Automakers and dealerships had record sales this summer on new vehicles. But the availability of cheap credit, generous factory incentives, and heavy discounts meant that many buyers found new cars a better value than used. With used car inventories piling up, prices are dropping.
According to Manhiem Inc a consulting firm that track used car prices and auctions, reported that the average transaction price of a pre-owned vehicles was down 9% in August. However, despite this trend Manhiem says that dealerships still have strong net margins on used inventory.
But industry analysts are concerned that a decline in used car sales may have a negative impact on new car values.
From the Wall Street Journal -
"...auto analyst David Lim said that although used-vehicle prices still remain historically strong, the four-month decline would affect automotive sales because of lower residual values. In addition, "it may delay prospective new car buyers as trade-in value may not be compelling."
"We note [auto makers] have been more aggressive with incentive use, which is essentially a repricing of the vehicle," Mr. Lim said. "Excessive incentive use would negatively affect" resale values, he said.
Even among new cars ,factory incentives are clearing out inventory on models just coming in. Classic car-buying wisdom said that the deals are on the left-over model year. I recently shopped a 14' and a 15' Hyundai Elantra, both cars had heavy discounts and the 15' was only a few hundred more than the 2014. Many pre-owned examples were priced higher than the new ones.
When it comes to buying new vs. used it really depends on the market and price range. Vehicles with heavy factory incentives that also have high resale value are often better purchased new. However, luxury cars the depreciate quickly can be found for great deals in the pre-owned market.
If you have a question, a tip, or something you would like to to share about car-buying, drop me a line at AutomatchConsulting@gmail.com and be sure to include your Kinja handle.