NADAguides discovers some used car prices exceed the new car price

(September 29, 2011) COSTA MESA, Calif. — NADAguides has discovered that more than 100 2011-model-year used vehicles are carrying a higher manufacturers suggested retail price than the comparable new models.

Some models were found to be valued at a whopping 39 percent more than the original MSRP price.

What is causing this unusual trend? Simply put: a shortage of used car inventory.  First, new car sales over the past three years have been significantly lower due to the economy. Additionally, lease returns, which dealerships heavily rely on for used car inventory, have become much lighter as more consumers are taking advantage of great prices to buy out the vehicle. 

And lastly, the earthquake in Japan caused a shortage of new 2011 model year vehicles, which not only decreased availability of used 2011 models it also prompted dealerships to increase new car prices for these vehicles. This price increase for new vehicle models may have deterred consumers from the new car market, pushing them into the used car market. 
   
Used vehicle prices are up significantly as compared to this same time last year.  Based on NADA data, price changes for one-to-five-year-old used cars are up nearly 14 percent for August 2011 as compared to August 2010, while used pickup truck prices are up nearly four percent, used utility vehicles are up more than six percent and used van prices are up more than seven percent. 

"After reviewing recent consumer shopping trend data on NADAguides.com, it became clear to our analysts that consumer research behavior of recent times was atypical for the current economic situation — more consumers are researching new vehicles than anticipated," said Troy Snyder, director of product development at NADAguides. 

"Further analysis by our analysts revealed this trend of 2011 vehicles yielding higher used retail pricing than the original manufacturer suggested retail price, unveiling why many consumers may be on the market for a new 2011 vehicle instead of a used with price as the focus.  With a lower supply of 2011 model year vehicles and increased used vehicle prices, coupled with manufacturers trying to keep prices competitive it was only a matter of time before the used prices surpassed MSRP."

Of the 107 models identified by NADAguides as having higher used retail prices than new MSRP prices, 48.5 percent are sedans or coupes, 37.3 percent are sport utility vehicles, and the remaining 14 percent are trucks and vans. Additionally, 27 of the 107 vehicles are luxury models — roughly 25 percent. 

"As shown, nearly 25 percent of the models with higher used retail prices are luxury vehicles. Collectively, the luxury segment used vehicle prices remain resilient in the face of the ongoing economic concerns, as more cost-conscious consumers in the market for a luxury vehicle increasingly look to the used market as a more affordable alternative to a new luxury vehicle," said Jonathan Banks, executive automotive analyst for the NADA Used Car Guide.

"Additionally, we anticipate that the ongoing strength in demand for all used vehicles joined with the severe lack in supply should help maintain used retail values for the foreseeable future."
   
Traditionally, consumer confidence levels can help predict new car interest — meaning as consumer confidence drops so too does new car interest and vice versa. During times of low consumer confidence used vehicle demand isn't as negatively affected because traditionally, used vehicles become an attractive lower-cost option. 

However, with this emerging trend of used retail prices being higher than MSRP, it is possible that this trend may not change until the market is righted.  NADAguides analysts predict that many consumers, despite low consumer confidence levels, will consider a new car over a used car due to new car benefits such as warranty and no mileage for a similar or lesser price than purchasing its used counterpart.
   
Typically, used car prices begin to fall during this time of year, however, the analysts at NADAguides expect used car prices to buck this trend and maintain their current higher prices. That makes this a great time for consumers to purchase a new 2011 model year vehicle at a great price or sell their used vehicle in high demand at top dollar.