Used Cars Make A Comeback

Gas prices aren't the only thing going up these days. Prices for used hybrids and more fuel-efficient small cars have risen dramatically in the past six months.

A shortage of new, popular and fuel-efficient vehicles has sparked interest and a surge in demand for older, fuel-efficient models in the used-car market. The same cars that were cheaper and virtually ignored last year are now selling at a premium, thanks to gas prices that have topped $4 a gallon.

The sharp rise in prices for used, fuel-efficient compact cars and hybrids is so "dramatic and one-sided," says Ricky Beggs, vice president and managing editor of Black Book, which compiles new- and used-car data for the industry. "We have never seen it where it was so focused [in one vehicle segment]," he says.

The most fuel-efficient vehicle in the market today is the 2007 Toyota Prius hybrid. It gets an Environmental Protection Agency (EPA) estimated average 46 mpg. The new 2008 Prius is in short supply, since Toyota has capped production of the model at 180,000 units for the year. Buyers who are just fine buying a used 2007 Prius paid an average of $21,850, or $1,900 more in mid-June than they did in January of this year. That's a 9% increase in a six-month period.

On Jan. 1 of this year, gas averaged $3.12 a gallon; today it is at $4.07, a 30% increase in the same time period.

It's not just used hybrids seeing a price increase, however. This year's Mini Cooper buyers expecting to find a lower-priced used 2007 Mini were in for a big surprise. They paid, on average, $2,300 more for a used Mini in mid-June, a 12% increase over the average transaction price on Jan. 1 of this year. The car has proved its value during the past six months; it gets an average EPA estimated 29 mpg.

Behind The Numbers
Black Book compiled data for used cars for model years 2002 through 2008 that dealers purchased at auction from Jan. 1 through June 16, 2008. The amount consumers actually paid for the vehicle is higher than what the dealer paid (since dealers mark up the price of the vehicle to make a profit).

Used cars typically depreciate in value from to 14% to 16% each year, so a vehicle that holds or increases its value is unusual, says Beggs. Any vehicle showing an increase of $400 or more in a six-month period is "out of the ordinary," adds Beggs, "and anything like a $1,800 increase is exceptional."

Dominating the list of 15 fuel-efficient used cars making a comeback is the Mini Cooper with four model years, including 2005 ($1,900 average transaction price increase, or 11%); 2006 ($1,600 average transaction price increase, or 10%); and 2004 ($1,050 average transaction price increase, or 7.4%).

As expected, the Toyota Prius hybrid is also popular, with four model years, along with the 2007, in high demand and commanding higher prices. The 2006 model saw a $1,600 average transaction price increase (8.5%); the 2005 jumped $1,200 in price on average (7%); and the 2004 jumped $800 in price (5.2%).

Other hybrids making the list are the 2007 Honda Civic Hybrid ($1,550 average transaction price increase, or 9.4%); the 2008 Mariner ($1,550 average transaction price increase, or 6%); and the 2006 Honda Civic Hybrid ($950 average transaction price increase, or 5.5%).

Rounding out the list are the 2006 Suzuki Aerio ($900 average transaction price increase, or 11%); 2004 Toyota Corolla ($400 average transaction price increase, or 4.3%); and the 2007 Nissan Versa ($400 average transaction price increase, or 3.4%).

The only SUV to make the list is also a hybrid, the 2008 Ford Escape ($700 average transaction price increase or 3%), which gets an EPA estimated 32 mpg.

Are you willing to pay more for a fuel-efficient used car? Is the price hike still lower than the long-term cost of gas? Add your thoughts in the Reader Comments section below.

Hybrid SUVs, it seems, stand in a different class from regular SUVs. The overall value of used SUVs has depreciated at a rate of 27% over the past several months, says Beggs. This time last year, the 2005 and 2006 Ford Expedition full-size SUVs were selling, on average, $1,760 higher at the end of May 2007 compared with Jan 1, 2007.

Auto experts say the used-car market is merely reflecting emerging trends in the new-car market: People want more fuel-efficient cars, plain and simple. Sales of the once popular Ford Expedition, which gets an EPA estimated average 14 mpg, tanked between January and April of this year by 27%, according to J.D. Power and Associates. At the same time, sales of the new 28 mpg Nissan Versa soared 37%.

While you can likely purchase any used gas-guzzler at a discount today, it'll cost you in the long run due to rising fuel prices. But as gas prices continue to rise, so will the cost of used, fuel-efficient cars.

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