Shoppers may put the brakes on plans to buy a used car this summer. Edmunds reports that used vehicle prices are at a record high. In the first quarter of 2018, the average transaction price was $19,657, up almost 18% from the first quarter of 2013. Edmunds attributes the increase to a growing supply of near-new cars coming off-lease, a greater demand for vehicles of all sizes and ages; as well as rising gas prices.
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“We've seen the value of sedans, cars, coupes, and convertibles drop year after year, however with this recent uptick in gas prices, we've actually seen values increase in those segments that were deemed undesirable for some time,” says Ivan Drury, senior manager of industry analysis at Edmunds.com.
According to AAA, consumers are spending $69 more a month to fill up compared to last summer. AAA predicts that the national gas price average will range from $2.85-$3.05 through Labor Day.
“It’s not enough to dissuade anyone from purchasing an SUV or truck, but if anyone is price conscious and really watching their fuel economy, it’s the thing that’s top of mind for shoppers,” says Drury.
If you're trying to buy or sell a used vehicle, Drury shares these tips:
Review available inventory
Edmunds says it’s the first time in years they are seeing renewed demand for smaller vehicles. If you're searching for a car online or at a dealership, Drury says you should keep your options open. If you're interested in a niche brand, you may have a hard time finding a car. His advice is to stick to mainstream cars and brands. Not only will you have more vehicles to choose from, you will also have more room to negotiate with the dealer. Regardless of high gas prices, he says SUVs and trucks are still in high demand, as some shoppers value increased cargo capacity and ride height. Edmunds analysts warn that this could change if gas prices continue to climb.
Stop before you sell
If you're considering selling your SUV or truck because of rising gas prices, Drury says you should wait it out. If you go with your gut reaction, you're going to lose money immediately, especially when considering the costs associated with trading in a vehicle. If you absolutely want to sell because of your car’s miles or gas mileage, his advice is to do the math. Check the vehicle’s value before selling to a dealership or private party. He says there are some trucks and SUVs where used values are pretty high or close to new vehicle prices. See how much you want to downsize. When you break down the numbers, you’ll find that many times you won’t save enough to offset the initial cost of the vehicle. Don’t sacrifice too much for size, capability or utility.
Think outside of the box
If you're torn between buying a used or a new car, you might consider a certified pre-owned vehicle or CPO. A CPO blends some traits of a new vehicle with characteristics of a used one. CPO’s cost less than new vehicles and have typically been repaired, inspected and come with a warranty. Dealers may also offer incentives for CPOs such as cash back or low financing rates.
“Take the time to study the segment that you really want,” says Drury. “Don’t let fuel economy be your only driver. If you do the math on the difference between 20, 30, or 35 miles a gallon, you’ll find that it’s not a whole lot of savings every single year. Shop for what’s going to give you the most utility and practicality.”
Linda Bell joined FOX Business Network (FBN) in September 2014 as an assignment editor. She is an award-winning writer of business and financial content. You can follow her on Twitter @lindanbell.