As Predicted, Used Car Prices Plummet

May 30, 2012
Car lot

Car lot

Remember how we said that used cars would get cheaper in June? We hate to say we told you so, but...well, do we really need to say it?

In point of fact, though, we can't take credit for the prediction. The National Automobile Dealers Association broke the news in April, and NADA has now confirmed that its analysts were right: in a press release, the company says that used car prices have already begun dropping, and that some models could see their values drop by $900 in just one month.

A little backstory

To understand the current slide in used-car value, we have to know a little about why used cars were so pricey in the first place.

First, used cars are in short supply, and as everyone who's taken Econ 101 can tell you, when you supplies get tighter and demand remains the same, prices climb.

Why are used cars so hard to find?

  • For starters, owners have been holding onto their rides. During the recent recession, many would-be auto shoppers couldn't secure credit to buy another vehicle -- and quite a few of those who did qualify for loans feared taking on more debt in a dodgy economy. (However, as we reported earlier this morning, both of those trends are reversing.)
  • The recession also affected vehicle supply in another way: during the crisis, automakers simply produced fewer cars. As a result of those lean years, there are now fewer used cars up for grabs.

Second, soaring gas prices in the first few months of 2012 created strong demand for fuel-efficient used cars. Earlier this year, when it looked as if gas would hit $5 a gallon, consumers scrambled to find cars with better fuel economy. Sure, they could've driven some brand-new hybrid off the lot, but many shoppers interested in saving at the pump wanted to save in the showroom, too, opting for used models.

Today's story

Now that gas prices have eased a bit, demand for fuel-efficient used cars has slipped. By NADA estimates, the biggest loser is the Toyota Prius. The 2011 model's value is expected to average $20,325 in June -- down $900 from May's high of $21,225.

Other cars losing value include the 2009 Toyota Camry (-$675), the 2009 Honda Civic (-$600), and the 2010 Hyundai Elantra (-$500). 

If you're shopping for one of those vehicles, of course, that's great news, but if you own one of them, don't fret: your investment is still way up for the year.

If you own that 2011 Prius, for example, the value of your car shot up $2,350 between January and May. So, even if you were to sell it in June for $900 less than you could've in May, you'd still come out $1,450 ahead.

And NADA says that demand for used cars will remain strong -- and it will do so despite lower gas prices, and despite the fact that we're done with the busy spring shopping season. On average, cars will fall about  2% in the near future, with truck values dipping 1%.

Have you been planning to buy a used car? Is this the sort of news that makes you feel like strolling back into showrooms? Drop us a line, or leave a note in the comments below.

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