Chicago ? Used-car values have fallen 8 percent since May because of robust new-vehicle sales in the summer fueled by employee discount programs and other incentives.

That’s good news for consumers, who will find plenty to choose from and lower prices, but it’s bad news for anyone trading in a used vehicle.

“Used-car prices for the most part are set up by new-car prices,” said Art Spinella, president of CNW Marketing Research.

Spinella says every dollar a manufacturer spends on incentives on a new car lowers the value of a similar used model by $1.05. Other analysts say the effect is about 80 to 85 cents per dollar spent on new-car incentives. Either way, values are hurt.

CNW’s data show that the average used car sold by franchised new-car dealers dropped to $10,339 in August, the third straight month of decline and 8 percent lower than May. What’s more, the dealers settled for 92 percent of their asking price in August vs. 94 percent in May.

Large sport-utility vehicles are among the biggest losers.

The average wholesale price of large SUVs fell 4.2 percent, to $13,129 in August, and are 7.2 percent lower than a year earlier, according to Adesa Inc., one of the major auction companies that dealers use to buy and sell vehicles at wholesale.

Cincinnati-based Beechmont Chevrolet advertises a 2005 Aveo model that gets more than 30 miles per gallon. Company's discount programs for new cars have sapped demand for used cars, analysts say, making the pre-owned market attractive for buyers.

“It was already pretty bleak for those vehicles for several months in a row,” said Tom Kontos, Adesa’s chief economist. “Gas prices shooting up has made matters even worse.”

Indeed, CNW says prices for used SUVs fell in August, with full-size models dropping the most, 6 percent.

Paul Taylor, chief economist of the National Automobile Dealers Assn., says gas prices are one thing steering shoppers from truck-based SUVs to large cars and crossover models.

As with sales of new SUVs, the used market is down but not out.

“They’re still desirable vehicles for many people, so there’s still demand out there,” Kontos said, adding that dealers have gotten pickier about which models they will take as trade-ins. “They aren’t being rejected, but dealers don’t want to touch the ones that are in rougher shape.”

Spinella adds that used SUVs are likely to appeal to buyers who need such a vehicle for its cargo room or towing ability.

“Used-car purchases are not as much of a fashion statement as new cars. Consumers tend to buy because they have a need for a specific vehicle,” he said.

John Guido, an owner of Arlington Heights (Ill.) Ford, says the Ford Explorer was the hottest model on his used-car lot in August, accounting for 25 percent of sales.

“There’s still a lot of interest in that vehicle. For someone who couldn’t afford a new one, it’s a lot cheaper used,” he said.

Likewise, Bill Stasek, president of Stasek Chevrolet in Wheeling, Ill., says he can bank on quickly selling a 5-year-old SUV he takes in trade.

“I can’t keep them in stock,” he said. “There are people who could never afford to buy one new, and they were starving for one for a long time.”

Around 43 million used cars and light trucks – pickups, SUVs and minivans – change hands annually in the United States. That includes sales at new-car dealerships and independent used-car dealers and private transactions, and it’s more than double the roughly 17 million new vehicles sold.

But what goes on in new-car showrooms quickly trickles down to the used-car lots.

Employee discounts offered by General Motors, Ford and Chrysler pushed July’s new-vehicle sales to a record 1.8 million units. With 60 percent of those sales involving a trade-in, Taylor estimates that brought in 150,000 more used cars than the previous July.

Supply will exceed demand, at least temporarily, with the scales balancing because new-vehicle sales are cooling. Hurricane Katrina could boost demand for used vehicles in the Southeast. So used-car prices could start to rise again this year.

Taylor estimates that 400,000 vehicles in Louisiana and Mississippi will need to be replaced because of the storm. It will probably be at least a few weeks before consumers and businesses start to do so.

“When people lose both their house and their car, their first concern is getting a roof over their heads,” he said. “If you’re buying anything, it may be a used car instead of a new car.”

The employee discounts left many domestic-brand dealers short of new vehicles at the end of August, and Kontos thinks they will more aggressively market used cars until they stock up on 2006 models.

“Dealers are low on new-vehicle inventory. They need something to sell,” he said.

GM and Ford expect their sales to be weak in September because of low inventories and because they pulled buyers into the market in the summer.

“As the employee discounts lose effect, you’ll see more used-car shoppers come out,” Kontos said.