Mad market for used fuel sippers
Combination of market quirks pushes used Priuses prices sky high. But don't bet it will continue.
May 18, 2006; Posted: 1:23 p.m. EDT (1723 GMT)
NEW YORK (CNNMoney.com) - In an atmosphere of high fuel prices, the market for used cars with high fuel mileage has gotten red hot.
Used car prices can fluctuate more with fuel prices because used car prices are more flexible than new car prices, experts say, and because used car shoppers generally have lower incomes than new car shoppers so they are more effected by gas prices.
In one extreme example, used Toyota Priuses are in such demand that they lose almost no value in the first year or two of ownership even after being driven tens of thousands miles.
For example, a 2005 Toyota Prius that had a sticker price of $21,515 when new could sell for $25,970 used with 20,000 miles on the odometer, according to data from Kelley Blue Book. Since Toyota dealers usually charge a few thousand over sticker for new Priuses, the buyer in this example probably wouldn't have made a profit, but nearly so.
Honda Civic Hybrids are also sporting near-immovable resale values.
The Prius is an extreme case, though, warned Forrest Sherman, a pricing analyst with Kelley Blue Book. Those paying top dollar for a used Prius now may see prices drop later.
"It will happen," said analyst Forrest Sherman with Kelley Blue Book. "There's only so many people that will find (a used Prius) that attractive and will pay that much for it"
It isn't all just Beanie Baby-style insanity, though. There are some sound fundamental reasons for the high prices being paid for hybrid cars like the Prius and Civic Hybrid in the used-car market.
First, prices for all kinds of used vehicles are relatively high now because the supply of used cars is low. A few years ago, leasing wasn't very popular. Today, that means fewer cars being traded in at the end of lease contracts, a major source of well-maintained used cars.
Second, prices for used compact cars, including non-hybrids, are up because of high gas prices. It isn't just that people are buying them to save fuel, but that more buyers are considering these cars and discovering how good they've actually become, said Raj Sundaram, president of Automotive Lease Guide, a company that tracks used car values for the leasing industry.
"Resale values on mid-compact cars are jumping quite a bit," said Sundaram.
Mid-compacts include the Honda Civic, Toyota Corolla and Ford Focus. Prices for used compact cars have climbed about 20 percent in the past year, according to data from Edmunds.com.
A 2005 Honda Civic EX with 20,000 miles on it is worth $55 more than its original $18,280 price, according to Kelley Blue Book.
Third, in the case of the Prius, the car is nearly impossible to find on dealer's new car lots. Customers generally have to wait months to get one.
In some ways, a used Prius offers a better value, said James Bell, publisher of IntelliChoice and a Prius owner.
Shoppers trolling lists of used Priuses on Websites like ebayMotors.com, for example, are looking at actual cars that are available immediately. They have choices of colors and option packages whereas, if they were shopping for a new car, they might have to take whatever is available or wait until they can get what they want.
So, a few thousand miles on the odometer may be a small price to pay, said Bell.
Bell has already bought a second Prius and intends to list his two-year-old one for sale at $25,000, just a few thousand less than he paid for it. He could ask for more.
"I want a quick sale," he said.
While these prices are a boon for sellers, they could prove to be a bust for buyers. The factors that are currently holding up prices for used hybrid cars could change quickly, said Sundaram.
Toyota and other companies are increasing hybrid car production. That will drive down the price of new hybrids and used ones. Also, hybrid technology will likely improve in coming years, said Sundaram, making today's Prius seem like a Walkman compared to tomorrow's iPod.