NADA Analyst Cites 5 Factors That Will Keep Used-Vehicle Trade-in Values High in 2013

At the National Automobile Dealers Association (NADA) Convention and Expo in Orlando, the organization’s Jonathan Banks, executive automotive analyst with the NADA Used Car Guide, outlined five key factors that will keep used-vehicle values high in 2013.

“Car buyers will find 2013 another excellent year to trade-in their current vehicles for either new or previously owned cars or trucks,” Banks said.

The five factors Banks outlined include the following:

Fed policy and a highly competitive lending environment will continue to see credit standards loosen and availability grow, he said.

The recovery in housing and construction will pick up steam, benefitting both the economy and employment, Banks stated. He said this will help stoke demand for traditional used-car and -truck shoppers.

Employment will continue to improve, especially toward the latter half of the year once the outcomes of the government sequester and debt ceiling extension are better known, according to Banks.

With a predicted increase of 8%, the supply of units up to three years in age will grow for the first time since 2006, but even with the increase, volume will still be 25% below where it was in the three years leading up to 2009, he said.

While it's expected that the recovery in new-vehicle sales will siphon off a portion of used-vehicle demand, there remains pent-up demand for those consumers who traditionally purchase only used vehicles, according to Banks.

“As job growth continues to progressively improve, used-vehicle intenders will gradually replace their current vehicles with newer, pre-owned ones, thereby helping to compensate for the loss of new-vehicle substitute demand,” he said.

With these factors in mind, NADA predicts the price of units up to eight years in age will average $14,375 this year, down 0.8% from 2012’s figure of $14,500. The organization went on to say that compared to last year, it expects prices will be softer in the first half of the year as consumers and businesses react to the expiration of the 2% payroll tax holiday and political activity surrounding the deferred federal budget sequester and the debt ceiling extension.

“Excluding last December's inflated showing from Hurricane Sandy, used prices in the second half of the year should essentially match what was observed in 2012,” Banks said.

NADA said that in 2012, the new- and used-vehicle markets saw several achievements, including new-vehicle sales accelerating by more than 13%, up 500,000 than the initial consensus forecast in 2012 and the largest annual increase recorded since 1984.

“Undoubtedly, the new-vehicle sales performance in 2012 was helped along by higher used trade-in prices,” Banks said.

By NADA’s estimation, used-vehicle prices for units up to eight years in age rose by 1.2% in 2012, thereby extending a three-year run of appreciation with prices increasing by 32% since bottoming out in 2008.