Many consumers are coming into the dealership with more equity in their trade-ins these days, and that will likely convert pent-up demand into actual sales, says NADA Used Car Guide executive automotive analyst Jonathan Banks.

Several used models are seeing stronger trade-in equity because of the drop in used supply, solid demand and a boost in vehicle quality, NADA UCG explained.

“Higher trade-in equity on used vehicles will help facilitate the release of pent-up demand for a growing number of consumers making the jump off the sidelines and into a vehicle purchase,” said Banks.

“The equity position that consumers find themselves in today is better, and in some cases, dramatically better than it was three years ago,” he added.

NADA UCG gives the example of a Ford Explorer purchase.

A shopper that bought a new six-cylinder Explorer XLT 4WD in 2006 had to make 41 monthly loan payments to obtain equity in the ride, analysts noted. Four months later, the consumer had $2,895 worth of equity in the vehicle.

Now say the consumer bought a new version of the same vehicle (six-cylinder Explorer XLT 4WD) in 2009.  It only took that shopper 26 months to hit equity, NADA UCG noted.

What’s more, after the owner had made payments for 45 months, his equity was at $6,830. So that’s more double the equity the shopper from 2006 had after 45 months.

Offering some more examples, NADA’s data indicates that the average trade-in value of a 2009 model-year Hyundai Elantra (4D GLS 2.0L I4) in the third quarter of 2012 is $8,875.

That’s a 77-percent increase from the average trade-in value of a 2006 model-year unit at the same point of 2009.

Of the 10 examples of rising trade-in values of three-year-old vehicles provided by NADA, this Elantra had the strongest increase, percentage-wise.

Coming in with the second-strongest increase was the Dodge Grand Caravan (SXT 3.8L V6 model).

For a 2009 model-year unit, the average trade-in value is at $12,633 (for the third quarter of 2012). This is up 54 percent from what a 2006 model-year van fetched three years ago.

Next was the Chrysler 300 (4D 300C 5.7L V8 model). The average trade-in value of a 2009 model in the third quarter of this year is at $19,529, up 53 percent from the trade-in value of a 2006 unit back in 2009.

To illustrate this trend in more detail, NADA provided the following table: