Anything that reduces the prices of new vehicles also reduces the prices of used vehicles. New-vehicle sales are still strong but are not growing at the clip seen in recent years. So used-market forecasters expect incentives on new cars to rise this year, causing used-car values to slide.
Jonathan Banks, executive analyst at NADA Used Car Guide, citing Power Information Network data from J.D. Power, said July marked the seventh month in a row that new-vehicle incentives grew by 10 percent or more. In July, the average new-vehicle incentive was $3,402, up from $3,100 in July 2015, PIN data show.
Anil Goyal, Black Book's senior vice president of automotive valuation and analytics, believes prices of used pickups will "soften" this year. He noted that pickup production and days supply are creeping up. Some incentives in the segment are reaching 15 to 20 percent of sticker price, he said.
"A 2014 pickup is at 65 to 70 percent of its original MSRP; that's very, very strong," Goyal said. "If you can get a 15 to 20 percent discount on a new one, if people can switch to the new side -- that's when you start to have that impact on used values."
Tom Kontos, chief economist at ADESA, predicts manufacturers will be "tempted" to add incentives on cars but prices of used pickups will hold up well.
Pickups are "under supplied" in the market because they are not popular vehicles in rental and other fleets and are in high demand in construction industries, he said. "There's not as much risk or need to do a lot of incentivizing on pickup trucks."
