Recap on later- and older-model price shift

In previous blog posts, we discussed some of the reasons impacting the price shifts across models years, with later-model prices softening more than those of their older counterparts. First, we looked at how the improving economy is impacting auto demand in general; with further analysis, we see that these economic forces – lower unemployment rates, a resurgent housing market, equity market gains and a competitive lending environment – are doing much more to increase new vehicle demand.

Second, we explored the impact improved quality and dependability has had on prices of older-model vehicles. For the better part of the last 10 years, manufacturers have taken major steps toward improving reliability of vehicles, resulting in higher older-model prices.

Later- and older-model prices to take opposing paths

Based on the data, NADA believes the combination of rising supply with stronger new vehicle demand and higher incentives will translate into a steady softening of later-model used vehicle prices through 2014. Conversely, we expect the advances in dependability and affordability relative to newer used models, as well as a rolling wave of lower supply, will keep prices for older models high over the same period.

For the remainder of 2013, NADA’s forecast indicates that, on average, prices of units one to three years of age will be 1.5% lower in 2013 than similar aged units in 2012. Meanwhile, prices for units four to six years of age will be 1.5% higher than like-age unit prices were last year. Prices for seven- to 10-year-old models are expected to remain essentially unchanged.

Prices for model year 2013 units are predicted to fall 16% on an annual basis through 2014, while depreciation for other model years is expected to fall from 15.1% for model year 2012 to an average rate of 14.3% for model years 2008 to 2009. Depreciation will rise back up to an average of 15% for model years 2004 to 2007.

This is the third blog post in a three-part series about our latest white paper, NADA Used Vehicle Price Report: Age-level Analysis and Forecast, which provides greater detail on the specific elements driving used price performance at a vehicle age level in order to help rental company, dealership and financial professionals better manage future fleet purchases, remarketing activities, inventory acquisition and loan origination policies.

Leveraging a combination of the industry’s most comprehensive database of used vehicle transactions, statistical analysis, and unrivaled market expertise, NADA’s white papers and special reports aim to inform industry stakeholders on current and expected used vehicle price movement so they can better maximize today’s opportunities and manage tomorrow’s risk.