Buyers are bidding up prices of used vehicles with fuel-saving diesel engines, industry analysts say.

A diesel engine added about $1,000 to the roughly $50,000 sticker price of a new 2005 Mercedes E320 CDI sedan. Two years later, that option fetches $2,500 more at wholesale auctions than the gasoline-powered engine on the same model, the Black Book used-vehicle price guide reports.

"As American consumers, we're looking to get better fuel economy, but we still want that full-sized vehicle," says Black Book managing editor Ricky Beggs. "The technology is so much better today, and the versatility and the accessibility to get diesel fuel are there."

The Power Information Network estimates that U.S. consumers will buy more than 500,000 vehicles with diesel engines this year. The network predicts that figure will more than double by 2011.

Except for a few thousand Mercedes cars and Jeep Grand Cherokee SUVs, all diesels sold as new in the United States this year will be in heavy-duty pickups.

Gaining acceptance

But several automakers plan to introduce diesel-powered cars and light trucks to the United States by 2010. Strong resale values for used diesels signal consumer interest and acceptance, Beggs told Automotive News.

Of six 2005 models reviewed by Black Book, five showed increases in the value of their diesel engines in the used-car market. The sixth, the 2005 Jeep Liberty, has a diesel engine valued at $2,200 - 82 percent of its original sticker price, Black Book says.

John Blair, CEO of Automotive Lease Guide, agrees that diesel engines are appreciating but warns that could change. As automakers introduce more diesel-powered cars, he says, the growing supply of used diesel cars will ease prices.

"In the future, the value is going to be lower, given the greater volume of diesels being produced and the increased competition with hybrids," says Blair, whose company sets residual values for the auto industry.

Volkswagen of America Inc. says it will reintroduce diesel engines in its Jetta and other models next year. VW did not offer diesel engines in most 2007 models, while it modified its technology to meet U.S. emissions rules for new low-sulfur diesel fuel.

Supply and demand

Terrence Wynne, director of ana-lytical services at NADA Analytical Services Group, says VW's actions reduced the supply of new diesel-powered vehicles. That helped drive up prices of used diesels, he says.

An optional diesel engine added $1,220 to the base price of a new 2005 Jetta GLS, Black Book says. The diesel now commands roughly a $2,000 price premium for the same car as a used vehicle.

Diesels also are holding their own in the market for used heavy-duty trucks.

Automotive Lease Guide's Blair says a diesel engine typically adds $6,000 to the sticker price of a new full-sized pickup. After 36 months, he estimates, the diesel engines will keep 60 percent of their value as an option, while the trucks themselves will retain only 47 percent of their value.

Glenn Romines, a Ford-Lincoln-Mercury dealer in Houston, Mo., says he sells 7 to 10 used diesel pickups a month. This month, he says, he paid $23,000 for a 2002 Ford F-350 - about $2,000 more than its guidebook wholesale value.

Romines says he sold the truck for $24,500 - roughly $1,500 more than its prevailing retail price. He says: "It was a good deal for everybody."

You may e-mail Arlena Sawyers at asawyers@crain.com