The first quarter of 2017 has seen average used car market prices soften and continue to drop both month to month as well as year over year. In fact “Auto Remarketing Magazine” stated in their April 1st Issue that it was just the 2nd time in the last 20 years that used car prices declined in the month of February.
The decline was counter to the 1-percent increase expected for the month and marked just the second time in the past 20 years prices fell in February. -Auto Remarketing Magazine
Used cars are displayed on a sales lot on June 9, 2011 in San Francisco, California. -Getty Images
Wholesale prices this year dropped 1.6% compared to the month of January.¹ From the same article it is noted that NADA’s Used Car Guide’s seasonally adjusted used vehicle price index fell for the 8th straight month. The drop in this index is the worst recorded drop since November 2008 – which was recession related.
There does not seem to be an end in sight of the downward pressure on used car prices. A recent article published on Market Watch sourced a Morgan Stanley projection for the future of the used car market industry. Their prediction is that prices for used vehicles is going to decline 20% over the next four years. This is their best case scenario as their bearish case projection could see a drop of up to 50%!
Posted on WSJ: The Daily Shot https://blogs.wsj.com/dailyshot/2017/04/03/wsjs-daily-shot-the-used-car-market-is-very-sick/
In the Market Watch article they mention that one of the reasons for the pressure on the market is due to the volume of vehicles coming off lease. This sentiment is reiterated in an April 6th Bloomberg article detailing General Motors joining Ford in worrying about the future of use car prices.
General Motors Co. said a glut of used cars will return to market after their leases expire and drag on its finance unit this year, following similar warnings by peer Ford Motor Co. and lenders such as Ally Financial Inc.²
CFO Chuck Stevens said there will be a decline of 7% on the prices of used cars in their leasing portfolio this year. If these leased vehicles are depreciating more than expected than big losses can occur. This article continues on to state how used car prices are falling at an even faster rate at the auctions. Many automakers typically use the wholesale auctions to dump their off-lease inventory. CarMax Inc. said that wholesale vehicle prices fell greater than 5% more than used vehicle prices to consumers in the last quarter.²
With used car market prices softening with no end in sight everyone in the industry is going to have to keep a close eye on their business. In today’s market to be successful the use of analytics and technology is drive decision-making is ever so important. On our blog we posted a recent article about “Wreckonomics” or the distribution or consumption of end of life and low value vehicles.
While it may not be a great sellers market for your old used car you can always choose to donate it with Car Donation Wizard. You can donate your car to great charities like American Cancer Society, Habitat for Humanity and many others. The vehicle donation process is simple and you receive a tax deduction when you donate a car. For more on how to donate a car and tips on making the process smooth visit our partner, Car Donation Wizard by clicking here.