Monthly used vehicle values see biggest drop in 2016

(September 20, 2016) MCLEAN, Va. — The September Guidelines report by NADA Used Car Guide notes that wholesale prices of eight-year-old or younger used vehicles in August fell by 2.6 percent compared to July. The decline was the biggest loss recorded so far in 2016. It was also 0.4 percent greater than the three-year average over the same period.

As a result, NADA Used Car Guide's seasonally adjusted used vehicle price index fell by 0.4 percent to 118.6.

"We forecasted vehicle prices would continue to trend downward this past month — and they did," said Jonathan Banks, vice president of vehicle analysis and analytics at NADA Used Car Guide. "The big question everybody is asking is, 'Will the decline in used vehicle prices accelerate?' We believe that will be influenced by manufacturers, and how much their incentive spend is on 2017 models."

August's segment level price movement left luxury vehicles with the greatest loss for the month.

    Luxury compact car and mid-size utility prices were loss leaders; they declined 3.5 percent each.
    Luxury mid-size and luxury large car prices fell by 3.4 percent and 3.2 percent.

Mainstream vehicle values saw varying depreciation, with the large utility segment taking the biggest hit.

    Prices within the large utility segment fell 3 percent compared to July.
    Compact car prices dropped 1.9 percent, which was the least of any car segment for the month.
    Mid-size utility and mid-size pickup prices fell by 2.3 percent each.
    Compact utilities experienced a 2.1 percent pullback in prices.
    Large pickup prices slipped by only 1.2 percent, the best of all segments.

What does the future hold?

According to the NADA Used Car Guide's September Guidelines report, analysts forecast prices of vehicles up to eight years in age falling by around 3.5 percent compared to August. The anticipated drop is nearly identical to the 3.4 percent decline recorded in August 2015.

Looking ahead, depreciation should remain steady before slowing toward the end of the year. In October, prices are expected to fall by around 3.4 percent before slowing to less than 2 percent in November. NADA Used Car Guide's full year forecast expects prices to be down by an average of 4 percent on an index-basis from 2015.