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Car Financing Incentives Stalling Resale Values

October 9, 2002

There's a little-noted downside to the slew of financing incentives that Detroit is using to keep car sales humming, according to the Wall Street Journal: The enticing deals are triggering sharp declines in the value of cars the minute they drive off the lot.

One reason for this, according to the Journal, is that millions of Americans are snapping up new cars, which is increasing the glut of used cars on the market and driving their values down.

In addition, the incentives themselves are effectively slashing the prices on new cars, which are a key factor in determining resale values. That also shrinks the value of earlier models already on the road.

For shoppers, it's a very good time to buy many

kinds of used cars, according to the Journal. Many of the best used-car deals are on larger SUVs and smaller cars because they have been so heavily discounted.

Since many models aren't worth as much these days as their owners think, it's increasingly important for buyers to do their homework before kicking any tires, including by using the car-pricing Web sites of the National

Automobile Dealers Association, or Kelley Blue Book, according to the Journal.

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