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Used Car Prices Finally Decrease

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author photo by Jeffrey Archer October 2011

After months of steady increases, used car prices are finally falling. According to wholesale automotive auction firm Manheim's Used Vehicle Value Index, used car prices recently fell for the fourth month in a row - but the company is quick to point out that prices remain close to record highs despite the declines.

In use since 1995, Manheim's Used Vehicle Value Index measures used car prices independent of underlying shifts in the characteristics of the vehicles being sold. That means the index can appropriately measure trends in used car prices, regardless of vehicle condition, mileage and options. The company says the index currently stands at 122.9, marking four straight months of declining prices and a sharp drop from May's record high of 127.5.

But that doesn't mean used car buyers can go searching for great deals just yet. According to Manheim, prices still remain at near-record levels, with this month's figure representing a 3.4 percent increase in the Used Vehicle Value Index compared to the same period last year. Tom Webb, an economist for the firm, says he expects prices to keep easing downwards through the end of 2011.

So what is finally causing used car prices to fall? According to Manheim, there are several factors at work. Chief among them is an increase in new vehicle sales, which boosts trade-in volume. The auction firm notes that such used car volume increases almost always drive down their sale prices, since shoppers have more stock to choose from. Manheim also says major incentives on new vehicles at the end of the model year are responsible for driving down used car prices. Since such incentives decrease transaction prices on new cars, used car prices must follow suit in order to remain competitive.

But regardless of the reason for the decline in used car prices, the pre-owned automotive market is once again swinging in favor of buyers - although sellers, too, may be happy to discover their used cars are still trading at a premium compared to this time last year.

This image is a stock photo and is not an exact representation of any vehicle offered for sale. Advertised vehicles of this model may have styling, trim levels, colors and optional equipment that differ from the stock photo.
Used Car Prices Finally Decrease - Autotrader