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2012 Vehicle Pricing Analysis:

15-Jan-2013

USED VEHICLE PRICES

December Closes Year Out on a Strong Note;

Despite pressing fiscal cliff concerns, wholesale price movement in December closed 2012 out on a strong note as the average price of vehicles up to eight years in age ticked up by a slight 0.1% to remain essentially unchanged from November’s level.
While prices for all segments fell by a scant 0.7% or less compared to the prior month, prices for mid-size cars, utilities, and vans increased by a collective aver-age of 0.5%.
When December’s results are considered alongside the 2.0-to-2.5% fall in prices normally associated with the month, it’s evident that demand for used vehicles in general remains firm and that Post-Sandy replacement demand continued to favorably influence prices over the course of the month. That being said, NADA expects that Sandy’s influence on used prices will begin to wane as we move through January, and that the increase in prices normally associated with a given first quarter will be muted relative what is typically seen.
Compared to the prior December, overall market prices were 1.9% higher, with large pickup and SUV prices the most improved at 7.7% and 6.3%, respectively, while luxury utility prices were down by 5.8% - more than any other segment by a wide margin.


FULL-YEAR FIGURES

Used Vehicle Prices;

For all of 2012, used vehicle prices for vehicles up to eight years in age grew by 1.2% compared to the prior year per NADA’s mileage and age adjusted used price index. While last year’s figure was well back of 2011’s 7.6% rise, it marked the fourth year in a row of used price growth and placed prices on average 32% higher than they were in 2008.
When looking back over the course of the year, used price movement followed a more traditional seasonal pattern whereby prices peak in the spring, fall by varying degrees through the middle of the fourth quarter, and then firm up as the year comes to a close. Certain external factors exacerbated results however, with the most notable being elevated gasoline prices in the spring and the replacement effect of Hurricane Sandy in the fourth quarter.
As it relates to the former, 2012 marked a discernible change in used price reaction to rapidly increasing fuel prices. During previous gasoline spikes, prices for compact and mid-size cars would rise dramatically, while prices for trucks in general would fall. Last year when gas prices grew by over 60 cents from January through April, prices for cars still increased beyond what would normally be expected for the season, but not nearly to the extent of what had been seen in the past.
Perhaps more notable, light truck prices did not drop, but rather continued to increase as is seasonally appropriate. It was the combination of these two appreciating trends that helped to push prices up so significantly last spring.
As we’ve stated in the past, NADA believes that this change in reaction can be attributed in large part to the market becoming more accustomed to dramatic swings in gasoline prices, and as long as pump prices remain between previously seen levels we can expect to see similar movements in used vehicle prices when gasoline prices expand quickly in the future.
Regarding price performance at a segment level, prices for the majority were more-or-less within a range of +/- 1.0% of 2011’s averages, with the exceptions being large pickups, large SUVs, and luxury utilities. Regarding the former two segments, the significant differences in price were due primarily to 2011’s softness generated by the return of $3+ per gallon gasoline prices following a two year hiatus, coupled with modest gains in construction (large pickups) and market-leading declines in used supply (both segments).

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