Buying a used 2019 Toyota Camry in the second quarter required a loan of $10,000 more than what was needed to purchase a 2018 model last year, LendingTree reported. In fact, the online lending marketplace saw the average loan request for 2-year-old vehicles rise $5,176, or 28 percent, over 2020.
Experian said its average used-vehicle purchase in the second quarter carried a $23,365 loan, up more than $2,000 from 2020 and $3,000 from the pre-pandemic second quarter of 2019. The average new model carried about $1,000 less in financing than in 2020, but the $35,163 financed still represented a nearly $3,000 increase from 2019.
The rise in prices means customers have more equity in trade-ins and leases, boosting profit-per-vehicle and F&I sales, according to Elliot Schor, JM&A Group vice president for sales operations. But the booming vehicle values today raise the specter of negative equity hindering dealer opportunities down the road, Schor said.
"I think that is a universal concern throughout the industry," he said.
But dealers might not need to worry.
National Automobile Dealers Association Chief Economist Patrick Manzi said Thursday that the association didn't foresee a negative-equity issue.
"We expect that once new-vehicle inventory levels have stabilized closer to historical levels, that prices will return to depreciating at a normal and manageable rate," Manzi said in a statement. "We do not expect that there will be a sudden cratering of used-vehicle values back to pre-COVID levels. We expect that there will be a new floor for used-vehicle prices above the floor seen before the pandemic."
Manzi said the new-vehicle market has underproduced for almost two years, a main factor driving up used-vehicle values.
"Given the current situation with continuing COVID outbreaks throughout the global automotive supply chain as well as the microchip shortage there is a chance that we continue to underproduce well into 2022 as well," he said. "We believe that there is currently, and will continue to be, strong demand for new and used vehicles in the market from both retail and fleet customers and because of that, we don't expect to see a massive cratering of used-vehicle values."