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Used-Car Prices Poised to Drop
America's shortage of used cars is finally easing as new-car sales boom, according to TrueCar Inc.'s ALG market research unit.
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America's shortage of used cars is finally easing as new-car sales boom, according to TrueCar Inc.'s ALG market research unit.
U.S. inventories of used cars have been tight in the aftermath of four years of poor sales in 2008-2012, coupled with the federal government's "cash for clunkers" program in 2009 that took 700,000 older vehicles off the road.
The shortage pushed up the residual value of a three-year-old car from 46% in 2008 to nearly 55% two months ago, according to ALG.
But rising new-car sales mean more trade-ins, which should drop residual values to about 49% by 2017 and 46% by 2019. The result, says ALG, will be a growing gap between new- and used-car prices that prompts more consumers to return to the used-car market.
The shift will prompt carmakers to revive sales incentives on new vehicles in a bid to maintain current sales rates, which rose to an annualized rate of 16.5 million units from 13.2 million in 2008.
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