Used car prices expected to drop 5.2 percent by 2017
SANTA BARBARA, Calif. (August 4, 2014) – Relief for used-car shoppers from record-high prices is finally coming, according to ALG, the auto industry benchmark for future vehicle values and the analytics division of TrueCar. ALG analysts say a wave of newer vehicles has started to flood the secondhand market and will gradually bring resale values in line with what they were before 2008’s economic downturn.
Due to historically poor sales years from 2008-2012, as well as 2009’s “Cash for Clunkers” program that took nearly 700,000 vehicles off U.S. roads, used-vehicle supplies have been limited. However, ALG estimates that June 2014 marked the lowest number of used vehicles available for sale (which also translated to the highest prices) and that the trend is shifting.
“The continued strength of new-car sales is increasing the availability of high-quality used cars as shoppers continue to trade in their old vehicles,” said Larry Dominique, president of ALG and executive vice president at TrueCar. “Additionally, because of the popularity of short 24- and 36-month leases, the drought of used-car supply is already starting to subside. As a result, we expect a steady decline in used-vehicle prices.”
By 2017, ALG forecasts the average new vehicle will retain 49.4 percent of its value after three years, in contrast to the 54.6-percent retention recorded for vehicles through June 2014. Furthermore, ALG forecasts the growing supply of used vehicles in the market should ease the industry back to a 46-percent residual average by 2019 – the same as it was before 2008.
“The lower residual values will create a greater gulf between used- and new-vehicle prices, which could steer more consumers to purchase used vehicles,” said Dominique. “Consequently, we expect automakers to increase new-car incentives to keep up their current sales pace.”
The impact of the used-vehicle supply increases is covered in greater detail in ALG’s Industry Report, a macro look at the U.S. economy and other drivers of ALG’s forecast, including gasoline prices, durable goods and interest rates, as well as trends in jobs reports and consumer confidence.
To obtain a copy of the ALG Industry Report, or for more information about ALG and its products, visit www.alg.com.
Founded in 1964 and headquartered in Santa Barbara, California, with an office in Toronto, Ontario, ALG is an authority on automotive residual value projections in North America. By analyzing nearly 2,500 vehicle trims each year to assess residual value – which is mainly driven by used car inventory, brand strength, macroeconomic conditions, incentive spending and pricing – ALG provides auto industry and financial services clients with resale insights, forecasts and consulting services about the future vehicle marketplace. ALG, owned by TrueCar, Inc., the negotiation-free car-buying platform, has been publishing residual values for all cars, trucks and SUVs in the U.S. for 50 years and in Canada since 1981. The 2015 Residual Value Awards, honoring new vehicles projected to best maintain their value, will be announced Nov. 17.