Used Luxury Becomes More Expensive
A sharp decline in the supply of luxury brand used cars and light trucks will result in higher prices this year, according to the National Automobile Dealers Association Used Car Guide.
NADA predicts the supply of luxury used-vehicles up to five years old will decline by 13 percent in 2012 compared to a year ago, resulting in an average price increase of 1.9 percent this year. Prices in the overall used-vehicle market are expected to increase 2.9 percent in 2012.
Prices for luxury brand used vehicles increased 9 percent in 2011.
NADA's price forecast for the following luxury brands in 2012, include: Acura (up 4.8 percent), Audi (up 3.3 percent), BMW (down 0.2 percent), Cadillac (up 0.5 percent), Infiniti (up 1.5 percent), Lexus (up 1.6 percent), Lincoln (up 2.6 percent), Mercedes-Benz (up 0.7 percent) and Volvo (down 3.1 percent).
The decline in used-vehicle supply was caused by the 2007-09 economic recession when fewer new vehicles were purchased or leased, resulting in a drastic drop in trade-ins and off-lease vehicles returning to the market. In 2011, mainstream (non-luxury brands) and luxury brand sales grew by 11 percent and 4 percent, respectively, compared to 2010.
In the luxury sector alone from 2009 to 2011, prices for used-vehicles up to five years old grew by about 22 percent, with appreciation across brands ranging from a low of 14.7 percent for Volvo to a high of 29 percent for Mercedes-Benz, according to the NADA Used Car Guide. Prices for luxury used vehicles are still at historic high levels.
NADA anticipates another year and a half of losses before the supply of luxury used-vehicles swings back up again. Although the upturn in overall supply is still some ways off, shorter-term off-lease supply is set to improve much sooner. In fact, NADA estimates that 36-month off-lease supply is already on the rise, and that supply for these units will be 9 percent higher in the second half of the year than it was in the first.
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