It’s the best time in years to sell your car.
People are holding on to cars and trucks for about a year longer than they did before the recession, which has created a tight supply of used vehicles. So few used cars are on the market that prices have risen to their highest in at least 16 years.
Dealers are paying an average of $11,660 for a used car or truck, up almost 30 percent since December 2008.
“You’re not going to find a situation like this very often,” said Jonathan Banks, executive auto analyst for the National Automobile Dealers Association used car pricing guide.
Bob Sparks, who owns D&S Auto in Brewer with his son, Corey Sparks, said he hasn’t seen an overall tightening of the used market. Rather, said Sparks, a specific type of used car is currently worth more.
“What it has caused is a tight supply for good used-mileage vehicles,” Sparks said.
D&S deals in late-model, low-mileage cars. The number of miles on the car has a serious impact on the price it will fetch, Sparks said. He pointed to a fairly popular SUV, the Jeep Grand Cherokee. A 2008 model with 50,000 miles on it will have a resale value of more than $27,300, according to the latest NADA listings. The same vehicle with 125,000 miles will go for about $4,000 less.
The run-up in prices for used cars has been so dramatic that it almost doesn’t make sense to buy them anymore, said David Whiston, an auto analyst for Morningstar. That’s probably a good indication that prices are at or near a peak.
“For just a little bit more, I can buy a brand-new car,” he said. “There’s a tipping point. I think we are getting very close to seeing that.”
Take the Honda Accord, known for reliability and holding its value. A dealer would sell a 2008 four-cylinder Accord LX sedan in good condition with about 45,000 miles on it for $16,175.
With no down payment and a loan at 5 percent interest, it would cost $373 a month to pay off the Accord in four years. But Honda is offering a three-year lease on a new 2011 Accord for just $250 a month. The company will even make the first payment. You still have to pay $600 up front and 15 cents for each mile you drive more than 12,000 a year.
In Greensboro, N.C., Jeremy Barnes and his wife are expecting their first child, so they decided to replace a white 2007 Accord with a bigger, new vehicle. He wasn’t sure what they could get for the Accord when he checked prices on the Kelley Blue Book website.
“I was pleasantly surprised,” said Barnes, 30, a heating and air conditioning equipment salesman.
He’s asking $15,200 for the car, which is in good shape and has 47,000 miles on it. While waiting for a buyer, the couple are looking at vehicles like the Jeep Grand Cherokee.
The rise in used-car prices is a byproduct of the recession. The average car on the road now is 10.6 years old, according to the Polk research firm. That’s up from 9.8 years in the middle of 2007, a few months before the recession struck and people began to rethink major purchases.
Sparks, at D&S, said his company also does car detailing. Those services are booked to mid-June, as people are hanging onto their vehicles longer and bringing them in to make them look as close to new as possible.
“The economy has not come back to where it was, and I’m not sure it ever will,” Sparks said.
Another source of used cars got choked off when credit tightened during the 2008 financial crisis and car companies cut back on leasing new vehicles. Companies sell leased cars as used when leases expire.
Japan’s earthquake and tsunami also are driving up the price of some used cars. New models of some small cars, such as the Toyota Prius and Honda Fit, are expected to be in short supply. Dealers are buying used ones to sell in their place. That won’t last, though.
Ron Russell, director of operations at Darling’s Honda in Bangor, noted that up until the end of 2008 the U.S. market for new vehicles ranged between 16 and 17 million new vehicles. In 2009, after the financial crisis hit, that number dropped to 10.2 million.
He said Darling’s customers are getting good prices for their trade-ins — for “good, solid used cars.” Low-mileage cars that are fuel-efficient are good trade-ins, he noted.
Manheim, a big auction house where dealers buy used cars, said prices this year are the highest since the company began collecting data in 1995. Tom Webb, chief economist there, predicted that used-car prices will rise for about two more months and then level off. They may fall in 2012 and beyond as more used cars come on the market.
There already are signs that used-car prices will come down. Leasing was 21 percent of U.S. sales in February, which was up from 11 percent in 2009, according to Experian Automotive. That should bring more used cars onto the market as three-year leases end.
Banks and auto company finance arms also have loosened credit for people with poorer credit ratings, meaning more buyers can get a loan for a new car.
BDN writer Matt Wickenheiser contributed to this report.