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Trade-In Equity on the Rise, NADA Reports

September 20, 2012

McLEAN, Va. — A declining supply of used vehicles, strong consumer demand and improving vehicle quality have resulted in higher trade-in equity on many used cars and light trucks.

“Higher trade-in equity on used vehicles will help facilitate the release of pent-up demand for a growing number of consumers making the jump off the sidelines and into a vehicle purchase,” said Jonathan Banks, executive automotive analyst with the NADA Used Car Guide.

“The equity position that consumers find themselves in today is better, and, in some cases, dramatically better than it was three years ago.”

For example, in 2006, it took a consumer who purchased a new Ford Explorer XLT 4WD with a 6-cylinder engine 41 months of loan payments or nearly 3.5 years to reach a positive equity position.

After 45 months of ownership, equity in the vehicle reached $2,895. In 2009, it took a consumer who purchased the same vehicle just 26 months, or 15 months faster than the individual who bought in 2006 to reach an equity position. The equity stake after 45 months of ownership jumped to $6,830, or nearly $4,000 more than three years earlier.

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