Used Car Prices on the Decline [AUDIO]
NEW JERSEY 101.5
As more consumers are opting to go with new cars, the price of used automobiles is at its lowest level in years.
A report from Edmunds.com finds used car prices at the lowest since the same quarter in 2009. The report states an average used car sold for $15,617 at a dealership in the third fiscal quarter, compared to $14,808 in 2009.
Those prices could only continue dropping as more people trade in their old cars for new models and a glut of leases signed in 2010 start expiring, flooding the market with high-quality used vehicles.
James Appleton, Director of the New Jersey Coalition of Auto Retailers, says the drop in prices is the product of supply and demand. He notes in 2007 and the beginning of 2008, New Jersey new car dealers were selling around 510,000 cars, but by 2009 new car sales slumped by almost half to 330,000."
"In 2010, there weren't the vehicles that would be traded in 2009, 2010, and the early part of 2011, because new car sales volumes were historically low," he said.
In the past several years, consumers have returned to the showroom to purchase new cars, bolstered by strong trade in prices, a slightly increasing economy, and priced-to-move lease offers.
"So now we have a greater supply of used cars to match demand and prices have moderated," Appleton explained.
While lower prices for used cars are good for those in the market for pre-owned, Appleton said those looking at new models could see some downsides.
Since there's a bigger difference in price between new and used, dealerships need to have more incentives to sweeten the offers. Appleton also notes the high value of trade-ins helped offset the costs of a new vehicle for many buyers; but with the abundance of used cars, trade in values will decrease.
"One of the things that helped push new car sales in the last twelve months was people were able to get more for than their trades than they expected, and dealers were able to offer more [in trade in value], which in terms of financing a vehicle makes it easier to put you behind the wheel of the car you want," he said.
While prices are expected to continue to decrease, Appleton reminds consumers to look at the bigger picture.
"Compared to where they were before, year used car prices are low. Compared to where they used to be historically, it adjustment is definitely more apt to used car prices."