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Used Prices to Drive New-Car Sales in Fourth Quarter, NADA Used Car Guide Predicts

October 18, 2011

MCLEAN, Va. — The NADA Used Car Guide said above average trade-in values for used cars should push car buyers into the new-vehicle market in the fourth quarter. Japanese automakers looking to recapture lost market share after the March 11 earthquake are also expected to provide a boost through increased incentive spending.

"Higher trade-in values will help facilitate new-vehicle purchases because car owners have an equity built into the deal, which they can use as a down payment," said Jonathan Banks, senior analyst with the Used Car Guide. "Higher used prices also will drive more car shoppers to choose new vehicles instead of used ones because monthly payments between a new and used purchase will be closer."

Trade-in values on many 3- to 5-year-old small cars are about 10 percent higher in September than a year ago, according to the NADA Used Car Guide. Banks believes used-car prices at the end of the year will still be higher than last year, but not at the levels during the peak in May and June when prices jumped 25 to 30 percent higher.

"We expect consumer demand for small and mid-size, fuel-efficient cars to shift from the used market to the new market in the fourth quarter," said Jonathan Banks, senior analyst with the Used Car Guide. "Automakers based in Japan will likely increase incentives to boost lost market share after the production disruptions from the earthquake and tsunami in March."

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