Used Vehicle Prices Fall 2.6% in September

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Federal government debate budget and debt ceiling should have little effect on used vehicle price movement

McLEAN, VA--Oct. 10, 2013: The average price of used cars and light trucks up to eight model years in age fell 2.6% in September, marking the highest rate of decline recorded since the 2.9% tumble in October 2012, according to the National Automobile Dealers Association (NADA) Used Car Guide. September ended a three-month period with depreciation averaging an unusually low rate of 1.2%.

"Historically, the rate of used vehicle depreciation begins to accelerate in September as consumer attention shifts toward more pressing seasonal obligations and because larger quantities of one-year-old units entering the used market converge," said Jonathan Banks, executive automotive analyst for the NADA Used Car Guide, in the October edition of Guidelines, a monthly report on new and used vehicle sales trends and price movement.

While the drop in September was higher compared to the previous 10 months, it was less severe than the 2.7% average rate of depreciation recorded for the past months of September from 2005 to 2012 (excluding the recession years of 2008 and 2009). As a result, NADA's seasonally-adjusted used vehicle price index ticked up to 124.8, one-tenth of a point higher than August's figure of 124.7.

Along with the time of the year, larger quantities of one-year-old units entering the used market also applied downward pressure on used prices in September. The number of 2013 model year units sold at auction last month–the majority coming from rental companies–grew by more than 24% compared to August.

Compact car, midsize car and midsize van segments, which have experienced the highest price increases in the 2013 model year supply, fell by a combined average of 2.9%, three-tenths of a point more than the market average—the biggest price decline in September. Luxury car prices, burdened by rising off-lease volume, fell by a similar figure of 2.8%.

Prices for most utilities—compact, midsize and luxury—all fell within a tight range of 1.9% to 2.2% in September, while prices for large SUVs and pickups continued to show strength as favorable fuel prices and a tight supply held declines to 0.6% and 1%, respectively.

Through three quarters of 2013, the average price of used vehicles up to eight model years in age was $15,011, up 0.5% from 2012's average of $14,990.

"Despite the contentiousness of the budget and debt ceiling debates currently roiling the federal government, used vehicle prices will remain unscathed because pressure from the public, businesses, media and U.S. debt-holders should be significant enough to force lawmakers to end the ordeal before it inflicts scarring damage," Banks said.

In addition, the underlying fundamentals supporting auto demand remain positive and should offset consumer concerns about inaction by the federal government in the short term, Banks added.

"Consumer purchases are being dictated less by want and more by the sense that a new or newer pre-owned vehicle is needed because the current one is too old," Banks said. "Credit terms and credit availability remain favorable, the housing market continues to recover and gasoline prices are stable."

NADA still expects depreciation in the fourth quarter of 2013 will be slightly higher than last year's unusually strong fourth quarter, when used vehicle prices dropped by an average of 1.6%-to-2% per month over the three-month period. On a full-year basis, used vehicle prices are still expected to be 0.5%-to-1% higher than 2012's record level.

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