Used Car Prices Expected to Decline in Next 12 Months

Used Car Prices Expected to Decline in Next 12 Months

Used vehicles prices are set to drop over the next 12 months by between 4 and 5 percent according to industry analyst group ALG.

Prices have been dropping on used vehicles ever since they reached an all-time high in 2011. Slow new car sales and especially a lack of leases caused the slowdown in the used car market, but thanks to the turn-around in new vehicle sales, prices on used vehicles continue to drop.

“We’re seeing sort of a landing back to a normal used-car market environment. With the financial crisis of 2008, you see that huge decline in the used-car value index. Since that time, we’ve seen this huge recovery,”  said Eric Lyman, ALG’s vice president of residual value solutions.

Within the next two to three years, ALG also says that used car prices will fall 8 to 10 percent compared to what they are at now.

One clear downside to the decline in prices, as ALG pointed out, is that used car dealers will be increasing costs to lease customers. “The bottom line is your lease payment is determined by the difference between your transaction price and your lease-end residual value,” Lyman said.

[Source: Automotive News]