The Memorial Day Weekend usually kicks off the summer used car buying season - just make sure you know where the bargains are.
Ricky Beggs, managing editor of Black Book, is my trusted source for information on pricing in the used car business because his publication/website collects its data at the used car auction sites. He knows where consumer prices are heading because he tracks the wholesale purchasing so well.
In an article with AutoRemarketing.com, Beggs said there are two segments that are still seeing price increases - while the rest of the used car market price is seeing drops in auction prices. The two segments are: compact SUVs and the full-size crossovers.
Those increases are being driven by two things. Consumers have short memories and gas prices are dropping. Well, actually those two things are related. The average consumer quickly forgets higher gas prices and doesn't mind buying a less fuel-efficient used car like a compact SUV or full-size crossover.
Ah, but some might argue that buying a compact SUV means consumers are cognizant of higher fuel prices. That's kind of a Band-aid approach frankly. Consumers pronounce a desire for fuel efficiency by saying they bought a compact SUV instead of a midsize or larger.
My argument is somewhat bolstered by this fact from Beggs: entry midsize cars dipped by 0.6% and prices for upper midsize cars ticked 0.4% lower.
So, stay away from the compact SUV and full-size crossover market. Their prices are still rising and dealers are not going to want to bargain in those segments.
It's the compact car segment where you are going to find bargains this weekend. Sure, their prices, on average, only dropped $20 last week but there's a growing sense of nervousness among used car dealers who paid too much for compact cars when fuel prices were higher.
Frankly, they're afraid they are going to get stuck with little or no profit - and shudder - possibly losses. Nobody gets into the used car market to lose money.
That's why for the first time in months consumers are going to be able to actually haggle over compact car prices. As Beggs pointed out, dealers are hesitant to stock their used car and used car truck lots until product sells. How do you sell product quickly? By moving it at lower prices.
Used car dealers are going to want to get into the more popular segments like compact SUVs and full-size crossovers but they can't do that if there are cars lingering on the lots.
Here are the details of Beggs' analysis that can be used to find the bargains:
- Prices for luxury SUVs paced the decliners last week, sinking by $91. Prices for midsize SUVs weren't far behind, dropping $56.
- While prices for midsize pickup have been strong for the past three months, the segment hit a bump last week, slipping $51.
- Overall truck prices dipped by $23 last week, the largest declining amount since the week ending March 2.
- For the first time in 12 weeks, compact car prices ticked lower, softening by $20, as I mentioned above.
- Prices in other car segments moved only modestly a week ago, as entry midsize cars dipped by 0.6 percent and prices for upper midsize cars and entry-level cars each ticked 0.4 percent lower.
The problem with luxury SUVs is they are both gas guzzlers and expensive. Not concerned as much with price? You're going to find dealers willing to bargain in this segment. Go to a site like Edmunds.com and get the value of the used luxury SUV. Your starting point for negotiations is going to be 5% below the dealer's asking price.
Unless, the dealer price matches what you find at Edmunds.com. That's a fairly savvy dealer who knows how to price used vehicles competitively. I prefer Edmunds.com because I think its pricing is more consumer friendly.
As always, there are questions to ask a dealer before buying a used car. Go over all of those questions to help in the bargaining process.
Also, make sure you get a CarFax report on the car, too. A good tidbit of info you can glean from the report is when the dealer bought the car at auction. Has the car been there more than 30 days? Then you are really in a position to bargain.
Good luck with the used car buying process. I'm confident that you are going to find bargains out there.