Used-car values drop adds increased pressure to auto makers

By Staff Writer

Mar 10, 2016 12:08 AM EST

The average price for used-car dropped modestly during February 2016, compared with the previous year period. This slump in used-car prices puts additional pressure on car makers investing more to maintain high volumes in the US market. According to the auction firm, Manheim, the median prices for used-vehicle in February amounted to $10,345, a decrease of 2% from the previous year period.

Prices for used-car, excluding seasonal aspects, declined 1.5% to $12,298 in February 2016, the second straight year-over-year drop. THE WALL STREET JOURNAL quoted Tom Webb, chief economist at Cox Automotive, who said that pricing is expected to drop further in the following two years as there are plenty of supply from vehicle producers.

Rental service superstars like large sedans, compact vehicles and family sedans are also facing serious challenges as low fuel prices combined with demographic changes curbed retail market. Prices for pre-owned sedan cars dropped 20%, while prices for compact and family sedan cars slumped 10% and 2% respectively in February.

The Manheim's index indicates a stressful start for auto makers across the globe. However, the index will soar in the near period as new car pricing movement, weak energy prices and easy access to auto loans may lubricate the sale of used and new cars. Meanwhile, prices for used vehicles are expected to melt between 10% and 15% from present levels, according to Adam Jonas, an auto analyst at Morgan Stanley.

According to Auto Remarketing, February 2016 epitomised the steepest fall in used-car values in more than years. In February 2016, index's reading was 123.3, a decrease of 1.4% over the previous year period. Prices for Pickup truck climbed 7.4% to $16,125 during February, overhead of $16,000 level since September 2015. While, sports vehicles recorded a modest drop during the reporting period.

Car sales swelled 6.9% to 1.34 million cars during February, leaving analysts to predict another year of record growth for auto industry. The journal said that over 40 million used cars have been vended over the recent period.

The Manheim report said that prices for cargo vans and large passenger cars increased 2% over the previous year. Prices for commercial and dealer packages dropped from January to February, however prices were higher 2% to 3% than the previous year period. In addition, median mileage was down 3% than February 2015.

According to the report, net revenue of rental car sector amounted to $27.1 billion and sale of passenger vehicle reached 80.6 million cars globally. The report showed that NAAA-member vehicle auction sales increased 6.3% to 9.3 million vehicles in 2015.

Auto maker sector is burdened by this wavering used car prices, which is expected to recover in the coming periods. Used car sale is impacted by over supply from manufacturers and other financial crisis.

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