Used car prices in the U.S. have been at historic highs in the years following the longest period of economic contraction since the Great Depression (from December 2007 to June 2009). But as the market for new cars rebounds, demand for used cars should decline as buyers feel more confident in purchasing new vehicles. A current cyclical uptick in lease expirations should also help. “Prices have been really high in the used car market and vehicles with low mileage have been rare,” said Michelle Krebs, senior analyst for the auto information and pricing provider Edmunds.com. “Demand is strong, but supply is short and prices are high. That will shift now that we’ve got leases expiring that will create a lot of late model, low mileage cars in the pool."
But we’re not there yet.
The latest data from the National Automobile Dealers Association shows that 2013 used car prices (for cars and light trucks up to eight years old) will be slightly higher than last year’s average of $15,042, which will be a fifth consecutive annual gain. Looking forward, however, used car prices are expected to take a turn. In the first quarter of 2014, used car prices adjusted for seasonal variations are expected to be about the same as the first quarter of 2012 and 1 percent lower than the current quarter, according to NADA. This suggests the peak in used car prices has come and gone.
But as the national inventory of ideal used cars begins to replenish, buyers will still need to do their homework to find good steals on used wheels in the coming months.
A recent analysis of a database of 30 million used vehicle listings on the automotive listing site iSeeCars.com found that the prices of the most popular used car models can vary greatly depending on where the cars are purchased.
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The Chevrolet Silverado pickup truck, for example, can see a price fluctuation of as much as about 14 percent between the highest and lowest price. That’s not chump change. The price difference depending on where you buy the truck can be as much as $2,500 between buying the truck in Charlotte, N.C., where pickups are popular, versus a comparable used Silverado in New York City, where a used version of the pickup enjoys the lowest average national price, according to iSeeCars.com CEO Phong Ly, who analyzed the millions of used car listings on his site.
The analysis showed that used versions of Honda’s two most popular sedans -- the Civic and the Accord -- cost the most in the Seattle-Tacoma metropolitan area, while the price of three popular used sedans (the Nissan Altima, the Chevrolet Malibu and the Toyota Camry) cost the most in Memphis, Tenn. Meanwhile, the Miami-Ft. Lauderdale region was where five of the top 10 most popular used cars had the best bargains.
There are two main reasons for the price fluctuations.
“For the cars where NYC is cheapest, like the Silverado and Civic, there may be lower demand for them in NYC coupled with greater dealer competition,” said Ly. “Likewise for the cars where Miami is the most affordable.”
Part of the reason for price fluctuations is intuitive. A used F-150 pickup truck costs the most on average in Denver, where buyers lean toward heavier utility-like vehicles in a city surrounded by rugged terrain. Likewise, a used F-150 costs the least on average in Detroit not far from where the vehicle is manufactured for the U.S. market. Other reasons are less intuitive and have more to do with local preferences that could result in higher or lower demand for certain models.