SANTA MONICA, Calif. — The average used car sold in the U.S. is getting younger and pricier, according to the latest Used Vehicle Market Report from car shopping destination Edmunds.com.
According to the report, the trends suggest a shifting tide in used-car inventories, which are skewing more toward newer off-lease vehicles and certified pre-owned (CPO) programs. Edmunds' analysis found that average used car prices hit a record high of $18,800 in the second quarter, up 7.6% — or $1,300 per vehicle — from the second quarter of 2014. Meanwhile, the average age of used cars sold in the second quarter of 2015 was 4.5 years, down from an average of 4.9 years the same time last year.
The influx of lease returns is leading to more availability and transactions of near-new used vehicles (aged five years or under). These newer used cars, of course, are typically priced higher than older used cars. But just because newer used cars come at a heftier price point, it doesn't mean that shoppers buying these vehicles are not locking in good values.
"Because there's a growing inventory of newer used cars, the prices on these vehicles seem to be more consumer-friendly than in the past," said Edmunds.com Director of Industry Analysis Jessica Caldwell. "Three-year old used cars, for example, have more bells and whistles than older used cars, and they're actually selling for less than they did just one year ago. Compare that to vehicles aged eight and over, whose prices are up 11% or more, on average, over last year. There's undoubtedly a growing value proposition these days in newer used cars."
Underscoring the popularity of ‘near-new' used vehicles are CPO sales, which continue to have a meaningful impact on the used car market. In 2015’s second quarter, dealers sold over 660,000 vehicles through CPO programs, the highest-ever volume for a single quarter. CPO sales accounted for 22.7% of used sales by dealers, another record for a single quarter.
The study also found that pickup trucks are seeing the most price growth in the used car market. Passenger cars, on the other hand, are generally showing year-over-year declines as a result of lower demand.
Also, Edmunds found that the average amount financed on a used car is $20,732, which is up 3% from last year. The finance amount is larger than the average price of used cars because many of the more inexpensive transactions are paid in cash. Loan terms on used cars are also on the rise, growing to offset higher average prices — and for the first time since before the recession, average APRs on used car loans are creeping higher.
To read the full report, click here.