CARY, N.C. -

NADA Used Car Guide reports that its seasonally adjusted used-vehicle price index at the midyear mark was 3.7 percent below last year’s six-month average.

And the rate of depreciation is increasing: Used-vehicle prices were 12 percent lower through June relative to all of last year. In the same period last year, that figure was 9 percent lower than full-year 2014. .

According to the latest Guidelines report, subcompact car prices fell the most through June, down by an average of 19 percent. Compact car depreciation reached 15 percent; midsize and large cars were down by just over 13 percent. Trucks and utilities saw milder declines: large pickups were down less than 7 percent, while large utility and midsize pickups prices were down by 5.5 percent.

Depreciation across luxury segments ranged from 11.4 percent for luxury large utilities to just below 15 percent for luxury large cars.

The one segment that saw an improvement in depreciation relative to last year was large utility. Prices fell by 7.1 percent over the first half of 2015, but only fell 5.4 percent in the first half this year.  

Mainstream car depreciation was roughly 4 percentage points higher through this June, while mainstream truck depreciation was 3 points worse. Luxury car and truck depreciation was 1.5 and 2.7 points higher, respectively.

“Used-vehicle prices are clearly, but not unexpectedly, on a downward trend,” Larry Dixon, senior manager for market intelligence for NADA Used Car Guide, said via email. “This comes following years of exceptional strength. But as the strength exhibited over the past several years was due to falling used-vehicle supply, the softness we’re currently witnessing is largely due to increasing supply.”

That rising supply, he said, is attributable to the recovery of new-vehicle sales and a massive increase in leasing since 2013.  “Manufacturer incentives are also taking a toll on used-vehicle prices,” he said. “Incentive spending is as high as it’s ever been and with new-vehicle sales appearing to plateau, it’s likely it will move even higher.”

What happened in June

Wholesale prices of vehicles up to 8 years old fell by 2.4 percent in June compared to May — the steepest monthly decline thus far in 2016, but in line with expectations for the month.

As such, NADA Used Car Guide’s used-vehicle price index moved only slightly, falling by 0.2 percent to 119.9.

Looking at individual segments, prices of mainstream used cars continued their near-industry high rate of decline in June. Subcompact car prices fell by an average rate of $455 over the month, which translates to a 4.5 percent decline from May. This was the steepest loss for the segment since last September’s nearly 6 percent drop.

Losses for midsize and large cars were high but not atypical for this time of year, with depreciation for each at 3.2 percent. Compact car depreciation was in line with last June at 3 percent.

Midsize and large pickup prices were relatively unchanged for the third straight month; prices for both slipped by a combined average of 0.6 percent in June. Prices for other mainstream truck segments fell between 1 percent (large utility) and 2.2 percent (compact utility).

Luxury cars saw the steepest price drop last month, with prices declining 4.7 percent in June after falling only 0.3 percent in May. June’s figure was nearly 3 percentage points worse than the segment’s five-year average for the period. Monthly average depreciation for the four months prior to June was 1 percent.

Among other segments, luxury compact utility and luxury large utility prices fell by 2.6 percent and 3 percent, respectively. Luxury midsize car prices fell 2.3 percent, and luxury midsize utility and luxury compact car prices were down by 1.6 percent.

Forecast for July and beyond

NADA Used Car Guide predicts that prices of vehicles up to 8 years old will fall by 2.5 percent to 3 percent in July when compared to June. This is somewhat higher than the 2-percent decline averaged for the month over the past five years.

Subcompacts are expected to fall by 3 percent to 3.5 percent in July, while compact, midsize and large car prices are expected to fall by an average of 3 percent. Prices for these segments fell at similar rates last July, with the exception being subcompacts, which were down more than 4 percent last year.

Other segments are expected to fall by 2.5 percent or less.

Depreciation is expected to pick up as the market enters what is typically considered the softest part of the year. Used vehicle prices are expected to fall by about 3 percent in August and 3.5 percent in September (last year, those numbers were 2 percent and 3.4 percent, respectively).

NADA Used Car Guide’s full-year forecast now has prices of used vehicles up to 8 years old falling by an average of less than 5 percent on an index basis from last year — an improvement over the previous outlook of a 5 percent to 6 percent decline.

Dixon said this is based on relatively solid market performance over the past two months as opposed to an expected improvement in fundamentals moving forward.

 “Moving forward, NADA Used Car Guide expects to see used prices continue to soften as supply and incentives move steadily higher. The positive, other factors affecting used-vehicle prices, namely job growth, consumer sentiment, overall economic activity, credit conditions, etc., remain relatively good. In short, we’re transitioning from a period dictated by extraordinary factors to one more in line with the ‘status quo,’ Dixon explained.