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NADA: Used-Vehicle Depreciation Slows in June

July 16, 2013

McLEAN, Va. — After falling by 2.1 percent in May, depreciation for used vehicles up to eight model years in age slowed to 1.1 percent in June, according to the NAD Used Car Guide’s latest edition of Guidelines.

The decline was substantially less than what has been recorded for the month historically; as a result, NADA’s seasonally adjusted used-vehicle price index jumped to 123.4 from 121.9 in May.

Across all segments, losses for month were predominantly better than in May. This was particularly true for compact and mid-size cars, where depreciation fell from a combined rate of 3.2 percent in May to 1.9 percent in June.

Prices for other segments — including compact and mid-size utilities, mid-size vans, and luxury cars and utilities — fell within a range of 0.6 to 1.2 percent. Prices for large SUVs and pickups remained relatively stable, with movement ranging between plus-or-minus .02 percent.

Used-vehicle prices grew by just 1.5 percent through March, substantially less than 2012’s first-quarter rise of 5.3 percent. According to the NADA, a number of factors contributed to this, including the expired payroll tax holiday. But while prices did not rise as much as they have in years past, they also suffered a less severe second quarter swoon. Declines averaged 1.7 percent over the period rather than the 2 percent figure recorded in 2012.

When combined, vehicles up to eight years in age carried an average price of $15,892 over the first six months of 2013, a figure that’s nearly identical to last year’s midpoint average of $15,910 and almost $600 higher than 2011’s average of $15,294.

At the segment level, there were pronounced shifts: Luxury car and utility prices were 1.8 percent lower than 2012’s mid-year figures, while compact utility and mid-size car prices dropped by 1.5 percent and 1.2 percent, respectively; prices for compact cars slipped by 0.7 percent.

Helping to offset these losses was a substantial 7.7 percent rise in large pickup and SUV prices combined, with respective increases of 1.4 percent and 2.3 percent in mid-size utility and van prices.

In the first quarter of 2013, the volume of vehicles up to eight model years in age dropped by 3.4 percent on a prior-year basis. But the re-ignition of leasing that occurred in 2010 propelled the volume of units between one-to-four years in age up by 9.1 percent over the period.

The NADA’s used supply projections for 2013 have changed little since January, with the firm expecting the supply of units up to eight years in age to decline by 3 percent, while supply for units three years in age is expected to grow by 8 percent.

The NADA Used Car Guide also expects that while growing late model supply will continue to apply downward pressure to used vehicle prices, its effect will be tempered by the fact that volume will remain well below pre-recession levels through at least 2014.

Click here for the July edition of Guidelines.

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