Used vehicle market to slip in 2014, US

The used vehicle market in the US is forecast to slide in 2014, ending five successive years of increasing prices, after a steep rise in the supply of late-model second-hand cars and light trucks, says the NADA Used Car Guide.

The increase in late-model used vehicle supply is mainly due to a 18% rise in off-lease volume, the report informs. Older models, aged six to eight years, however, will be less plentiful because of lower new-car sales from 2006 to 2009.

Jonathan Banks, executive automotive analyst for the NADA Used Car Guide, said at the 2014 NADA Convention & Expo in New Orleans, Louisiana:

“These diverging trends will result in late-model used vehicle prices dropping more substantially than their older counterparts.”

Used vehicles aged up to four years will go down in price by an average of 2.5% this year, NADA predicts, while older vehicles (6 to 8 years) will overall remain unchanged.

Overall, all cars aged up to eight years will fall in price by between 0.5% and 1% in 2014, compared to a 0.4% rise in 2013 and a 18% increase since 2007.

Lease volume still well below 2009 levels

Banks said “Although availability of off-lease units will be better this year, it’s important to place volume levels into historical context. Despite the increase, lease volume will still be 11% below 2009 levels.”

The following types of vehicles will see the highest increase in volume, and therefore the steepest falls in prices this year, because they have been the best sellers over recent years:

  • utilities
  • luxury cars
  • subcompact cars
  • compact utilities

Tighter supply for certain truck segments are predicted for this year, resulting in the highest price increases:

  • compact/large pickups
  • large SUVs
  • mid-size vans

Economic fundamentals positive for the vehicle market

The fundamental factors that encourage consumer spending are improving. US GDP (gross domestic product) is forecast to grow at its highest level since 2012, employment will continue to improve, house prices are rising and are expected to continue doing so for the rest of this year, and “credit conditions will continue to be advantageous.”

Banks said:

“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.”