Lower Prices for Used Cars Expected

For the first time since 2008, used car prices are expected to drop – and by 5.2 percent by 2017.

According to ALG, the analytics division of TrueCar, analysts say a wave of newer vehicles has started to flood the secondhand market and will gradually bring resale values in line with what they were before 2008’s economic downturn.

Due to historically poor sales years from 2008-2012, as well as 2009’s “Cash for Clunkers” program that took nearly 700,000 vehicles off U.S. roads, used-vehicle supplies have been limited.

However, ALG estimates that June 2014 marked the lowest number of used vehicles available for sale (which also translated to the highest prices) and that the trend is shifting.

“The continued strength of new-car sales is increasing the availability of high-quality used cars as shoppers continue to trade in their old vehicles,” said Larry Dominique, president of ALG and executive vice president at TrueCar. “Additionally, because of the popularity of short 24- and 36-month leases, the drought of used-car supply is already starting to subside. As a result, we expect a steady decline in used-vehicle prices.”

By 2017, ALG forecasts the average new vehicle will retain 49.4 percent of its value after three years, in contrast to the 54.6-percent retention recorded for vehicles through June 2014.

Furthermore, ALG forecasts the growing supply of used vehicles in the market should ease the industry back to a 46-percent residual average by 2019 – the same as it was before 2008.

Category: General Update