What do prices at the pump have to do with prices at the used car lot? They actually tend to mimic each other. Higher gas prices tend to cause drivers to want to spend less out of pocket on their automobiles. That means rising demand, as well as rising prices, for used cars—fuel-efficient used cars especially. Used car prices spiked last summer as gas prices soared, and then spiked again earlier this year as the national average neared $4 a gallon. Now that gas prices are retreating, relief is also in sight for consumers in the market for used cars.
Drivers have more than one reason to welcome decreasing gasoline prices. First, and most obviously, they mean that it’ll cost less to commute, drop kids off at school, and run errands with the assistance of an automobile.
While a few months ago, it seemed all but certain that average gas prices around the nation would easily top $4 this summer, prices at the pump have been on a steady decline for more than a month now, even as the peak summer travel season nears. As of Wednesday, AAA’s Fuel Gauge Report listed the national average at $3.62 per gallon, down from $3.82 one month beforehand.
The latest reports indicate that the recent reversal in gas prices is unlikely to reverse itself again anytime soon. Experts quoted in a CNN Money post say that prices will more or less stay the same in the months ahead:
“We might move a little lower, we might move a little higher,” said Tom Kloza, chief oil analyst of the Oil Price Information Service, the firm that compiles the pump price averages for AAA.
USA Today, meanwhile, cites analysts who anticipate that due to weak demand and decreasing crude prices, the national average may dip as low as $3.55 by mid-June.
So long as gas prices at least stay put, prices for used cars will come down from their recent highs as well. That’s the second benefit of cheaper gas prices. The National Automobile Dealers Association estimates that after a five-month period in which used-car prices increased by 10% or more, prices on many popular used models are expected to decline by 4% or 5% in June.
The average asking price for a 2009 Toyota Camry, for instance, was $13,235 in May, up 15% from the January average of $11,510. In June, though, the average should retreat to $12,560, a drop of $675 (5% lower) from May—though still roughly $1,000 more than what the same car would have cost in January.
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Likewise, the 2010 Hyundai Elantra, which was averaging $12,167 in May, is expected to sell for $500 less in June. The 2011 Toyota Prius is supposed to sell for $20,325, on average, in June, which is $900 less than it did in May. If gas prices decline further, used car prices may very well do the same.