If you’re shopping for a used car, or thinking about it, here are things you should know:
• It’s a bad time to be looking for a used pickup or big SUV. They’re very popular now, and that’s driving prices up sharply.
• It’s a great time to be looking for a late-model compact. Prices are coming down. Luxury used cars are getting cheaper, too.
• In fact, a flood of cars coming off lease seems to be weighing down used car prices in general this season, after three years of price increases.
• If you’re not shopping right away, you might get a better deal if you can hold out until next fall.
Used car prices are seasonal. Prices tend to be lowest in late fall and early winter. Prices are usually rising in March as tax refunds arrive and people start shopping. They’re highest in May and June.
Cargurus.com, an auto shopping service that tallies millions of car listings, says that prices hit bottom this year in early February, and were 5 percent cheaper than in May. Kelley Blue Book, the car pricing service, found an 11 percent difference in prices between May and November.
Then again, price isn’t the only factor in deciding when to buy. Interest rates on car loans are low now, and we don’t know what they’ll be at Halloween.
Like new car dealers, used car lot owners have been enjoying rising sales and better prices as the economy slowly improves. The average price of a used car rose 4 percent last year to $18,600, according to Edmunds.com, the car review and shopping website.
In part, that’s because more people have jobs, and it’s raising demand for cars. In part it’s because the typical car on the lot is younger these days, and newer cars command better prices.
The big change this year involves a deluge of about 4 million 3-year-old cars coming off lease — and that’s holding prices down.
“Overall, prices should fall this year because of significantly higher supplies,” says Tom Webb, chief economist for Cox Automotive, which owns Kelley.
Early in this decade, new car dealerships began pushing leasing as a way to get more people into more expensive cars. Leases jumped 26 percent in 2013 alone, says Edmunds.com. Lots of those leases are expiring this year, sending more cars to the used lots.
Kelley Blue Book isn’t seeing the normal rise in prices it usually sees in February and March as tax refund checks arrive. “We’ve seen absolutely no uptick this year,” says Sean Foyil, manager of vehicle valuation at Kelley. In fact, cars in general are selling for 2 percent less right now than last year, according to Kelley.
But the price story differs widely by type of vehicle, as well as by age.
“When the price of oil plummeted about halfway through 2015, shoppers returned to the segments that they truly desire: trucks and SUVs,” reported Edmunds.com in its latest report on the used car market. “As a result, prices of these vehicles increased much more than non-luxury cars.”
Manheim, a national car auctioneer, says auction prices for used pickups are up 25 percent over the past three years. Besides lower gas prices, Manheim credits higher sticker prices for new trucks, and a revival in the construction industry for pushing up used pickup prices.
As of January, used pickups were selling for 8.5 percent more than a year earlier, according to Manheim. Full-size SUV prices are up 7 to 9 percent, according to Kelley Blue Book, although smaller SUV crossovers are not seeing such increases.
Meanwhile, compact gas-sippers are a bargain, with prices down about 9 percent over the past year, says Manheim. Luxury brands are also down in price by nearly 4 percent.
Around St. Louis, the effect of the lease car glut will vary by the dealer. Steve Brown, general manager at Frank Leta Acura, fills his used car lot mainly with trade-ins. Rather than a glut, he’s seeing low inventory on his used car lot because new car sales are slow in winter, meaning fewer trade-ins.
But dealers like him will still feel the effect if the supply increase lowers prices at his competitors. The impact may be great on brands that rely more heavily on leasing — such as Toyota, Acura, Honda, Lexus and German luxury brands.
Brown, meanwhile, is expecting a “very strong year” for used car sales as the growing economy keeps customers coming.
If you’re vacationing in Miami this winter, consider picking up a used car while you’re there. Miami has the cheapest used cars in the nation, with prices 8 percent below average, according to a 2014 survey by Cargurus.
St. Louis is a little on the expensive side. It ranked 67th among 95 cities in Cargurus’ price survey, with used car prices here about 3 percent above the national average. Most cities are within 2 or 3 percent of the average.