Market Forces: New-Car Sales Surge Making Used Cars Cheaper

August 7, 2014
Car lot

Car lot

It's been a very strong year—a very strong several years, really—for new-car sales.

New-vehicle sales continue to be the bull-market bright spot of the economy, with analysts still predicting annual sales headed past 16 million vehicles this year. July sales factored in as the best for the month since 2005, and strong summer sales are pushing predictions higher toward a near-record 17-million rate, unparalleled since the early 2000s.

The flip side is that the used-car lot is getting sidelined in this latest market boom. and trade-ins are flooding the market. And the laws of supply and demand are taking over, pulling demand—as well as prices—downward as supply continues to surge.

And used cars—especially cars, more than trucks—are getting cheaper.

READ: The 17 Most Important New Cars Of 2015

“Accelerating depreciation” for used cars

Used vehicles from model years 2009 through 2013 have been going through a period of “accelerating depreciation,” as the pricing authority Black Book puts it. Such models have fallen in value by 1.5 percent, on average, just during July, and the company expects overall used-vehicle depreciation for 2014 to be at 13.5 percent—far more pronounced than it's been in recent years.

“We anticipate this trend of accelerating depreciation will continue through the rest of the year, with smaller cars and luxury segments seeing higher levels of depreciation,” said Ricky Beggs, the editorial director at Black Book.

As Black Book notes—citing low fuel prices and incoming 2015 models as factors—eleven of the thirteen strongest-performing segments for the past month include trucks. The other two were Sporty Cars and Premium Sporty Cars.

ALSO SEE: 2015 Mercedes-Benz C-Class First Drive

Vans, pickups, compact SUVs still strong in the used market

Through July, versus last year, the average late-model vehicle in this model-year range has lost nearly 12 percent of its value. Import-brand cars and trucks actually lost more value than domestic-brand cars and trucks. Full-size vans, compact SUVs, and pickups of all sizes are among those with the smallest plunge in price this past year, while many types of cars, SUVs, and crossovers have taken double-digit depreciation.

Looking at this past month, mid-size sedans, like the Honda Accord, Toyota Camry, Nissan Altima, and Volkswagen Passat are seeing the steepest depreciation.

Among trucks, full-size SUVs have been depreciating at the steepest rate; prices on such models, including the Nissan Armada, Dodge Durango, Chevrolet Suburban, and Ford Expedition, among others, fell by 2.1 percent in July, while the average price of such a vehicle is down eight percent versus the same time a year ago.

Market trends aside, there's a clear message here for anyone looking to replace what's in their driveway now: If you can do without that new-car smell, it's a great time to go with a late-model used car or truck.


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