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Used-Car Lots Full, But Window of Opportunity Closing Fast

February 15, 2002

The zero percent finance-fueled boom in new-car sales has produced a glut of used cars selling at bargain prices. Consumers taking advantage of the financing deals have traded in old models, while reduced travel, pared-down rental-car fleets and returned leased vehicles have put even more cars in dealer lots. But the chance to take advantage of these used-car sales is quickly vanishing as prices begin to firm, according to thestreet.com.

"The first quarter is an excellent time to buy," said Paul Taylor, chief economist for the

National Automobile Dealers Association (NADA).

Retail used-car prices are still falling, but only for a couple more months, according to industry observers. That's because at the retail level, used-car depreciation is bottoming.

In January 2002, a 1999 model had an average annual depreciation of 18.8 percent; a year earlier, the average annual depreciation for a 1999 model was just 15.5 percent, according to Taylor. The year-over-year trend favors lower retail prices, but by April, when the depreciation is expected to peak around 20 percent, prices should stabilize, Taylor predicts.

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