Throw the conventional wisdom for buying and selling cars out the door. Right now, because the supply of new cars is limited, the prices of new and used cars alike are soaring, and decent gas mileage is increasingly more important to buyers than the thrill of new-car smell, traditional concepts of depreciation upon driving a new car off the lot don’t apply—and certain vehicles are being sold for more than what the owners paid a year or two ago.
A car is usually thought of as an investment only in the same way that a professional wardrobe, or even one’s education, is considered an investment: They can all help put you in a position to get a career going and earn more money. But they’re not investments like homes or gold, in which the owners buy with the idea they’re likely to sell them later and make a profit. (It’d be weird if you could sell your education, graduate degree and all; I know a few people who’d love to try.)
But now, the unheard-of scenario is upon us in which used car values have skyrocketed, sometimes to the point that owners are selling them at profits, or at least selling them after a few years of what amounts to basically driving around for free.
(LIST: Top 10 Most Valuable Used Cars)
The Wall Street Journal has been fielding questions from readers wondering about how much they can get for used vehicles. One man inquired about the likelihood of selling a 2010 Toyota Prius with 11,000 miles on it for $22,000—$500 more than he paid for it a year ago. A few years ago, this seller would have been laughed at for such a ballsy proposition. But the WSJ columnist acknowledges the possibilities of getting his asking price:
Thanks to supply and demand you may be able to sell your car for more than you paid for it. Even if you don’t wind up making a profit you can probably work out a deal under which the 11,000 miles you drove will be essentially free of charge.
Today, the New York Times lists several good-mpg used vehicles whose values have risen sharply in recent months, including the Honda Civic, Chevy Aveo, and Ford Focus. Buyers looking to scoop up one of these used models can expect to pay thousands more than they would have just a few months ago. But above all, the Toyota Prius is currently retaining its value more than any other used vehicle, not in the least because the earthquake in Japan has hampered Toyota’s output of new cars. The Times reports:
A year-old Prius actually can command about as much as the list price of a new Prius because the new ones are in such short supply that many dealers are selling them for several thousand dollars more than the sticker price.
The “unusual confluence of factors,” as the Times puts it, has also given U.S. manufacturers an excuse to raise sticker prices on new cars. GM, for instance, just jacked up prices on the Chevy Sonic and Chevy Cruze, which are both get good gas mileage and appeal to cost-conscious buyers.
Even more curious (and borderline despicable), some Chevy dealers have been taking advantage of high-demand for fuel-efficient vehicles—and taking advantage of government tax incentives accompanying electric vehicle purchases—by selling gently used Chevy Volts for $5,000, even $10,000 more than their brand-new equivalents.
So, could buying a car today be a good investment. It’s possible, I suppose, but very unlikely. The current scenario is more of a fluke than anything. Were it not for the confluence of the Japan earthquake and soaring gas prices (which are already coming back to earth), used car prices wouldn’t have risen as they did, at least not as much.
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There is one other interesting theory out there on how to buy and sell cars in the most financially savvy way. With some strategy, good timing, and solid negotiating skills, you can own a car essentially for free for a few years. The trick is to buy the vehicle in the sweet spot—after it depreciates significantly in price—and then sell it before it’s likely to need any costly maintenance.
Of course, this theory only works if the vehicle depreciates sharply in value, and for many in-demand cars, that’s just not happening lately.