Strong used-vehicle prices make it more likely new-vehicle shoppers will get a high price for their trade-in and won’t be underwater on their current vehicle’s loan. If used prices tank that will make car buying significantly more expensive for many Americans.
Jonas cited several reasons for his dire forecast.
- The Manheim Used Vehicle Value Index declined in July from the previous month for the third month in a row, with prices of used full-sized cars down for 35 straight months.
- The decline came despite what Jonas called a “relatively tight” used-vehicle market, at around 45 days supply.
- Amid widespread offers of 0 percent, 72-month new-car loans, declining new-vehicle transaction prices are putting pressure on used-vehicle margins.
- Jonas’ discussions with rental-car companies “suggest a shift back towards program cars,” with automakers guaranteeing they will buy back vehicles that are retired from the rental fleet, as opposed to “risk cars,” for which the rental companies assume the risk of price depreciation. Jonas called that “a complete U-turn from the direction they were headed just six months ago.”