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DETROIT — Is that new set of wheels out of your price range? Used cars have gotten more affordable, especially if you’re looking for a small car or a hybrid.
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Used car prices have been falling since 2011, and they’re expected to decline gradually for the remainder of this year. That’s good news for those joining or re-entering the work force, or anyone else who might find a payment on a new car too steep.
There is some volatility. Prices for used cars are typically higher at the start of the year, when dealers buy cars at auctions in advance of the spring selling season. They decline as the year goes on. The price of a three-year-old car fell 4 percent between April and June, estimates Alex Gutierrez of car-pricing company Kelley Blue Book.
Used-car dealers get many of their cars from auctions run by companies like Manheim. The average price for a used car at auction was $11,031 in June, down 6 percent from its peak in May, 2011, Manheim reported this week. The 2011 peak was the highest price Manheim had seen since 1995, when it began collecting data.
At Manheim-run auctions, banks and auto company financing operations sell cars that have come back after leases expire. Rental-car companies and car dealers also sell cars there.
Auction values also help set prices for individuals who want to sell their cars at the market rate.
In 2009, new vehicle sales fell to a 30-year low of 10.4 million. Two years later, used cars were in short supply and prices got so high that it made sense for consumers to buy new.
Things have turned around. New car sales picked up starting in 2010 and now there are far more used cars in the pipeline. Buyers shopping for a three-year-old used car can expect to pay 25 or 30 percent less than the manufacturer’s suggested retail price for a current new model.
The average retail price of a used car fell by $1,000 per car in the last half of 2012. Mr. Gutierrez expects a similar decline in the second half of this year. But used car prices vary widely based on the age of the car and the miles it has been driven.
The price declines will be gradual. While more inventory is helping to lower prices, demand is rising as more people get jobs and need vehicles for work.
Mr. Gutierrez estimates that a three-year-old car cost an average of $19,000 in June. By comparison, a new car averaged $31,663 last month.
Every year around 40 million used cars are sold in the United States, compared with 14 or 15 million new cars.