Trade-in values on used small cars may rise in the United States, says NADA

Article by Christian Andrei, on April 12, 2012

It’s likely that during the next few weeks, the trade-in values of compact and mid-sized used cars would peak, according to a senior analyst at NADA Used Car Guide. The factors he cited include a shortage of used-vehicle inventory, increasing gasoline prices, and the demand for fuel-efficient vehicles. Jonathan Banks said that over the next two months, the prices for all used-vehicle segments will stay stable but the clean, late-model used vehicles, which are younger than six years old and have reasonable mileage, will command top dollar. The used-car guide said that from March to April, the used-vehicle prices for compact and mid-sized cars increased by an average of $300, or 3%. Since the year started, its values have increased an average of $500, or 4%.

Banks said that typically, used-vehicle prices peak in March and by the end of the year, they depreciate about 15%. He said that due to an inventory shortage of popular models that result from fewer off-lease vehicles going back to the market and fewer trade-ins, the used-car prices are expected to peak in April or May. In a statement, Banks said that new-car dealers are finding it difficult to consistently stock reliable, well-maintained used vehicles due to the persistent decline in the used-vehicle supply that started in 2009.

This meant that dealers would have to be aggressive with trade-in offers for in-demand used vehicles. Manheim Consulting said that its Used Vehicle Value Index in March was at 126.2, up from 125.8 in February and 124.2 in March 2011. However, this is lower than the record 127.8 posted in May 2011. The index calculates changes in wholesale used-vehicle prices and had adjustments for make, model and time of year. In 1995, it began at 100. According to Tom Webb, Manheim chief economist, the index has to have an "upward drift.” He also said that wholesale prices would later get to the May 2011 peak but before this occurs, the prices may level off.

Topics: small car

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