Used-Car Prices Surging

Last Updated Apr 29, 2011 9:51 AM EDT

Used car prices have surged again in April, especially for gas-sipping models. A combination of rising gas prices and a disruption of the supply of cars and parts from Japan has added as much as 7% in April for used models like Honda Civic and Toyota Corolla.

It is a poor time to buy fuel-efficient used cars but maybe a good time for trading in your old car.

The price statistics come from Jonathan Banks, executive auto analyst for the NADA used car guide, a subscription service used by dealers and bank auto loan officers. His data show, for instance, that the average Honda Civic auction price for model years 2006 to 2009 has risen 22% since the start of this year. Used versions of mileage champ Toyota Prius hybrid have gained 38% over the same period. Gas prices -- $3.03 a gallon at New Year's -- now have risen to a $3.88 national average for regular, including a 30-cent jump in April alone.

"You already had gas prices causing increases for these cars, and the Japan earthquake shifted that curve upward more," says analyst Banks. The damage to plants in Japan disrupted supplies of new cars and parts from Japan. As new-car supplies for popular high-mileage cars have shrunk and prices have risen, customers have begun to look at used cars instead and dealers have rushed to get more used models, pushing up auction and retail prices. (See Automakers Scramble in the Wake of Japanese Disasters.)

Some additional effects of the Japan tragedies:
  • Prices are rising on some new cars, too. Data from TrueCar.com shows the average new-car selling price of the Japanese-made Lexus RX 350, a midsize SUV, jumping by $550 in just one recent week to $43,808. And General Motors has announced that the list price on its models would be going up by an average of $120.
  • The inventory situation is likely to get worse before it gets better. Toyota, which owns the Lexus brand, says normal production likely will not resume until November or December.
  • Banks predicts the new car supply of Japanese-made vehicles will be at its tightest in June and July - so expect to see used-car prices hit a peak then. Competing models from U.S. brands may not need to offer as many discounts as they normally do in summer months.
How should you react if you are thinking about buying a new or used car? Here's a look at some different situations:

Look for a used car with lower resale value: If you are shopping for a used car with good gas mileage, a 2008 Honda Civic DX sedan ( rated 26 mpg city, 34 highway) would cost an average $14,085 at a dealership, according to Kelley Blue Book's kbb.com web site. The Civic always has had strong resale values. But a 2008 Ford Focus (at right) with nearly as good mileage (24 mpg city, 35 highway) would cost an average $12,895.

Ponder your trade-in value: If you own a small car now but have been thinking about trading up in size, the scramble to find good used cars might net you a strong trade-in. Or you might be able to sell that car for a good price even without buying a new one. (See Best Way to Sell Your Car.)

Look for alternatives to Japanese models: If the new Toyota Camry is in tight supply because of parts shortages, consider buying a Chevrolet Malibu, where list price starts at $21,975 but a $2,500 rebate is currently available. The much-praised Hyundai Sonata (at left) starts at a lower $19,395 for the base model before options.

Consider leasing: Some of the best promotional deals currently are on leases. Honda, like Toyota, has had new-car and parts disruption from the Japanese disasters. But its mid-size Accord, assembled in Marysville, Ohio, is offering a $250- a-month lease for 36 months on its LX version with no money due at signing.

If you do sign a lease, however, check out carefully your option to buy the car when the lease is over. This traditionally has been a reassuring option, with the future sale price to you stated in the lease. But rising use car prices means leasing companies are eager to get the car back at lease-end, rather than sell it to you. Linda Goldberg, owner of CarQ car-buying service reports that recent leasing clients have found that General Motors lease contracts added a $2,300 penalty if the leasing consumer buys the car. You might be able to renegotiate such a clause.

Think about waiting: If you want a Japanese-made car, you're more likely to avoid overpaying if you wait until the end of 2011. For a Prius, for instance, when production has fully resumed, inventory will rise (from the recent extremely tight 19 days' supply). That will mean that prices should ease. "Toyota will want to catch up on the sales it lost, and there may well be deals out there," says NADA Guides' Jonathan Banks. That may well prompt some slight reduction -- or at least a stabilization -- of used-Prius prices as well.

High gas prices are indeed a budget buster. But don't rush out and pay too much just to get a higher-MPG new or used car. Think carefully about the cost of a new car and how those monthly payments stack up against your rising bill at the gas pump.

Ford Focus photo courtesy of Flickr user Wonderdawg777. Hyundai Sonata courtesy of the manufacturer.
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    Jerry Edgerton, author of Car Shopping Made Easy, has been covering the car beat since Detroit companies dominated the U.S. market. The former car columnist for Money magazine and Washington correspondent for Business Week, Edgerton specializes in finding the best deals on wheels and offering advice on making your car last.

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