Used-Car Prices Fall as Ending Leases Fill Dealer Lots
It’s a good time to buy a used car, reported The Detroit News. Millions of previously owned cars and trucks are flooding the market as leases expire and customers look to upgrade. Prices have fallen since the start of the summer, and inventories are climbing. It’s a delayed reaction to a recovering auto industry: When ... Read More »
It’s a good time to buy a used car, reported The Detroit News.
Millions of previously owned cars and trucks are flooding the market as leases expire and customers look to upgrade. Prices have fallen since the start of the summer, and inventories are climbing.
It’s a delayed reaction to a recovering auto industry: When credit loosened two or three years ago, it became easier to lease a car. Now those leases are coming to an end, and car buyers are flocking to dealerships to turn in their now-used vehicles.
While analysts predict supply levels are still years away from pre-recession numbers, they say the used-car market should continue to rebound through the remainder of the year and into 2015.
“During the recession, it almost cost as much to get a used car as it did to get a new car, but now the market is going back to historical norms and it’s going to be better every month,” said Larry Dominique, vice president of California-based TrueCar, an automotive research site. “From 2008 to 2012, there was a significant growth in the number of leased cars and now they’re all coming back to the market. As supply is increasing, auction values are dropping … making used cars more affordable.”
The average used car sold at a franchised auto dealership for $10,963 in September, down about 2.1 percent from a year ago, according to CNW Research. Although the September average is 0.7 percent higher than August, prices had fallen every month before that since May.
Georgia-based Manheim Inc., which tracks the used-car market, says prices are falling back to normal levels after a long period of “exceptionally strong pricing.”
Concurrently, used-car inventory has risen for the past three straight months; it was up 1.5 percent in September compared to the same month a year ago, according to TrueCar. About 9.76 million used cars were available in the U.S. in September, compared to about 9.62 million last September.
The number of certified pre-owned vehicles — those inspected and deemed worthy to resell by manufacturers — are on the rise, too. AutoTrader.com said the supply of those has increased 6 percent in the past six months.
“The last quarter of 2014 will be a great time to get a good deal on a used or certified pre-owned vehicle,” said Michelle Krebs, senior analyst at auto research site AutoTrader.com.
Mark Tracey, used vehicle manager at Huntington Ford in Rochester Hills, said he’s seen a better supply of used cars on his lot, and that prices “have been slipping.”
“We’re finding more trade-ins,” he said. “Two or three years ago, we struggled to get cars in. Now, we’re getting lots. That’s helping.”
Lower prices and better supply have led to an increase in used-car sales nationwide: Through September, used-car sales were up 3 percent over the same period last year to 28,805,863, according to TrueCar.
During and after the recession, used-car prices soared and inventory dropped as fewer people bought new cars, which eventually led to fewer used cars being turned in. Now, the market is shifting back on the heels of robust new-vehicle sales.
Automakers sold 1.2 million new cars and trucks in September, a 9.4 percent increase from a year ago, and analysts have predicted the annual rate of sales could reach 17 million vehicles in the coming years. Sales have been steadily rising since 2010 after falling to 10.6 million in 2009. Last year, sales were 15.9 million.
The used-car trend does have downsides, industry analysts say. Because supply is high, selling a used car is harder than in years past. Manufacturers will also start charging higher lease rates, since resale values will drop because of the the high inventory and low prices.
Analysts are split on if the used vehicle market will affect the strong sale of new cars and trucks.
TrueCar’s Dominique said the high inventories could “add a level of challenge” to new vehicle sales, but AutoTrader.com’s Krebs said it could actually help.
“It opens up the markets to more people,” she said. “A lot of people can’t afford to buy a new car. Expanded inventory of used cars means more people can get new transportation.”
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