With new car sales on the rise in the past seven years, the secondary market is now experiencing rapid depreciation rates.
Autonews reports that while your almost-new car might not be quite that old yet, odds are its value has dropped drastically compared to what it cost before you drove it out of the dealership.
In fact, according to data from auto analytics company Black Book, the average used car lost 17% of its value in the past 12 months, dropping from $18,400 to $15,300. It’s this type of depreciation that has been increasing rapidly.
Today, the average used car depreciates nearly twice as fast as it did back in 2014, when the annual rate was 9.5% instead of 17%.
“We’ve got ourselves in an oversupply situation,” said Jim Hallett, CEO of KAR Auction Services. “Nobody is interested in stockpiling inventory right now.” In other words, if you’re trying to sell a used car, don’t expect to get a good deal on it.
Also worth noting is the fact that some segments are dropping in value more rapidly than others. For example, subcompact models such as the Honda Fit, and large sedans like the Chevrolet Impala, are depreciating even faster than average. On the other hand, large SUVs, vans and pickups are holding onto their value better, with imports dropping more quickly than domestic models.
The main issue remains supply. After seven consecutive years of increasing U.S. sales, the roads are now overpopulated with cars – with a good percentage of them coming with a lease. This led to a rising tide of cars hitting the secondary market when their three-year contract ran out.
Of course, there’s a plus side to all of this, namely America being in the midst of a buyer’s market for second hand vehicles. According to Cargurus.com, the average 3-year old car was selling at 26% off its original sticker price back in 2012, whereas now it’s currently at a 34% discount.
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