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Used-Car Price Decline Slams Luxury Makes

Washington DC May 5, 2008; The AIADA newsletter reported that used-vehicle prices are slumping in the United States, just as cars and trucks coming off lease are crowding the upscale pre-owned market. Luxury international used vehicles now are selling, in some cases, for thousands of dollars less than the automakers expected.

For example, last week, BMW AG said it had taken a $372 million charge to reflect falling U.S. resale prices, according to the Automotive News.

Sales volume isn't BMW's problem. Jan Ehlen, a spokesman for BMW North America LLC, said the number of BMW vehicles that came off lease between September 2007 and March 2008 rose 50 percent from the year-ago period. Like other automakers, BMW generally leases vehicles for 36 months. So the 2005 models are coming off lease and joining the used-vehicle market now.

Ricky Beggs said those cars and trucks are selling for an average wholesale price of $25,607 — more than $3,000 less than projected.

Similarly, the 2005-model Mercedes vehicles had an initial 36-month residual value of $34,472. But the current average wholesale sales price of those vehicles is $29,733 — more than $4,700 less.

The problem is less pronounced for Lexus, Beggs said. Its 3-year-old used cars and trucks are selling for an average wholesale price of $23,571 — about $1,400 less than their projected residuals, he said. Overall, about 2.2 million off-lease vehicles will join the used-vehicle market this year, CNW Marketing Research predicts.

The increased supply of used vehicles and a sagging economy are driving down prices. In March 2008, average wholesale prices of used cars and trucks were 2.4 percent lower than in the year-ago month, ADESA Analytical Services said. Prices of luxury cars dropped 2.5 percent, and prices of luxury SUVs fell 9.3 percent.