Cash for Clunkers Shifts Used Car Values
By: Jeff Brown

The biggest surprise in the government’s Cash for Clunkers program is the boost it apparently has given to used-car sales and prices. Since the rebates of up to $4,500 are only for new-car sales and leases, it seemed obvious the program would reduce demand for used cars, depressing prices.

But it appears that vibrant used-car sales are the result of drivers gearing up to replace their vehicles, only to discover they don’t qualify for the clunkers program. Rather than go home disappointed, they turn to the used-car market.

But this week-old phenomenon adds a wrinkle to the already difficult problem of determining what a used car is worth. Whether you are a buyer or seller, it would pay to make an extra effort to assess rapidly changing values.

Two cars that are identical when they come off the assembly line can have far different values a few years later, depending on how much each has been driven, how well it’s been maintained and whether it’s suffered any mishaps.

Even geography has an effect, as a car that’s been driven over salty winter roads in the Northeast may appear older than one in the Southwest that hasn’t, though sun damage might be worse in Arizona than Maine.

A 2004 Ford (Stock Quote: F) Explorer with 50,000 miles is worth $9,600 in a trade-in, or $11,700 in a retail sale, according to the car-data firm Vehix.com. With 80,000 miles the figures are $7,975 and $10,075.

While it certainly would pay to use a car-valuation service like Vehix, Kelley Blue Book or Edmunds.com, keep in mind that value estimates based on reported car sales can be weeks or months out of date.

While Vehix valued a 2004 Explorer with 40,000 miles at $12,325, some similar vehicles listed for sale on the site had price tags closer to $15,000.

Of course, sales prices are just asking prices that could be knocked down in negotiations. Still, a thorough survey of asking prices can give you a sense of whether current prices vary from those provided in the car-valuation services.

The three services mentioned have for-sale listings. Also check Craigslist, eBay (Stock Quote: EBAY), the local newspaper and the car-sales booklets given away at convenience stores and street-corner honor boxes.

Buyers should also shop for the best loan rates. New-car loans average 6.5 % to 7.2 %, depending on the term, according to the manybanking.com survey. Use this search tool to find the best loans for used cars. Bank of American (Stock Quote: BAC) has a five-year loan at 5 %, for example, and many credit unions do better.

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