Edmunds: Used Cars Hit Record Highs

I’ve been telling you the used car market was sky high and that this is a good time to trade.  Here’s proof.

Used Car Report

According to Edmunds’ latest Used Car Report,  the average price of used cars is going up meaning bargains may be hard to come by. Here are the stats. In the first quarter of 2018, the average transaction price for a used vehicle was $19,657.

  • 2.2 percent increase from the first quarter of 2017
  • 7.6 percent increase from the first quarter of 2013

Edmunds attributes this increase to a large number of vehicles coming off lease, as well as greater demand. A total of 10.6 million used vehicles were sold in Q1 2018,  a 1.5 increase over that period last year.

“Used-car shoppers are typically more price-sensitive to changes in the market, but this is the first time in years that we’re seeing renewed demand for smaller vehicles,” said Ivan Drury, senior manager of industry analysis at Edmunds. “With rising fuel costs breathing fresh air into this segment, subcompact and compact cars are finally retaining value again.” 

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SUVs and trucks may be steamrolling the new vehicle market, but small cars are actually moving quicker off dealer used lots. Edmunds says that’s because fuel costs, which hit a four-year high in the first quarter of 2018, are prompting some price-sensitive consumers to reconsider making the switch from a car to an SUV or truck.  

  • The average price for a 3-year-old compact car has increased by 3.9 percent, and days to sell has decreased by 7 percent in the first quarter of 2018 compared to the first quarter of 2017.
  • The average price for a 3-year-old subcompact car has increased by 3 percent in the first quarter of 2018 compared to the first quarter of 2017. 

SUV and Truck Prices Remain High

If you’re hoping SUV and truck used car prices will go down soon, that doesn’t look likely in the current market. Edmunds says we’re not seeing dropping residual values for SUV and trucks, at least yet. There are still people willing to pay the higher price tags for cargo space, ride height and other SUV and truck features.  But if high gas prices continue that could change. 

“Newer SUVs and trucks are nothing like their counterparts from 10 years ago during the gas crisis of 2008; however, they still lag behind their car segment counterparts in fuel economy,” said Drury. “For now, SUV and truck segments are insulated from rising fuel costs, but a large spike or steady creep past the $4-a-gallon threshold could spell disaster for resale values.”  How To Buy a Used Car ... Wade Tyler Buy New $12.97 (as of 10:00 EDT - Details)

Edmunds analysts note that the risk posed to used SUV and truck residual values is further compounded by the shift in lease type in recent years, reflecting consumer preferences for larger vehicles. 

“For the last few years, car-based products reigned as the dominant vehicle type in the off-lease market, which was unfortunate timing for those lease returns given that low fuel costs shifted consumer preference from cars to SUVs and trucks,” said Drury. “As we enter the timeframe for SUVs and trucks to take over a larger share of lease returns, fuel costs are showing signs of rising and disrupting a market that has been stable for years.” 

Don’t Panic Over High Gas Prices

Despite the uncertainties of rising fuel costs, Edmunds advises against any knee-jerk reaction like trading-in your SUV or large truck right away.

“Gas prices are cyclical, and individuals who react too soon could find themselves deeper in the red, especially considering all of the other costs associated with trading in a vehicle,” said Drury. “The best rule of thumb is to wait this out.” 

Reprinted from Car Pro.