Used prices on compact cars have continued to move upward in April driven by a rapid rise in gas prices and higher new vehicle prices (supported by tighter inventory from the earthquake and tsunami in Japan).  NADA’s adjustments to Used Car Guide values through the May edition accounted for this upward swing; however, used prices through May might eclipse NADA’s value forecasts due to a greater than anticipated increase in gas prices.

Gas prices in April have increased to $3.88 on April 28 representing a $.30 increase compared to March and $1.00 over last year’s level.  Although we expected gas prices to more-or-less reach their current level, we did not expect the rise to be so sudden; instead, our forecast predicted that prices would peak closer to June.  If analysts are correct, there should be some moderation in the rate of the increase in gas prices resulting in more stability, however prices will stabilize at about $4.00 per gallon. 

When breaking down the compact car segment into individual models, we can see  that prices on individual models have increased at a similar rate to what was seen in 2008 when gas prices topped out at $4.11 in July.  Although the trend is similar, in most cases we’ve yet to reach  the highs set in 2008.  The situation today may be even more extreme than what was witnessed in ’08 once inventory concerns begin to manifest themselves in earnest, most likely in the May – September time period.  This additional demand stands to push used vehicle prices up even more.  

NADA believes we will see slight moderation in compact car price increases during May,  however, we expect more appreciation to occur as new vehicle inventory begins to be depleted due to Japanese production disruptions.