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Prices cooling off in used-car market

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RIVERSIDE, Calif. — It was 9:30 a.m. on a recent Tuesday at Manheim Riverside, a wholesale auto auction, and more than a thousand used-car dealers were mulling in the desert heat. They had gathered on the perimeters of Manheim’s 10 lanes of cars, watching vehicles cycle through 10 auction blocks. The dealers wink, nod, or raise a hand to bid.

The auction is one of hundreds across the country that set the pace — and the price — for most Americans who buy used cars. The used-car market is far larger than the one for new vehicles, with more than double the sales, and automakers pay close attention to the ebb and flow of its prices.

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And those prices are about to decline from some unusually high levels, analysts say.

During the recession, consumers stopped buying new cars and automakers trimmed production, creating a shortage of sought-after used vehicles — later models with low mileage. Used-car prices surged.

But prices are beginning to moderate from those heady days when dealers scrambled just to find used cars to sell. Then, the monthly payments on a used car could equal the payments on a similar new car because of interest rates and financing terms, and because of robust consumer demand.

The average price of a used car surged 10 percent, to $16,474 in 2010 from $14,976 in 2009, according to the National Automobile Dealers Association. In the first seven months of this year, the average price climbed 2 percent, to $17,926, from last year.

Cliff Wood, executive vice president of stores at CarMax, the used-car chain, said that 85 percent of its inventory was traditionally in the zero- to four-year-old category. “That fell to 70 percent in 2010 when fewer later-model cars became available,” he said.

Now supply is coming closer to meeting demand, analysts said.

“It’s always hard to find a good, clean used car, and it will always be that way,” said David W. Westcott, chairman of the National Automobile Dealers Association and president of Westcott Automotive. “But is it better now than it was three or four years ago? Absolutely.”

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