Since the 2007-2009 economic recession, the automotive retail market displayed a drop in new car-sales and the increased demand for used vehicles. For 2012, data indicates that it will be more of the same.
Jonathan Banks, Executive Auto Analyst for the NADA Used Car Guide, explained, “The average trade-in value of a 3-year-old used car is 8 percent higher in January 2012 compared to last January. We expect this trend of higher trade-in values to continue throughout the year.”
Essentially, Banks noted there were two reasons for the ongoing trend in used car value. First, NADA analysts predict a 7 percent decline in used vehicle supply for 2012. The off-lease supply, which accounts for a large number of pre-owned vehicles, is estimated to have fallen by 22 percent for 2012.
“Banks says, “The depreciation rate of used vehicles this year will be slower than it has been at any other time in recent history because of reduced inventory, which will keep prices on used models in demand at a premium.”
The second factor attributing to the value of used vehicles is the continuing demand for them. The average age of vehicles currently on the road are at nearly 11 years old. However, Jonathan Banks believes the demand for both new and used cars will increase for 2012.
“Strong consumer demand for late-model used vehicles and a continued reduction in supply will drive up prices this year. For many car buyers who are concerned about cost and economic uncertainty, the used-vehicle market will remain a viable option.”