Used-vehicle market relaxes

Aug 30, 2012

As reported by Arlena Sawyers of Automotive News, the used-vehicle market shows evidence of slowing down. The scarcity of 3-year-old used vehicles, a staple of many franchised dealerships’ used-car operations, and the weakened link between spikes in gasoline prices and increased used compact car prices are signs of an enervated used-car market.

The shortage of 3-year-old vehicles from the 2009 model year has kept prices of those models high despite the re-emergence of seasonal trends that are carrying prices lower. According to Jonathan Banks, an analyst with NADA Used Car Guide, that number of 2009 vehicles sold at auctions plunged 84% through mid-August, compared to the number of 3-year-old 2008 vehicles sold in the same period last year. The continuing scarcity of these vehicles will support stable to high prices.

The average price of a 2009 vehicle was calculated at $19,600 in mid-August, 2% less than the average price of a 2008 model at the same time last year. The decrease in the average price of all used vehicles 5 years old and younger from August 2011 to August 2012 was roughly 1.5%. Used-vehicle prices are at historic highs, Banks said.

Fluctuating gas prices have also disrupted seasonal used-vehicle price trends, but the impact of the price changes appears to be diminishing. Ricky Beggs, managing editor of Black Book, said the prices of fuel-efficient vehicles has dropped more steeply in recent weeks than prices of large pickups and SUVs, even though the average price of gasoline is 38 cents a gallon higher than it was in July.

According to Black Book, the average price of used compact cars across all model years dropped 3.1% between mid-July and mid-August, while the average price of full-sized pickups dropped only 1.7% in the same period. The prices of large pickups and SUVs are more stable because there is a smaller supply of these vehicles and their values are less driven by gasoline prices than previous years when pickup and SUV owners dumped their vehicles for more fuel-efficient alternatives.