Though supply continues to expand, the year has turned, and the industry has begun looking out toward tax season. Consequently, instead of responding negatively to supply expansion, prices for used vehicles are expected to stay flat to up slightly this month.

According to the latest issue of Guidelines from NADA Used Car Guide, used prices will remain steady this month, with more pronounced increased expected in February and March.

“Coinciding with the steady receipt of tax refund checks, used-vehicle prices gradually improved over a given first quarter before tapering off as spring transitions into summer,” Jonathan Banks, NADA UCG executive automotive analyst, said in the report.  “We expect to see a similar pattern play out this year. In addition to seasonality, used-vehicle prices will be most influenced by low gas prices, rising supply and increased new market pressure in 2015.”

By the end of the first quarter, NADA expects prices to average 1.5 percent to 2.5 percent higher than rates seen in December.

Banks pointed out the trucks segments will most likely benefit the most from recent declines in fuel rates. Midsize and large utility, van and pickup prices are expected to rise by 4 percent or more through March, according to NADA UCG data.

On the other hand, subcompact, compact and midsize car prices are scheduled to improve by 1 percent or less over the period, while luxury car and truck prices should grow by roughly 1 percent to 1.5 percent and 2 percent to 2.5 percent, respectively, the report indicated.  

Though used-prices traditionally remain strong as consumers prepare to use their tax refunds toward their next vehicle purchase, there is another trend this time around putting even more money in shoppers’ pockets: the decline in gas prices.

According to the Guidelines report, the U.S. Energy Information Administration predicts that regular grade gas prices will average $2.60 per gallon this year, which is 80 cents lower than the 2014 average of $3.37 per gallon.

This drop in gas prices is expected to combine with the positive environment tax season creates at dealerships to support high demand for used vehicles.  This demand may serve to keep pre-owned rates strong, even as supply floods the market and new-car incentives spike.

“The drop in pump prices will support demand by leaving more money in consumer wallets. In turn, this will help counteract — but not eliminate — the drag on used-vehicle prices,” said Banks. “The drag stems from an expanding supply of used vehicles and a new vehicle market that is sure to lean even more heavily on incentives than it did last year when discounts grew by 8 percent.”