Trade-in values on used cars are expected to peak in April, said Jonathan Banks, executive automotive analyst with the National Automobile Dealers Association (NADA) Used Car Guide.
“While prices for all used-vehicle segments will remain stable over the next two months, compact and mid-size cars will appreciate in value and outpace other segments because of rising gasoline prices, shortage of inventory and strong consumer demand for fuel-efficient vehicles,” Banks said.
Used values for the compact and mid-size car segments grew by an average of $300 or 2.6% from March to April, and values have grown by an average of $500 or 4.3% since the start of the year, according to the association’s car guide.
“The most advantageous time this year to trade in a used car will be April through May because values will be higher,” Banks added.
Another factor that has contributed to the dramatic rise in used-vehicle prices over the past year has been an inventory shortage of popular models resulting from fewer off-lease vehicles returning to the market and fewer trade-ins.
“The ongoing decline in the used-vehicle supply that began in 2009 has made it challenging for new-car dealers to consistently stock reliable, well-maintained used vehicles,” Banks said. “This means that dealers will be aggressive with trade-in offers for used vehicles that are in high consumer demand.”
NADA estimates that the used supply of vehicles under five years in age has declined by 14% since 2009. “Clean, late-model used vehicles under six years old with reasonable mileage will command top dollar,” Banks said.
The Used Car Guide forecasts that used-car prices will decline in June and the rate of decline will pick up over the second half of the year. Prices in June will be about 0.5% less compared to April; and July’s prices will be about 1.5% less compared to April.
“Over the past few years, the auto industry has gone through automaker bankruptcies and restructurings, a challenging economic environment and natural disasters which have resulted in significant seasonal volatility,” Banks said. “Last year, used-vehicle prices remained high through July because of a new-vehicle shortage stemming from the natural disasters in Japan, which led to a spike in demand for used vehicles. This year, used-vehicle prices will return to a more normal seasonal pattern.”