NADA: Five factors will keep used vehicle trade-in values high in 2013

Jonathan Banks, executive automotive analyst with the NADA Used Car Guide, highlighted several factors that will keep used-vehicle prices at historically high levels this year. Banks spoke at the National Automobile Dealers Association (NADA) convention at the Orange County Convention Center in Orlando, Fla.

“Car buyers will find 2013 another excellent year to trade-in their current vehicles for either new or previously owned cars or trucks,” Banks said .

Banks outlined five key factors that will result in high used-vehicle prices in 2013:

• Fed policy and a highly competitive lending environment will continue to see credit standards loosen and availability grow.
• The recovery in housing and construction will pick up steam, benefitting both the economy and employment. This will help stoke demand for traditional used-car and -truck shoppers.
• Employment will continue to improve, especially toward the latter half of the year once the outcomes of the government sequester and debt ceiling extension are better known.
• With a predicted increase of 8 percent, the supply of units up to three years in age will grow for the first time since 2006, but even with the increase, volume will still be 25 percent below where it was in the three years leading up to 2009.
• While it’s expected that the recovery in new-vehicle sales will siphon off a portion of used-vehicle demand, there remains pent-up demand for those consumers who traditionally purchase only used vehicles. “As job growth continues to progressively improve, used-vehicle intenders will gradually replace their current vehicles with newer, pre-owned ones, thereby helping to compensate for the loss of new-vehicle substitute demand,” Banks said.

Taken as a collective, NADA predicts the price of units up to eight years in age will average $14,375 this year, down 0.8 percent from 2012’s figure of $14,500.

Compared to last year, NADA expects that prices will be softer in the first half of the year as consumers and businesses react to the expiration of the 2 percent payroll tax holiday and political activity surrounding the deferred federal budget sequester and the debt ceiling extension.

“Excluding last December’s inflated showing from Hurricane Sandy, used prices in the second half of the year should essentially match what was observed in 2012,” Banks added.

Last year, both the new- and used automotive markets made several notable achievements. New-vehicle sales accelerated by more than 13 percent in 2012, which was 500,000 more than the year’s initial consensus forecast and also the largest annual increase recorded since 1984.

“Undoubtedly, the new-vehicle sales performance in 2012 was helped along by higher used trade-in prices,” Banks added.

By NADA’s estimation, used-vehicle prices for units up to eight years in age rose by 1.2 percent in 2012, thereby extending a three-year run of appreciation with prices increasing by a staggering 32 percent since bottoming out in 2008.