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NADA: Used-Vehicle Prices Drop, But Remain at Elevated Levels

June 13, 2013

McLEAN, Va. — Prices for used cars and light trucks up to eight years old declined 2.1 percent in May — the largest drop since last October, according to the NADA Used Car Guide’s June edition of Guidelines.

In terms of U.S. dollars, the average trade-in price of used vehicles up to eight 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 is, in part, 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.

The 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 8 percent.

Trade-in prices for midsize cars have depreciated by 2.8 percent over the first five months of the year, declining from an average of $13,120 in January to $12,749 in May. Overall market prices have declined by 1.9 percent over the same five-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, according to June’s edition of the NADA Official Used Car Guide, were reduced by a modest 1.3 percent. The NADA Used Car Guide 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 7 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.

The NADA’s seasonally-adjusted used-vehicle price index moved to 122.1 in May, representing 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 five-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.

Click here for the June edition of Guidelines.

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