Drop in used car values

The first quarter of 2016 marked the first year-over-year decline in the National Automobile Dealers Association (NADA) Used Car Guide’s measure of used-vehicle prices in about seven years, a trend which has implications for residual values in the leasing industry.

NADA Used Car Guide reports that its seasonally adjusted used-vehicle index for March was down about 1% from February. The reading of 118.6 represents a five-year low.

Used prices actually rose by 1% in March, but this was less than the average 2.7% increase recorded over the preceding seven years, the Guide explained.

“We saw the index down as we closed out the first quarter of the year as well,” NADA Used Car Guide executive analyst Jonathan Banks said. “Compared to Q1 of 2015, it was down 3.6%. It was the first year-over-year decline we’ve seen since 2009.”

In the report, analysts forecast a 1.3% to 1.8% sequential decline in April for prices of used cars up to eight years old. This contrast with the previous two years, when the decline has averaged 1.%.

May is likely to show a 3% decline, with June and July showing some stabilization.

However, the NADA Used Car Guide is expecting full-year used-car prices to drop between 5% and 6% year-over-year on an index basis, the biggest such decline since 2008.