Higher Gas Prices Drive Up the Price of Trade-Ins, Too

Gas prices and trade-in offers linked to better deals on newer vehiclesHigher gas prices and a demand for smaller used cars -- like the Ford Focus, Honda Civic and Toyota Corolla -- has driven up the price that dealerships are willing to pay for trade-ins to the highest they've been in at least 16 years, according to the National Automobile Dealers Association's used car pricing guide.

But those prices are expected to hit their peak this month, Jonathan Banks, a NADA senior analyst, said in a NADA video.

"Strong consumer demand for small used cars is driving up prices," Banks said in a statement. "The NADA Guide increase in trade-in values for June should come as no surprise because it reflects a shortage of both new and used cars entering the market. Fewer new cars have been produced as a result of the crisis in Japan, which has shifted consumer demand to the used car market. High gasoline prices are also increasing the demand for both new and used small cars."A 2007 Toyota Prius in average condition, for instance, would have brought a trade-in value of $13,400 in May. NADA's June issue of the Used Car Guide puts the trade-in value at $15,350 -- a 15% increase.

But David Whiston, a Morningstar auto analyst, told the Associated Press the price hikes for used cars have now put them in the range of new car prices and he expected the trade-in values to peak soon.

"For just a little bit more, I can buy a brand-new car," Whiston told AP. "There's a tipping point. I think we are getting very close to seeing that."

But what if you're looking for a deal on a used car? Can you still get one? Yes, but be warned: The National Consumer League warns consumers to be very wary of sellers who seem to offering too good of a deal.

The NCL's Fraud Center has received more then 100 complaints since the beginning of the year from consumers nationwide who were looking for a bargain but ended up getting burned. The used car scams usually involved classified ad listings on sites like craigslist or eBay for late model luxury cars listed well below market value.

The NCL warns consumers to be cautious and avoid the following red flags that could indicate the used car for sale is just a scam:

  • The car is listed far below market values like those in Kelley Blue Book.
  • The seller wants payment quickly through wire or bank-to-bank transfers because they are or will soon be moving out of the country.
  • The sellers tell you they live outside the United States but are working with an American middleman or online escrow service.
  • The seller refuses to meet in person or talk on the phone; all transactions are done via email, instant messages or text.
  • The seller's messages have numerous grammatical and spelling errors.

The NCL encourages consumers who believe they've been a victim of fraud to file a complaint online with the group.
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