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New and Used Car Sales Accelerate in 2014
Tuesday, January 28, 2014 6:55 AM

Used car prices, which grew sharply following the recession, are expected to decline slightly this year in the U.S. as more consumers turn in cars from leases and supplies of older models become more readily available.

Prices rose 18 percent from 2007 through 2013, with U.S. customers paying an average of $14,685 last year. Americans bought about 42 million used vehicles, nearly three times as many as new cars sold.

But in 2014, the year-over-year rise is expected to come to a halt with used-car prices expected to fall about 1 percent. Many new cars leased two to three years ago are ready to be turned back in, giving dealers a fresh supply of slightly older models that they can then turnaround and sell to used-car customers.

Manheim, the vehicle auction company owned by Cox Enterprises Inc., anticipates 2.1 million vehicles coming back to market in 2014 from people returning leases. That will grow to 2.5 million in 2015 and 3 million in 2016. The increased supply is certain to lower prices. Lower used vehicle prices can be both positive and negative. It makes used vehicles more affordable, but lowers the trade-in value for people seeking new cars.

For dealers, such used car sales are typically a big profit driver, earning them three times as much as a new car sale.

Used-car supplies remain well below historic levels and with the economy on the mend, pent-up demand among customers to replace aging vehicles will continue to drive strong demand for both new and used cars.

Manheim also stated that a surge in sales of used vehicles to emerging markets overseas, will help to keep supplies of vehicles limited and therefore prevent a crash in prices.

On the new-car side, NADA remains bullish, forecasting U.S. new-vehicle sales will continue to rise in 2014 to 16.4 million, up from 15.6 million in 2013. That is one of the highest estimates of sales among forecasters.

 

(Source: The Wall Street Journal)