Why are used car prices falling?

Used cars are displayed on a sales lot in San Francisco, California.

The market for used cars is still strong. It's just weaker than it was last year.

Richard Arca, senior manager of pricing at Edmunds.com, says used car prices are down less than one percent compared to last quarter. 

"With the new car market, it's really easy to find a car payment that's within your budget," Arca says. And, he says, one out of every three new cars sold involves a trade-in. So a lot more used cars are flooding dealerships. 

But not everyone's seeing inventory overload. Take Rick Elio, manager at Front Range Auto Sales, a small used car dealership in Brighton, Colorado.

"Used cars are harder to get, and they're bringing more money wholesale," he says. Elio says the cars that are toughest to find these days are the 2002 through 2008 models. And he pays a premium for those at auction. 

"If you've got to go pay too much for a car and sell it and make a little less money, you sell it, make a customer, and you just don't make as much money," he says. Elio says profit margins are small, but that could change.

Richard Arca, of Edmunds.com, says people aren't holding onto their cars as long as they were a few years ago. And that means a lot more used cars up for grabs. 

 

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