Used prices are declining from their peak in June and are expected to continue this trend through the remainder of the year.  The overall used market is expected to experience overall depreciation of 3.7% which dramatically outperforms normal depreciation which averaged about XX% during the past five years.  Compact cars to continue to outpace the market and even with the anticipated declines in value most vehicles are still enjoying strong year to date gains.  Prices for the overall segment, shown above, are 10.2% above the prices paid in January.



On a model level basis the price changes are much more substantial.  The table below shows NADA Used Car Guide values from January 2011 to August 2011 and highlights the dramatic price changes small cars experienced during the year.  For example, NADA values for Toyota Prius models (MY 2006-2009) increased by 41.3% from January to June, then declined 7.8% from June to August, which represents an increase through August of 33.5%.



Used Prices have been strong through June with Small Car Prices Increases breaking historical highs

  • Toyota Prius values led the pack with an average trade-in value increase of $5050, or 41%, 
  • The remaining nineteen subcompact and compact models on the list all increased by a minimum of 20% relative to January.
  • Fuel prices reached the peak of $3.96 during the first two weeks of May with many regions paying over $4.00 per gallon.   Clearly this drove consumers into fuel efficient models.
  • Incentive spending through June is down ~14% for cars and 9% on trucks; this coupled with MSRP increases made the ceiling on used car prices higher.
  • Japanese production disruption puts strain on overall vehicle supply by cutting off new vehicle production which drove up dealer demand for used cars.

Prices are expected to Decline from June Peak

  • Since June guidebook values for compact and mid-size cars are declining as strong dealer demand witnessed during the first half of the year has waned.
  • Fuel prices have fallen by $.28 per gallon (regular, national) after reaching a three year high in May. 
  • The economy and employment has driven down consumer confidence which in turn has negatively impacted showroom traffic and vehicle sales.
  • Japanese brand production continues its revival and all brands expect to be fully back on line by September.
  • Manufacturers are being more aggressive in incentive spending in a preparation for the arrival of 2012MY units.For example, Toyota is offering 0% financing for up to 60 months with additional $500 cash back on the 2011 Camry.
  • As a result, through August subcompact and compact cars dominated the list of the top 20 models with the largest percentage DECREASE in guidebook value since maxing out back in June. 
  • The Prius has dropped by $1350 or 7.8% since June, while the Hyundai Accent and Kia Rio have dropped by 11% and 9% respectively.
  • Although fuel-efficient car values are on the descent, on the whole values are still up by 10% since the beginning of the year while the overall market is down by almost 4%.

Outlook

  • AuctionNet wholesale price data indicated an average decline on small car prices of ~1.5% which does not suggest a “correction” in the market but instead points to prices moderating and beginning to experience depreciation. 
  • Looking ahead through the fall, it’s our expectation that used car values will face downward pressure associated with the new model year changeover, and while there are certain models that bear closer watching than others (e.g. Prius), we expect cars in general to retain a meaningful portion of the gains realized year-to-date.
  • On the truck side, we’re seeing strong interest for certain compact CUV and SUV models, and in fact, the list of models increasing in value from June to August is dominated by trucks.