Used-vehicle values are falling but will remain high, analysts predict.
After five months of price increases, used vehicles up to 8 years old will decline in price this month, and prices of some fuel-efficient used cars will drop by as much as 5 percent, NADA Used Car Guide predicts.
The Manheim Used Vehicle Value Index, which covers vehicles of all ages, shows the drop in prices already has begun. In May it stood at 125.1, down from 126.1 in April and 127.8 in May 2011. The index measures changes in used-vehicle prices and is adjusted for vehicle age, mileage and time of year.
But even with the erosion, overall prices are high and will remain so, says Larry Dixon, an analyst with the NADA guide. Those elevated prices mean consumers have considerable equity in their vehicles, which is important when they trade them in for new ones.
"Consumers will find that the trade-in values of their car will be less in June than it was in May or April, but values are still at historical highs," Dixon says.
Gasoline prices, which peaked in April, and seasonal trends will cause values of used cars to drop an average 2 percent this month compared to May, predicts the guide company, while the prices of used trucks will drop an average of 1 percent. Prices of used compact and mid-sized cars are predicted to fall an average 2.4 percent this month from May and will drop in July, too.
From January through May, values of used cars grew 6 percent, while truck values fell about 1.6 percent. But the prices of some 1- to 3-year-old subcompact and compact cars are ex- pected to decline up to 5 percent during June compared with May levels.
Take the 2009 Honda Civic Sedan LX. After rising $1,200, or 11 percent, from January through May to $12,187, the price of that vehicle is projected to drop $600, or 5 percent, in June, according to the NADA guide.
Likewise, the average price of a used 2009 Toyota Prius rose 12 percent, or $2,350, from January through May to $21,225 but is expected to drop by $900, or 4 percent, in June.
Prices of used vehicles are following a typical seasonal pattern: peaking in the spring and falling in the summer, Dixon says.
But last year prices remained high through mid-summer. That's because dealers turned to the used-vehicle market to satisfy inventory needs when new-vehicle production was cut as a result of the March 2011 earthquake and tsunami in Japan.
Gasoline prices peaked in May 2011, further buoying used-vehicle prices last year. c