Shopping for a used car? Now is a good time to hunt for bargains.
Prices for used vehicles are falling, including for certain popular SUVs and pickups, because of a surge of vehicles returning to car dealers as their leases expire. Those price drops are sharp enough to have forced Ford (F) to report last week that it was slashing the profit forecast for its finance arm, Ford Credit, by $300 million. Automakers lease cars based on their best estimate of what they will be worth at the end of a three-year lease. When prices fall below that so-called residual value, automaker profits suffer.
Expect this trend to continue throughout this year, with an estimated 3.3 million vehicles ready to be returned as their 2014 leases end. The impact on car manufacturers’ earnings could continue where companies offered promotional leases to move their cars.
“All automakers who have subsidized leasing for subcompact and compact cars will be vulnerable,” said Ivan Drury, senior analyst for automotive website Edmunds.
While the biggest used car bargains are in small sedans, the downward pressure on prices is starting to spread to SUVs and pickups. With gas prices low, shoppers moved strongly toward these bigger vehicles. And booming lease volumes in 2013 and 2014 are now leading to a surge of returning vehicles, depressing prices.
Here’s a closer look at some bargain vehicles in various categories. Prices are from Edmunds and reflect year-end 2016 values:
Compact SUVs. The Honda CR-V is the best-selling vehicle in this highly popular and growing category. But that new car popularity has started to put pressure on used car prices. At the end of 2016, the average price of a 2013 CR-V was $17,959. That is a 7.3 percent decline from the $19,377 value of a three-year-old CR-V a year earlier. The least expensive new 2017 CR-V begins at $24,045.
Large SUVs. Values are just starting to decline among these big haulers. You could buy the average 2013 GMC Yukon XL at year’s end for $33,183, down 3.4 percent from its three-year-old counterpart a year earlier. The least expensive new Yukon XL with standard options lists for $52,425.
Pickups. Given their utility for both business and personal usage, pickups have been the fastest-growing new vehicle segment. And values here have slumped less than in some other categories. The Ford F-150, the best-selling vehicle in America, was available in its 2013 edition at the end of last year for an average of $27,732. That is down just 0.8 percent from its three-year-old equivalent a year earlier. Still, a new 2017 F-150 in the popular Supercab XLT version starts at a list price of $35,985.
Midsize sedans. Formerly popular as family cars, this segment has increasingly lost sales to the more spacious compact SUVs. Still, enough people leased these cars in 2013 and 2014 to push down values now. The Toyota Camry, the best-selling sedan in the U.S., was available in its 2013 version for an average of $14,591, down 5.1 percent from a year earlier three-year-old value. A new 2017 Camry starts at $23,070.
Compact sedans. With fuel economy less of a concern than in the days of higher gas prices, this category has slumped in new car sales. But used values are down here, too. An average 2013 Nissan Versa was selling for $8,210, an 11.7 percent decrease from a 2012 model a year earlier. A new Versa starts at $11,990.
Subcompact sedans. Like compacts, new car sales for these small sedans have fallen along with gas prices. An average 2013 Toyota Yaris was selling for $8,958, a 9.1 percent decrease from a 2012 model a year earlier. A new Yaris starts at a list price of $15,250.