Used Car Prices on the Rise
Aug 24, 2010
Consumers looking to save money by purchasing a used car may find that price tags for used vehicles are more than they expect. According to Edmunds, consumers paid $1,800 more for a used vehicle in July 2010 than they did a year ago.
The price jump reflects a 10.3 percent increase from last year, an increase of about $19,248 for three-year-old used cars. One used vehicle that experienced a price jump is the Cadillac Escalade, whose average price increased 35.6 percent from last year.
Edmunds admits that its data isn’t perfect. With the Cash for Clunkers program, many Americans bought used cars last year, helping increase averages. Joe Spina, Senior analyst for Edmunds, explains that it’s difficult to isolate the impact Cash for Clunkers had on automobile sales. “So many economic factors affect automobile sales and prices. It's believed that the program delayed purchases prior to the program and also pulled sales forward while in place," he said. "The program also eliminated inventory of older vehicles that were traded and then scrapped."
Edmund’s data reflects an American mindset that prioritizes saving. Used car inventory is low, and as a result, prices for unsold used cars are increasing. USA Today, however, reveals an interesting trend: sales for big SUVs are on the rise even though they cost more, guzzle gas and the government is encouraging consumers to buy hybrids, electric vehicles and small compact cars. One reason for the increase is that Americans who need SUVs are buying used to save money.
Just because used cars are now pricier, it doesn’t mean that consumers shouldn’t buy used. Consumer Reports states that purchasing a pre-owned vehicle has a lot of benefits. Ownership expenses, like collision insurance and taxes, are lower, and buyers don’t have to worry about the values of their cars plummeting when they drive them off dealership lots. Even if consumers end up paying more than they want for a used vehicle, in the long run, they’ll save more.
Still, consumers must do their homework before shopping for a used car. Phil Reed, Senior Consumer Advice Editor for Edmunds, advises, “Decide ahead of time how much you are willing to spend and keep yourself to that limit."