Today’s AuctionNet report with prices for the week of 10/11 – 10/18 showed small car prices continuing to decline at a similar pace first witnessed in early September.   The declines in October exceeded NADA’s expectations meaning that NADA trade-in values for October will be slightly higher than auction results for the remainder of the month.   We have seen slightly higher declines on Civic and Prius models where declines for the first 2 weeks of October are around 6% compared to September’s average price. On a lighter note prices during the week for Prius models stabilized and experienced the smallest weekly decline since August.  Please take this into consideration when using NADA values for the next two weeks. 

Truck models continued to show strength with nominal seasonal declines occurring during October.  NADA trade in values on most truck models should be closely aligned with auction prices with the expectation that we will encounter a relatively flat market for the remainder of the month.  In fact, NADA believes tight used supply and very moderate seasonal impacts will keep truck prices relatively flat during the remainder of the year.   Based on NADA’s analysis truck supply will remain tight for the foreseeable future which bodes well for used vehicle prices.  As the chart below indicates inventory on 1-8 year old trucks will continue to be down by ~15% compared to last year.  Meanwhile small car inventory has increased slightly compared to 2010.

We also may see incentives go down since inventory levels, especially from GM, are at more comfortable levels than the prior 3 months.  This means that truck incentives should follow historical incentive seasonality trends, which usually shows a pull-back from September and October, since we are through the high incentive period implemented during the launch of the new model year.

The one wild card factor we are watching is incentives on cars.  According to Autodata incentives increased slightly from August to September of 1.6%, however they remained a few percentage points back of where they were last year.  So incentives overall are at very reasonable levels.

However, incentives on cars potentially may increase more than expected when dealer inventory for Toyota and Honda reach normal levels.  In many cases the impact on used prices will be significant especially on one year old small and mid size cars.  You may have seen some press headlines talking about prices between new and used vehicles getting closer, and in some cases where payments have been higher on used cars.  This creates a situation where if incentives do increase the downward pressure on used values can be significant.