News Column

Used Car Prices Continue to Drop

November 18, 2013

Travel & Leisure Close - Up

Used car prices dropped in October, the largest drop in two years.
Used car prices dropped in October, the largest drop in two years.

Nada announced that wholesale used vehicle prices for units up to eight years in age fell by 3.5 percent in October, nearly a point higher than the decline recorded in September.

According to a release, this marked the largest fall since October 2011's similar drop of 3.5 percent.

"Without the drama created by federal lawmakers that resulted in the shutdown, it's likely that October's rate of decline would have been directly in line with recent seasonal norms," said Jonathan Banks, executive automotive analyst for the NADA Used Car Guide, in the November edition of Guidelines, a monthly report on new and used vehicle sales trends and price movement.

In addition, Nada noted:

October's softness dropped Nada's seasonally adjusted used vehicle price index to 123.8, down one point from September's figure of 124.8. Year-to-date, however, prices remain 0.5 percent higher than they were through October last year.

At the segment level, mid-size vans recorded the biggest monthly decline as prices fell 4.7 percent, slightly more than the 4.2 percent drop in October 2012. This acute decline can be attributed to the substantial rental fleet exposure and the fact that rental companies remarket large quantities of similarly equipped units at auction over a compressed period of time.

Prices for luxury cars and compact cars also experienced declines slightly higher than the market average, falling by 3.8 percent and 3.6 percent, respectively. Large pickups posted another strong showing last month, but October's 2.3 percent decline was slightly more than the 2 percent drop recorded during the same period in 2012, and higher than the previous three-month average of 0.4 percent.

On a year-to-date basis, vehicles up to eight years in age carried a mix and seasonally-adjusted average price of $15,066, a figure up slightly from 2012's average of $15,042 and $388 higher than 2011's average of $14,678.

"Projecting through December, given the absence of any looming governmental crisis, there is little to suggest that depreciation over the final two months of the year will deviate from seasonal trends," Banks added.

"While lower consumer confidence provides concern that consumer demand, and thus used vehicle prices, could take a steeper-than- expected downward turn, we expect that consumer confidence will rebound given the end of the federal government hiatus and October's decent employment report," Banks said.

As a result, Nada expects that used prices will fall by an average of about 1.9 percent over the next two months. While higher than 2012's Superstorm Sandy-influenced decline, this year's forecast is just slightly higher than the 1.5 percent decline recorded for the period back in 2011.

Trade-in values in November's edition of the Official Nada Used Car Guide were lowered by an average of 2.5 percent, which is the most significant reduction recorded since last November's adjustment of 2.7 percent. Reductions across model years fell within a tightly grouped range of 2.2 percent - 2.8 percent, with least-to-greatest figures corresponding to the 2009 and 2012 model years, respectively.

October's result along with Nada's prediction for the remainder of the year would see used vehicle prices finish 2013 at 0.3 percent to 0.8 percent higher than 2012's record level.

Nada Used Car Guide is a provider of market-reflective vehicle valuation products, services and information.

Original headline: Nada: Used Vehicle Prices Fall by Largest Amount in 2 Years


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