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Trade-in equity up on used cars

September 28, 2012
A declining supply of used vehicles, strong consumer demand and improving vehicle quality have resulted in higher trade-in equity on many used cars and light trucks.
“Higher trade-in equity on used vehicles will help facilitate the release of pent up demand for a growing number of consumers making the jump off the sidelines and into a vehicle purchase,” said Jonathan Banks of the National utomobile Dealers Association. “The equity position that consumers find themselves in today is better, and in some cases dramatically better, than it was three years ago.”
For example, in 2006 it took a consumer who bought a new Ford Explorer XLT 4WD with a 6-cylinder engine 41 months of loan payments to reach a positive equity position. After 45 months of ownership, equity in the vehicle reached $2,895.
Fast forward three years. In 2009 it took a consumer who purchased a new Explorer XLT 4WD with a 6-cylinder engine just 26 months to reach an equity position. The equity stake after 45 months of ownership jumped to $6,830, nearly $4,000 more than three years earlier.
The NADA estimates that used-vehicle depreciation averaged just 13.1 percent  from 2009 through 2011, or about nine percentage points better than the 22 percent average rate of loss recorded over the past 10 years.