Used cars: Where the bargains aren't

Red car on coins

Considering dumping your old heap for something newer this year?

We think the better bargains might be in new cars rather than used ones in 2012.

Used-car inventories will be down and, although average prices on used cars might not noticeably increase, they will at least remain at their elevated 2011 levels.

Here's why.

Used-car prices have been abnormally high since the economic meltdown near the end of 2008. Industry pundits expect them to remain high at least through this year and into next.

The reason is simple: If no one is buying or leasing new cars, fewer used cars find their way to the marketplace as trade-ins.

Yes, new-car sales have been steadily improving the last 18 months, but they are still nowhere near 2007 levels. So the trade-ins that are the primary source of used cars are still down.

Overall, the used-vehicle supply is expected to drop 7% in 2012, the automotive trade publication Automotive News reports.

If you are shopping for certified used cars -- ones that manufacturers inspect and sell with a limited warranty -- the news is even worse.

You will find the supply of those cars down more than 20%, according to Automotive News.

That means prices not only will remain high, but there will be even fewer cars to choose from.

Although some analysts, like Atlanta-based Manheim's chief economist Tom Webb, don't expect used-car prices to rise significantly over the next 10 to 12 months, they don't expect them to drop, either.

"Used-car prices will remain strong," he said. "...And because they weren't sold new, 3- or 4-year-old vehicles just won't be there."

What this means is, even for the most budget-conscious, you should consider new as well as used vehicles when shopping for a car.

Inflated used-car prices can make a deal on a new car that much better.

Although carmakers have seen several consecutive months of increased new-car sales and are keeping their new-car inventories tight, several still offer cash incentives or 0% financing.

Some offer both.

For example, Lincoln is offering free financing and a trade-in bonus on several models.

The bottom line: We believe that, in this year's auto marketplace, the best way to save a few bucks is to amp up your research. This includes searching out those manufacturer new-car incentives.

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