Used-vehicle prices have leveled off after retreating from all-time highs early this past summer, in part because of seasonal factors.
But the prices remain much higher than at the start of the recession. And analysts predict they will stay high for the foreseeable future, underpinned by tighter supplies of new and used vehicles.
Bill Pearson, co-owner of Velde Lincoln-Volvo in Peoria, Ill., sees the price changes firsthand. He and his two used-vehicle buyers scour at least six physical auctions and as many as four online auctions a week to buy about 100 vehicles a month for the store, which is part of the Velde Automotive Group in Pekin, Ill.
Pearson is finding the used vehicles he needs. Prices aren't low but are at least within reason now.
"They're fair now," Pearson says of used-vehicle prices. "I don't know how far the valley will be, but if you want to buy [retired] rental cars, they are available every week."
Manheim's Used Vehicle Value Index, which measures used-car price changes, eased in October for the fifth month in a row. The index peaked at 127.8 in May.
In October, the index, which is adjusted for time of year and vehicle model mix, stood at 122.8. That is down from 122.9 in both September 2011 and October 2010. The May peak followed more than two years of steady gains.
Consider the average price of 2- to 5-year-old used vehicles. In the first 10 months of this year, that price has been much higher than during the same period before the recession began, says Larry Dixon, a senior analyst at NADA Used Car Guide.
When adjusted for mileage and model mix, the average price of those vehicles through October was 21 percent higher than for 2- to 5-year-old vehicles in January through October 2007, the year preceding the recession, he says.
"Late 2008 saw prices reach their lowest point; since early 2009 prices have been on an upward course," he says. "Prices for the August-October 2011 time period were 40 percent higher than during the same period of time in 2008."
Before the recession, automakers built too many vehicles. They used hefty incentives to clear some vehicles and shoved others into rental fleets, depressing used-vehicle values.
Then new-vehicle sales collapsed with the recession. Now, more than two years after the onset of the recession, the supply of 2- and 3-year-old used vehicles has dried up. And with new-vehicle production matching market demand, used-vehicle prices have shot up.
Those market changes also allow prices to follow traditional seasonal patterns.
For example, prices typically soften in the fall when rental car companies trim their summer-vacation fleets, Dixon says. Prices then increase with the new year as dealers buy in anticipation of the spring selling season, which kicks off when consumers start receiving income-tax refunds.
The easing in prices since the summer is due in part to the first part of that seasonal trend.
Ricky Beggs, managing editor of Black Book, a guide to used-vehicle prices, says that used-vehicle prices have retreated a bit, but are still relatively high. His company, which monitors and reports daily used-vehicle price changes, says during the week of Nov. 18, prices on average, across all vehicle ages and categories, declined $28 for trucks and $63 for cars.
Price declines in the autumn are usually more substantial than that. So considering the time of year, those fairly modest declines represent "a pretty good market," he says.
Alec Gutierrez, manager of vehicle valuation at Kelley Blue Book, expects vehicle prices to remain relatively stable through year end, then increase in the first quarter, as in previous years. But because the dearth of off-lease vehicles is expected to continue and to be even more pronounced in 2012, he says prices could increase three to four percent in the first quarter instead of the more typical two percent.
He adds: "This is all assuming we don't see another spike in gas prices."