Used car prices expected to fall in 2015

SAN FRANCISCO /PRNewswire-USNewswire/ — From the 2015 NADA Convention and Expo (running Jan. 22-25), NADA Used Car Guide presented its 2015 used vehicle market forecast. Among the several data-intensive insights, used vehicle prices are expected to fall 2-2.5 percent for the year, while growing off-lease supply will drive late-model vehicle volume up 8 percent.

According to Jonathan Banks, executive analyst at NADA Used Car Guide, “A higher used vehicle supply, flat new vehicle prices with higher incentive rates, and less favorable credit conditions are just some of the factors that will pressure the vehicle market for the year.”

Banks went on to say, “Luxury compact utilities will increase their supply for the year by about 33 percent, with vehicles in the large car segment decreasing the most, supply-wise, by a 14 percent drop.”

Additional fluctuations Banks referred to can be observed in the lists below:

Used Vehicle Segments Contributing to a Flooded Supply in 2015*

1. Luxury Compact Utility +33%
2. Sub-compact Car +24%
3. Compact Utility +9%
4. Mid-size Utility +5%

Used Vehicle Segments Seeing the Biggest Drop In Supply for 2015*

1. Large Car -14%
2. Mid-size Pickup -11%
3. Large SUV -9%
4. Mid-size Van -7%

*Remaining segments +/- 3 percent.

What Does the Forecast Mean for Used Vehicle Shoppers?
For consumers interested in purchasing a used mid-size or large pickup truck or utility vehicle, prices are expected to stay high due to low gas prices. On dealer lots, a 5 percent or higher jump in price is forecasted for the mid-size and large pickup segments, while the mid-size and large utility segments should see a 1 percent or greater bump in price.

The unusually low gas prices will have the opposite effect on compact car shoppers, with mid-size car prices seeing a 4 percent or higher drop in value. Consumers interested in buying a car in the used subcompact or compacts segments will see a 6 percent or greater drop in price.

What Does the Forecast Mean for Used Vehicle Dealerships?
While used vehicle prices will fall in 2015, they will remain very strong from a historical perspective. Contrarily, a rapidly growing off-lease supply and increasing amount of retail vehicle returns will lead to higher losses in 2016 and beyond. With North American production capacity rising to 21 million vehicles by 2018 (up 16 percent from 2014), manufacturer-pricing discipline will be challenged as new sales growth slows.