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A good time to sell used car, bad time to buy

April 10, 2012|By Jerry Hirsch
  • Prices for used cars such as these Toyota Prius hybrids are rising rapidly.
Prices for used cars such as these Toyota Prius hybrids are rising rapidly. (Irfan Khan/Los Angeles…)

If you are planning to sell or trade in a used car, the next couple of months might be the most optimum time.

Prices of late-model used cars are expected to peak for the year over the next six weeks or so, according to analysts at the National Automobile Dealers Assn. Used Car Guide.

That’s because auto dealers are trying to stock up on their used car inventory for the busy spring and summer seasons and there is a shortage of good used cars, an echo effect of the recession.

Auto sales plunged to their lowest level in a generation in 2009, when Americans purchased just 10.4 million vehicles after buying an annual average of well over 16 million for the previous decade.  That removed millions of potential used vehicles from the market. At the same time, the credit crunch and recession almost killed the car leasing business, typically a consistent supplier of late model used cars to the industry.

The U.S. supply of 3- to 4-year old light vehicles is now near all-time lows, said Brian Johnson, an analyst with Barclay's Capital. 

“The ongoing decline in the used-vehicle supply that began in 2009 has made it challenging for new-car dealers to consistently stock reliable, well-maintained used vehicles,” said Jonathan Banks, a NADA analyst. “This means that dealers will be aggressive with trade-in offers for used vehicles that are in high consumer demand.”

But owners don’t have to go to a dealer to realize the higher used car prices. Analysts for the trade group said people selling vehicles in private party transactions will also get among the highest prices relative to new car pricing in at least a decade.

“Clean, late-model used vehicles under 6 years old with reasonable mileage will command top dollar,” Banks said.

Used values for the compact and mid-size car segments grew by an average of $300 or 2.6% from March to April, and values have grown by an average of $500 or 4.3% since the start of the year, according to the NADA Used Car Guide.

For example, the trade-in value of a 2007 Kia Rio in decent condition was $7,700 in January. It is $9,100 as of mid-April, a 15% gain.  A 2009 Toyota Prius carried a $13,750 trade in price in January.  It now stands at $15,675, a 12% gain, according to the dealer group.

Other vehicles with double-digit increases this year include the Toyota Camry, Honda Civic, Nissan Altima, Ford Focus and Dodge Caliber.

The flip side of this is that what’s good news for sellers is often bad for buyers.

“Consumers looking for cheap transportation are finding it more and more difficult to locate a used vehicle at an affordable price,” said Alec Gutierrez, senior market analyst at Kelley Blue Book’s, which operates the kbb.com auto information website. “Late-model vehicles with low miles are becoming increasingly hard to find, especially as used-vehicle values continue to aggressively increase.”

Prices will start to dip in June, but still will remain strong.  NADA doesn’t see the late-model used car shortage easing until the last quarter of 2013.

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