In January, the going rate for a 2007 model of the Ford Explorer was $11,600. In March, the same make is listed at $13,850. And that change gives auto dealer Jeff Liccardi reason to smile.

"I think the worst is over," says Liccardi, a third-generation auto dealer who sells new and used Ford vehicles in Watchung, N.J.

Used cars are rising in value as budget-conscious U.S. consumers flock to this segment of the market amid an economic slump. This is good for dealerships, like Liccardi's, because it boosts the value of their stockpiles of used cars. It also brings relief to lenders of auto loans and leases at a time when the auto industry is struggling to make ends meet amid tumbling sales of new cars.

Falling used vehicle prices fueled by $4-a-gallon gasoline in the midst of a weakening economy were responsible for substantial red ink in lenders' books last year, forcing them to scale back or eliminate leasing altogether.

GMAC LLC, the lending arm of General Motors Corp. (GM), took a $1.2 billion impairment charge on its operating lease portfolio last year. Similarly, rival Ford Motor Credit, the financing arm of Ford Motor Co. (F), took a $2.1 billion write-down in 2008 related to unprofitable lease deals. Privately owned Chrysler LLC's Chrysler Financial pulled out of the leasing market in July.

Prices on used vehicles rose 7.7% in February from December, according to the Manheim Used Vehicle Value Index.

"They are very significant increases," says Tom Webb, chief economist at Manheim, the largest U.S. wholesale auction company that sells and buys used cars to and from dealers.

Values on used cars matter a great deal. After leases expire, lenders take the vehicles back and sell them at used-car auctions, hopefully at a profit. But falling resale values force lenders - saddled with inventories of thousands of these vehicles as they come off leases or are repossessed from owners unable to keep up with payments - to sell them at a loss.

Higher values on used cars "relieve some pressure on lease portfolios of the auto finance companies because it reduces the risk of further impairment charges on operating lease assets," says Mark Wasden, an analyst at Moody's Investors Service.

GMAC had $26.4 billion in operating lease assets on its books as of Dec. 31, 2008; Ford Credit had $22.5 billion.

Used vehicle "prices are up as much as $1,600 per vehicle compared with December," says Michael Stoller, a GMAC spokesman. "It's a positive in terms of revenue. It improves proceeds from vehicle auctions."

Higher values also have "a positive effect" on the amount recovered from a repossessed vehicle, says Meredith Libbey, a Ford Credit spokeswoman.

-By Aparajita Saha-Bubna, Dow Jones Newswires; 617-654-6729; aparajita.saha-bubna@dowjones.com