Used-Car Prices in U.S. Stronger than Expected

Average used-car prices in the U.S. remain stronger than analysts expected, The Wall Street Journal reports.

Manheim, the wholesale vehicle auction giant, says the average wholesale price of a used car, which was at about $12,500 in late 2016, has risen 8% to a record $13,600 so far this year. Strong demand for large pickup trucks and SUVs is offsetting falling prices for sedans of all sizes.

Pundits had predicted that used-car prices would plunge this year as millions of vehicle leases expired. The decline was expected to put pressure on new-car prices and make leases more expensive for consumers.

But analysts say demand for replacement vehicles in the wake of hurricanes in October propped up price. Black Book, which tracks used-car pricing, says depreciation has increased only 1.5% this year, one one-fourth the pace previously expected.

The Journal notes that rental fleets and dealers are becoming more disciplined about how they unload used vehicles, which also helps maintain prices. Carmakers like high used-car prices, which help make new cars more attractive to would-be buyers.

Still, J.D. Power estimates the number of lease returns during the three-year period ending in 2019 will surge 50% to 11.3 million compared with the previous three-year interval. That wave of inventory could still trigger an accelerated depreciation rate for used vehicles.