There's a growing shift of vehicle sales from new to used as consumers look for value and off-lease cars continue to return to market. Dealerships should consider these sales trends and factor them into their inventory decisions.
The Used Vehicle Market is on the Rise
According to the July 2018 Used Car and Light Truck Guidelines Industry Update from J.D. Power Valuation Services, the used vehicle market had a strong June. Their Seasonally Adjusted Used Vehicle Price Index for June increased to 118.2, up 1.2 points from May and 4.1 points year-over-year. While wholesale used car prices fell 0.9 percent compared to May, losses in June have averaged 2.2 percent over the past five years, so values are holding strong.
Meanwhile, the latest forecast from Edmunds pegged used car sales to reach 3.4 million in July, beating June's 3.2 million. That figure brings the current used car SAAR to 39.5 million units, up from 39.2 million at the end of June.
These trends are easily visible by looking at the reported earnings from some of the largest public dealership groups. According to Automotive News, a number of dealer groups reported strong second quarter 2018 earnings thanks to increased used car sales, with the following public dealership groups reporting double digit growth in used vehicle sales compared to a year-earlier: Penske Automotive Group Inc. (up 10 percent), Group 1 Automotive Inc. (up 13 percent), and Sonic Automotive Inc. (up 17 percent). Meanwhile, AutoNation Inc. – the largest automotive retailer in the US – saw used vehicle gross profits increase 22 percent year-over-year.
Reasons for the Growth in Used Vehicle Sales
Cox Automotive analysts provided two reasons for the rise in used car sales in a recent conference call with reporters:
- Stronger Selection from Off-lease Vehicles: American consumers have been increasingly favoring utility vehicles over cars for some time now. Each year, more and more of these in-demand crossovers and SUVs are coming back to the market as they come off lease. This rich mix of nearly-new vehicles returning to dealerships is driving some consumers – who would've purchased new – to the used car market.
- The Value Proposition: New vehicle transaction prices rose three percent in July to $35,359, and interest rates are hovering around a nine-year high. It's not surprising to see new car sales down considering these factors: consumers are turning to used vehicles to save money and the value proposition is strong, especially considering the improved quality of inventory selection. Many consumers would rather have a three-year-old crossover than a brand new sedan if they're close to the same price.
Increasing Used Car Sales at Your Dealership
With used vehicle sales increasing and prices holding strong, dealerships can turn to the used market to make up for shrinking new vehicle margins and sales.
For example, Group 1 is doubling their efforts with their Val-U-Line program, which had success during the first half of the year. This is Group 1's venture into retailing older, high-mileage used cars – ones they would have traditionally sent to auction. The dealership group told Automotive News that Val-U-Line vehicles account for over 10 percent of their overall used car business.
Another CEO of a public dealer group told the outlet that they plan on following a more assertive acquisition strategy to continue driving used retail sales, which they plan to showcase more aggressively online.
With used cars enjoying strong sales, your store can capitalize with the help of Auto Credit Express. Our used car leads can help your inventory get showcased on our automotive network of websites that generate over 35 million visits each month. We’re also a leading originator of subprime auto leads – consumers who'll be looking at used vehicles, in most cases.
We want to help your store increase sales and maximize its bottom line with our valuable leads and other great dealer tools. Call us today at 888-535-2277 or fill out our contact form online to learn more.