September is kicking off with lower used-car prices than expected, perhaps, as August’s auction price declines far exceeded initial predictions — at least through half the month.

In a post on NADA’s Used Car & Truck Blog on Wednesday, NADA automotive analyst David Paris pointed out that used-vehicle depreciation for units up to 8 years in age had dropped by 3 percent by mid-August.

Paris pointed out this figure is much higher than what’s typically been recorded for the month, and looking back to the 2011-2013 period, the average August decline was in the range of 1.6 percent to 2.4 percent.  

But what seems as unusual market movement can be explained easily, Paris says.

“For starters, we believe the market is still compensating for the unusually strong spring market that was caused by temporary factors (harsh winter conditions, influx of recalls),” Paris said. “The large chunk of the rental unit volume that was kept in service to address these factors has steadily been finding its way to the auction over the past few weeks.”

In fact, the amount of 2013 and 2014 model-year units in the lanes rose by 11 percent on a month-over-month basis in July.

“Given that rental supply at auction through July remained down by some 8–10 percent compared to last year, it’s likely that the growth observed in supply last month has carried over into August,” Paris wrote.

Besides expanding off-lease supply, the new-car market is also serving to push used prices down, flooding the market with trade-ins.

“New-vehicle sales have thrived through the spring and summer months, sparked by an improving economy and strong incentives which have ultimately helped draw more consumers into dealer showrooms and in turn increased the number of vehicles being traded in,” said Paris.

On top of that, manufacturers are ramping up incentives to bring more shoppers in the new-car showroom, as well.

According to NADA, as of the end of August, total incentive spending was at its highest level since 2010.

Not surprisingly, the segments that are seeing some of the biggest drops are ones with some of the biggest incentives spikes on the new side.

Paris offered the following examples:

Manufactures had spent an average of $1,436 in subcompact car incentives as of late August, which is 32 percent more than they did in 2013, according to NADA data.

 Furthermore, midsize ($2,817) and compact cars ($1,823) have both increased incentive spending by 21 percent compared to 2013, Paris reported.

Corresponding to the incentive spikes, subcompact, compact and midsize cars are seeing some of the largest price declines, with prices dropping by 3.7 percent, 3.3 percent and 2.9 percent, respectively, as of Aug. 23.

Trucks and SUVs continue to see stronger price retention than their smaller counterparts, picking up the smallest price losses this past month.

Large pickup prices has fallen in price by only 1.4 percent by Aug. 23, while large SUVs saw a slightly larger drop of 2.3 percent.