Used Cars Make A Comeback

- Jacqueline Mitchell

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.

In Pictures: Used Cars In High Demand

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 (5.1 L/100km). 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 US, 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.

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 (8.1 L/100km).

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 (7.4 L/100km).

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 (16.8 L/100km), 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 (8.4 L/100km) 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.