American Recycler News, Inc.

 

Used-vehicle prices drop, but still above average

Prices for used cars and light trucks up to 8 years old declined 2.1 percent in May – the largest drop since last October, according to the NADA Used Car Guide.

In terms of U.S. dollars, the average trade-in price of used vehicles up to 8 years old slipped from $15,320 last year to $15,263 in May 2013 year-to-date, a modest drop of $57.

“While prices this year have held up well, a growing supply of three year old vehicles is applying downward pressure on prices for late-model used vehicles,” said Jonathan Banks, executive automotive analyst for the NADA Used Car Guide.

Banks said the increase in used-vehicle supply, in part, is the result of more fleet and lease sales after 2009, the same time new-vehicle sales hit a 30-year low with fewer trade-ins.

“Some used-vehicle segments are feeling the squeeze of higher supply more than others,” he added.

NADA estimates that the late-model supply of midsize cars and compact and luxury utility vehicles has increased on average by 16 percent. By comparison, the late-model supply for the overall market has increased by eight percent.

Trade-in prices for midsize cars have depreciated by 2.8 percent over the first 5 months of the year, from an average of $13,120 in January to $12,749 in May, NADA said. Overall market prices have declined by 1.9 percent over the same 5 month period, while prices for full-size pickup trucks are up nearly 1 percent. Prices of used luxury cars and utility vehicles have fallen the most this year, down 3.3 percent on average.

“Despite the price declines in May, there is little evidence to suggest a substantive negative change in any of the major drivers underpinning overall used-vehicle price performance,” Banks said. “With gasoline prices holding steady and consumer sentiment at its highest level since 2007, we’re expecting an above-average performance in June.”

Average trade-in values in June’s edition of the NADA Official Used Car Guide were reduced by a modest 1.3 percent. NADA expects that price depreciation for compact and midsize cars will be among the highest recorded in June with depreciation of midsize and luxury utility vehicles following closely behind. Price declines for full-size pickup trucks are expected to remain minimal for another month.

Just like the new-vehicle market (sales up seven percent in May YTD), used-vehicle demand is supported by favorable credit conditions, stable gasoline prices, rising consumer confidence and higher home prices, Banks added.

NADA’s seasonally-adjusted used-vehicle price index moved to 122.1 in May, which was a 0.6 percent improvement over April’s figure of 121.3. With a year-to-date loss of just 0.4 percent, the index’s 5 month average of 122.5 remains just slightly below 2012’s historical peak of 122.9.

The index is a seasonally adjusted measurement of the change in price for used vehicles up to eight years old.