New Orleans – A sharp rise in the supply of late-model used cars and light trucks is expected to end a five-year run of price growth, according to the NADA Used Car Guide.
Late-model used vehicle supply will be more plentiful in large part due to an 18% surge in off-lease volume. The supply of units six to eight years in age, however, will continue to fall as a byproduct of the new vehicle sales decline from 2006 to 2009.
“These diverging trends will result in late-model used vehicle prices dropping more substantially than their older counterparts,” said Jonathan Banks, executive automotive analyst, NADA Used Car Guide, at the 2014 NADA Convention & Expo in New Orleans.
NADA predicts prices of used vehicles up to four years in age will decline by an average of 2.5% on an annual basis in 2014. By comparison, prices of units from five to eight years in age will essentially remain flat. Collectively, NADA anticipates the average price of used vehicles up to eight model years in age will fall by 0.5% to 1% this year. In 2013, prices grew by a slight 0.4% and have increased 18% since 2007.
“Although availability of off-lease units will be better this year, it’s important to place volume levels into historical context,” Banks said. “Despite the increase, lease volume will still be 11% below 2009 levels.”
Volume growth will be highest for the segments with higher new sales over the past few years – compact utilities, subcompact cars, luxury cars and utilities. Conversely, tight supply for certain truck segments – mid-size vans, large SUVs and compact/large pickups – will see prices increase once again in 2014.
Supply aside, the outlook for other market fundamentals remain positive. The economy is expected to grow at its highest level since 2012, unemployment will continue to fall, home prices remain on the rise and credit conditions will continue to be advantageous.
“Economic factors, in addition to the increased dealer focus on used car operations and greater awareness of manufacturer certified pre-owned programs, will keep used vehicle prices at historically high levels despite the anticipated decline,” Banks said.
