Used Car Prices Expected to Drop in 2010

The best way to maximize savings when buying a car is to purchase one that is 3 to 4 years old. This way, you'll avoid incurring the largest cost of a new vehicle - depreciation cost.

This past year however, used car prices steadily increased due to unusually low supply. With new car sales near 30-year lows, people were trading-in fewer cars for new ones. In addition, rental car companies were keeping their vehicles for a longer duration rather than upgrading to newer models.

According to USA Today, there were 8 million fewer used cars and trucks over the past two years.

If economists are correct, that's about to change in 2010. Car sales have recently improved and economists are expecting a 15% increase in new car sales this year. This means more people will be trading-in their used cars, thus increasing the supply.

This is good news if you intend to buy a used car this year. But keep in mind that new car sales are still way below average and used car prices will still be higher than usual. If you're buying used, our advice is to buy a car that is at least 3 years old. If you're looking for anything newer than that, your savings won't be as large.

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