KBB Encourages Consumers Not to Wait to Buy Used Vehicles with Higher Prices on Horizon
Predicting a 4- to 6-percent spike in used-vehicle values into early next year, Kelley Blue Book came out Tuesday and strongly suggested that consumers make the move now if they're looking to purchase a used model.
The refilling of the industry's used supply via off-lease and off-rental models will likely be limited in early 2012, pushing prices up. As of now, though, prices are sliding.
In fact, through October, used values have been on a five-month downturn, according to KBB.
Prices dipped 2.6 percent in October and have declined 10 percent from their June peak, the company reported. The heftiest decline has been in the fuel-efficient segment, whose values are down by more than 20 percent as compared to the June peak.
There has been a “substantial cooling” for the car market in light of lower fuel prices and normalizing inventory levels (particularly for Japanese brands), KBB explained.
The firm is projecting another 3- to 4-percent drop in used values before year’s end, but that decline won’t last. This is why the company is encouraging consumers to act quickly. KBB is projecting the first quarter will show a rebound in used values.
“Used-car values typically decline through the fourth quarter due to a seasonal drop in demand that lasts through the holiday season,” said Alec Gutierrez, KBB’s manager of vehicle valuation. “We believe sales volume also will decline through the remaining fourth quarter, similar to years past; and as a result values will likely remain soft through year-end, with few exceptions.”
In the last few years, though, the first quarter is a different story when it comes to used demand. There have been strong increases in used registrations, and KBB expects more of the same for 2012 . That, coupled with limited supply, will drive up used prices, the company said.
“Since 2009, used-vehicle registrations in the first quarter have increased by 15 to 20 percent on average from the preceding fourth quarter; and since we expect a similar increase in demand in 2012, a lack of supply will likely put upward pressure on values early in the year,” Gutierrez noted.
“Since we expect fewer leases and trade-ins replenishing supply, values will likely increase across the board as supply struggles to keep pace with demand,” he shared. “Values for certain segments can change more aggressively should fuel prices increase similar to earlier this year.”