Forecast Strong for Used Car Sales Through 2020

Private Party Sales Will Continue To Increase But Prices Drop

Honda Odyssey airbag recall
Minivans like the Honda Odyssey will show a deep drop in value in the coming years. (c) Honda

The sales of used cars are expected to continue rising through 2016 with one of the highest peaks in years. At the same time, used car sale prices are expected to decline through 2018, which means it's a good time to be a buyer but not so good if you're a seller.

CNW Marketing Research is estimating that the used-car industry should top 41 million units into the foreseeable future with 2016 hitting a peak of 43.5 million sales.

Private party sales will continue to climb and reach 31 percent by 2020, CNW projects.

Over the course of those years, independent dealers will steadily lose some market share even though the sales levels except for 2018 will remain above 14 million.

Meanwhile, the RVI Group, based in Connecticut, reported, "Used car prices are expected to decline between 2014 and 2018. Later on in 2013, used car supply will begin to increase and carry over from 2014 through 2018, putting downward pressure on used car prices. This, along with higher gas prices and softening new car prices, will result in softening used car prices through 2018."

RVI, which studies the new and used car marketplace, is predicting a decline in prices of 4.5%, according to its Used Car Price Index. The index compares existing used cars to the same used models that were sold in previous years (with similar mileage).

RVI also had some predictions to make on small used SUVs.

In the short term, prices are actually going to increase but in the next couple years after that things will change. It said, "Used vehicle prices for Small SUVs have underperformed the market average over the past 12 months. Used car prices for the segment are expected to increase from current levels through 2014 as used car supply remains low.

Competition in the segment is expected to decrease from 2015 through 2016. Higher gas prices will keep small SUV prices strong through 2015, although increasing used vehicle supply between 2014 and 2018 will put downward pressure on used car prices."

It gets back to RVI's main point that the increasing used car supply should sweep across all segments and affect prices in a positive way for consumers. It's not going to be as good for sellers, though. They will face decreases in profits, except maybe at the private sales level. (Those are the private party to private party sales between ordinary consumers.)

Other segments are going to suffer as well, according to RVI. Here is a look at the top 10 segments in terms of decline based on the RVI used car price index. (It doesn't include full-size vans, which are typically used for commercial reasons than by consumers.)

  • Minivans will be down 8.8%
  • Full-size pickups will be down 8.3%
  • Midsize SUVs will be down 7.8%
  • Full-size sedans will be down 7.7%
  • Sub-compacts will be down 6.8%
  • Sports cars will be down 6.3%
  • Luxury full-size sedans will be down 5.6%
  • Luxury small sedans will be down 4.7%
  • Small sedans will be down 3.2%

What do all these numbers mean? If you're buying a used car between now and 2018, don't expect it to hold its value at all.

That period has passed in used cars when some segments actually saw increases in value from year to year.

Now is the time to look at a used car as transportation. Depreciation is not quite going to be on a new car level but it's still going to be higher than in the past because of the simple case of supply exceeding demand.

But the odd thing is demand is still going to be high. That just demonstrates how a robust new car market that has been improving since 2011 is going to seriously impact the used car market in years to come. Again, this is good news for the used car buyer but not good news for the used car seller.

So, if you're in the market for a used car, now may not be the time to act if you feel you can hold off a year. All indications seem to point to used cars costing less next year in most segments.

Spare yourself the car payments for another year and you might be able to afford something nicer than you thought.