November 10, 2010
Do you think buying a used car will keep your monthly auto payment down? In a rare reversal, you now could pay less for a new one.
Values for late-model used cars and trucks—especially trucks and SUVs—have jumped during the past year to the point that in some cases, the monthly payment on a one-year-old vehicle could cost you more than a new one.
Prices in the used-vehicle market, in October reached the highest level since January 1995, according to the Manheim Used Vehicle Value Index, a widely recognized indicator of pricing trends. A two- or three-year-old used car or truck in good condition should fetch more than a comparable vehicle a year ago, other analysts say.
Deals are particularly good for people trading in a used car or truck. If your old ride is in good condition and five years old or less, you may get a better trade-in offer, or selling price, than you could have expected a year ago.
Pickup trucks and sport utility vehicles are among the most in-demand used vehicles. "Two years ago was a particularly bad year for those vehicles," says Joe Spina of Edmunds.com, a vehicle shopping site that tracks used-vehicle values. Gas prices were over $4 a gallon and many truck and SUV owners were scrambling to bail out, causing a glut of vehicles in the used market. At the same time, auto makers slashed production of those models. Now, Mr. Spina says, sales of those used vehicles "have rebounded."
2010 Honda CR-V
$424 Typical monthly payment, NEW model
$444 Typical monthly payment, USED 1-year-old model
Thanks to those production cuts and the dearth of new model sales in 2008 and 2009, supplies of late-model used pickups and SUVs are now relatively tight. Demand for such vehicles has come back as a result of sub-$3 a gallon gasoline and value-conscious shoppers weighing the price of that new truck smell against the warm feeling of cash in their wallets. The result: Used pickup values are up 10.1% compared with a year ago, according to Manheim's data. SUV values are up 5.6%. The gains in both truck segments beat the 3.7% rise Manheim calculates for midsize and small cars.
Used luxury cars haven't enjoyed as dramatic a bounce as trucks and SUVs in the past year. But Manheim chief economist Thomas Webb says that during the past few months, used luxury vehicle value gains have outpaced the rest of the market. As a result, luxury used-car values are basically flat compared with a year ago.
Luxury-car makers say their used-vehicle business—most of it done under the "certified pre-owned" label—is strong.
Used Mercedes models saw a dip in sales "in 2008, and then a speedy recovery in 2009 to levels above where they were 10 years ago," says Niles Barlow, general manager for pre-owned and fleet operations at Mercedes-Benz's U.S. operations. Mr. Barlow says Mercedes and its dealers closely watch the spread between new and used vehicle prices and can adjust quickly. "There's relatively little price increase on the new car side," he says. That means the price gaps "are getting narrower between model years."
2010 BMW X3
$619 Typical monthly payment, NEW model
$632 Typical monthly payment, USED 1-year-old model
How much stronger can used-vehicle prices get? After increasing more than 20% on average since last December, Manheim's Mr. Webb says, "the logical expectation would be plateauing."
Now may be the time to make a deal on a new car. The price gap between new and used luxury models could narrow in the next couple of months, as the big premium brands uncork their holiday-season sales events.
BMW is already promoting its "Joy Sales Event," offering up to $2,500 in "holiday credit," or rebates. A 2011 X3 xDrive28i model comes with a lease offer as low as $489 for 36 months. There are also deals available on certified pre-owned BMWs—up to $1,500 off and finance rates as low as 0.9%. The other big brands are rolling out their year-end promotions, too. Mercedes has a $499 a month, 36-month deal on a new M-Class SUV and is prepared to sell you a new E-Class with a 1.9%, 36 month loan.
Before shopping, check online services such as the NADA Used Car Guide, Edmunds.com, or KBB.com to get a read on the potential trade-in or sale value. Once you are shopping, don't be surprised if a late-model used vehicle costs about the same as a comparable new vehicle—at least in terms of the monthly finance or lease payment. If you are financing, Edmunds.com says you could find a certified pre-owned BMW X3 sport utility could cost as much per month as a new X3. A BMW spokesman says the redesigned, 2011 X3 sport utility has a lower base price than the outgoing model, which helps to explain why the price of a new X3 and a one-year old model are so close. Plus, until new X3s start arriving at showrooms in January, about the only way to get an X3 is to buy a used one.
2010 Volkswagen Touareg
$592 Typical monthly payment, NEW model
$622 Typical monthly payment, USED 1-year-old model
Auto makers say strong used car prices are a great problem to have, because they signal that demand is stabilizing and showrooms aren't glutted with cars nobody wants. A used Honda CR-V that costs more per month than a new one is "a rare instance," Honda spokesman Chris Martin says. But when it happens, it's a sign that demand is high for the model and Honda's efforts to sustain its resale values are working. "In the end, it's a good thing."
For car makers, giving you more for a trade-in also makes it easier for you to buy a new vehicle. "We want them to buy the new product," says Chuck Yaeger, national manager for Lexus's certified pre-owned program. "If our used-car values push themselves to the point where it makes sense to buy new, we say, 'Woo hoo!' "
Do you think buying a used car will keep your monthly auto payment down? In a rare reversal, you now could pay less for a new one.
Values for late-model used cars and trucks—especially trucks and SUVs—have jumped during the past year to the point that in some cases, the monthly payment on a one-year-old vehicle could cost you more than a new one.
Prices in the used-vehicle market, in October reached the highest level since January 1995, according to the Manheim Used Vehicle Value Index, a widely recognized indicator of pricing trends. A two- or three-year-old used car or truck in good condition should fetch more than a comparable vehicle a year ago, other analysts say.
Deals are particularly good for people trading in a used car or truck. If your old ride is in good condition and five years old or less, you may get a better trade-in offer, or selling price, than you could have expected a year ago.
Pickup trucks and sport utility vehicles are among the most in-demand used vehicles. "Two years ago was a particularly bad year for those vehicles," says Joe Spina of Edmunds.com, a vehicle shopping site that tracks used-vehicle values. Gas prices were over $4 a gallon and many truck and SUV owners were scrambling to bail out, causing a glut of vehicles in the used market. At the same time, auto makers slashed production of those models. Now, Mr. Spina says, sales of those used vehicles "have rebounded."
2010 Honda CR-V
$424 Typical monthly payment, NEW model
$444 Typical monthly payment, USED 1-year-old model
Thanks to those production cuts and the dearth of new model sales in 2008 and 2009, supplies of late-model used pickups and SUVs are now relatively tight. Demand for such vehicles has come back as a result of sub-$3 a gallon gasoline and value-conscious shoppers weighing the price of that new truck smell against the warm feeling of cash in their wallets. The result: Used pickup values are up 10.1% compared with a year ago, according to Manheim's data. SUV values are up 5.6%. The gains in both truck segments beat the 3.7% rise Manheim calculates for midsize and small cars.
Used luxury cars haven't enjoyed as dramatic a bounce as trucks and SUVs in the past year. But Manheim chief economist Thomas Webb says that during the past few months, used luxury vehicle value gains have outpaced the rest of the market. As a result, luxury used-car values are basically flat compared with a year ago.
Luxury-car makers say their used-vehicle business—most of it done under the "certified pre-owned" label—is strong.
Used Mercedes models saw a dip in sales "in 2008, and then a speedy recovery in 2009 to levels above where they were 10 years ago," says Niles Barlow, general manager for pre-owned and fleet operations at Mercedes-Benz's U.S. operations. Mr. Barlow says Mercedes and its dealers closely watch the spread between new and used vehicle prices and can adjust quickly. "There's relatively little price increase on the new car side," he says. That means the price gaps "are getting narrower between model years."
2010 BMW X3
$619 Typical monthly payment, NEW model
$632 Typical monthly payment, USED 1-year-old model
How much stronger can used-vehicle prices get? After increasing more than 20% on average since last December, Manheim's Mr. Webb says, "the logical expectation would be plateauing."
Now may be the time to make a deal on a new car. The price gap between new and used luxury models could narrow in the next couple of months, as the big premium brands uncork their holiday-season sales events.
BMW is already promoting its "Joy Sales Event," offering up to $2,500 in "holiday credit," or rebates. A 2011 X3 xDrive28i model comes with a lease offer as low as $489 for 36 months. There are also deals available on certified pre-owned BMWs—up to $1,500 off and finance rates as low as 0.9%. The other big brands are rolling out their year-end promotions, too. Mercedes has a $499 a month, 36-month deal on a new M-Class SUV and is prepared to sell you a new E-Class with a 1.9%, 36 month loan.
Before shopping, check online services such as the NADA Used Car Guide, Edmunds.com, or KBB.com to get a read on the potential trade-in or sale value. Once you are shopping, don't be surprised if a late-model used vehicle costs about the same as a comparable new vehicle—at least in terms of the monthly finance or lease payment. If you are financing, Edmunds.com says you could find a certified pre-owned BMW X3 sport utility could cost as much per month as a new X3. A BMW spokesman says the redesigned, 2011 X3 sport utility has a lower base price than the outgoing model, which helps to explain why the price of a new X3 and a one-year old model are so close. Plus, until new X3s start arriving at showrooms in January, about the only way to get an X3 is to buy a used one.
2010 Volkswagen Touareg
$592 Typical monthly payment, NEW model
$622 Typical monthly payment, USED 1-year-old model
Auto makers say strong used car prices are a great problem to have, because they signal that demand is stabilizing and showrooms aren't glutted with cars nobody wants. A used Honda CR-V that costs more per month than a new one is "a rare instance," Honda spokesman Chris Martin says. But when it happens, it's a sign that demand is high for the model and Honda's efforts to sustain its resale values are working. "In the end, it's a good thing."
For car makers, giving you more for a trade-in also makes it easier for you to buy a new vehicle. "We want them to buy the new product," says Chuck Yaeger, national manager for Lexus's certified pre-owned program. "If our used-car values push themselves to the point where it makes sense to buy new, we say, 'Woo hoo!' "
Closed November 2010
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