Not surprisingly, used-vehicle depreciation slowed a bit last month, after May’s market correction stemming from tax season highs. And with relatively stable depreciation predicted for the rest of 2015, NADA Used Car Guide explained that strong prices for trucks are making up for weaker rates in among the car segments.
According to the latest Guidelines report from NADA Used Car Guide, prices of pre-owned vehicles up to eight years in age dropped by 2.5 percent in June, compared to the 3.2-percent decline see during the same month last year.
This month, NADA UCG expects prices will drop between 2 percent and 2.5 percent from June rates, with another 2.5-percent decline in August. According to the commentary from NADA's Jonathan Banks, the organization predicts depreciation will continue to ramp up through October, “as the market heads into what is typically the softest part of the year.”
“With the first half of the year now behind us, one could say used vehicle prices have held up well despite mounting pressure from the new vehicle market and rise in supply,” Banks said in the the report.
Taking a look at some specific numbers through the first six months of the year, overall depreciation year-to-date came in at 9 percent, which is up from the 7.2-percent rate recorded last year. That said, is it down from the 10-percent depreciation rate recorded during the first half of 2013.
NADA UCG expects depreciation of 14 percent for the full year, which would just be slightly worse than 2014’s rate of 13 percent, even as used supply continues to expand.
The stable performance this year, NADA explained, is driven by strong truck prices making up for dipping car prices.
Cars have been taking a hit, specifically the subcompact, compact and midsize cars. According to NADA UCG data, compact and midsize car prices dropped by almost 3 percent in June. They have fallen 11 percent year-over-year during the first half of 2015.
And subcompact cars are seeing even more downward pressure with a decline of 4 percent in both May and June, and year-to-date depreciation of 12 percent. NADA UCG pointed out this year-to-date figure is 4 percent worse than 2014’s mid-year numbers for the subcompact segment.
“Starting with cars, subcompact, compact and midsize car prices have been among the softest all year. This is due in large part to intense new market competition, both within their respective segments and from high demand crossover utilities (lower gasoline prices aren’t helping either),” Banks explained in the report.
According to NADA UCG, new subcompact, compact and midsize car incentives were up by a combined 10 percent through May.
On the other hand, while car prices suffer, rates for used trucks and utility vehicles have held up overall industry values through the first half of the year.
For example, in June large pickups only saw prices drop by 0.5 percent in June with year-to-date depreciation of just 4 percent, which is the best performance out of all the segments NADA UCG tracks.
In fact, the report pointed out large pickup rates haven’t fallen by more than 2.5 percent on a monthly basis in more than five years, showing the segments staying strength among American consumers.
“On a like-age basis, we continue to see trucks and SUVs outperforming their car counterparts,” Banks said.
Take this statistic: through the first half of the year, large pickup prices were up by 7.3 percent from the same period of 2014.
A few other segments contributing to a more stable overall used prices are the mid-size utility and large SUV segments, whose prices were up 4.1 percent and 3.1 percent, respectively, through the first half of the year.