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Used Vehicle Prices Will Drop

Posted on: 02/01/2016

Lower used-vehicle prices and negative equity go hand-in-hand. The Power Information Network reported that the trade-in payoff on used vehicles was higher than the actual cash value (acv) through the first nine months of 2015. Negative equity is commonly referred to as "upside-down".

Leasing accounted for 28% of new-vehicle sales through November 2015 for a 2% increase from 2014 and a huge 9 points from 2010. The majority of leases are for 36 months. This puts more used-vehicles in the market-place.

Another factor is the large number of SUVs, light trucks and crossovers that consumers are buying which tends to lower the value of used cars.

Negative equity can be avoided by selecting a smaller time frame to finance the vehicle. A 60 month loan will build equity much sooner than a 72 month loan. And, of course, a larger down payment will not only reduce the monthly payment but will build equity at a substantially higher pace.