It's the best time in years to sell your car.
People are holding on to cars and trucks for about a year longer than they did before the recession, which has created a tight supply of used vehicles. So few are on the market that prices have risen to their highest in at least 16 years.
As of last month, dealers were paying an average of $11,660 for a used car or truck, up almost 30 percent since December 2008.
"You're not going to find a situation like this very often," says Jonathan Banks, executive auto analyst for the National Automobile Dealers Association (NADA) used-car pricing guide.
David Whiston, an auto analyst for Morningstar, says prices are at or near a peak. "For just a little bit more I can buy a brand-new car," he says. "There's a tipping point. I think we are getting very close to seeing that."
Take the Honda Accord, known for reliability and holding its value. A dealer would sell a 2008 four-cylinder Accord LX sedan in good condition with about 45,000 miles on it for $16,175.
With no down payment and a loan at 5 percent interest, it would cost $373 a month to pay off the Accord in four years. But Honda is offering a three-year lease on a new 2011 Accord for just $250 a month. The company will even make the first payment. (You still have to pay $600 up front, plus 15 cents for each mile you drive over 12,000 a year.)
Along with owners holding on to their vehicles longer, other factors have helped drive up used-car prices:
- The federal government's 2009 "cash for clunkers" rebate program took 700,000 older cars and trucks off the market.
- Rising fuel prices have disproportionately increased prices for 2- to 5-year-old fuel-friendly compacts such as the Honda Civic, Toyota Corolla and Ford Focus.
- Japan's earthquake and tsunami have caused new models of some small cars, such as the Toyota Prius and Honda Fit, to be in short supply. Dealers are buying used ones to sell in their place. That won't last, though.
- Normal seasonal activity drives up used-car prices in spring as car buying ramps up.
Jeremy Barnes and his wife are expecting their first child, so they decided to replace their white 2007 Accord with a bigger, new vehicle. Barnes, who lives in Greensboro, N.C., wasn't sure what they could get for the Accord when he checked prices on the Kelley Blue Book website.
"I was pleasantly surprised," says Barnes, 30, a heating and air-conditioning equipment salesman.
He's asking $15,200 for the car, which is in good shape and has 47,000 miles on it. While waiting for a buyer, the couple is looking at larger vehicles such as the Jeep Grand Cherokee.
The rise in used-car prices is a byproduct of the recession. The average car on the road now is 10.6 years old, according to research firm Polk. That's up from 9.8 years in mid-2007, a few months before the recession struck and people began to rethink major purchases.
Prices are rising so fast that NADA is advising dealers to disregard its monthly printed guide on used-car prices and check prices online instead.
Cars.com, an online car-buying site, says average used-car prices increased 10 percent over the past year. Biggest gainers: Hyundai (up 22 percent), Mercury (19 percent) and Ford (14 percent).