Used Car Values Are Falling – Car Pro Commentary

used carsI have talked many times over the past couple of years on The Car Pro Show about sky-high used vehicle prices. It is the most unusual thing I have seen in 35 years of watching and reporting on the auto industry. Going back five years, we could count on truck and SUV prices falling when gas topped $3 per gallon, but that hasn’t been the case in recent times.
We know the reason for the high prices of late model used cars, it was a shortage. Since 2008, there have been fewer trade-ins on the market and leasing dried completely up and except for luxury cars, was almost non-existent. A normal leasing year in 2008 and 2009 would have dumped thousands of cars on the market last year, but they just weren’t there. Many of the rental car companies have scaled back operations or gone out of business, which was another stream of used cars.
One of the reasons the auto industry has been on the upswing in the past four years is because of the high used car values. Fewer people were “upside down” in the cars, meaning they owed more on their car than its actual value. More people had a surprising amount of equity to help them purchase their new vehicle.
In 2010, used car prices shot up 20 percent on average. Those high prices have held, at least until recently. We’ve seen ups and down since 2010, and we always see prices fall in early September as every car turns a year older. Just a month ago, we saw wholesale used car prices fall almost 5 percent. The exception was full-sized trucks, which continue to hold their value.
Looking to prices declining the second half of 2013, indicators are used prices will continue to fall. Barring a national tragedy, the auto industry will sell 15.3 million new vehicles in 2013, and that will create a lot more trade-ins in the third and fourth quarter, many of which will happen in December of this year. I predict there will be an excess of trade-ins to start 2014, and that will drive prices down.
According to the good folks at Edmunds.com, the projected number of vehicles coming back from leases in 2013 will be almost 2.6 million vehicles, an increase of over 600,000 vehicles from 2012. That is a significant increase and will also drop used vehicle prices.
Roll all those factors into the mix and it appears the used vehicle shortage will turn into a used vehicle surplus in pretty short order.
Take this into consideration when trying to figure out the best time to purchase a new vehicle. Late model used car values have been up $2000 or so until just recently, and odds are, prices will fall by at least that much in the remainder of 2013. In the case of larger vehicles, trucks and full-sized SUVS, they could be the exception if the economy continues to improve. Much of that market is controlled by businesses, so we could see them continuing to hold their value.

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