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Trade In Prices Pick Up Steam

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author photo by Autotrader February 2011

New data from the National Automobile Dealers Association says trade-ins are commanding higher prices – which is not necessarily good news for all car shoppers.

According to NADA projections, used car supplies are expected to drop 4 percent through 2011, causing dealers to spend more money to buy used cars. That means trade-in values will see a price hike – good news for new-car shoppers who are already faced with near-record incentive levels on new cars, but bad news for first-time used-car buyers without a trade-in, who will see used-car pricing jump.

One Internet site reported that the average transaction price for a used car last month was $17,848 – three percent more than January 2010, and a startling 13.4 percent higher than 2009 prices. That means that used cars – usually known for steep depreciation and uncertain quality – are often getting more expensive, and fast.

Many theories could help explain the rise in used car prices. Automotive quality is higher now than ever before, leading many car shoppers to question the necessity of buying new. Pent-up demand is another potential culprit, as many car owners held on to their vehicles during the recession, only recently exchanging them for newer models. And more automakers are offering certified pre-owned programs, bumping up used-car prices by adding warranties and inspections to pre-owned vehicles.

Another theory explaining higher used car prices is the continued increasing popularity of automotive classified websites like AutoTrader.com. Car shoppers can use these sites to find out exactly what their cars are worth, leaving them reluctant to trade in cars considerably below their retail values.

According to the NADA, price gains have been highest for Chrysler and General Motors vehicles, which have seen 15- to 20-percent residual value gains among two- to five-year-old models. Used cars from most Japanese, German, and Korean brands have seen gains closer to 10 percent.

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.
Trade In Prices Pick Up Steam - Autotrader