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Used-Car Prices Set to Plunge for High-MPG Cars

As gas prices rose toward $4 a gallon, prices soared for used cars with high gas mileage. But now with pump prices having fallen back, those used-car prices have backed off and could be down by 15% by the end of the year, according to analysts at Kelley Blue Book.

It turns out that Americans' focus on high-mileage cars has been, typically, short-lived: Edmunds.com reports that June sales of hybrid and electric vehicles like the Toyota Prius (right) were down 17% below May sales, hitting the lowest level in more than six years.

The Kelley Blue Book web site reports that prices for fuel-efficient compacts and subcompacts dropped 1% to 2% in June -- about in line with the overall used-car market. But analysts project that overall prices -- which have been up sharply this year -- will go down only about 3 to 5% more by year's end, while small, high-MPG models will drop an average 15%.

Why the turnaround? Used-car prices rose this spring in reaction to both near-record gas prices and supply shortages resulting from the Japanese earthquake and tsunami. Those shortages hit high-MPG cars produced in Japan in particular; as a result, prices on fuel-efficient used cars jumped. Now, however, Toyota, Nissan and other Japanese automakers say they expect to resume full production by September -- hence the falling price forecast as supply eases.

The Kelley Blue Book projections are based in part on past sales patterns. "If we look back at 2008, when gas prices hit $4 a gallon, we can foresee drops during the next few months," says Alec Gutierrez, KBB's manager of vehicle valuation. After gas prices peaked in 2008, used, fuel-efficient models dropped some 40% in price. However, there are significant differences now from 2008:

  • In 2008, gas prices fell off sharply to $1.60 per gallon. With gas at about $3.50 now and oil prices holding up above $95 a barrel, no analysts are calling for a 2008-style drop.
  • The economy in 2008 was heading into freefall; today it's relatively stable, if not growing as quickly as we'd like.
  • Used vehicles were in abundant supply in 2008; there are lower inventories now.
But even a 15% drop is good enough reason to bide your time if you are in the market for a high-MPG used car, says Gutierrez.

Elsewhere in the high-mileage market: Edmunds.com has a few details on the June fall-off of hybrid and electric new-car sales:

  • Toyota Prius, by far the largest-selling hybrid, registered a sales drop of 61% in June from a year earlier. That is the worst single month for Prius since September 2004. Much of the Prius problem came not from lack of demand, however, but from sharply curtailed supply of the Japan-made Prius.
  • Honda's Civic Hybrid was down 30% from a year earlier.
  • Bucking the trend, Nissan's all-electric Leaf (above right) rose in June sales by 50% over May.
To be fair, Americans have not totally abandoned cars with strong gas mileage. New models like the Chevrolet Cruze and Ford Focus, with ratings of up to 40 mpg on the highway, posted strong June sales.

If auto companies can convince buyers to stick with these smaller but well-appointed models, the flight from fuel-efficient cars may slow down.

Photos courtesy of the manufacturers
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