Edmunds.com: Falling Used-Car Prices Likely to Affect All Buyers

Santa Monica, Calif. — A glut of vehicles hitting used-car lots will drive down prices as much as 2% this year, projects Edmunds.com. And while that might be music to your ears if you’re in the market for a used car, Edmunds.com believes the trend will likely cause a ripple effect, influencing shoppers of both new and used cars.

“Many car shoppers might not realize how much the new- and used-car markets feed off each other,” said Philip Reed, Edmunds.com senior consumer advice editor. “The boom in new-car leases, for example, is leading to a higher number of lease returns, which adds to the growing inventory of used cars, forcing their prices down.”

But the drop in use-car values, cautions Reed, could raise the monthly payments of new-car leases. Softer "residual values" — declines in what a car is worth at the end of the lease — are likely to cause higher monthly payments to make up the difference.

Edmunds.com pricing experts also expect the following changes in the coming year as used car prices fall:

• Greater selection of used cars for buyers to browse: Some new-car shoppers who don't have enough money for the new car of their dreams could now find what they need on the used-car lot.
• Better certified pre-owned (CPO) car deals: Manufacturers have strengthened these popular certified pre-owned programs by offering lower interest financing and including service plans. Now, with lower used-car prices, these factors combine to make for an even more attractive package.
• Lower values on trade-ins vehicles: When the inventory is high, the value of used cars drops, and that applies to the car consumers are looking to trade in on their next vehicle purchase as well.