NADA: New-car sales healthy, used prices down, incentives up
A new report from NADA Used Car Guide shows optimism about the economy and new car sales (again), along with lower wholesale prices for used cars and manufacturer incentive spending year-to-date 9 percent higher than in 2013. NADA is sticking to its 16.4 million light vehicle sales forecast for 2014.
Despite wage stagnation and a decline in labor force participation, the U.S. economy has strong fundamentals and appears to be headed for growth. The weakness of other economies helps strengthen the dollar, which in turn should keep inflation low, says Steven Szakaly, NADA chief economist.
Used vehicles depreciated at an above average rate for the third straight month in September, as wholesale prices of vehicles up to eight years in age fell by 3.6 percent compared to August, says the report, the October issue of Guidelines. It was the weakest third quarter for prices since 2002. The reasons: downward pressure from the successful new vehicle market and increasing volumes of off-rental units.
Pent-up demand, an array of new models and continuing economic growth were the main drivers of new sales, but manufacturer incentives also played a role. Incentives jumped 18 percent from third quarter 2013 to a level not seen since mid-2005 (except during the recession in 2009). Incentives on new vehicles no doubt persuaded some traditional used car buyers to buy new. Szakaly predicts that manufacturers will continue to offer aggressive incentives.
Higher volumes of off-rental 2013 and 2014 vehicles at auctions added to the pressure on wholesale prices. Depreciation in September was strongest for the subcompact, compact and midsize car segments.
Szakalyês used vehicle forecast for October: Prices of vehicles up to eight years old are expected to drop by 3.1 percent to 3.6 percent. Luxury cars, luxury utilities and midsize vans will see the greatest drop in prices, thanks to their increase in off-rental supply.
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