Used car prices in the U.S. have reached a record high thanks to a growing supply of near-new vehicles coming off-lease and a boost in the demand for cars of all sizes and ages due to shifting market factors, according to Edmunds. Based on Edmunds’ Used Car Report, shoppers continue to eye trucks and SUVs as a preference, but rising gas prices are “stimulating” consumer demand — along with residual values — for smaller cars that are more fuel efficient and less expensive.
During the first quarter of the year, the average transaction price for a used vehicle in the U.S. was $19,657 — equivalent to a 2.2 per cent jump in sales price from the same period in 2017. It also represents a 17.6 per cent increase from Q1 of 2013.
“Used-car shoppers are typically more price-sensitive to changes in the market, but this is the first time in years that we’re seeing renewed demand for smaller vehicles,” said Ivan Drury, senior manager of industry analysis at Edmunds. “With rising fuel costs breathing fresh air into this segment, subcompact and compact cars are finally retaining value again.”
Rising fuel costs may become the catalyst for a disruption in a market that has been stable for years, leading many consumers to consider trading in their larger vehicles (such as trucks and SUVs) for smaller ones. However, Edmunds advises against this — suggesting instead to avoid the “knee-jerk reaction” of trading in the car immediately.
“Gas prices are cyclical, and individuals who react too soon could find themselves deeper in the red, especially considering all of the other costs associated with trading in a vehicle,” said Drury. “The best rule of thumb is to wait this out.”
Canadian dealers may need to keep an eye on this trend as gas prices have gone up across the country, and consumers are bound to react if these prices continue to rise.
