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Surge of New-Car Sales Swells Used-Car Lots

November 20, 2001

Making a deal on a used vehicle is tricky for consumers and dealers because the vehicle is always declining in value (depreciating). The

rate of decline depends on economic conditions and supply and demand for vehicles. And the recent surge of new-car sales attributed largely to zero percent and low-interest financing deals adds a new factor to the mix.

Strong new-vehicle sales for the past two years, however, already had impacted the used-car market before the events of Sept. 11. Data through August from the National Automobile Dealers Association (NADA), which publishes a monthly guide to used-vehicle values, showed the annual depreciation rate rose to about 15 percent this year from 13 percent last year. The increase is due partly to strong sales of

new vehicles in 1999 and 2000, some of which are beginning to show up in the used market.

Dealers in the last decade have relied more heavily on auctions to balance their used-car inventories. But so many used cars have arrived in recent weeks that they're having trouble

disposing of the surplus, according to the Associated Press.

Some dealers kept used-car inventories in line

by steering buyers who couldn't afford new cars to used ones. Wes Lutz's Dodge and Hyundai dealerships in Jackson, Mich., for instance, sold 108 used cars in October, up from an average of 85, according to AP.

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