Prices for Luxury Brand Used-Vehicles To Rise In 2012

NADA says the law of supply and demand is kicking in

A sharp decline in the supply of luxury brand used cars and light trucks will result in higher prices this year, according to Jonathan Banks, senior analyst with the National Automobile Dealers Association (NADA) Used Car Guide. 

NADA predicts the supply of luxury used vehicles up to five-years-old will decline by 13% in 2012 from a year ago -- resulting in an average price increase of 1.9% this year. Prices in the overall used-vehicle market are expected to increase 2.9% in 2012.  

“The falling used supply will raise used-vehicle luxury prices again this year, but overall appreciation will be mild by recent standards,” said Banks, in the NADA Used Car Guide’s latest report, 2012 Special Analysis: Luxury Brand Trends and Used Price Forecast. Prices for luxury brand used vehicles increased 9% in 2011. 

NADA’s price forecast for the following luxury brands in 2012, include: Acura (up 4.8%), Audi (up 3.3%), BMW (down 0.2%), Cadillac (up 0.5%), Infiniti (up 1.5%), Lexus (up 1.6%), Lincoln (up 2.6%), Mercedes-Benz (up 0.7%) and Volvo (down 3.1%). 

Supply decline 

The decline in used-vehicle supply was caused by the 2007-2009 economic recession when fewer new vehicles were purchased or leased, resulting in a drastic drop in trade-ins and off-lease vehicles returning to the market. In 2011, mainstream (non-luxury brands) and luxury brand sales grew by 11% and 4%, respectively, compared to 2010. 

In the luxury sector alone from 2009 to 2011, prices for used vehicles up to five-years-old grew by about 22%, with appreciation across brands ranging from a low of 14.7% for Volvo to a high of 29% for Mercedes-Benz, according to the NADA Used Car Guide. Prices for luxury used vehicles are still at historic high levels. 

“Used-vehicle prices have risen over the past couple of years because of economic conditions that lowered supply and increased demand,” Banks added. 

Supply turnaround expected 

NADA anticipates another year and a half of losses before the supply of luxury used vehicles swings back up again. Although the upturn in overall supply is still some ways off, shorter-term off-lease supply is set to improve much sooner, Banks said. 

In fact, NADA estimates that 36-month off-lease supply is already on the rise, and that supply for these units will be 9% higher in the second half of the year than it was in the first. 

“This means that for the first time in years, downside price risk is on the horizon in 2013 and even more so farther out into 2014,” Banks said. 

Story provided by ConsumerAffairs.
Consumer Affairs

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