Used-vehicle prices driven to 13-year high
Even small-car sales are strong as leased vehicles flood market
The average price of a used car has hit a 13-year high, pushed up by a crush of late-model leased vehicles hitting the market, experts say.
Buyers may fret when they see the average price of a used car rose to $19,657 in the first quarter, up 17.6 percent compared with the same period five years ago. But a lot of the reason is that vehicles on the market are generally newer than in past years, Edmunds.com says.
“Off-lease cars are flooding in the market,” said Ivan Drury, senior analyst at the car-buying website. But with more motorists ready to rid themselves of their jalopies in a strong economy, “the market is doing a good job of absorbing the large quantity.”
Strong demand is also holding up prices, defying past predictions that they would fall when the cascade of off-lease cars inundated the used-vehicle market. In fact, even with an average price of $22,685, the average 3-year-old used car only spent 41 days on the market. That’s tied with last year, a number that has fallen from 55 in 2005.
Like overall used-car prices, the average for those 3-year-old cream puffs is also highest since 2005, when Edmunds began keeping records.
Other experts agree that more off-lease vehicles translates to a fresher crop of used cars over-
all compared with the older, more worn vehicles that customers drag in to trade to exchange for new ones.
Off-lease “vehicles (are) probably a bit younger ... as opposed to trade-ins that tend to be 4- or 5-yearold cars,” said Tom Kontos, chief economist for wholesale used-car operation KAR Auction Services.
Also holding up prices: More pickups and SUVs. As consumers have shifted their preference to larger vehicles, their higher prices are reflected when they come to the used market. Most consumers haven’t been put off by higher fuel costs.
“While some consumers hold fuel costs as a top (consideration) and are drawn to the smaller car segments, fuel costs are not high enough to significantly detract other buyers,” Drury said.
The used-car market is so strong that even small cars, which have been performing poorly in newvehicle sales, are showing stronger sales.
The average price for a 3-year-old subcompact car was up 3 percent, and compact cars rose 3.9 percent in the first quarter compared with the year before, Edmunds.com said. The two categories were only surpassed by large trucks when it came to price gains. Small cars, also showing stronger demand, spent fewer overall days on dealers’ lots before selling.
Prices also have been buoyed by the lingering effects of last year’s hurricanes.
There was a “delayed effect” driving the price of 1- to 3-year-old vehicles due to disaster victims buying used cars with insurance money they received for vehicles lost to the storms, said AJ Schoonover, director of vehicle valuations at Kelley Blue Book.