Used car buyers have come to expect good deals this time of the year as dealers traditionally try to clear out their lots and hit their sales numbers.
This year, however, buyers looking to squeeze some additional savings off the sticker price may be in the driver’s seat.
That’s because used car prices for many makes and models are dropping, something that’s sure to improve the mood of many parents preparing to write a check on a vehicle for one of their kids to drive.
After peaking last spring, used car prices have been falling for five consecutive months, according to the Manheim Used Vehicle Value Index. The index, considered one of the most reliable in the industry, showed wholesale used vehicle prices were down 0.3 percent in September, the latest month available.
The CarGurus used car price index supports the trend. This index, which tracks millions of car sales from SUVs to subcompacts, showed an average used car price of $18,474 at the end of October. That was down nearly 3 percent over the past 90 days and more than 2 percent lower than the same period last year.
Credit the price declines to healthy new car sales, which have resulted in more trade-ins showing up on used car lots. In addition, auto experts cited a surge in the number of leased vehicles being turned in to dealerships to be resold.
“We’re definitely seeing some prices fall,” said Joe Spina, a senior analyst at Edmunds.com.
As is typically the case in the used car market, the price declines are not across the board. Indeed, prices for certain models and segments in hot demand are higher now than a year ago, according to data from the CarGurus website. For example, prices are up 3.2 percent for used pickup trucks and more than 5 percent for convertibles, compared with 2013.
▪ Begin by narrowing your shopping list to four or five vehicles that you and your teen driver agree are suitable choices and within your budget. Don’t proceed unless you’re on the same page.
▪ Do some digging before hitting the dealership or negotiating with the neighbor down the street. Of course, do your homework on prices by looking at car-buying websites. The information may not be perfect, Spina said, but it gives you negotiating numbers.
In addition, check out financing rates with banks and credit unions, ask your auto insurer for a ballpark estimate on coverage and have a general idea on the cost of an extended warranty in case the model you’re interested in isn’t a “certified” used car with guaranteed dealer protection.
▪ Be careful about falling into the payment trap. That’s how Spina describes the all too common situation of stretching loan terms to 60 or 72 months to lower the monthly payment. All those interest payments could very easily wipe out the sweet deal you negotiated.
▪ Know the accident and repair history of the vehicle. Services such as Carfax provide information on maintenance and condition. In addition, ask a qualified mechanic to give the vehicle a once-over. If it’s a private transaction, ask the owner for his maintenance records.
▪ Don’t shop with the mindset that you’ll necessarily get a better deal on a used car. Once you pencil in the cost of extended warranties and loan payment terms, there might be a small difference between the 4-year-old model and the 2014 closeout special, particularly on certain compacts, subcompacts and even some small trucks, Spina said. You may be better off buying new.
If you come up empty on your shopping expeditions, don’t worry. Spina expects the same trends pushing used car prices lower to continue into early 2015.