When NADA Used Car Guide released its Guidelines report earlier this month, it predicted that May prices on used vehicles up to 8 years old would fall 2.8 percent to 3.3 percent relative to April, with prices for the majority of mainstream segments expected to fall by 3 percent or more.

It was a forecast similar to the 3-percent loss recorded for May 2015, but steeper than the 2.3-percent average decline in May of the previous two years. 

So how have prices behaved so far this month? Auto Remarketing caught up with Larry Dixon, senior manager for market intelligence at NADA Used Car Guide, to find out.

“Prices of vehicles up to 8 years in age were down by 2.1 percent through the third week of May relative to all of April,” he said, noting that losses were steepest for compact cars (down 3 percent) and large and midsize cars (down 2.2 percent).

Midsize and large pickup prices, he said, were down by roughly 1.1 percent — the least of all segments; those prices had been predicted to fall by 2 percent to 2.5 percent.

As for June and July, overall prices were predicted to decline in the neighborhood of 2.5 percent to 3 percent relative to each preceding month.

Those predictions remain intact.

“Auction prices were more depressed over the first half of May than they were last week; as such, we have not made changes to our full-month forecast,” Dixon said. “July’s forecast remains unchanged as well.”

NADA Used Car Guide’s full-year forecast remains with prices expected to be down 5 percent to 6 percent on an index basis from 2015. This would place prices below 2011 levels and mark one of the steepest non-recession declines seen during the past 20 years.

A look back at April

NADA Used Car Guide’s seasonally adjusted used-vehicle price index fell for the fifth straight month in April, dropping 0.6 percent from March to 118. Lower prices in the first part of the year placed the index 4 percent below last year’s four-month average and dropped it to its lowest level in five years.

Lower prices in the first quarter of the year were mostly universal across segments, but April’s lackluster showing was due in large part to poor performance by cars.

— Prices for subcompact cars fell by 4.3 percent, nearly double the 2.3 percent loss averaged by the two closest segments, compact and midsize cars.

— Luxury car prices fell by 2.1 percent, pushing year-to-date losses for this segment to nearly 6 percent versus the fourth quarter. This, the highest in the industry, occurred despite a 29-percent pullback in late-model auction volume.

— Compact utility prices continued to fall compared to prior years. Depreciation for this segment reached an average of 1.2 percent in April, which was twice the amount of last year’s rate.

— Midsize pickup, midsize utility, luxury midsize utility and large pickup prices fell by a low average of 0.5 percent. Large utility prices were nearly unchanged.

— Subcompact car prices were 3.3 percent lower than in Q4 2015 YTD, while compact car prices were down 2.6 percent. Prices of other mainstream segments are down 2 percent or less.

— Across luxury segments, luxury midsize car prices were down 5 percent; losses for remaining segments (except luxury large cars) were mostly down by about 4 percent.

As for why subcompact car prices continue to fall, Dixon cited a general trend in consumer preference away from cars.

“Consumer demand for new and used trucks and utilities is simply much stronger than it is for cars, and consumers in the market for a small vehicle are more likely to purchase from the growing list of small utilities (Honda HRV, Chevy Trax, Mazda CX-3, etc.) than from a list of small cars,” he said.

Lower gas prices, higher fuel economy across all segments, and higher supply of subcompact cars combine to propel prices on these cars lower, he continued.