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Ask Sid

Is My Used Car Really Worth More?

A shortage is driving values up, but the deal may go to the dealers

Q. I receive several mailings a month from car dealerships saying that my 2009 Honda is worth more at trade-in than ever before. Is this true or a marketing ploy to get me to buy a new car?

A. Most likely it's both. As of late June, the average price of three-year-old vehicles was 11 percent higher than in 2010, and used vehicles of all ages were up 5 percent, according to the car sales website Edmunds.com. That compares with a typical yearly increase of roughly 3 percent.

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Used gas-sipping compacts between one and five years old are particularly prized: They were worth about 30 percent more in June than just six months earlier, notes the National Auto Auction Association.

The higher prices are due to the law of supply and demand. The recession that began in 2007 caused a big dip in new-car sales, meaning that today there are fewer late-model used vehicles on the market. And continuing hard times mean that people tend to keep their cars longer, rather than selling them used.

So in theory, you should be getting more for a trade-in. But dealers are in business to make money and may try to capture the increased value for themselves.

I recently got a mailing informing me that my two-year-old Toyota was "worth more than ever." But when I stopped by the dealer to ask what that meant, I got an offer nearly $2,000 lower than its trade-in value as estimated by Edmunds. And based on the windshield price of models at that lot, the deal that was offered me would have netted the dealer a mark-up of about $5,000. (Of course, you can dicker on used-car prices just as you can dicker when buying a new car.)

Which leads us to the "marketing ploy" part of your question. These mailings, which sometimes offer incentives such as free gift cards just for getting a trade-in quote, are aimed at getting you to visit the lot. There, the scant number and high prices of used cars may sway you to shop "new."

Notes Edmunds: "A number of people are researching used cars on our site but then ultimately buy a new car, apparently swayed by the limited used-car inventory that is available and the minimal difference between the prices of lightly used cars and their heavily incentivized new counterparts."

The bottom line: Do your homework before heading to the dealership. In addition to Edmunds, you can get realistic buying and selling prices at AutoTrader, TrueCar and Kelley Blue Book.

You may also like: Used cars can be the way to go. >>

Sid Kirchheimer writes about consumer and health issues.

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