Used cars for saleThinking about buying a used car? You might want to think about doing it sooner rather than later.

According to new data from the National Automotive Dealers Association, which tracks the market closely, prices are on track to rise an average of 1.8% in 2012. The cost of a used compact car will go up even more -- nearly 3%. And prices will near their peak in April and May, says the association.

What's going on? And what does it mean for car shoppers?

A Market Under Pressure From Both Sides

This is a trend that has been going on for awhile. A recent Wall Street Journal report noted that the price of an average midsized used car less than five years old has risen nearly 15% over the last two years.

What's happening is that both sides of the supply and-demand equation are getting squeezed. On the demand side are consumers who, since the economic crisis in 2008, have been looking for ways to save money. Instead of buying new cars, they've been choosing to purchase nice used vehicles.

On the supply side, new-car sales have been down during the same period -- way down. More than 16 million cars and light trucks were sold in the U.S. in 2007. Last year's total was just 12.8 million, and even that was a big increase over levels seen in prior years.

The result: Supplies of lightly used cars have run short while demand has been high. Some models have become quite scarce, particularly fuel-economy stars like Toyota's (TM) Prius and the Honda (HMC) Fit. To get one, you've got to be willing to pay top dollar.

Good Strategies for Concerned Car Shoppers

Yes, the market is tight, and higher used-car prices are likely to be with us for a while. But don't slam the brakes on your plans to buy a used car just yet. You can still get a lot of car for your money if you employ a few smart shopping strategies.
  • Steer clear of Toyotas and Hondas for now. Sure, they're steady, dependable choices. But key models are in especially short supply because of the struggles both automakers had in the wake of last year's tsunami in Japan. That means prices will be extra-high -- but improved reliability across the industry means that there are plenty of other good options to choose from nowadays.
  • Consider buying American. General Motors (GM) and Ford (F) both got tarred with a bad quality rep after decades of sub-par products. That means that their cars still tend to depreciate faster than imports, even though both companies have made huge improvements in recent years. This is especially true of Ford, whose more recent products -- cars like the Fusion and Mustang -- are among the best used-car buys out there right now.
  • Consider buying new. Buying new gives you more choices, a better warranty, and some peace of mind -- you don't have to worry about hidden damage or other lurking problems. You will pay more for a new car, but the white-hot used-car market means that you'll get more for your trade-in -- and you'll lose less to depreciation in the first year.
Whatever you decide, remember to shop for used cars the right way: Start by choosing a model, then shop for the best example available. And unless you're buying a car that has been "certified" by a factory program, make sure to have a mechanic check it out before you buy, especially if you're buying long-distance.

At the time of publication, Motley Fool contributor John Rosevear owned shares of General Motors and Ford. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of General Motors and Ford, as well as creating a synthetic long position in Ford.



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9 Comments

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ladywindsor1

I owned one Toyota. Never again. It was lemon. The replacement parts were rediculously expensive. Example: an alternator (rebuilt) for my Toyota Corolla cost 170. My mother had hers replaced on her Buick for $70. That is the only foreign car I owned. I will stick with GM. I have never had a bad GM car. I guess we all make choices based on experience.

February 11 2012 at 2:27 PM Report abuse rate up rate down Reply
burgesswv

Shop for a southern car ; A northern used car has underbelly rust problems after several harsh Winters. Car washes only help a wee bit the cash for clunkers program didnt come too soon, as they were ate up with rust.

February 10 2012 at 5:29 PM Report abuse +3 rate up rate down Reply
subtrek1

I'd buy a used car but I can guarantee any company who took a bailout and didn't go through a proper bankruptcy but gave the company to foreign investors or UNIONS who helped put them there will NEVER EVER see another penny of my money OUR jerk President already gave them 25K of my bond retirement money. Thanks BOOBRACK OBUMMER

February 10 2012 at 2:03 PM Report abuse +1 rate up rate down Reply
rickpetersonms

Did this article even mention that "Cash-For-Unions" destroyed thens of thousands of perfectly serviceable used cars?

February 10 2012 at 11:46 AM Report abuse +6 rate up rate down Reply
1 reply to rickpetersonms's comment
dknowles60

hear! hear!

February 11 2012 at 1:51 PM Report abuse rate up rate down Reply
mn4470

Sirs, If the mustang and the fusion are such good deals, then why are they so available? The American car companies traded in their collective ethics decades ago and even now make inferior products. Look at the "fit and finish" of Japanese cars as compared to American cars and there is no contest. Gpas between the hood and fenders, fenders and doors, ergonomics of the interior while sitting in the driver's seat, trunk room, etc. Japanese cars make the interior feel big( I had a honda crx), American cars not only look small, but sit and feel small.
Why are there plenty of American trucks for sale in the classified, while the Toyota Tundra is scarcer than gold?
I would love to buy American cars and trucks, even aside from their "planned obsolesence" campaign that scammed all of for decades. But, even still, the quality of American car products is lacking. You would think that they(Ford, Chevy, and Chrysler) would be smart enough to at least copy the Japanese modeling. Nope, not them, their arrogance is both unsurpassed and financially crippling.
They deserve what they get.
Mark Comerford

February 10 2012 at 10:39 AM Report abuse -2 rate up rate down Reply
2 replies to mn4470's comment
chris1011

And the Toyotas are literally catching fire now, aren't they? Because of an inferior door switch. Really are they that much better than a Ford?

February 10 2012 at 1:14 PM Report abuse +2 rate up rate down Reply
vlady1000

We have many work trucks in our construction company (all Ford/GM and some Dodge) and since we help build the Tundra plant (One of the larger subcontractors) we bought one. A mistake. It did not last 1/2 as long as our others. We get 250K miles (somethimed 350K miles) on the F-150 and Silverados all the time and they are field work trucks. One of the reasons you do not see many Tundra's for sell is because they make no where near as many....us your head

February 10 2012 at 9:39 PM Report abuse +1 rate up rate down Reply
starla

Most people don't realize that cars sold in the last 10-15 years can easily go for 200,000 to 250,000 miles. As soon as the odometer gets close to 80-90 thousand, they push the panic button and start shopping for another ride. My car is eleven years old and has close to 190,000 miles. I keep it properly maintained and it runs beautifully. People, stop buying cars so often, keep your old ones. Never, never lease a car unless your employer is paying for it. It it by far the most expensive way to drive a car.

February 09 2012 at 11:34 PM Report abuse +8 rate up rate down Reply
vlady1000

Yep, I noticed the used car are getting more expensive. Glad I bought acouple new cars 2 years ago with the huge going out business deals from Pontiac and Saturn. Between the huge rebates they had, GM credit card points and cash for clunkers, etc I was able to get them for about 1/2 sticker prices. The Saturn (a small Astra) is a actually worth a little more now (2 years later) than I paid for it. I will never see that again.

February 09 2012 at 9:59 PM Report abuse -1 rate up rate down Reply