10/8/2012 - Depreciation rates to moderate
While used vehicles are typically cheaper than new cars, they carry the added benefit of generally having less expensive car insurance rates. In addition, as a new report indicates, the value of those vehicles may not diminish significantly over the next few years.
According to NADA Used Car Guide and its latest report, "Volatility in Used Vehicle Depreciation," the automotive valuation company indicates that there should be a period of used-vehicle price stability during the next 10 years. This would be in stark contrast to more recent years, as the average used vehicle worth $12,000 declined in value by more than $3,000 in 2008.
Jonathan Banks, senior analyst with NADA, said price stabilization in the used car market large results from limited inventory.
"The expected low annual rate of depreciation can be attributed in part to the continued decline in the supply of late-model used vehicles, which was caused by a substantial reduction in new-vehicle sales during the economic recession," said Banks.
Also affecting the rate of depreciation, according to NADA, is automakers building vehicles in confluence with the rate of demand. Historically, manufacturers have tended to overproduce.