Yes, lower used car prices are just around the corner; and no, it’s not just about off-lease units seeing big volume increases.
Experts like NADA Used Car Guide analyst Larry Dixon and Black Book’s Ricky Beggssee price declines, with much of it coming from seasonal patterns – and from what happens historically when used car prices skyrocket to abnormal levels. Now, they’re coming down to get back in line, Dixon said.
As April closes, Dixon expects eight-year-old and newer vehicles will see a 2% price drop from March levels – and that should fall another 3% in May. It does tend to happen – “When see [the prices] rise dramatically, they tend to fall dramatically,” he said. “We’ve seen this cycle before.”
Beggs saw that used-vehicle prices remained strong in April, but Black Book research has been indicating that by mid-April, dealers were bidding less aggressively. Mid-size and compact cars took the biggest hit. Pickup trucks are retaining their value and that should continue with all the demand coming from housing and construction.
Dixon does acknowledge that the predicted downward price trend is here, and that March was unexpectedly high due to pent up demand following the harsh weather conditions of January and February. He cites tight used-vehicle supply coming from car rental companies holding their cars longer than usual to satisfy replacement car demand following weather-related accidents and to meet demand generated by massive vehicle recalls.
Auction volume was down 4% in March – that was surprising to Dixon given the growth in off-lease vehicles. He thinks that auction volume was thrown off by dealers purchasing many of these units from lessors before they arrived at auctions. But pay attention to off-lease vehicles – it is growing. “Its trajectory is up, not down,” Dixon said.