If you’ve paid even the slightest attention to the used car market in 2016, you probably know that the prices dropped pretty low, especially for economy cars like full-size sedans, hatchbacks, or compact cars. Trucks and SUV prices might have gone up a bit (along with the demand) but, that’s because the gas prices stabilized and the economy improved. As a whole, the used car market is doing great. The good news? It looks like that trend will be continuing into 2017. It’s about time. After all, before 2016, used car prices climbed sky high. Compared to 2015, used car prices declined approximately 4% in 2016, the first significant decline the used market has seen since the recession.
If this trend continues, 2017 should be an even greater time to buy.
Why The Price Drops?
The answer to that is simple: the elementary concept of supply and demand. The exact same phenomena which explains why the prices of used trucks have gone up slightly, and SUVs have maintained the same price. As far as other vehicles on the market, that supply and demand concept has a heavy emphasis on the “supply” side. As in, used cars (and even trucks) are flooding the market right now. It’s all those three or four year vehicle leases that have finally ended.
Why are 2016 and 2017 so different? Because, three or four years ago the industry saw a huge boom in new vehicles being leased instead of purchased. Major automotive manufacturers decided to push low monthly payment auto leasing, convincing consumers to lease, rather than buy, new vehicles. The result proved a very fruitful used car market when they come off lease. In fact, there were 3.1 million off-lease used cars sitting on dealer lots in 2016, a whopping 570,000 more than 2015.
A lot of people don’t realize the automotive market is cyclical; everything comes around in the end. It’s all connected, and the new car market has a huge impact on the used car market.
How Do We Know Prices Will Keep Dropping in 2017?
Well, we don’t know for sure. Like anything in the automotive world, the future of the market is based on trends in the past. Considering the fact leasing is now almost at 35% in 2017, and it was only 20% in 2011, means that the lease market has grown since then to this point. This also means that there are still plenty of vehicles due to come off lease in 2017.
At the very least, prices should stay around the same. As long as there isn’t a huge increase in gas prices — where SUVs and trucks will then drop in price, and other fuel-efficient vehicles will increase — they should stay the same.
Bottom line? If you have a truck, SUV, or van that you’re looking to trade in, now is a great time. This is especially true if you want to trade it in to put towards a used sedan or subcompact vehicle. Currently, any vehicle that’s fuel-efficient is bound to represent a rip-roaring deal for you, the savvy used car shopper.