Higher Quality and Tight Supply Keep Older Used Vehicle Prices High

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Later-model prices soften due to new market pressures

MCLEAN, VA--Sept. 10, 2013: Used car and light-truck prices for 4-to-10 year old units are expected to be 0.5% higher in 2013 than like-age units were in 2012, according to the National Automobile Dealers Association (NADA) Used Car Guide in its latest report, NADA Used Vehicle Price Report: Age-level Analysis and Forecast. By comparison, NADA predicts that prices for vehicles up to three years in age will be 1.5% lower than similarly aged unit prices last year.

"Historically speaking, reliability and unexpected repair cost concerns meant that vehicles over five years of age took a back seat to their younger, in-warranty counterparts in terms of demand," said Jonathan Banks, executive automotive analyst for the NADA Used Car Guide. "However, rapid advances in dependability over the past decade have changed consumer attitudes towards purchasing older vehicles."

Through the first half of 2013 prices for units from 4-to-10 years old have stayed high, with prices essentially unchanged from the historically high averages observed in 2012. Prices for later-model vehicles less than four years in age fell by 1.2% over the same period.

Looking ahead, NADA believes the combination of rising supply, combined with stronger new vehicle demand and favorable incentives, will translate into a steady softening of later-model used vehicle prices through 2014.

Conversely, it is expected that advances in dependability and affordability relative to newer used models, as well as a rolling wave of lower supply stemming from the recession will keep prices for older models high over the same period.

For 2013, NADA forecasts that prices of units 1-to-3 years in age will be 1.5% lower than similarly aged units were in 2012, and that prices for units 4-to-6 years in age will be 1.5% higher. Slipping by an average of just 0.2%, prices for 7-to-10-year-old models are expected to be relatively unchanged.

Regarding model year-specific expectations, NADA predicts that used prices for 2013 model year units will fall by 16% from 2013 to 2014 – the steepest decline expected over the period. Depreciation for other model years is expected to range from 15.1% for model year 2012 to 14.2% for model year 2008. Depreciation is expected to average a moderately higher rate of 15% for model years 2004 to 2007.

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