Some car buyers might instinctively turn to a used car if they can't find a good new car deal. But they'll be hard-pressed to find bargains there. The True Market Value® (TMV®) prices of 3-year-old used cars are already up virtually across the board. The average TMV price for a used Honda Civic was up 10.4 percent in March, compared to the previous year. Other popular used-car models with price increases over the last year include the Nissan Sentra (up 11.8 percent), the Toyota Camry (up 7.2 percent) and the Hyundai Sonata (up a steep 20.2 percent).
Edmunds' current list of new cars that are cheaper than their used counterparts reflects these changing conditions, says Edmunds analyst Ivan Drury. "As we see a combination of inventory squeeze and a reduction of incentives on small vehicles, the savings on new cars will diminish, used car values will increase and new cars will transact closer to MSRP," he says. "This scenario is not a good one for consumers looking to buy a small car, but if they feel like trading in or selling their fuel-efficient used vehicles, there might be some benefit."
If you do want to sell that car, Penske and other dealers would likely be interested in buying it. Penske is aggressively building up its used-car inventory beyond the usual trade-ins and lease returns. It's also hanging on to trade-in cars it previously would have sent to auction, converting loaner cars to sales stock, and "buying more cars at the curb," Roger Penske said in the earnings call.
"We're buying cars directly from consumers," Penske representative Pordon says. "We anticipate being even more active in that — purchasing from you even if you don't purchase from us." He also notes, "Our guys and girls in stores look in newspapers, Craigslist and eBay and will go out and acquire those cars." This will probably be a disheartening development for private-party buyers, who suddenly have more competition for used vehicles.
But it's not all bad news — for some consumers, at least. Honda and Toyota are two carmakers so far which have said that they will work with customers whose leases are expiring, to arrange extensions with the same monthly payments. That will be a huge help to dealers, Pordon says. If the customer doesn't have to turn in an off-lease car immediately, this gives the dealers breathing space until they once again have the model color and features the customer wants in his replacement car. Toyota Financial Services told Penske it will extend leases for up to 12 months, Roger Penske said.
The best advice for the summer car shopper, Pordon says, is to be "flexible but diligent." Edmunds' TMV tracks changes in car prices, so consumers can gauge whether a particular dealer's quote is reflective of prices in the local market or simply an opportunistic play to maximize his profit margin. As Edmunds CEO Anwyl says, shoppers might want to accelerate their plans and buy in May to beat the looming supply chokepoints. Or, if they can be patient, they might just sit out what promises to be an uncertain shopping season.