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After several depressed years, used-vehicle prices on the rise

November 22, 2010
Used-car prices have rebounded to the highest level since 2001, good news for car buyers hoping for a decent price on their trade-ins and automakers slammed by rapidly depreciating models. The price rise reflects a sharp decline in the number of cars and trucks coming off lease and the number of tradeins from new car sales. On March 31, the average used vehicle retailed for $13,888, up from $13,703 a year ago, according to the latest data from the NADA. And because the volatile used-vehicle market is so huge-42 million car and trucks sold in a typical year- pricing swings of any size have immediate ramifications for consumers, dealers and automakers. The latest rise in prices means dealers are offering more money for trade-ins, but shoppers no longer are finding the plethora of used-car bargains available in recent years. The used-car price spike may soon be blunted, however. Chastened by flat new-car sales, automakers are sweetening incentives, which likely will result in bloated usedcar inventories and thus lower prices. But Paul Taylor, the NADA's chief economist, predicts a strengthening economy will prevent new vehicles from depreciating as fast, meaning prices for used vehicles could climb still higher. Dealers are paying more at used-car auctions and from wholesalers. Since December, wholesale prices on used nonluxury vehicles have increased at an annualized rate of 6 percent, and wholesale prices for used luxury vehicles have climbed 2 percent, Taylor said. Used-car prices began dropping after Sept. 11, 2001. Automakers introduced no-interest financing on new vehicles, which jump-started business but had a withering effect on used-car values. New cars became so affordable that they attracted buyers who normally bought used. Then decreasing demand for used vehicles deflated their prices.