New-car prices, resale values rise

By Karl Henkel | May 22, 2011 at 12:00a.m.

YOUNGSTOWN

Relief at the gas pump appears to be on the horizon, but it may just be a consolation, as this summer could be a confusing one for car owners — not just in the Mahoning Valley — but throughout the nation.

As fuel prices slowly start falling, drivers instead will have to combat the rising cost of cars. Those costs could hinder new-car buyers’ choices, but could also potentially net used-car drivers a substantial return on their investment.

The Big 3 — General Motors Co., Chrysler Group LLC and Ford Motor Co. — have all slowly increased prices on new vehicles, while at the same time paring incentives.

Overall, new-car prices have increased nearly 20 percent in the last two years, according to Kelley Blue Book, the popular auto- valuation website.

There are a multitude of reasons for the spike, most leading back to the economic downturn of the past few years, when consumers couldn’t afford to buy as many new cars (which helped contribute to the government assistance to GM and Chrysler), which led to a rise in used-car sales.

Now, with new-car sales increasing, dealerships are in desperate need to restock used-car supplies, and auto dealers are willing to pay top dollar.

KBB highlighted the drastic increase in used-car values. The most substantial change was in the Toyota 4Runner. In a three-year span from April 2007 through 2011, the trade-in value jumped from $13,000 to $20,500 — a $7,500 increase.

Other big gainers were the Ford Explorer (up $7,100), Toyota Prius ($5,700) and Honda Civic ($3,500).

Alec Gutierrez, manager of vehicle valuation for KBB, said this is a big plus for those who own used cars.

He said now is the best time to trade in or sell a fuel-efficient vehicle — such as the Civic.

Nick Siciliano, general manager at The Honda Store in Boardman, said the reason Civics have such a high value now is threefold: quality and longevity, the demand for used cars, and the gas mileage (Civics regularly get 30 miles per gallon and above).

“Naturally, we’d like to have a lot of Civics in the inventory, because we do have kids going to school and a lot of parents want a vehicle like this for the gas mileage and safety rating,” he said.

Not all cars are uniform to the Civic, and the older the vehicles, the lesser the market for them.

Russ Nardo of Nardo’s Auto Sales, a used-car dealership in Niles, primarily sells older-model used cars.

Nardo said the dealership has only sold one vehicle this month, much in part to the demand for higher-quality, newer vehicles.

“People who can spend want nicer cars,” he said.

Nardo said the need for low-mileage, fuel-efficient, inexpensive vehicles has encumbered his sales and has severely affected his sales. He said he’s sold just one car through the first three weeks of May.

Used-car dealers may be struggling to find stock, but new-car dealers seemingly can’t keep up.

Inventory levels are shrinking. AutoWards.com reported earlier this month, subcompact inventory levels were far below the 60-day industry standard.

Parts for foreign-built cars are also increasing, and prices have — and will — continue to increase moving forward.

“If certain models like the [Chevrolet] Cruze are at maximum capacity, then I think prices will increase,” said Gutierrez, who said many subcompact models are being sold at or near manufacturer suggested retail price value.

He said he could see prices rise about $1,000 more than MSRP, but said anything more than that could shift the market back to recessionlike attributes: passing on new, buying up used.

“At the end of the day, a customer is going to wait or find another alternative that won’t cost them $3,000 to $4,000 over MSRP,” Gutierrez said.

In the meantime, he said the message is clear: If you’re in the market for a new vehicle, now is the time to buy.

“Values are likely to remain strong for at least the next couple of months,” Gutierrez said. “Once gas prices level off and come back down, we’ll see the demand for those hot [fuel-efficient] vehicles start to deflate.

“There might be more- attractive deals in the fall, but if you’re in a position where you need a new car, you’re best to get out there sooner than later.”