Expect to pay more for that "previously-owned" car in the months ahead.
There’s good news and bad news for used car buyers. On the down side, prices will likely be higher due to strong demand. But that also should translate into better trade-in prices, as well, according to an automotive industry trade group.
The National Automobile Dealers Association is predicting that used car prices will rise again but at a slower pace than in 2011. Those higher used vehicle prices will be the result of Increasing demand and a drop in the supply of previously-owned cars and trucks, said Jonathan Banks, executive automotive analyst with the NADA Used Car Guide.
On the positive side, “Consumers shopping for either a new or used vehicle will benefit this year from higher trade-in values along with loosening credit,” Banks said.
For dealers, reliance on customer trade-ins will increase as they strive to meet the challenges of growing demand in a supply-constrained market. Dealers are facing a particular struggle coming up with “nearly new” two to four-year-old vehicles due to the downturn in the new car market over the last four years. In particular, there are significantly fewer vehicles coming off-lease as many lenders curtailed their leasing programs during the depths of the Great Recession.
On a seasonally adjusted basis, the NADA Used Car Guide predicts previously-owned vehicle prices will increase by 1.8% by the end of 2012, with prices peaking in April and May. Used vehicle prices increased 3% in 2011, Banks said.
“The slowing rate of depreciation on used vehicles over the course of the year will lead to even stronger trade-in values and enhance the equity that a consumer has in their vehicle,” Banks added.
Banks also said fuel prices hovering at $3.50 a gallon will increase demand for fuel-efficient compact and midsize cars with prices up by 2.7% and 2.1%, respectively, by the end of the year. But the NADA Used Car Guide predicts prices for large SUVs will increase by 1.4% this year.
“A 15% drop year-over-year in the used supply of large SUVs will offset the (impact of) elevated price of gasoline,” he said.
Americans bought nearly 39 million used vehicles in 2011, more than three times the number of new cars, trucks and crossovers sold last year, according to research by CNW Marketing.