This could be the year to buy a new car — a new used car, that is.
Used car prices are expected to drop 5 to 6 percent in 2016, according to the National Automobile Dealers Association, which publishes the NADA Used Car Guide.
Jonathan Banks, executive automotive analyst for the NADA Used Car Guide, recently told CNBC that the drop in used car prices is the result of autos leased in 2013 returning to the market.
That represents an increase of about 800,000 leased cars returning to the market in 2016 compared with 2015.
“The primary driver for this decline is the resurgence of used supply. So basically, 2016 marks the first year where we have a material increase in used supply.”
The NADA used car price index has been at historic highs in recent years, Banks says, following lows in 2008 through 2011.
Another driver for the decline in used car prices is strong sales of new cars over the past few years. Those new cars are also returning to the market as used cars. Banks says incentives for new vehicles average $3,500, or $5,000 for lease purchases.
The Detroit Free Press also reported late last week that a similar trend in used car prices has been seen at wholesale auctions where dealers purchase cars.
Michelle Krebs, a Detroit-based senior analyst for Autotrader, tells the newspaper:
“This is good news for used car shoppers. Prices are falling. The selection is varied and abundant. …
Bargain shoppers can find some of the best deals in the small car category that includes models like Honda Civic, Toyota Corolla and Ford Focus. Midsize cars, which also saw some drop, are a good deal as well.”
If you’re considering a used vehicle, be sure to first check out “6 Things You Should Check Before Buying a Used Car.”
If you’re in the market for a car loan or already have one, be sure you aren’t paying too much in interest.
What do you make of the rising number of used cars? Share your thoughts below or on our Facebook page.