Auction Lane

Used Car Prices Are Softening, but It’s Not Just from Off-Lease

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.

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