ATLANTA -

Amid the increased buzz in the new- and used-car markets that comes with the start of the spring selling season, there are three connected trends at play that are likely to downwardly impact used-car prices, according to AutoTrader.com.

Juan Flores, director of operations for the Trade-In Marketplace at AutoTrader.com, said that as the season begins to ramp up used and new sales, dealers should keep a close eye on movements in new-vehicle pricing, used-vehicle volume and access to credit.

“While used-vehicle prices typically see an increase in the range of 3 to 5 percent during this time of year, market factors will likely keep price increases more in the 1- to 2-percent range,” Flores said.

“Dealers need to be aware of these trends and ensure that they are using tools that can help them mitigate risk on both the retail and trade-in sides of their used vehicle operations,” he added.

So how, exactly, will these three trends “converge” to affect used prices?

The analysis begins with the impact of pricing on the new-car side.

Despite weather that slowed the market early on, 2014 is still expected to have the strongest new-car sales in seven years and beat 2013 totals by 3.5 percent to 4.5 percent.

However, that projection comes with a caveat.

“While manufacturers are expected to remain resilient in their continued pursuit of market share, the projection suggests that not all manufacturers will achieve their much higher internal 2014 volume target,” the AutoTrader analysis indicated.

What that likely means is that within this “competitive landscape,” there will be continued aggressive pricing and incentives to drive new-car purchases.  There will likely be many new-car shoppers who will come to the dealership with a trade-in, thus driving higher used supply.

And that’s where the second trend emerges.   Additional increases in used-vehicle volume will likely lead to “slight downward pressure” on used prices this year. This volume boost is not only driven by the aforementioned trade-in lift; AutoTrader says there will be “notable volume” of off-lease cars entering the market.

“This influx of supply will not only create negotiation opportunities for consumers as they look to purchase used vehicles, but it will also increase consumer demand, particularly among payment sensitive shoppers, as many units will become more affordable,” the analysis indicates.

Next, we come to what AutoTrader called the most important of the three trends: access to credit.

The company is expecting continued thawing in credit access this year, “even in the subprime market.”

What this means is more potential customers, many who haven’t had this kind of purchasing power in years.  With consumers having greater access to credit and more affordable vehicles from which to choose, new and used retail sales are likely to continue climbing “in a market-efficient manner,” Auto Trader said. And this will impact the price and volumes of trades that dealers receive.

“Dealers need to be extra focused on used-vehicle pricing patterns to ensure that they are valuing trade-ins and retailing their used vehicles accurately, and they should also pay close attention to the days’ supply of their used inventory,” Flores continued. “Tools like the Trade-In Marketplace from AutoTrader.com and vAuto’s Provision can help dealers ensure that they are acquiring the right vehicles at the right prices, keeping their turn in check and setting retail asking prices that reflect the current market.”
 

Joe Overby can be reached at joverby@autoremarketing.com. Continue the conversation with Auto Remarketing on both LinkedIn and Twitter.