Used Cars In Five Segments Will Soon Be Cheaper

As demand tapers at the end of tax-refund season, car values will drop in kind

Used cars across five different segments will soon get much cheaper, according to data from Black Book. This means that if you're in the market for one of these types of vehicles, you may want to hold off shopping until late spring or summer.

The period between February and April has been known as the "tax-buying" season in the used-car market because many Americans use their tax refund checks from Uncle Sam toward a new used vehicle. Black Book has been tracking this trend over the past couple of years and discovered that used-car values tend to hold steady or even increase during this period, as the market experiences higher than average demand. Then, as the season ends, values drop rather rapidly.

In other words, used cars will be noticeably cheaper starting in May and continuing through July.

Black Book expects the cycle to continue in 2014. According to the company's research, used vehicles in the entry mid-size car, full-size car, full-size crossover, upper mid-size car and compact car segments will experience noticeable declines in value starting in the late spring.

As an example, the average price for a used entry-level car in April is currently $10,741. Black Book expects the average car in that segment to begin declining in value in May, eventually dropping 5.9 percent in value by July. This will bring the average price down to $10,107. Other segments will experience similar declines, with full-size cars dropping 4.2 percent, full-size crossovers dropping 3.6 percent, upper mid-size cars dropping 3.5 percent and compact car prices declining 3.4 percent.

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