Falling Used Car Prices Likely to Affect All Car Buyers
SANTA MONICA, CA--Feb. 11, 2014: A glut of vehicles hitting used car lots will drive down prices as much as two percent this year, projects Edmunds.com. And while that might be music to your ears if you're in the market for a used car, Edmunds.com says that the trend will likely cause a ripple effect, influencing shoppers of both new and used cars.
"Many car shoppers might not realize how much the new- and used-car markets feed off each other," says Edmunds.com Sr. Consumer Advice Editor Philip Reed. "The boom in new car leases, for example, is leading to a higher number of lease returns, which adds to the growing inventory of used cars, forcing their prices down."
But, cautions Mr. Reed, the drop in used-car values could raise the monthly payments of new car leases. Softer "residual values" – a decline in what a car is worth at the end of the lease – are likely to cause higher monthly payments to make up the difference.
Edmunds.com pricing experts also expect the following changes in the coming year as used car prices fall:
Greater selection of used cars for buyers to browse. Some new-car shoppers who don't have enough money for the new car of their dreams could now find what they need on the used-car lot. Better certified pre-owned (CPO) car deals. Manufacturers have strengthened these popular CPO programs by offering lower-interest financing and included service plans. Now, with lower used-car prices, these factors combine to make for an even more attractive package. Lower values on vehicle trade-ins. When the inventory is high, the value of used cars drops, and that applies to the car you're looking to trade in on your next car purchase as well.
Edmunds.com provides an overview of the used car market's effect on all car shoppers at Falling Prices.
A new report from Edmunds.com also sheds light on what segments of used cars are seeing the biggest price decreases. Large crossovers (such as GMC Acadia and Chevrolet Traverse) have seen the biggest year-over-year decreases, down 8.3 percent. Entry luxury cars (such as BMW 3 Series) and compact cars (like the Honda Civic) show the next biggest price decreases in the last year, down 5.3 percent and 2.7 percent, respectively.
Edmunds.com's 2013 4Q Used Car Market report offers a wide range of comprehensive insights into other used car trends and is available for free download at Used Car Quarterly.