The average price of used units up to eight model years in age fell by 2.6% in September, marking the highest rate of decline recorded since the 2.9% tumble in October 2012 and ending a three-month period in which depreciation averaged an uncharacteristically low rate of 1.2%, according to the most recent issue of Guidelines.
While the drop high compared to the previous 10 months, it was less severe than the 2.7% average rate of depreciation recorded for the month of September from 2005 to 2012, excluding the recession years (2008 and 2009). As a result, NADA’s seasonally-adjusted used vehicle price index ticked up to 124.8, a tenth of a point higher than August’s figure of 124.7.
Historically, the rate of used vehicle depreciation begins to accelerate in September due to a shift in consumer attention towards more pressing seasonal obligations, larger quantities of like-vintage vehicles entering the used market and increased discounting on outgoing model year new vehicles. In fact, the number of 2013 model year units sold at auction last month–the majority of which were sourced from rental companies–grew by more than 24% relative to August.
While the current shutdown and other budget and debt ceiling issues are roiling the federal government, NADA believes that used vehicle prices will remain relatively unscathed because external pressure should be significant enough to force lawmakers to end the ordeals before they inflict scarring damage.
NADA still expects that depreciation will be just slightly more pronounced than what was observed over 2012’s atypically strong fourth quarter, with used vehicle prices dropping by an average of 1.6%-to-2.0% per month over the period. On a full-year basis, used vehicle prices are still scheduled to finish the year from 0.5%-to-1.0% higher than 2012’s record level.
Interested in more from this issue of Guidelines? Click here to download and read about NADA’s analysis and forecast for the remainder of 2013.