New vehicles sales in the U.S. have been blazing along for the last 13 months, but they may be coming at the expense of the used car market, according to a new report.
The NADA Used Car Guide concluded the used vehicle market slightly underperformed in January 2016 compared to December 2015 with wholesale prices of vehicles up to eight years in age were down 0.1% in January versus December.
January’s used vehicle price index followed a slightly greater decline of 0.3% compared to December, bringing the index to 122.2. The index stood at 125.4 last January, 2.6% above this year’s level.
“Bouncing back after the holiday season slowdown, auction sales volume of models up to eight years old grew by 38% over the four week period ending Jan. 25, reaching 322,200 units,” said Jonathan Banks, executive analyst for NADA Used Car Guide.
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Typical for January, luxury segment depreciation led the industry, while mainstream losses were mild. With prices down by 3.2%, luxury large car declines were the most in the industry and outpaced the segment’s previous five year average of 2.4% by nearly one point.
Losses across other luxury segments were more in line with what is typically seen this time of the year, however, the group’s collective 1.6% drop was slightly more aggressive than the 1% decline averaged since 2011. Among mainstream vehicles, subcompact car prices were softest once again last month and fell by 0.8%.
One of the drivers of the price drop was the number of used vehicles available. The year-over-year decline in supply was driven in part by a drop in late-model volume.
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The number of 2015 models was 20% lower than 2014 units last January, while 2014 volume was off by 8% compared to 2013 units last year.
“While sales volume was up significantly on a month-over-month basis, volume was 4% lower than the same period last year,” said Larry Dixon, senior analyst for NADA Used Car Guide.
Another factor in the decline was the difficult weather that hit the East coast. That said, fewer vehicles available may mean better prices. Due to the effects of winter storm Jonas on the east coast, the report notes NADA Used Car Guide’s forecast for the rest of the first quarter has been raised from the January edition of Guidelines.
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Used vehicle prices are now expected to rise by an average of approximately 1% in February and then by an additional 2 – 2.5% in March, according to NADA. The revision places prices 3% above December levels by the end of March, or roughly 1% more than last month’s forecast.