If you’re in the market for a used car, you might be able to get what you want at a significant discount due to the entire market’s recent decline. This goes especially for 3-year old or newer vehicles.
According to the Manheim Used Vehicle Value Index, prices for used cars have gone down by roughly 11% compared to last month, and are down about 10% year over year. The last time we saw such a dip was during the 08-09 financial crisis.
If we adjust for retention, which is the average difference in price relative to the current MMR (Manheim Market Report), it results in a stunning decline of 11.9% for 3-year old vehicles since the end of March alone.
Related: Carmageddon – Used And New Car Prices Set To Plummet
In the first 15 days of April, all major market segments saw seasonally adjusted price declines year-over-year. While luxury cars and SUVs/Crossovers outperformed the overall market, most other major segments didn’t – midsize models registered the steepest drop.
It’s also worth noting that while overall retail sales have fallen dramatically, actual retail prices have remained quite stable, with Dealertrack showing a decline of less than 1% since March 16. Then there are rental risk units sold at auctions, where prices were down 18.5% compared to last month.
Car loans are also being impacted, as Barron’s points out, because carmakers also car lenders.
“As of Dec. 31, 2019, GM Financial reported $30.4 billion of estimated residual values of leased vehicles and Ford Credit reported $27.6 billion,” wrote J.P. Morgan analyst Ryan Brinkman. Both Ford and GM have been expecting used car prices to decline in 2020, but if they drop more than expected, Brinkman anticipates nearly $6 billion in incremental losses from leasing impairments alone.
