Used-car prices hit a record high in the second quarter of 2015, climbing 7.6 percent year-over-year to an average of $18,800, according to a new study by car shopping site Edmunds.com.
The price growth mirrors the average transaction price for new light-duty vehicles, which hit a near-record $33,340 in the second quarter this year.
“People are buying more trucks and SUVs, and they’re getting them better equipped,” said Jessica Caldwell, analyst at Edmunds.com. “More expensive new vehicles means more expensive used vehicles.”
The same factors boosting new-car sales — better economic outlook, low unemployment, low interest rates, low gas prices — are fueling used-car sales as well.
Pickup trucks, the most popular vehicle on new and used markets, saw the most price growth of any segment, jumping 8.7 percent from last year to an average of $23,081.
Some new pickups cost more than $60,000.
“The same features that appeal to a new-car customer appeal to a 2- to 3-year-old used-car customer,” said Dave Sloan, president of the Chicago Auto Trade Association.
Registrations for used-car sales are up 5.3 percent in Chicagoland in 2015, according to Edmunds.
But in Illinois used-car sales were down 2.8 percent, although that is likely to change in the next few years as residents capitalize on a sales tax law change from taxing the entire price of a leased car to taxing only the down payment and monthly lease payments.
The prohibitive tax law meant that Illinois auto leasing lagged behind the nation, where leasing as a percentage of new vehicle sales has doubled to 26 percent over the past five years.
The leasing tax law change “has had a very positive effect,” said Sloan, who added that leasing was up 23 percent in the first quarter in Chicagoland.
Sloan expects off-lease cars, those returned to dealers after the lease expires, to boost used-car sales locally in the next few years.
Off-lease cars are part of the reason the used-car market is robust. The recession constricted the used-car market, and people have been holding on to their cars at the historic level of 11.5 years, on average.
That appears to be changing. New-car sales are on a blistering pace to exceed 17 million this year, which hasn’t happened since 2001. The used-car market follows.
“With inventory finally at a better place, people have a lot more options,” Caldwell said.
Caldwell added that certified pre-owned vehicles, which manufacturers offer with extended warranties and dealers back by inspecting and repairing cars before selling them, are contributing to the popularity of used-car sales.
“It’s a way for automakers to make money on used cars, get a piece of pie from dealers,” Caldwell said of the abundance of CPOs, which now make up a record 22.7 percent of used-car sales. “People want peace of mind for their used car, and I think CPO delivers that. They’re afraid of the lemon.”
Interestingly, newer used cars 1 or 2 years old have experienced a price drop. It is the price of older used cars, age 8 and over, that has gone up more than 11 percent since last year.
“Some of this is people wanting SUVs but not being able to finance them, so they go back in time to get body-on-frame SUVs, pre-crossovers,” Caldwell said.
On the other end, the used luxury car price has dropped the most, nearly 7 percent down to $52,438 in the second quarter of 2015.
“It’s a good time to get a car off-lease that is good quality,” Caldwell said.