For years there has been speculation as to when used car prices might finally soften, despite their steady increase and no real signs of slowing. As recently as the first half of 2016, used vehicle prices seemed pretty solid, and there was no drop-off in sight. Now, as the year starts winding down, there is finally some evidence that prices may indeed soften—and that there may be sharp price decreases before 2016 is over.
How much of a price drop can consumers expect to see? While it’s impossible to say for sure, some estimates put it at three to five percent before the end of the year—reason enough for consumers to consider investing in a used vehicle before Christmas comes.
A Long Time Coming for Used Vehicles
Throughout 2016, all economic indicators have defied the notion of a price softening, which makes this last-minute revelation all the more surprising. According to people in the know, such as KAR Auction Services CEO Jim Hallett, however, the price drop is real.
“We’re now starting to see them soften a little bit more and we may get to those 3 to 5 percent levels,” Hallett has stated.
But if the price softening is happening after all, why were used vehicle prices so robust for the first half of the year? Eric Loughmiller, also of KAR, says it’s because there were more one-to-three-year-old vehicles in the mix earlier this year, all due to an influx of off-lease vehicles. This created a richer array of used vehicles that kept prices high.
Now that more and more of those off-lease vehicles have sold, however, it’s bringing the average down a bit, and providing consumers with overall lower prices to choose from.
Hallet also says that he’s seen less of a desire among consumers to purchase off-lease vehicles accepted on behalf of lessors, resulting in more of these cars showing up at auctions, either online or otherwise. He’s seen a nine percent increase in the commercial vehicle segment—off-lease and repossessed vehicles—at the company’s recent physical auctions.
“I would expect to see that continue,” Hallett remarks. “As we see more volume, we have more selection, and the dealer — rather than paying what might be the residual value on the vehicle at termination — would rather take his chances on buying the vehicle online or in an open sale or a closed sale or physical sale.”
What Does this Mean for Used Vehicle Buyers?
Softening prices are obviously good news for consumers—but a couple of questions present themselves:
How long will these lower used car prices last?
Will they actually get any lower, or is this as soft as used vehicle prices are going to get?
Nobody can say for sure, so maybe it’s worth noting that you can get some truly great values on used vehicles right now, and it’s as simple as visiting your local certified pre-owned dealer. To learn more, we invite you to stay plugged in to the Get My Auto.