Don't buy a used car right now


Don't buy a used car right now

Don't buy a used car right nowAlthough we're normally big fans of buying your cars used, now is the absolute worst time to be buying one — especially if you want high fuel economy. Here's why.
As seems to happen every summer when fuel prices tick skyward, many are once again searching for a fuel-efficient vehicle. Although the new vehicle marketplace may be filled with a slew of small car options, it's pretty clear American consumers still would prefer a large car, SUV or pickup truck. Preferably one filled to the brim with cupholders.
But on the used vehicle market, consumers can not only find fuel-efficient older cars, but also usually buy big at a smaller price.
And a surge of demand means prices for popular used vehicles are poppin'. Recent data from Kelley Blue Book indicates that so far this year, fuel-efficient segments have increased far more aggressively than they have during the past two years. Today, values of high fuel economy vehicles are up nearly 20% since January, a far cry from the steady depreciation of 2009 and 2010. At the segment level, values are up around $1,500-$2,500, with some models surpassing their respective segment average.
Examples of this increase include the Toyota Prius hybrid, which has increased in value nearly $3,800 since January 1st, and the Ford Fusion mid-size, up a substantial $1,800. As fuel prices continue to rise, Kelley Blue Book tells us they expect values for many of these vehicles to continue to increase. Makes sense, right?
But, although fuel-efficient segments have performed better than others due to the substantial rise in gas prices since the beginning of the year; it is safe to say all used vehicle values have seen spikes. Not only in dollars measured since the beginning of the year, but also in comparison to the past several years.
Don't buy a used car right nowAlthough more difficult to measure, the chart over yonder helps to illustrate the average change in value for a three-year-old vehicle in April 2007 versus today. It clearly shows how much values have risen since 2007.
This strength in values can be attributed to a sustained lack of supply of used vehicles over the past several years, primarily stemming from reduced new-car sales through the same period, combined with the Cash for Clunkers program of two years ago providing a readily-accessible fleet of older vehicles to comb through.
So, as sales have remained low due to the economic downturn, used-vehicle supplies have been hard-hit, driving prices up over the past several years.
But, this does mean there's money to be had in the market — especially if you've got a fuel-efficient used vehicle to sell. Used Geo Metros — which have a highway fuel economy rating anywhere between 39 and 44 MPG — are regularly selling on eBay between $3,500 and $5,000. That's not too shabby considering they originally retailed for anywhere between $8,500 and $11,000.
So maybe what folks should be doing to beat the summer gas price spike is to buy Geo Metros in the winter when they're cheap and then sell them to dealerships in the summer. Now that's the type of capitalistic car fervor we can get behind.

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