalas for a year. If you have the figures for 2011 Impalas I’ll be happy to use those. I don’t have them.

        No one (in their right mind) pays the asking price for a used car either. Can you supply avg transaction prices for one year old Impalas? Is there a better way to compare a used car and a new car? Asking price for the used car vs MSRP for a new model seems like a sensible way to make an initial price comparison. Both the used and new car will be negotiated, so neither will sell at the “window” price. It seems like a good 5 minute way to get an initial read on the savings to be had buying used vs. new.

      • 0 avatar
        jmo

        Can you supply avg transaction prices for one year old Impalas?

        http://www.edmunds.com/chevrolet/impala/2011/tmv-appraise-results.html

        http://www.edmunds.com/chevrolet/car-incentives.html

        Notice the $4,000 cash back on new Impalas.

  • avatar
    healthy skeptic

    I tend to think of used cars as being a much better bargain in the premium end of the market. Premium cars have a higher markup, of course, which means faster depreciation, and they aren’t quite as much a must-have as an entry-level car for most folks, so demand is softer and the economics not quite so cut-throat.

    So for a Honda Civic, you probably get what you pay for. By this I mean that if the car is 50% cheaper because it’s used, it’s also only 50% as good (higher mileage, higher age, lower state of repair, etc.). Value and price both decrease at the same rate.

    With a Porsche, Mercedes, or BMW, though, you’re likely to come out ahead, where the car might be 60% percent the cost of new, for 80% as good as new.

    • 0 avatar
      jmo

      where the car might be 60% percent the cost of new, for 80% as good as new.

      But, with maintenance and repair costs so easily able to swap any savings – it’s still quite a risk. Personally, I don’t think a 20% discount is adequate compensation for the risk.

  • avatar
    FromaBuick6

    @ Dynamic88: I don’t consider that a valid example. The Impala is a purpose-built rental car. An year old ex-rental with 36k miles on it is a terrible value even at $15k.

    To quote Jeff Foxworthy: “Buying a used rental car is like going to a house of ill repute looking for a wife.”

    • 0 avatar
      Dynamic88

      What makes you think all Impalas are rentals? My mom and one of my brothers both have Impalas that have never been rentals. Lot’s of people here in Michigan buy new Impalas.

      36K on a one year old car would naturally make you ask the question -was it a rental? But the answer isn’t always yes. I know some people who rack up that kind of mileage. I’d go with my LTZ example with 26K on it.

      How about a 2011 Impala LT, CPO, 15,779 miles, $19,995

      Or an ’08 Silverado 1500 with 20K on the clock for $13,995 That not a lot of miles for an ’08. It is a work truck.

      Most people between voting age and under 55 are going to put 15K a year on their whip.

      http://www.fhwa.dot.gov/ohim/onh00/bar8.htm

      • 0 avatar
        Pch101

        What makes you think all Impalas are rentals?

        According to Fleet Central, 68% of Impala sales during MY 2010 were fleet sales. About eight out of ten of those fleet sales went to rental.

        I don’t have the 2011 figures, but they’re probably about the same.

      • 0 avatar
        Dynamic88

        @ PCH

        I’ll accept that 2011 figures are about the same. That still leaves 32% of Impalas being sold as family cars. I dare say these percentages vary by region. On the coasts I’m sure most Impalas are rentals. Here in mid-Michigan people tend to view it as a purpose built family car. I don’t have any data, but I’d guess that in my zip code most Impalas are sold retail, not to rental fleets. But this is Michigan, and I’m in a GM town.

        I’ll throw out one more example. 2008 Impala LT, 30,174 miles. $14,495 asking price. With that mileage it’s very unlikely to be a rental. It’s still cheaper than the 22K MSRP of a stripper new Impala.

        As an aside, my first couple examples were CPO cars, which tend to be priced higher than non-CPO. I would think CPOs would be most likely to be cross shopped against new. You can find a lower price if you don’t feel the need for certification.

        My overall point is that it’s not that hard to find a decent used car with lot’s of life left in it at several thousand less than a new car of the same make model. I just looked at the closest Chevy dealers website – hardly exhaustive research.

        That said, I’m not much of a believer in used cars, and I’m a satisfied Honda owner. I’m just not buying the idea that it’s hard to find a good used car at a good price.

      • 0 avatar
        Pch101

        That still leaves 32% of Impalas being sold as family cars

        Correct. And there are a couple of implications of that:

        -The demand for the car is low.

        -Large numbers of the car with low demand hit the market about 1-2 years after they are first sold.

        Those factors don’t bode well for residuals. Not only is the demand low in the first place, but there is a flood of them to hit the used car market. You can’t really compare a vehicle like that to the norm.

      • 0 avatar
        Dynamic88

        @PCH

        I largely agree with your point, certain makes/models will have low residuals. I think that tends to reinforce my point that good used car deals are out there – assuming one is willing to drive that make/model.

        I know an Impala is anathema to most of the B&B, but working people here in the Midwest are not embarrassed to drive an Impala.

        But I take your point, so I did another 3 minutes research on the local Honda dealers website. ’09Accord, 26,290 miles, $14,992. Highly unlikely to have been a rental, and $6K less than a new Accord.

        Of course the mid-Michigan market for Hondas is probably softer than some other areas of the country.

      • 0 avatar
        Pch101

        The point is that one should expect an Impala to have above-average rates of depreciation. You can’t cite it as an example of the market average.

      • 0 avatar
        Dynamic88

        @PCH

        I wasn’t really citing it as the market average, just as an example of a late model used car that can be had considerably cheaper than the new model. I don’t know that any particular make/model could be cited as the market average.

        You have a valid point -some makes/models will have lower residuals than others. That’s why I offered the example of the Honda Accord. The accord isn’t likely to have had low residuals due to rental fleet sales.

        Very quickly I was able to find a 3 MY old Accord at a savings of $6K compared to new. Of course, these are just asking prices. Whether or not $6K is sufficient savings over a new Accord is debatable, and ultimately up to the individual.

        I don’t doubt that used car prices may have gone up, (I simply don’t know) but there is still quite a difference in price between new and a 1-3 year old used version of the same make/model. Of course, this does not hold with all makes/models. It’s a little harder to find a deal on a used CR-V.

      • 0 avatar
        Zackman

        “What makes you think all Impalas are rentals?”

        Who gives a care? I bought my 2004 new. When we were in SoCal back in September, we had a rental Impala. You know what? We loved it. I’ve had a few of this version as rentals and I still come away with wanting to buy a new one. I won’t because my ’04 is still in great shape and would be a sin to get rid of it for the wrong reason.

        These are solid, work-a-day cars. What’s wrong with that?

    • 0 avatar
      Patrickj

      The Impala can be bought for under $22K new:

      http://www.fitzmall.com/fitzway/carfind/RESULTSB.ASP?V_XREFID=FCG1194008:2011-12-07T10:36:31.170

      In my view, used rental cars weren’t a bad deal back when they were sold at 20 or 22K miles, they are too tired to consider at 36K or more.

  • avatar
    Sundowner

    I love how the TTAC editors berate others for buying new cars, and then laments that not enough people buy new cars to feed the used car market. Then they get their wish that more people buy used cars, new car sales go down, and then the prices of used cars become almost untenable compared to walking into the dealer and buying a new car. Economic genius or hubris?

  • avatar
    toxicroach

    It always seemed pretty ridiculous to me that a car that has been driven for 15% of its reasonably useful lifespan lost 60% of its value. I mean the new car smell and warranty is nice and all, but not THAT nice. Not when the immediate savings was clearly superior to the probable lifetime repair costs for the vehicle.

    The only reason for that was overproduction and cheap credit. There’s no particular reason that the gap should be so massive that it was really financially foolish to buy a new car. Ultimately that’s not a sustainable thing for obvious reasons. What cannot last forever won’t. I think used/new will be a lot closer call for a long time. As it should be.

    • 0 avatar
      jmo

      It always seemed pretty ridiculous to me that a car that has been driven for 15% of its reasonably useful lifespan lost 60% of its value.

      Examples please. The case with most cars is now that depreciation is linear. A car that has driven for 15% has lost 15% of its vale.

      Also, it’s vitally important to compare actual transaction prices not MSRP.

      • 0 avatar
        toxicroach

        Well, I guess I exaggerated the amount of depreciation that is normal. Still, the amount of depreciation that new cars used to experience was a bit excessive. It really shouldn’t be the clear cut smart decision to go CPO over a new car.

    • 0 avatar
      racer-esq.

      A Nobel Prize was awarded for explaining the steep depreciation:

      http://en.wikipedia.org/wiki/The_Market_for_Lemons

      To an extent the asymmetric information issue has gone away, with services like CarFax and Experion, which is probably one of the reasons for stronger used prices.

      Of course, the services are not perfect. I have seen the paint worn off the heads of the fender bolts on a lot of cars that, according to Experion or CarFax, have had no accident damage. If it didn’t get reported to an agency that reports to CarFax or Experion, it didn’t happen.

  • avatar

    Yesterday I put a deposit on a 2008 Civic LX (midrange trim), 35k miles (pending a check by my mechanic), which I bargained down to 11k. This was a Toyota dealer, in Boston. I probably would have bought new–looking for a Civic with a stick was a pain–but I don’t like the current generation.

    I went to a previous dealer which had an 08 with 20k and a number of dings on the body, they said they wouldn’t go below 12.9k.

  • avatar
    ajla

    Things aren’t that much better in the nonclassic 10+ yr old side of the used market.

  • avatar
    Dynamic88

    Here’s a question – what kind of mileage would you accept on a used car? For me the upper limit would be about 50K.

    • 0 avatar
      healthy skeptic

      My current car is a ’97 Lexus ES300 that I bought 2 years ago. It was around 145K mi then, and is around 155k now. I paid six grand for it, but probably could have found an equivalent for around five grand if I waited longer.

      It turns out the car needed some struts and a couple of other odds and ends that ran about $1,200, but since then it’s been fine, with the exception of a battery replacement. In spite of its age and mileage, it’s still a luxury car than looks and runs about as good as the day it was born. Every month, I have no car payments and cheap insurance.

      My mom also had a ’97 ES300 that she let go around 150k mi, and the only thing that car ever needed was minor electrical work. However they were doing it, Lexus was really rocking their quality and reliability mojo in the mid-90s.

      I guess the mileage you accept depends partly on the make and model.

  • avatar
    gasser

    This month I rented from Enterprise a 2011 Corolla for three weeks in Los Angeles. I was surprised about two things: car had over 36,000 miles on it; it drove well, smooth, good brakes, no squeaks are rattles.
    Maybe 36K today is the 15K of the past in dependability?

    • 0 avatar
      pdieten

      Well, that’s what I think. In an era where a car will drive like new for 100K miles and stay on the road for 18 years / 200K miles with indifferent maintenance, why does anyone think they should get 30% off of the new transaction price for a year-old car with 15K miles on it? That’s not equitable. If you’re getting 90% of the utility you should pay 90% of the price (though that 90% should include an extended warranty equivalent to factory warranty…..)

      On the low end, my local Craigslist and the junk dealers have all kinds of sub-$2000 vehicles for sale, so no one is ever going to convince me that any bitching about C4C is valid. At a time when a rusty heap that has to be towed to the yard can pull $500 scrap value, nobody should ever expect to get a drivable car for under $1000 IMO. Besides, a $1000 purchase price is basically nothing compared to the costs of gas, maintenance and insurance necessary to keep the thing on the road. If you can’t swing a thousand bucks for a running car, you can’t afford a car at all.

  • avatar
    Dynasty

    Here’s hoping the used car market sorts it self out in less than two to three years.

    The gently pre-owned vehicle I’m planning on buying has gone up about 5 or 6K since shortly after the Japanese tsunami. So what was once around 23K has jumped up to 29K. And new isn’t an option either since those are around 41K.

    I’ve been planning between August and Dec 2013 to purchase. I really don’t want to bump that out to August of 15′.

  • avatar
    Dynasty

    Is that a picture of King Diamond?

    • 0 avatar
      Trend-Shifter

      He sure looks a lot like King Crinsom’s 21st Century Schizoid Man in the flesh.

      link: http://www.youtube.com/watch?v=CDU8FWJrZEA

      This song changes tempo, direction, and is chaotic just like this comment thread. (smile! )
      Makes me want to fire up the old Pioneer Spec system and warm up the tubes.

  • avatar
    acuraandy

    The real reason for CPO and Used Car prices being high (at least at dealers) – the profit margins on new cars are so low at the moment (2-3%), that they need to sell used at an obscene profit just to pay their employees and ‘keep the lights on’.

    I can’t even get a decent deal where I work at the moment.

    Just sayin’…

    • 0 avatar
      toxicroach

      Problem with that theory is that why wouldn’t they have charged top dollar when times were good? I mean, why not really pad the books?

      Used car prices are high for a lot of reasons, but it’s not universal collusion between every car dealer in the country.

      • 0 avatar
        acuraandy

        Back during the mid 2000s, this formula was different. We had so much new volume (especially for an Acura dealer) going through that CPO and Used could offer significant deals, simply to move cars.

        Now, thanks to the quake/tsunami/nuclear disaster in Japan a year ago (of which we all know the economic ramifications by now, for the most part), all manufactures, but especially Honda suffered. Remember not being able to get a new Ford in red for a while?

        Japan had the ‘lost decade’. When it comes to cars, it seems for the US 2011 will be considered the ‘lost year’. At least that’s what we’re calling it at work…

        It has taken over 10 MONTHS to replenish new inventory to any respectable level. This was mainly due to parts shortages (since most Acuras are assembled in the US or Canada) from, yes, Japan.

        For exsmple, we didn’t see a brand new TSX come off the transport trucks for nearly 5 months after the disaster (P.S. Made in Japan). That’s why a CPO or used 2006 with 90k goes for $14k. OUCH.

        Thus, this is a problem that won’t go away any time soon, at least for the Jap cars…

      • 0 avatar

        ToxicRoach, maybe collusion was the wrong word. Does ‘irrational exuberance’ sound any better. Ask anyone left holding the bag for a house they still owe more than it was worth… are they in as much denial about home prices as you are about car valuation?

    • 0 avatar
      highdesertcat

      Depending on where you live, new car sales are pretty brisk and margins pretty decent for new cars in demand. But not everyone can buy new and most dealers are pretty low on used stock, so they jack up the prices on their used cars.

      Those who can, avoid buying used because you’re buying someone else’s problems when you buy used. When I was young and poor that was all that we could afford and invariably we bought used from reputable dealers and the problems that went along with that. In the long run it would have been cheaper for us to buy a cheap new car econobox.

      And buying lease, fleet or rentals is also a no-no. Most of those have been beaten like a rented mule and dealerships have been known not to honor the remaining warranty on them. Happened to a friend of mine who bought a rental Taurus with transmission issues.

      But as long as dealerships are low on used stock, we can expect them to try and squeeze every penny out of what they have.

      • 0 avatar
        geozinger

        @HDC: I guess it depends upon what you consider decent. 20 years ago when I was hawking Toyotas, a 3-4% margin on a new one was pretty good. If Acuraandy’s information is correct (and I’d bet it is), then things haven’t changed much.

        Additionally, I have to agree with acuraandy the only way dealerships make money is on used inventory, financing and service that isn’t warranty work.

        When I was walking the floor, I greatly preferred to sell used, as my commissions on used were much higher than the new stock. That included the “back money” on new cars.

      • 0 avatar
        highdesertcat

        geozinger, I understand what you are saying. But it does vary by region.

        I had three brothers in the new-car retail business for the past 30 years and was a consultant to them and their partners for the same period of time.

        Their profits on new cars like the Camry, Sonata, F150, Fusion and Buick were pretty decent, although the F150 and the foreign brands they carried are what made them profitable.

        Location, location, location – California was outstanding for used cars and remains so today. A lot of money to be made in California, still.

        But Arizona, Texas and Alabama did not do so well for the used cars they took in and they had to be very careful what they could offer for a trade-in. They took no RAM or Chrysler because resale was the pits.

        Financing packages were the gift that just kept on giving if it went through with the OEM Finance arm or a participating financial partner like a bank or credit union.

        But most buyers, especially on the used side of the house, either bought something outright or financed through a bank or credit union not partnered with the dealership. No kickbacks there.

        I can understand preferring to sell used if a better commission could be made, but some regions are better than others for margins. Many dealerships in the Southwest actually sell much of their used stock to dealerships in the east and northeast.

        I know that their dealership in AZ had an agreement with a dealership in upstate NY to ship them off-lease vehicles because they could be sold for a lot more money there than in AZ.

        In my region, Chrysler, Honda, Toyota, Hyundai, Kia, F150 and Nissan are all doing very well in new-car sales with transaction prices at or very near MSRP. Only Sonata, Elantra and F150 are consistently padded to sell over MSRP, and they are selling briskly.

  • avatar
    SoylentGreen

    I’ve never bought a car that was less than 7 years old at the time that I bought it. You can find cars that age or older in excellent shape dirt cheap, since nobody wants them.

  • avatar
    Dynamic88

    jmo

    Thanks for the data.

    2012 Impalas start at 25,760. With 4K cash back it’s 21,760. Of course negotiating doesn’t have to stop with cash back, but we won’t know what average retail 2012 Impala transaction prices will be until about a year from now. I’m willing to use the 2011 retail Impala transaction prices as a substitute, but we don’t have those.

    What you did provide is what a 2011 Impala goes for as a one year old used car. A 2011 goes for 16,077

    It’s till $5600 cheaper to buy the used car.

  • avatar
    GS650G

    I bought a TSX Wagon new because there were no used ones, and with the earthquake stopping production there are darn few around

  • avatar
    naterator

    So by the time I get around to buying a 2009/2010 model – like, in 2018 – things should have stabilized. Whew.

  • avatar
    alluster

    I am not complaining in the least bit. On Saturday, the nearest Toyota dealer offered me $3000 if I trade in my Focus for a Matrix, in addition to the $500 cash back and a $1000 conquest rebate(lucky for me, only the Civic and Focus qualify). I bought the Focus 22 Months and 26,000 miles ago for $3200 (excluding tax, title & tags). I was gonna wait until the Prius C comes out, but this deal is hard to beat.

  • avatar
    ciddyguy

    I can attest to the used car prices being on the high side, not that I’m complaining but as a matter of observation.

    Just bought a very nice,black on black 2003 Mazda Protege5 with triptronic sport shift automatic, leather, power windows, door locks and keyless entry etc, even has the 2.0L 4 with 110,740 or so miles on it at a new car dealer, they were asking $8422. I got it plus $1000 trade in for my aging, and dying, but running Ranger and with $1100 dollars via tax refund as down payment.

    And the clincher was, not only is this one sweet ride, but all the necessary work has ALREADY been done (thanks to the dealer), including the timing belt and possibly the water pump too. Tires are good, the license tabs are good until next Nov, so paid all of $27.50 for that to transfer over.

    I bet that car in any other time in similar condition, it’d have sold for less than what I just paid, but I was on a very limited budget and thus could not swing $15K for a car right now.

    I knew that this wild market for used cars could find me in good stead as I tried to offload the old Ranger truck, which for it’s condition, that’s not bad

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