FLADCO News

Used Car Sales to Keep Dealers Afloat During New Vehicle Sales Slide

Posted by Mark Mackson on Jul 12, 2017 6:00:00 AM

The Detroit Bureau
By:  Joseph Szczesny on June 29, 2017
Read time = 1 ½ minutes

No one is arguing the case that after several years of consistent increasing new car sales, we are experiencing a sales drop.

“Additionally, we are also seeing lease penetration rates come down from record highs and starting to see a slowdown in the growth of incentives as a result.  Both are good signs for the long-term health of the automotive industry and show manufacturers’ commitment to profitability and preserving future used-car values.”


New data shows that U.S. auto dealers are expected to handle the downturn in new car sales just fine by selling more used cars.
 

Despite a drop in the sales of new vehicles during the first half of 2017, American car dealerships are still expected to sell more cars and trucks this year thanks to robust demand for used vehicles, which indicates the auto industry is nowhere near slipping into a recession.

Jonathan Smoke, chief economist for Cox Automotive, which manages online publications such as Kelley Blue Book and Auto Trader as well as used-auction centers, said data already indicates that the shift is well underway.  “Dealers are selling more vehicles, but the mix is changing and shifting from new to used.”

“Overall, despite slowing new-vehicle sales, we think the automotive market is healthy,” added Smoke.  “Sales of approximately 17.1 million will make 2017 among the best years the industry has ever recorded.  And the mix is strong, with profitable SUVs and crossovers dominating the market.”

Smoke noted that the default-rate on car loans is still very low.  Less than 1% of car loans wind up in default.

Rebecca Lindland, executive analyst for Kelley Blue Book, says that millennial buyers under the age of 40 now have a major influence on vehicle purchase, accounting for 29% of all vehicles sold in the U.S.  For a number of reasons, these millennial buyers are much more likely to purchase a used vehicle.

“Affordability is a big issue for millennial buyers,” added Lindland, who noted young buyers shop for vehicles on line.”

Overall the sales of new vehicles in the U.S. are still relatively strong but have slipped, clearly passed their 2016 peak of 17.5 million vehicles, said Charles Chesbrough, Cox Automotive’s senior director of industry insights.

“It’s hard to say the industry is near collapse, barring a recession or some kind of financial event,” he added.

 

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Topics: used cars, sales, insurance, ucc, gap insurance


Mark Mackson


Mark is the Founder and CEO of Fladco.
He has over 30 years of Financial and
Group Purchasing experience.

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