(MoneyWatch) Used car prices, after rising sharply this year, are starting to fall. But experts advise waiting until later this year to buy a vehicle to take advantage of the best deals.
Small and midsize used cars will drop in value by 5 percent during June, predicts analyst Jonathan Banks of the NADA Used Car Guides. Prices for all used cars are forecast to decline about 2 percent next month, with the decrease driven largely by the falling cost of gas. Banks cites the example of the 2009 Toyota Camry, which saw its price rise 15 percent, to $13,325, from January to May. He expects the value of that same Camry to decline by $675, or 5 percent, in June.
But that vehicle and other used cars will be cheaper still by this autumn, says senior market analyst Alex Gutierrez of Kelley Blue Book's kbb.com website. He expects prices to continue to drop 2 to 3 percent a month until fall.
This is the second straight year in which used car prices have spiked. The 2011 Japanese earthquake and tsunami, which resulted in a shortage of some new cars, combined with rising gas prices to push up used car values. This year, gas prices surged early in the year to a peak national average cost of $3.93 a gallon for regular, according to the AAA fuel gauge. But now, with crude oil prices declining, that figure was down to $3.57 this week.
In addition, a long-term supply problem for used cars is beginning to be solved. Starting with the financial crisis in 2008, fewer new cars were sold or leased. In recent years, that resulted in a shortage of trade-ins or off-lease cars in the used car market. Butexpected to top 14 million this year in the U.S., are today boosting the used car supply with trade-ins.
If you are considering buying a new car, it makes sense to move ahead now while the value of your trade-in remains relatively high. But if you want the best deal on a used car, wait. "Consumers looking for the most attractive prices should wait until the fall, when the market is typically at its annual low point," says Alec Gutierrez of kbb.com.
Here are some of the models he expects to drop to attractive price levels:
Hybrid: 2009 Toyota Prius. The highest-mileage car sold in the U.S (48 MPG city, 45 highway) is worth about $4,000 more than it was in January, with a Kelley Blue Book price of $20,050 if bought from a dealer. Gutierrez expects that price gain to largely recede by fall.
Compact: 2011 Chevrolet Cruze. General Motors' (GM) well-reviewed compact, which is available with many comfort and convenience features previously found only in much larger cars, is currently selling for $17,507 for the 2011 model, the year it was introduced. Look for that price to come down by about $1,000 by fall. The Cruze is rated for 22 MPG in city driving, 35 on the highway.
SUV: 2009 DodgeDurango. While gas prices were rising, low-MPG SUVs and pickups actually fell slightly in value as used vehicles. And these people and cargo haulers likely will continue to decline 2 to 3 percent a month in line with the overall market. Gutierrez cites as a potentially good deal the 2009 Dodge Durango, an old-style truck-based SUV recently selling for $18,485. That works if gas mileage is not a big issue -- the Durango is rated at 13 MPG city, 18 highway.