Editor's note: The story has been edited to make clearer that used-car prices are expected to decline in 2017.
DETROIT -- Used-vehicle prices could fall this year as the number of off-lease and other used vehicles is slated to increase, said Tom Webb, Cox Automotive’s chief economist.
Webb, speaking at a Cox media briefing on Sunday ahead of the Detroit auto show, said used-vehicle sales are set to rise again in 2017 after jumping 4 percent last year, the fastest pace since the Great Recession.
Despite the projected sales increase, demand is unlikely to keep up with rising wholesale vehicle supplies as more off-lease vehicles return to the market, he said.
“The growth is going to occur, but it is not going to occur as fast as the increase in wholesale supply. As a result, yes, there will be downward pressure on used-vehicle prices,” Webb said.
Despite a glut of off-lease vehicles beginning to enter the used market over the past year, pricing has remained relatively stable since values spiked during the recession.
The Manheim Used Vehicle Value Index, released Tuesday, closed 2016 at 124.9, up 0.2 percent from November and down 0.6 percent from December 2015. The index is adjusted for vehicle mix, mileage and time of year.
“The most notable aspect of wholesale pricing in recent years has been the stability,” Manheim said in its monthly report that accompanied the release of the index. “After a sharp rise in wholesale pricing in 2009 and 2010 coming out of the recession, the absolute year-over-year change in pricing was less than 2 percentage points in each of the last six years,” making it the least volatile period the index has measured since it began in 1995.
Manheim attributed the stability in pricing to “better, and more efficient” practices among remarketers that have “enabled commercial consignors to anticipate, respond to, and, thus, minimize impending swings in wholesale pricing.”
The stability in wholesale pricing in recent years does not extend to every used-vehicle class, Manheim said. Over the past four years, adjusted wholesale prices for pickups have jumped 28 percent, compared with a 14 percent drop in compact car pricing.
“Blame it on the tremendous consumer preference shift toward crossovers and away from small sedans,” Manheim said. “The supply of used compact cars has been higher than what consumers demanded in recent years, and as a consequence, residuals suffered.”