Used-car prices are softening as new-car sales continue to increase.
WardsAuto predicts light-vehicle deliveries of 14.3 million units this year, 1.6 million more than 2011.
About 60% of 2012’s sales will involve trade-ins, meaning nearly 1 million used cars will enter the market.
“This is one of the biggest reasons why used-car prices are coming down,” says Ricky Beggs, an analyst for the Black Book used-car guide.
“This is a significant driver of lower prices, combined with additional rental cars being sold at auction and dealers preparing for the coming 2013 models.”
Dealers around the country are beginning to make room for the ’13 models, which start arriving this summer.
This will reduce wholesale demand for existing used-vehicle inventory and drive prices down, Beggs says.
In particular, used-car analysts say all-new vehicles such as the Dodge Dart and Cadillac XTS will significantly affect future used-vehicle values.
So will vehicle refreshes and powertrain improvements, Beggs says, citing General Motors’ V-6 engine upgrades that will provide more horsepower and respectable fuel economy in the Chevy Equinox and GMC Terrain cross/utility vehicles.
“The softness in the market, especially the 1-2 year-old models, is driven partially as the market is making room for another model year,” Beggs says. “For many of these refreshed vehicles, there are interior upgrades giving better ergonomics, which will also play a factor in the future used values.”
Moderate seasonal demand will drive down prices in all used-vehicle segments over the coming months, says Jonathan Banks, senior analyst with the National Automobile Dealers Assn. Used-Car Guide. “NADA’s current forecast points to used-vehicle prices dropping by 3% in July.”
This month, prices of compact and midsize used cars have declined the most, by 2.5% and 2.8%, respectively, according to NADA. The remaining vehicle segments dropped between 0.8% and 1.4%.
NADA predicts prices in the compact and midsize used-car segments will drop between 3.5% and 4.5% in July compared with June. Used-vehicle prices are down 1.6% in June compared with May.
“Falling gasoline prices will result in greater depreciation of compact and midsize cars, but will help moderate losses for light trucks, such as large pickups and SUVs,” Banks says.
It has been a strong run for used-car prices, as demand was high and supply low in the past few years.
Demand was high because many people financially hurt by the recession opted to buy used cars rather than more expensive new cars. Supplies were low because the super-soft new-car sales years of 2008 and 2009 created a dearth of used cars in ensuing years.
Beggs predicts used-car prices will continue to slide well into next year, assuming new-car sales continue to increase.
WardsAuto predicts that after 12% growth this year, new-car sales will increase 4% for each of the following three years, returning to 16 million units by 2015, or 2016 at the latest.
But NADA doesn’t anticipate used-car pricing will crater. The trade group’s seasonally adjusted forecast for the rest of the year remains positive, with current price projections for used vehicles in all segments up 0.7% from June through December.
“It’s important to note that used-car prices will remain at historically high levels through the end of the year, despite the expected seasonal softening,” Banks says.
A total of 38.8 million used cars were sold last year. Franchised dealers sold 13.8 million of them. New-car sales for 2011 reached 12.7 million units.
