Financials

The price of an average used vehicle sold in the United States has reached a record high

The price of an average used vehicle sold in the United States has reached a record high, according to the automotive site Edmunds. com. However, the report says one benefit of this trend is that shoppers are getting plenty of benefits—from improved fuel economy to smarter vehicle technology—as part of the price.

In its latest "Used Vehicle Market Report," Edmunds. com says the average price for a used vehicle was $18,800 in the second quarter of 2015. This price marked an increase of 7.6 percent, or $1,300, fromthe second quarter of 2014.

Used cars have also gotten younger in the past year. The average age of a used vehicle sold in the second quarter of 2015 was 4.5 years, down from4.9 years at the same time in 2014.

The report says certain trends in the used vehicle market are leading to the younger ages and higher prices. More leased vehicles are being returned, leading to an influx in inventory under five years old. The report also says that certified pre-owned vehicles are becoming more common.

There were 9.56million used vehicle sales in the United States in the second quarter of 2015, up 5.1 percent fromthe previous year. Certified pre-owned vehicles accounted for 660,766 of these sales, an increase of 12 percent fromthe previous year.

Certified pre-owned vehicles are also making up a larger share of franchise used vehicle sales. This kind of sale accounted for 22.7 percent of these sales in the second quarter of 2015, up from 20.5 percent in the previous year.

Jessica Caldwell, director of industry analysis at Edmunds.com, says the higher prices on used vehicles do not necessarily present a barrier to buyers. In fact, she says it can allow buyers to get more value for their money.

"Three-year-old used cars, for example, havemore bells and whistles than older used cars, and they're actually selling for less than they did just one year ago," says Caldwell. "Compare that to vehicles aged eight and over, whose prices are up 11 percent or more, on average, over last year. There's undoubtedly a growing value proposition these days in newer used cars."

Demand for older vehicles remained strong, though these vehicles also had larger price increases than younger used vehicles. Compared to the year before, the price for a 15-year-old used vehicle in the second quarter of 2015 was 55 percent higher than inthe second quarter of 2015. Average prices were 48 percent higher for 14-year-old vehicles, 36 percent higher for 13-year-old vehicles, and 30percent higher for 11- or 12-year-old vehicles.

Prices were down in other areas. The average price for a three-year-old vehicle decreased by 3 percent, while the average price for a six-year-old vehicle fell by 2 percent. The report says these trends are likely a result of lease returns, since leases typically end after three years, aswell as the fact that sixyears is the average age of vehicles traded in for a new vehicle purchase.

The change in price from the second quarter of 2014 varied widely based on the type of vehicle. Trucks, SUVs, and vans had more significant price increases, with the average price rising 8.7 percent for a three-yearold compact truck and 5.1 percent for a large truck of the same age. The report says prices for used vehicles in this segment will likely decrease in the near future, as new trucks are often leased and returned after three years.

Passenger car prices were more likely to have decreased in the past year. Luxury cars had the largest decline in prices in the three-year-old segment, falling 6.9 percent for premium luxury vehicles and 4 percent for entry level luxury vehicles.

The average financing amount on a used vehicle was $20,732, a 3 percent increase from2014. The report says this amount is higher than the price of an average used vehicle because many of themore inexpensive vehicles are purchased using cash.

The average termon a loan for a used vehicle has been increasing since 2009, standing at 66.2months for the second quarter of 2015. The average annual percentage rate has also started to increase after falling steadily for several years. The report says almost 60 percent of buyers who financed a used vehicle purchase got an APR of 5 percent or lower, but that many others have an APR of 10percent or higher; asa result, the average APR was 7.7percent for the quarter.

The average price for a three-year-old used vehicle was $21,169, and the report says this price represented 64.6 percent of the new vehicle price. Compact trucks retained the largest share of their value at 74.6 percent after three years, or $23,801. Premium luxury cars and SUVs had the largest drop in value as a percentage, falling an average of 51.3 percent to $51,122 for cars and $44,691 for SUVs.

Used vehicle sales were up in 37 states, including a 5.7 percent increase in Connecticut. The largest yearover-year increase occurred in Tennessee, where used vehicle sales increased by 34.8 percent. Maryland also saw a significant increase, with sales going up 20.8 percent.

Maine had the largest decline in used vehicle sales at 22.7 percent, followed by Kansas at 14.5 percent. New York and Vermont also had decreases in used vehicle sales of 11 percent and 6.5 percent, respectively.

The report says younger used vehicles are likely to remain common as the volume of former leased vehicles increases. It also says 48 percent of new vehicle purchases and 30 percent of used vehicle purchases include a trade-in, further increasing the volume of used vehicles.