RVI: Used Prices to Soften Through 2018; Lease Penetration Continues to Increase
Used-car prices are likely to soften some this year, according to the latest RVI Risk Outlook, and it appears this trend will not stop anytime soon. In fact, it appears this decline will accelerate.
After an anticipated 0.2-percent year-over-year downturn in the RVI Used Car Price Index for 2013, the firm is projecting used-car prices to soften through 2018 as used supply begins to loosen.
“In 2014, used-car supply will begin to increase, putting downward pressure on used-car price,” officials said. “This, along with softening new-car prices and strengthening new car demand, will cause a downward trend on used-car prices through 2018.”
More specifically, RVI Used Car Price Index is projected to fall 0.6 percent year-over-year in 2014, 2.0 percent in 2015, 1.9 percent in 2016, 0.7 percent in 2017 and 0.4 percent in 2018.
Offering some additional analytics impacting the used industry, the report shared that lease penetration in the fourth quarter of 2012 was 20.8 percent, up from 19.2 percent in the 3rd quarter of last year.
As lease penetration continues to increase, dealers can perhaps assume the coming years may bring more abundant off-lease supply.
And this may come as welcome news as RVI reported auction volume has declined 10.1 percent (on an annualized basis) so far in 2013.
More on Early-Year Price Decline
In the RVI Risk Outlook, officials provided some more insight into this year's used-car price decline.
Specifically, RVI shared that used-car prices (seasonally adjusted; 2–5 year old vehicles) saw a monthly decrease in February. In fact, used-car prices decreased by 1.4 percent from January, and are up by 2.7 percent on a year-over-year basis, according to RVI.
Why the drop?
RVI explained that increased incentives and new-car sales have “moved buyers to new cars, resulting in lower used-car demand.”
This could perhaps be playing a part in declining used prices.
On the new-vehicle front, sales continue to increase. In Feburary, the SAAR sat at 15.3 million, according to RVI.
And new vehicle sales increased by 6.2 percent from last February, and increased 0.7 percent from January. RVI shared that this marked the fourth straight month with sales over 15 million SAAR.
Helping achieve this higher level of sales are incentives, which were up to 14.1 percent of MSRP in February, a 0.1 percent increase from a month ago,” officials reported.