Sticker Shock: Used Car and Gas Prices


used car dealerships and prices

If you are one of the thousands of people who are feeling the crunch of rising gas prices, you might be considering trading your current car in for a more fuel efficient, smaller car. However, you may be in for a surprise. According to a recent Wall Street Journal article, used car prices have been steadily increasing for the last three years. In fact, prices are expected to jump nearly two percent during 2012, a marked increase.

Increase in long-term ownership

It is believed that part of the blame for increasing used car prices is the recession of 2008. In part, this is because car owners were (or are) holding onto their current vehicles for longer periods of time. After all, once a car is paid off, regular maintenance is generally less expensive than purchasing a new vehicle.  If a car is running well, the benefits of trading in may be diminished.

What This Means for Car Dealers

When car owners are holding onto their vehicles for longer periods of time, the availability of used cars declines. Couple that with lower than expected repossession numbers and the availability takes a further dive. Unfortunately, during this same period of time, many owners are interested in getting their gas-guzzlers out of their driveways and purchase more fuel efficient, smaller vehicles. Supply and demand is not keeping up with each other, resulting in higher prices for used cars.  Consumers are much more educated today with several online tools allowing for more research before ever stepping foot on a car lot.  It is important for dealers to make sure their used car inventory is online so shoppers can compare cars in the privacy of their own homes.  Updating your car dealership website is more important now than ever before.

More Certified Pre-Owned Used Cars

More companies are now offering certified pre-owned vehicles, which may also play a role in increased pricing. When a dealership is offering a car that has an extended warranty, ultimately, the consumer pays for that certification.  However, many consumers that are used to buying new will tend to want the comfort that a certification provides when they buy used.  Making sure that your website

Smaller Cars Doesn’t Equal Cheaper

Interestingly enough, the smaller and more fuel efficient the vehicle, the higher the price is likely to be. A Kelley Blue Book analyst stated that even wholesale prices (e.g, cars purchased at auctions) are increasing. One of the most significant increases in cost has been the 2010 Toyota Prius, spiking more than $1,200 in  value in only one month.

Prices Will Come Down

Most analysts feel that once gas prices level off, that the prices of used cars will begin to level out and stop increasing. Many used car prices may even see a drop once consumers begin focusing on purchasing new cars again. The changes in pricing will likely impact first compact cars then bigger models.

What This Means for Car Buyers

For those who are considering purchasing a used car, there may be not only a shortage of choices, but the prices may warrant considering a new car versus a used car. The market for used cars is currently a seller’s market and buyers will have to accept the higher prices or make the decision to save for a new car. In some cases, car loans with low interest rates may make new car purchases more sensible.

The used car market is one that fluctuates depending largely on how long cars are held by their owners. In addition, companies that use fleet vehicles may also be holding onto their smaller, fuel-efficient vehicles for longer before placing them on the used car market.  It may be several months before the consumer can recover from the combined sticker shock of increasing gas and used car pricing.


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