With the first half of 2012 in the books, sales are up and prices are down. Used-vehicle pricing continues to drop as the new-vehicle sales SAAR improved to 14.1 in June, according to the July edition of the Guidelines report from NADA Used Car Guide. But there is one section of the market that is bucking this trend.

For older models six to seven years old, auction prices in June were 12 percent higher than last year, NADA officials reported.

The organization offered the following background: “Back in December 2010’s edition of Guidelines, we discussed how auction prices of units over five years in age were starting to increase at a level on par with younger models, and how improving quality and longevity were joining forces with the economy and shrinking late-model supply to push the trend..

“Fast forward to today, and we see that not only has this trend continued, but that older model price growth has actually surpassed that of newer units,” they added.

And the prices for these particular vehicles are rising by double-digit percentages in the lanes — much faster than their younger counterparts.

In fact, used prices for vehicles six to seven years in age grew by just over $2,000, or 29 percent, from 2009 through 2011, while prices for units five years in age and younger grew by $2,300, or 19 percent (mileage- and mix-adjusted).

Also of interest, vehicles eight to 10 model years in age, “units traditionally considered to be more risky from a maintenance perspective”, had prices improve by a consequential 28 percent, or $1,200, over that three-year period.

NADA also noted that the fact that the six- to seven-year-old group comprises the maximum allowable age for the majority of manufacturer certified pre-owned programs, which is likely working to push prices up more than eight- to 10-year-old units.

That said, with these considerable increases in wholesale value for older units, NADA noted that some “have begun to question the extent of future downside risk, particularly when used-vehicle supply begins to pick back up again late next year.”

NADA officials explained that part of the answer to this question lies in the consistent improvements in long-term dependability. 

“Per results from J.D. Power and Associates’ U.S. Vehicle Dependability Study, which measures problems experienced during the previous 12 months by original owners of three-year-old vehicles, the industry average for overall dependability fell from 237 problems per 100 vehicles (PP100) in 2005 to 132 PP100 in 2012, which according to the organization ‘is the lowest problem rate since the inception of the study in 1990’,” officials explained.

“It makes sense that as reliability concerns are tempered, demand for older used vehicles will strengthen, which will of course support used price retention,” they added.

And that’s just one of the factors NADA cited.

“Another important driver of the price growth can be attributed to the number of new releases and major redesigns that occurred for the 2007 model year (e.g. Chevy Tahoe, Nissan Altima, Toyota Camry, etc.), which are now offering used consumers desirable products at affordable prices,” NADA further explained.

The report also went on to touch on the fact that affordability of older models relative to their younger counterparts may provide additional insight on how prices of older models will perform moving forward.

“Currently, average prices for six- to seven-year-old units stand at a 34-percent discount to one- to five-year-old models. While this is nine points higher than 2009’s recession-depressed discount, the figure is a reasonable two points better than what was observed back in 2006,”  the report stated.

“These signs — sizable advances in dependability, significant product improvements, and the reasonable price gap that exists between late- and older-model used vehicles — point to the future risk associated with older units being no better or worse than the risk posed by younger ones,” it continued.

Officials also explained that the “slow” rate of economic expansion may contribute to this trend as well.

“This gradual improvement of the economy should continue to support demand for less expensive — i.e. older — vehicles, especially by hourly wage earners,” the report noted.

Wrapping up their commentary, officials made the following conclusion: “To be sure, as new-vehicle production and used supply begin to expand at the same time, used prices in general will be pressured down from the high ledge on which they’ve been perched, but considering the points above, it’s likely that the fall will be more organized than disorderly.”