As used-car supply continues to increase, consequently, used-car prices are slumping. The seasonal summer slowdown continues to push prices down, and RVI Group reported late last week it expects used prices to drop by 10 percent by 2019.
When describing last week’s auction price movement, Black Book’s Ricky Beggs said the only difference from previous weeks is the price drops continue to grow week-over-week.
Hitting a the biggest drop seen in the past 12 months, the 10 car segments fell by an average of $86 last week, he said in the latest “Beggs on the Used Car Market” video report.
This comes in as a total price decline of 1.7 percent for cars in July — which is slightly over traditional pre-recession monthly change levels.
And there are three segments, in particular, that are trending softer than most.
For example, the prestige luxury cars, which declined by an average of $183 this past week, have a four-week average decline of $131, according to Black Book data.
Next up is the premium sporty cars, which saw a decline of $184 last week — the largest drop for the week — and touts a four-week average drop of $121.
Lastly, the third segment to see a larger-than-average price drop were the luxury level cars, which saw a prices fall by $110 this past week, with a four-week average decline of $87.
Why the significant drops in vehicle values this past week and month?
“Part is the adjustments to get ready and create a space for a new model year of vehicles to come into the market,” said Beggs, editorial director at Black Book.
On the other hand, the truck segment fared better this past week than the previous week, dropping by an average of $45. The four-week average decline for trucks came in at $49.
Used-Car Prices Expected to Drop by 10%
RVI analysts said in its latest Risk Outlook report they expect to see used-car prices drop from current levels during the rest of the year, as well, as supply rises.
“With strong current sales and more favorable economic conditions, the supply of used cars in the market is expected to increase steadily through 2019,” the report stated.
Lease penetration also continues to grown, RVI pointed out, and the company predicts this rate to increase even more for 2014 and 2015 model-year vehicles.
Illustrating the significant spike in lease penetration, Infiniti — which led the market in leases for the first quarter — reported 60 percent lease penetratsion in the first quarter.
Volkswagen had the highest lease penetration among non-luxury brands with a rate of 42 percent.
Interestingly, the new-car market is expected to have a downward impact on used prices, as well, as new-car competition increase and new-car prices decline. Click here to read more on this trend.
RVI predicts that with both expanding used supply and new-car market trends pushing downward, used-car prices will drop more than 10 percent by 2017. And though prices have begun dropping this year, RVI expects more dramatic declines to begin in 2015.
And one segment, in particular, is expected to exceed the 10 percent drop: small SUVs.
RVI predicts supply to expand significantly in this segment through 2019, pushing the expected price decline up to 10.9 percent by the end of 2017.
To view the latest “Beggs on the Used Car Market” report, see the video above.