Used car rates look set to suffer their first significant decline since 2008. And the likely perpetrator is the strong variety of new car sales.
As per “NADA Used Car Guide,” utilized car rates will fall 5 to 6 percent this year. And while some might be lured to draw from that negative conclusions about the United States economy, NADA executive expert Jonathan Banks discusses that the drop is reflective of increasing supply, instead of falling need.
“2016 marks the very first year where we have a material boost in used supply,” Banks stated Friday on CNBC’s “Trading Nation.”.
He discusses that recently, record-high secondhand car prices have been spurred by a lack of used automobile supply, which in turn was brought on by low new vehicle sales as a result of the economic downturn. That pattern is now reversing.
The provision of used vehicles “is driven by 2013 lease returns coming back into the marketplace, which represents about an 800,000 increase compared to 2015,” Banks stated.
In that method, the drop in used automobile costs is “a byproduct of the strong brand-new vehicle sale success we have actually been having”.
Will used car costs continue to drop, as cars that were leased when brand-new continue to come back onto the market?
It’s possible, says Banks, including that “one of the wildcards is the new vehicle incentives”.
There is “more danger” of lower costs “if there’s a continuation of the rewards that are stoking brand-new automobile sales,” he stated.